United States District Court,

S.D. Mississippi,

Northern Division.

FIRST TRINITY CAPITAL CORPORATION, Plaintiff/Counter–Defendant

v.

CANAL INDEMNITY INSURANCE COMPANY and Southern Cross Underwriters, Inc., Defendants/Counter–Claimants.

 

Civil No. 3:12CV891–HSO–RHW.

Jan. 10, 2014.

 

John Graham Holaday, Holaday Law Firm, PLLC, Flowood, MS, William C. Walter, Grand Bank for Savings, FSB, Hattiesbrug, MS, for Plaintiff/Counter–Defendant.

 

Timothy J. Sterling, Charles Greg Copeland, Copeland, Cook, Taylor & Bush, PA, Ridgeland, MS, for Defendants/Counter–Claimants.

 

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

HALIL SULEYMAN OZERDEN, District Judge.

*1 BEFORE THE COURT is the Motion for Summary Judgment [17] filed by Defendants Canal Indemnity Insurance Company and Southern Cross Underwriters, Inc., on October 18, 2013. This Motion is now fully briefed. After due consideration of the record, the submissions on file, and relevant legal authorities, the Court finds that Defendants’ Motion for Summary Judgment [17] should be granted and that Plaintiff First Trinity Capital Corporation’s claims in this civil action should be dismissed with prejudice.

 

I. FACTS AND PROCEDURAL HISTORY

A. Factual Background

Plaintiff First Trinity Capital Corporation [“First Trinity” or “Plaintiff”] engages in the business of financing insurance premiums. First Am. Compl. [7] at 15. Premium financing

 

involves an advance by the finance company to the insurance company or its agent of the premium due for the full term of the policy. This advance is then repaid by the insured to the finance company in amortized monthly installments which include an additional amount to cover financing charges. The finance company is secured in making this advance payment by obtaining the right to cancel the policy and to receive the return premium due upon cancellation if timely repayments are not made.

 

Baker & Co., Florida v. Preferred Risk Mut. Ins. Co., 569 F.2d 1347, 1348 (5th Cir.1978).

 

At issue in this case are three insurance policies financed by First Trinity. First Trinity financed insurance policy premiums on behalf of Harper Trucking [“Harper”], Eddie Johnson [“Johnson”], and Anthony Greg Groves [“Groves”] [collectively, the “Insureds”] which were purportedly obtained by the Insureds from Defendant Canal Indemnity Insurance Company [“Canal”] through Central Mississippi Insurance [“CMI”]. First Am. Compl. [7] at 16–21. According to First Trinity, the Harper policy had effective dates of June 11, 2009, to June 11, 2010, the Johnson policy was issued by Canal Insurance as Policy No. PIA04839201, and the Groves policy was issued by Canal Insurance as Policy No. PIA04868901. Id. at 16, 18, 20.FN1

 

FN1. First Trinity has not provided a policy number for the Harper policy or any effective dates for the Johnson or Groves policies.

 

According to the First Amended Complaint [7], First Trinity agreed to tender the annual premiums on each policy, less each Insured’s down payment. In exchange, each Insured executed a premium finance agreement FN2 in which they promised to repay First Trinity the monies advanced plus interest and finance charges, in amortized monthly installments. Id. Each Insured also assigned all unearned premiums to First Trinity and granted First Trinity a power of attorney to cancel the policies after notice and receive the unearned premiums on the policies in the event of default under the premium finance agreement. First Am. Compl. [7] at 16–21.FN3

 

FN2. A premium finance agreement is

 

an agreement by which an insured or prospective insured promises to pay to a premium finance company the amount advanced or to be advanced to an insurer or to an insurance agent or broker in payment of premiums of an insurance contract together with interest or discount and a service charge ….

 

Miss.Code § 81–21–1(c).

 

FN3. The only premium finance agreement supplied in the record is that of Harper. See Harper Premium Finance Agreement [21–1] at 1–2. The parties have not provided the premium finance agreements for either Johnson or Groves.

 

First Trinity contends that it informed Canal and Canal’s general agent, Defendant Southern Cross Underwriters, Inc. [“Southern Cross”] [collectively, “Defendants”], that it had financed each Insured’s premium payments and that each Insured’s rights in any unearned premiums had been assigned to First Trinity. Id. at 17–21. When the Insureds defaulted on their repayment obligations, First Trinity claims that it sent Notices of Cancellation for each policy to the respective Insured, as well as to Defendants. Id. First Trinity alleges that although Defendants were obligated under Mississippi law to repay to First Trinity all unearned premiums as of the date of cancellation of each policy, they have refused to do so. Id.

