Strongbow Holdings, LLC v. RMS Titantic, Inc.

Background

These related cases concern ownership of four items recovered from the wreck of the Titanic: a 1912 gold coin, two five-dollar bills, and a piece of coal. RMST originally sued Strongbow, Mobile Grocers of America, LLC, and Maureen Daly in New York County Supreme Court on July 3, 2022, seeking a declaration of ownership and an injunction. Strongbow filed a related federal action against RMST two days later and removed RMST’s state-court action to the Southern District of New York based on diversity jurisdiction.

RMST claimed that complete diversity was lacking because RMST, Daly, and Mobile Grocers were all citizens of Florida. Strongbow argued that Daly and Mobile Grocers had been improperly joined because they had sold the items to Strongbow and no longer claimed an ownership interest or possessed the items. RMST also argued that Strongbow’s federal action should be dismissed under the first-filed rule because RMST had filed its state-court action first. Strongbow sought sanctions under 28 U.S.C. § 1927, arguing that RMST’s claims against Daly and Mobile Grocers unnecessarily multiplied the proceedings.

Remand and Removal

The court denied RMST’s motion to remand. It explained that a nondiverse defendant may be disregarded when the removing party shows by clear and convincing evidence that the defendant was fraudulently joined—that is, that there is no possibility of stating a claim against that defendant in state court.

The court relied on Daly’s declarations stating that she and Mobile Grocers no longer had any legal rights or interests in the items and no longer possessed them. Because RMST sought a declaration that the defendants had no rights in the items, the court found no current legal dispute involving Daly or Mobile Grocers that a declaration against them would resolve. The court therefore dismissed Daly and Mobile Grocers under Federal Rule of Civil Procedure 21 and concluded that diversity jurisdiction existed between the relevant parties. RMST’s motion to remand was denied.

First-Filed Rule and Stay Request

The court denied RMST’s motion to dismiss Strongbow’s action under the first-filed rule. That rule generally gives priority to an earlier-filed lawsuit when competing lawsuits are pending in different federal courts. The court held that the rule did not apply because the two related actions were before the same federal court and the same judge; one was not a competing case in a different federal court.

RMST alternatively asked the court to stay Strongbow’s action while the RMST action proceeded. The court found that request moot after denying remand. Rather than stay the case, the court consolidated the two related actions under Federal Rule of Civil Procedure 42(a) because they involved common legal and factual issues and the same relevant parties. Consolidation joined the cases for management without eliminating their independent character.

Sanctions

The court denied Strongbow’s request for costs and fees under Section 1927. That statute permits sanctions against attorneys who unreasonably and vexatiously multiply proceedings, but the court explained that an award requires clear evidence that the claims were meritless and that the attorney knew or should have known this while acting for an improper purpose. The court found no clear evidence of the required bad faith. It also stated that RMST had explained why it believed Daly and Mobile Grocers still had an interest in the items when RMST filed its case.

Disposition

The court denied RMST’s motions to remand and to dismiss or stay the Strongbow action. The court denied Strongbow’s motion for sanctions, dismissed Mobile Grocers and Daly as defendants in the RMST action under Rule 21, and directed the Clerk to consolidate the two related cases. The court did not decide which party owns the four items.