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Hashem v. D'Angelo

United States District Court, D. Massachusetts

January 24, 2019

SABA HASHEM, individually and as a member of, and derivatively on behalf of, D'Angelo and Hashem, LLC, Plaintiff / Defendant-in-Counterclaim,
v.
STEPHEN D'ANGELO, individually and as a member of D'Angelo & Hashem, LLC, and D'Angelo Law Group; D'ANGELO LAW GROUP, LLC, and D'ANGELO AND HASHEM, LLC, Defendants / Plaintiffs-in-Counterclaim JENNIFER M. CARRION, Intervention-Plaintiff,
v.
SABA HASHEM, STEPHEN D'ANGELO, D'ANGELO & HASHEM, LLC, D'ANGELO LAW GROUP, LLC, Intervention-Defendants.

          MEMORANDUM AND ORDER

          INDIRA TALWANI, UNITED STATES DISTRICT JUDGE.

         I. Introduction

         Plaintiff Saba Hashem (“Hashem”) filed this action in the Superior Court of Essex County, Massachusetts, [1] individually, and “as a [m]ember of, and derivatively on behalf of, D'Angelo and Hashem, LLC [(“D&H”)], ” against Defendants Stephen D'Angelo (“D'Angelo”) and D'Angelo Law Group, LLC (“D'Angelo Law”), and “nominally” against D&H. Verified Compl. 1 [#1-2]. D'Angelo and D'Angelo Law promptly removed the case to this court pursuant to 28 U.S.C. § 1332(a)(1). Not. of Removal [#1].

         The Notice of Removal asserted for purposes of diversity jurisdiction that Plaintiff Hashem is a citizen of Massachusetts, and Defendants D'Angelo and D'Angelo Law are citizens of New Hampshire. Id. ¶¶ 8-11. The Notice of Removal acknowledged that D&H's “initial members”-D'Angelo and Hashem-were a citizen of Massachusetts and a citizen of New Hampshire, but asserted that “D&H [was] named only ‘derivatively' and ‘nominally,' and thus should not be considered a substantial party to the controversy for purposes of diversity.” Id. ¶¶ 12, 14.[2] Consistent with this position, Defendants subsequently asserted that D&H “was not a legal entity, ” “exists in name only, ” and “could not be a moving party” as to their motion to dismiss. Mot. for Leave to Respond to Order ¶¶ 4-5 [#21].

         After the court allowed Jennifer Carrion's Motion to Intervene [#26] as a judgment creditor of Hashem and D&H, see Mem. & Order [## 38, 39], Defendants changed their position. D&H joined D'Angelo and D'Angelo Law in filing an Answer [#59] to Carrion's Cross-Complaint [#48] and Answer and Counterclaim [#58] to Plaintiff's Amended Complaint [#46]. In these pleadings, Defendants admitted that D&H was formed as a limited liability company and that both Hashem and D'Angelo are members of D&H. See, e.g., Answer and Countercl. ¶¶ 6-7 [#58]. In Counterclaim, they sought damages for, inter alia, an alleged breach of a fiduciary duty owed to D&H, damages caused to D&H's reputation, the loss of D&H's clients, and an accounting of work performed by Hashem for D&H. Id. at Countercl. ¶¶ 29, 31.

         On November 16, 2018, on Carrion's Emergency Motion for Preliminary Injunction against D'Angelo and D'Angelo Law Group [#155], the court entered a Temporary Restraining Order [#165] as agreed to by the parties and set a motion hearing on the preliminary injunction for December 6, 2018.

         On November 20 and December 4, 2018, new counsel filed notices of appearance for D'Angelo and D'Angelo Law Group. On December 4, 2018, these two Defendants filed a Motion to Remand [#169], which this court denied without prejudice for failing to comply with Local Rule 7.1. Elec. Order [#180].

         On December 6, 2018, the court entered a preliminary injunction, which remains in place “pending further order of this court, or if the matter is remanded, of the Superior Court for the Commonwealth of Massachusetts.” Mem. & Order 10 [#183].

         II. Renewed Motion to Remand

         On December 17, 2018, approximately two years after removing the case, D'Angelo and D'Angelo Law filed their Renewed Motion to Remand the Case to Essex Superior Court for Lack of Subject Matter Jurisdiction (“Mot. to Remand”) [#188]. Defendants D'Angelo and D'Angelo Law now assert that because “[D&H] had not been dissolved, was still legally in existence, and was fully capably and duly authorized to enter into contracts and to conduct business operations[, ]” D&H was a real and substantial party and no diversity existed at the time that this lawsuit commenced. Defs.' Mem. 2 [#189].[3]

         “The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000 . . . and is between [] citizens of different States.” 28 U.S.C. § 1332(a)(1). “[T]he citizenship of an unincorporated entity, such as a partnership, is determined by the citizens of all of its members.” Pramco, LLC v. San Juan Bay Marina, Inc., 435 F.3d 51, 54 (1st Cir. 2005) (citing Carden v. Arkoma Assoc., 494 U.S. 185, 195-96 (1990)). “[A] federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.” Navarro Savings Assoc. v. Lee, 446 U.S. 458, 461 (1980).

         Despite the assertions in the Notice of Removal [#1] filed by D'Angelo and D'Angelo Law Group, D&H was not simply a “derivative” or “nominal” party at the time the action commenced. Plaintiff's original Verified Complaint sought relief from D&H, including an accounting of D&H's clients and assets and an injunction ordering distributions by D&H to its members. Verified Compl. 7-8 [#1-2]. D&H's subsequent Answers [##58, 59] admit to D&H's legal existence at all relevant times. Accordingly, because D&H was a real and substantial party to this action from the outset, and is a citizen of both Massachusetts and New Hampshire, and because Hashem is a citizen of Massachusetts, complete diversity never existed and the court lacks subject matter jurisdiction. The removal by D'Angelo and D'Angelo Law was improper.

         In opposition to remand, Carrion argues that her intervention in this case did not destroy diversity, that she had a right to intervene under federal law, that her confidential settlement agreement with Hashem would restore complete diversity, and that the doctrine of laches prevent D'Angelo and D'Angelo Law from now moving to remand. Intervenor Pl.'s Opp'n [#173]; Intervenor Pl.'s Second Opp'n [#176]. However, the court is not remanding based on Carrion's intervention, but because complete diversity did not exist amongst the parties at the time that this lawsuit commenced. See Valentin v. Hosp. Bella Vista, 254 F.3d 358, 361 (1st Cir. 2001) (“For federal jurisdictional purposes, diversity of citizenship must be determined at the time of suit.” (citing Bank One v. Montle, 964 F.2d 48, 49 (1st Cir. 1992)). Moreover, where the court lacks subject matter jurisdiction, remand is mandatory, and the doctrine of laches does not apply. See 28 U.S.C. § 1447(c).

         III. F ...


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