 

B. Procedural History

*2 First Trinity filed a Complaint [7] in the Circuit Court of Hinds County, Mississippi, First Judicial District, on August 6, 2012, naming Canal and Southern Cross as Defendants. Compl. [7] at 2. On September 4, 2012, First Trinity filed a First Amended Complaint [7], which advances claims against Defendants for breach of statutory law and negligence per se, breach of contract, negligence, fraud, constructive trust, and actual and apparent authority. First Am. Compl. [7] at 22–27.FN4 First Trinity seeks the return of the unearned premiums it paid on behalf of Harper, Johnson, and Groves, as well as punitive damages, costs, expenses, interest, and attorneys’ fees.

 

FN4. On March 26, 2013, First Trinity filed a Motion [12] in this Court for leave to amend its Complaint and attached a proposed Second Amended Complaint [12–1]. The proposed Second Amended Complaint sought to add a claim against Defendants for ratification and estoppel. Proposed Second Am. Compl. [12–1] at 16–17. The Magistrate Judge granted First Trinity’s Motion to Amend by text order entered on April 22, 2013. First Trinity never filed the Second Amended Complaint into the record. For this reason, Southern Cross and Canal focus on the claims asserted by First Trinity in the First Amended Complaint. Defs.’ Mem. in Supp. of Mot. for Summ. J. [18] at 1, 2 n. 1. First Trinity does not address this argument or its proposed ratification and estoppel claims in its Response. Based on the foregoing, the Court finds that the First Amended Complaint is the operative pleading and will proceed accordingly in resolving Defendants’ Motion for Summary Judgment.

 

Defendants removed the case on December 27, 2012, invoking this Court’s diversity jurisdiction pursuant to 28 U.S.C. § 1332. Notice of Removal [1] at 1–2. Southern Cross and Canal each filed Answers and Counterclaims [3], [5] against First Trinity. In their present Motion, Southern Cross and Canal seek dismissal of all claims asserted against them in the First Amended Complaint. Mot. [17] at 2.

 

First Trinity claims that Defendants failed to return unearned premiums after their receipt of notices of cancellation of the Insureds’ insurance policies, as required by Mississippi law. First Am. Compl. [7] at 22–24. In the alternative, First Trinity asserts that in the event the insurance policies were not actually issued by Canal, Defendants perpetrated a fraud by and through their purported agent, CMI. First Trinity charges that Defendants were negligent in their supervision of CMI as their purported agent. Id. at 24–25. The parties indicate in their summary judgment briefing that Jan Gunn [“Gunn”], the owner of CMI, made misrepresentations and misappropriated certain premium finance funds rather than turning them over to the insurers. As a result, First Trinity has filed a number of other lawsuits in this Court against various insurance companies. See Defs.’ Mem. in Supp. of Mot. for Summ. J. [18] at 5–6; Pl.’s Mem. in Supp. of Resp. [24] at 2, 7, 19; see also, e . g., First Trinity Capital Corp. v. Catlin Specialty Ins., No. 3:13cv9–TSL–JMR (S.D.Miss.); First Trinity Capital Corp. v. Arch Ins. Co., No. 3:12 cv310–HTW–LRA (S.D.Miss.); First Trinity Capital Corp. v. State National Ins. Co., No. 1:12–cv–253–LG–JMR (S.D.Miss.); First Trinity Capital Corp. v. Gramercy Ins. Co., No. 3:11–cv–795–CWR–FKB (S.D.Miss.). First Trinity asserts that it first learned of Gunn’s fraud in August 2009. Pl.’s Mem. in Supp. of Resp. [24] at 5; Aff. of Clarence Zahn [21–3] at 5–6.

 

First Trinity alleges that CMI acted as Defendants’ agent because CMI exhibited actual and apparent authority to do all acts on behalf of Defendants incidental to the sale of the insurance policies and the collection of their premium payments. First Trinity further asserts that Defendants have obtained and/or are holding property which in equity and good conscience belong to First Trinity such that the Court should impose a constructive trust on the funds. Id. at 26.

