Paruchuri v. Re.Imagin, Inc.

Background

Srinivas Paruchuri sued Jennifer Snape and Re.Imagin, Inc. in the Supreme Court of the State of New York for New York County. Paruchuri alleged that Snape hired him as Re.Imagin’s Chief Technology Officer and co-founder and promised him a 35% ownership interest, a board seat, and an annual salary of $150,000, with payment deferred until 2023. After the company’s expected financing did not close, Snape allegedly proposed changing his title, reducing his compensation by more than half, and reducing his ownership interest to 4%. Paruchuri did not accept the proposed changes.

Paruchuri filed the lawsuit on November 10, 2022, seeking at least $4,200,000 in damages. Snape was personally served in New York on November 18, 2022, and Re.Imagin accepted service through counsel in New York on December 1, 2022. Defendants removed the case to federal court on December 30, 2022, invoking diversity jurisdiction.

Motion to Remand

Paruchuri moved to remand, or return, the case to state court under 28 U.S.C. § 1441(b)(2). That provision is known as the forum-defendant rule. It prohibits removal based solely on diversity jurisdiction when any properly joined and served defendant is a citizen of the state where the lawsuit was filed.

The parties did not dispute that complete diversity otherwise existed or that the amount in controversy exceeded $75,000. The dispute was whether Snape or Re.Imagin was a citizen of New York. The removing parties had the burden to establish the facts supporting removal by a preponderance of the evidence, meaning that the facts were more likely true than not.

Jennifer Snape’s Citizenship

Defendants argued that Snape was domiciled in London because she had lived there since February 2022 and had no current plans to move elsewhere. Snape’s evidence included her own declarations, statements from her uncle and her fiancé’s landlord, text messages, a Massachusetts tax-filing confirmation, and a Massachusetts storage-payment receipt.

The court found this evidence insufficient. Snape did not establish how much time she spent in London or any other location, and there was no evidence that she paid rent or utilities in the United Kingdom, obtained a United Kingdom driver’s license, held United Kingdom financial accounts, joined United Kingdom organizations, or paid United Kingdom taxes. The court also found that the declarations and text messages did not adequately address evidence linking Snape to New York.

That evidence included Snape’s personal acceptance of service in New York, work communications referring to New York City as “home” or as the place where she was normally located, communications about looking for New York leases, and LinkedIn profiles listing her location as New York. The court concluded that defendants failed to prove by a preponderance of the evidence that Snape was not domiciled in New York when the lawsuit began or when defendants removed it.

Re.Imagin’s Citizenship

The parties agreed that Re.Imagin was incorporated in Delaware, making it a Delaware citizen for diversity purposes. They disputed the company’s principal place of business. The court applied the “nerve center” test, which asks where the corporation’s activities are directed, controlled, and coordinated.

Because Re.Imagin had few, if any, employees and was primarily run by Snape, its founder and chief executive officer, defendants needed to show that the company was not directed and controlled from New York. Defendants argued that the company’s principal place of business was in the United Kingdom and pointed to London co-working space and an invoice concerning the formation of “RE.IMAGIN LTD.”

The court found that evidence inadequate. Defendants did not provide corroborating evidence that Snape actually directed the company from the London office, such as a lease, rent or utility payments, or statements from people at the building. The invoice also referred to “RE.IMAGIN LTD,” while the corporate defendant was Re.Imagin, Inc., and defendants did not establish that the two entities were the same. In any event, incorporation alone would not establish a company’s principal place of business.

The court found substantial evidence that Re.Imagin was directed from New York. The company’s Delaware incorporation certificate and application for an employer identification number listed the New York address. Several company confidentiality agreements signed by Snape as chief executive officer also listed that address, and the agreements designated New York courts for disputes. The evidence further showed that Snape conducted company business in New York, including discussing strategy, seeking financing, and meeting vendors. Defendants therefore failed to prove that Re.Imagin’s principal place of business was outside New York.

Attorneys’ Fees and Costs

Paruchuri also sought attorneys’ fees and costs under 28 U.S.C. § 1447(c). The court explained that fees are generally available when the removing party lacked an objectively reasonable basis for removal. Although the court described the removal issue as a close call and criticized defendants’ incomplete exhibits, it found that some evidence connected defendants to the United Kingdom. The court therefore concluded that defendants had an objectively reasonable basis for attempting removal.

Disposition

The court granted Paruchuri’s motion to remand. It directed the Clerk to remand the case to the Supreme Court of the State of New York for New York County, terminate all open motions, and close the federal case. The court denied Paruchuri’s motion for attorneys’ fees and costs. The opinion did not decide the underlying dispute about Paruchuri’s employment agreement.