Taylor v. Zampella

Background

Robert Taylor sued individually and on behalf of Blue Tree Management LLC in New York State Supreme Court, New York County. The complaint alleges that Taylor, Aniello Zampella, and Chad Russo agreed to form a joint venture involving Bitcoin automated teller machines. It further alleges that Taylor invested money, contributed business assets and work, and was later removed from the venture after the promised written arrangements were not completed.

The complaint asserts claims for breach of contract based on an alleged oral joint-venture agreement, unjust enrichment, fraud, breach of fiduciary duty, and an accounting. Taylor asserted some claims individually and others on behalf of Blue Tree. The defendants named in the complaint are Zampella, Russo, Pierre Basmaji, and Cottonwood Vending LLC.

Cottonwood filed a voluntary bankruptcy petition under Chapter 11 in the U.S. Bankruptcy Court for the Eastern District of New York on August 24, 2023. Cottonwood then removed the state-court action to the U.S. District Court for the Southern District of New York, asserting that the action was connected to the bankruptcy case and concerned assets of the bankruptcy estate. The bankruptcy court later converted Cottonwood’s case from Chapter 11 to Chapter 7. The opinion states that a motion to reconsider that conversion remained pending.

Motion to remand

Taylor moved under 28 U.S.C. § 1452(b) to remand, meaning return, the action to New York state court. That statute allows a federal court to remand a case removed because of its connection to a bankruptcy case on any fair and reasonable ground. The motion was unopposed.

The court considered factors including the effect on administration of the bankruptcy estate, whether state-law issues predominated, the relationship between the action and the bankruptcy case, the right to a jury trial, and possible prejudice to parties who did not choose federal court.

The court held that every factor favored remand. It reasoned that the Chapter 7 trustee could liquidate the remaining bankruptcy-estate assets without interference from the state-court case. Taylor did not seek relief on behalf of the bankruptcy estate, and he represented that his primary requested relief was a money judgment against Zampella, who is not the debtor identified in the bankruptcy proceeding.

The court also found that the complaint depended entirely on New York law and did not involve federal or bankruptcy-law claims. It concluded that the claims concerned events and agreements occurring years before Cottonwood’s bankruptcy filing and therefore existed independently of the Bankruptcy Code. The court characterized the action’s connection to the bankruptcy case as remote.

The court further noted Taylor’s asserted right to a jury trial. It explained that a bankruptcy court may be unable to conduct a jury trial without special authorization from the district court and the parties’ consent. The court also found no demonstrated prejudice from returning the case to state court and stated that keeping the case in federal court could cause delay and unnecessary expense.

Ruling

Judge Liman granted Taylor’s motion to remand. The court directed the Clerk to take the necessary steps to remand the action to New York State Supreme Court, New York County, without delay, and to close the federal case. The ruling addressed the proper forum and did not resolve the merits of Taylor’s underlying claims.