 

*3 Defendants argue that CMI’s Gunn was not acting as their agent, but as First Trinity’s agent, during the solicitation, negotiation, execution, and performing of the premium finance agreements, such that any claims based upon an agency theory fail as a matter of law. Defs.’ Mem. in Supp. of Mot. for Summ. J. [18] at 4–6. Even if the Court finds that Gunn was Defendants’ agent, Defendants posit that dismissal is nevertheless required because Gunn served as a dual agent. Id. at 6–7. Defendants also argue that First Trinity cannot and has not presented any evidence supporting its claims for negligence, imposition of a constructive trust, or punitive damages. Id. at 7.FN5

 

FN5. Defendants also assert in their Motion [17] that First Trinity is prohibited from challenging the Motion with any witness or document because First Trinity failed to comply with Federal Rule of Civil Procedure 37(c)(1). First Trinity disputes this charge. Because summary judgment in Defendants’ favor is warranted even considering all evidence presented, the Court need not resolve this discovery issue.

 

II. DISCUSSION

A. Summary Judgment Standard

Federal Rule of Civil Procedure 56(a) provides that summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FED.R.CIV.P. 56(a). If the movant meets this burden, “the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial.” Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc). To rebut a properly supported motion for summary judgment, the opposing party must show, with “significant probative evidence,” that there exists a genuine issue of material fact. Hamilton v. Segue Software, Inc., 232 F .3d 473, 477 (5th Cir.2000). In deciding whether summary judgment is appropriate, the Court views facts and inferences in the light most favorable to the nonmoving party. RSR Corp. v. Int’l Ins. Co., 612 F.3d 851, 858 (5th Cir.2010). However, if the evidence is merely colorable, or is not significantly probative, summary judgment is appropriate. Cutting Underwater Techs. USA, Inc. v. ENI U.S. Operating Co., 671 F.3d 512, 516 (5th Cir.2012)(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)).

 

B. Analysis

The Court has jurisdiction over this matter pursuant to diversity of citizenship under 28 U.S.C. § 1332. “Under the Erie doctrine, federal courts sitting in diversity apply state substantive law and federal procedural law.” Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996); see also Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The Court applies Mississippi law in this case. See, e.g., Truong v. Bank of America, N.A., 717 F.3d 377, 382 (5th Cir.2013).

 

1. Plaintiff’s Claims for Breach of Statutory Law, Negligence Per Se, and Breach of Contract

The thrust of these three claims is that Defendants failed to return unearned premiums to First Trinity after First Trinity tendered them notices of cancellation of the Insureds’ policies. First Am. Compl. [7] at 22–24. Defendants argue that First Trinity cannot supply any evidence to create a genuine issue of material fact as to whether it is entitled to a refund of any unearned premiums. Defs.’ Mem. in Supp. of Mot. for Summ. J. [18] at 3–4. Defendants also contend that First Trinity cannot produce valid premium finance agreements, notices of intent to cancel along with proof of delivery, or notices of cancellation for the three Insureds’ policies. Id. at 4 (citing Miss.Code §§ 81–21–13 & 81–21–19).

 

*4 Plaintiff has not explained which statute forms the basis of its breach of statutory law and negligence per se claims. It appears these claims are premised upon Mississippi Code § 81–21–21, which provides in relevant part that

 

[w]henever a financed insurance contract is cancelled, the insurer shall return to the premium finance company as soon as reasonably possible whatever gross unearned premiums are due under the insurance contract, and also shall furnish to the premium finance company a report setting forth an itemization of the unearned premiums under the policy that includes a detailed mathematical summary of the computation of the return premium.

 

Miss.Code § 81–21–21(1). If a premium finance agreement contains a power of attorney clause which enables the premium finance company to cancel an insurance contract, the premium finance company must follow the procedure contained in Mississippi Code § 81–21–19. Under this section,

(2) Not less than ten (10) days’ written notice shall be mailed to the insured, at the last known address shown on the records of the premium finance company, of the intent of the premium finance company to cancel the insurance contract unless the default is cured within such ten-day period.

 

(3) After expiration of such ten-day period, the premium finance company may thereafter cancel such insurance contract or contracts by sending to the insurer a notice of cancellation. The insurance contract shall be cancelled as if such notice of cancellation had been submitted by the insured, but without requiring the return of the insurance contract or contracts. The premium finance company shall also mail a copy of the notice of cancellation to the insured at the last known address shown on the records of the premium finance company.

 

Miss.Code § 81–21–19(2)–(3).

 

With the exception of listing their purported policy numbers in the First Amended Complaint, First Trinity has offered no information regarding Johnson’s and Groves’ insurance policies. First Trinity has supplied no evidence that these policies ever existed or, if they did, whether there were cancelled or whether any unearned premiums were due under Mississippi Code § 81–21–21. In the absence of an insurance contract, there can be no “unearned premiums” and thus no violation of § 81–21–21. First Trinity Capital Corp. v. Catlin Specialty Ins., No. 3:13–cv–9–TSL–JMR, 2013 WL 62300099, at *3 (S.D.Miss. Dec. 2, 2013) (citing Insurasource, Inc. v. Phoenix Ins. Co., 912 F.Supp.2d 433, 439–440 (S.D.Miss.2012)). Because First Trinity does not address either the Johnson or Groves policies in response to summary judgment, it has not carried its summary judgment burden with respect to these policies.

 

As for the Harper policy, Defendants maintain that Canal actually issued this policy. Defs.’ Reply [26] at 1, 5–10. According to Defendants, First Trinity never cancelled the Harper policy, such that all premiums paid were actually earned. Id. Defendants have submitted evidence that First Trinity never cancelled the Harper policy and that the Harper policy expired at the end of its term on June 11, 2010. Aff. of Tammy Vaughn [26–1] at 1–2; Aff. of Joseph E. Horsman [26–2] at 1–2. Defendants also have presented competent evidence that First Trinity’s Southern Insurance Services requested that vehicles insured under the Harper policy be deleted on or around December 8, 2009, and February 4, 2010, and that a vehicle be added for insurance coverage under the Harper policy on or around February 25, 2010, Aff. of Joseph E. Horsman [26–2] at 2, all of which occurred after the time First Trinity claims that it cancelled the Harper policy.

 

*5 In its Response, First Trinity maintains that it cancelled the Harper policy in accordance with the premium finance agreement and cites Exhibit “A” to its Response in support of this assertion. While it appears that First Trinity may have supplied the insured notice of impending cancellation pursuant to Mississippi Code § 81–21–19(2), the seven pages of documents contained in Exhibit “A” to First Trinity’s Response do not establish that the Harper policy was actually cancelled in accordance with Mississippi Code § 81–21–19(3), and a reasonable jury could not reach such a conclusion based upon these documents alone. First Trinity has not offered any other competent summary judgment evidence which would permit a reasonable jury to make such a finding. First Trinity has not carried its summary judgment burden on its breach of statutory law, negligence per se, and breach of contract claims.

 

2. First Trinity’s Remaining Claims

First Trinity also advances claims for negligence, fraud, imposition of a constructive trust, actual and apparent authority, and punitive damages. These claims rest upon First Trinity’s theory that CMI was acting as Defendants’ authorized agent. See First Am. Compl. [7] at 24–28. In their Motion for Summary Judgment, Defendants maintain that CMI was not acting as their agent, but even if it were, CMI through Gunn was also acting as First Trinity’s agent. Defs.’ Mem. in Supp. of Mot. for Summ. J. [18] at 4–7; Defs.’ Reply [26] at 4–5. Defendants argue that the theory of dual agency would require dismissal of these claims “without regard to the agency relationship or lack thereof between the Defendants and Gunn….” Defs.’ Mem. in Supp. of Mot. for Summ. J. [18] at 6 (citing Hodges v. Mayes, 242 S.E.2d 160 (Ga.1978)).

 

First Trinity responds that CMI acted as Defendants’ agent and possessed at least apparent authority to act on behalf of Southern Cross. Pl.’s Mem. in Supp. of Resp. [24] at 12–19. First Trinity asserts that at a minimum there exists a genuine issue of material fact as to whether CMI acted as Defendants’ agent in connection with the relevant transactions. Id. at 19. First Trinity insists that Defendants failed to supervise CMI because Southern Cross knew as early as October 2007 that CMI was failing to forward premiums that CMI had received on at least one policy. Id. at 19–20.

 

Both Insurasource, Inc. v. Cowles & Connell of NY, Inc., No. 2:11–cv–76–KS–MTP, 2011 WL 4397487 (S.D.Miss. Sept. 21, 2011), aff’d, 467 F. App’x 337, 338 (5th Cir.2012), and First Trinity Capital Corp. v. Catlin Specialty Ins., No. 3:13–cv–9–TSL–JMR, 2013 WL 6230099 (S.D.Miss. Dec. 2, 2013), are instructive on the question of CMI’s agency.

 

In Insurasource, Rocco was an insurance agency which contacted plaintiff Insurasource to solicit its insurance premium financing services. Rocco then entered into a broker’s agreement with defendant Cowles & Connell, a general agent for a number of insurance companies for which Cowles & Connell was authorized to bind and issue insurance policies and collect premiums.   Insurasource, 2011 WL 4397487 at *1. After several Rocco accounts defaulted, Insurasource contacted Cowles & Connell to inquire about the unearned premiums and was told that Rocco had never remitted premiums for some of the policies. Id. As a result, Insurasource had submitted a number of finance agreements to Cowles & Connell for which Cowles & Connell had never bound policies. Id. Insurasource sued Cowles & Connell for the alleged fraud perpetrated by Rocco and charged that because Rocco was Cowles & Connell’s authorized agent, payments made to Rocco constituted payments to Cowles & Connell. Id. at 2. The question presented was whether Cowles & Connell was a party to the insurance premium financing agreements because Rocco purportedly acted as its agent. Id. at 3.

 

*6 The Insurasource Court cited the following Mississippi agency principles in making its determination:

 

An agency relationship may be express or de facto. A de facto agency may be proven by the presence of three elements at the time of contracting: (1) “manifestation by the alleged principal, either by words or conduct, that the alleged agent is employed as such by the principal,” (2) “the agent’s acceptance of the arrangement,” and (3) “the parties understood that the principal will control the undertaking.”

 

* * *

 

Whether an agency relationship exists is “to be determined by the relations of the parties as they exist under their agreements or acts, with the question being ultimately one of intention…. If relations exist which will constitute an agency, it will be an agency whether the parties understood the exact nature of the relation or not. Moreover, the manner in which the parties designate the relationship is not controlling, and if an act done by one person in behalf of another is in its essential nature one of agency, the one is the agent of such other notwithstanding he is not so called.

 

Id. at *3 (quoting Stripling v. Guardian Energy Exploration Co., 234 F.3d 863, 870 (5th Cir.2000)).

 

Applying these principles, the Insurasource Court reasoned that

 

the financing agreements themselves provide no evidence that Rocco acted on Defendant’s behalf. The only parties other than Plaintiff to sign the financing agreements were Rocco and some of the primary insureds. In some of the contracts, Rocco signed on behalf of the primary insured as an “Authorized Signatory.” In others, the primary insured signed the contract. In each of the contracts, Rocco signed as the “AGENT.” Each contract lists the insurance company writing the policy and the general agent through whom the policy was to be purchased. Defendant is listed as the “general agent” on each contract. However, there is no indication in the contracts themselves that either the insurance company or the general agent were parties to the negotiation, execution, or performance of the financing agreements.

 

Id. at *4.

 

The Court also found that the broker’s agreement between Rocco and Cowles & Connell did not establish the existence of an agency relationship. Id. The agreement was clear that Rocco was not authorized to accept premium payments on behalf of Cowles & Connell, and while Rocco was authorized to submit applications for insurance to Cowles & Connell, it was not authorized to bind coverage without receiving Cowles & Connell’s prior authorization. Id. Nor was Rocco authorized to accept payment of premiums or deposit checks made payable directly to Cowles & Connell. Id. Instead, Cowles & Connell sent Rocco a monthly billing of premiums, and Rocco guaranteed Cowles & Connell payment of all premiums for policies it placed. Id. The Court concluded that there was no evidence that Cowles & Connell represented to Insurasource that Rocco was acting as its agent with regard to the premium financing agreements, and that the e-mails among the three parties indicated that neither Insurasource nor Cowles & Connell knew or controlled what Rocco was doing. Id.

 

*7 Catlin Specialty involved facts similar to those present in this case. At issue was a premium finance agreement allegedly entered into between First Trinity and B & W Auto Sales to finance B & W’s premium for a garage policy obtained from Catlin Specialty Insurance through Catlin’s general agent, Crump. Catlin Specialty, 2013 WL 6230099 at *1. After B & W defaulted on its repayment obligations and Catlin and Crump did not return the unearned premiums, First Trinity filed a complaint in this Court asserting the same causes of action as those raised here. Id. at *2. After First Trinity voluntarily dismissed Catlin, Crump filed a motion for summary judgment. In considering the question of agency, the Catlin Specialty Court held that “there is no proof that Crump had any involvement in the solicitation, negotiation, execution, or performance of the financing agreement, or that it ‘was in control of [CMI/Gunn] throughout the undertaking.’ “ Id. at *6 (quoting Insurasource, 2011 WL 4397487 at *5). The Court concluded that “First Trinity has failed to create a genuine issue of material fact as to its allegation that CMI/Gunn was Crump’s agent.” Id. The Catlin Specialty Court also found no evidence to support the theory that CMI or Gunn possessed apparent authority to act on behalf of Crump, explaining that “the mere fact that CMI/Gunn had previously placed policies through Crump provides no indication as to the exact nature or extent of CMI/Gunn’s authority.” Id.

 

In this case, First Trinity has not offered sufficient competent evidence that either Defendant had any involvement in the solicitation, negotiation, execution, or performance of the financing agreement, or that either Defendant was in control of CMI or Gunn throughout the undertaking. First Trinity has failed to create a genuine issue of material fact as to its allegation that either CMI or Gunn acted as the agent of either Defendant, or that CMI and Gunn had apparent authority to bind either Defendant. See id. In sum, Plaintiff has not shown the existence of a triable fact question as to its allegation that CMI or Gunn acted as an agent of either Defendant or exhibited apparent authority to act on either Defendant’s behalf. Summary judgment in Defendants’ favor on Plaintiff’s remaining claims is therefore warranted.

 

III. CONCLUSION

For the foregoing reasons, Defendants’ Motion for Summary Judgment [17] will be granted, and Plaintiff’s claims against Defendants will be dismissed with prejudice. To the extent the Court has not addressed any of the parties’ arguments, it has considered them and determined that they would not alter the result.

 

IT IS, THEREFORE, ORDERED AND ADJUDGED that, the Motion for Summary Judgment [17] filed by Defendants Canal Indemnity Insurance Company and Southern Cross Underwriters, Inc., on October 18, 2013, is GRANTED, and Plaintiff First Trinity Capital Corporation’s claims in this civil action are DISMISSED WITH PREJUDICE. Defendant Southern Cross Underwriters, Inc.’s and Defendant Canal Indemnity Insurance Company’s Counterclaims [3], [5], remain pending.

 

*8 SO ORDERED AND ADJUDGED.

United States District Court,

E.D. New York.

Those CERTAIN UNDERWRITERS AT LLOYD’S LONDON Subscribing to Policy No.: B0501 HfLoaazt 999 a/s/o Estate of David Smith, Plaintiff,

v.

ART CRATING, INC., Masterpiece International, Ltd., ABC Companies 1–5 (said corporations being fictitious, the true names unknown, responsible for the design of the crate used to transport Horizontal 9/4/52), ABC Companies 6–10 (said corporations being fictitious, the true names unknown, said corporationsbeing responsible for the packing, repacking, crating and re-crating of Horizontal 9/4/52), John Does 1–10 (said names being fictitious, the true names unknown, said persons being employees, agents or individuals responsible for the design of the crate used to transport Horizontal 9/4/52), and John Does 11–20 (said names being fictitious, the true names unknown, said persons being employees, agents or individuals responsible for the packing, repacking, crating and re-crating of Horizontal 9/4/52), Defendants.

Art Crating, Inc., Third-party Plaintiff,

v.

Delta Air Lines, Inc., Third-party Defendant.

 

No. 12–CV–5078 (NGG)(VMS).

Jan. 10, 2014.

 

Joseph Michael Powell, Jose Diego Roman, Powell & Roman, Old Bridge, NJ, for Plaintiff.Eliot L. Greenberg, Rosner Nocera & Ragone LLP, New York, NY, for Third-party Plaintiff.

 

Eliot L. Greenberg, Rosner Nocera & Ragone LLP, New York, NY, Matthew Todd Loesberg, James J. Ruddy, Marshall Dennehey Warner Coleman & Goggin, New York, NY, for Defendants.

 

Francis Allen Montbach, Mound, Cotton, & Wollan, New York, NY, for Third-party Defendant.

 

ORDER

NICHOLAS G. GARAUFIS, District Judge.

*1 Plaintiff Those Certain Underwriters at Lloyd’s London Subscribing to Policy No.: B0501 HF10AAZT 999 a/s/o Estate of David Smith (“Lloyd’s”) brought this action in the Supreme Court of New York, Kings County, on September 4, 2012. (Not. of Removal & Verified Compl. (Dkt.1).) Lloyd’s had insured the risk of loss and damage to a sculpture created by the late American sculptor David Smith and currently owned by his Estate (“the Sculpture”). (Verified Compl. at ¶ 8.) Plaintiff alleged that damage to the Sculpture in transport from New York City to Valencia, Spain, where it was to be exhibited, was due to negligence on the part of a number of Defendants: Art Crating, Inc. (“Art Crating”); ABC Companies 1–5, fictitious names for unknown corporations responsible for the design of the crate used the transport the Sculpture; ABC Companies 6–10, fictitious names for unknown corporations responsible for the packing, re-packing, crating, and re-crating of the Sculpture; John Does 1–10, fictitious names for unknown employees, agents, or individuals responsible for the design of the crate used to transport the Sculpture; and John Does 11–20, fictitious names for unknown employees, agents, or individuals responsible for the packing, re-packing, crating, and re-crating of the Sculpture. (Id. ¶¶ 3–7.) Plaintiff added Masterpiece International, Ltd. (“Masterpiece”) as a Defendant in its Verified Amended Complaint filed in state court October 5, 2012.

 

On October 10, 2012, Art Crating removed this action to this court, pursuant to 28 U.S.C. § 1446 (Not. of Removal), and subsequently filed its Answer, asserting crossclaims against all other Defendants. (Answer (Dkt.4).) On December 20, 2012, Art Crating filed a Third-party Complaint against Delta Air Lines, Inc. (“Delta”), alleging that Delta was liable for contribution to or indemnification of Art Crating for any damages award that Plaintiff may recover, plus costs. (Third-party Compl. (Dkt.11) ¶¶ 12–13.)

 

On April 2, 2013, Plaintiff filed a Motion to Remand the action to state court. (Mot. to Remand (Dkt.25).) Delta then filed a Motion to Sever on April 4, 2013, requesting that the third-party action be severed and remain before the court pursuant to Federal Rule of Civil Procedure 14(a)(4) regardless of the resolution of Plaintiff’s Motion to Remand. (Mot. to Sever & Stay (Dkt.26).) Delta also requested that the third-party action be stayed pending the outcome of the first-party action. (Id.)

 

The court referred the Motion to Remand and the Motion to Sever to Magistrate Judge Vera M. Scanlon for a Report and Recommendation (“R & R”) pursuant to 28 U.S.C. § 636(b)(1)(B) and Federal Rule of Civil Procedure 72(b)(1). (Nov. 5, 2013, Order; Nov. 14, 2013 Order.) On December 16, 2013, Judge Scanlon issued her R & R, recommending that Plaintiff’s Motion to Remand be granted and Delta’s Motion to Sever be denied as moot. (R & R (Dkt.31).)

 

No party has objected to Judge Scanlon’s R & R, and the time to do so has passed. See Fed.R.Civ.P. 72(b)(2). (See also R & R at 45 (“Written objections to this Report and Recommendation must be filed within fourteen days of service of this Report…. Failure to file objections within the specified time waives the right to appeal.”) (citations omitted).) Therefore, the court reviews the R & R for clear error. See Gesualdi v. Mack Excavation & Trailer Serv., Inc., No. 09–CV–2502 (KAM), 2010 WL 985294, at *1 (E.D.N.Y. Mar.15, 2010); La Torres v. Walker, 216 F.Supp.2d 157, 159 (S.D.N.Y.2000); cf. 28 U.S.C. § 636(b)(1). Finding no clear error, the court ADOPTS IN FULL the R & R. See Porter v. Potter, 219 F. App’x 112 (2d Cir.2007).

 

*2 Accordingly, Plaintiff’s Motion to Remand is GRANTED, Delta’s Motion to Sever and Stay is DENIED, and the entire action is REMANDED to the Supreme Court of New York, Kings County. The Clerk of Court is directed to immediately send a certified copy of this Order to the Clerk of Civil Court of the City of New York, County of Kings, 120 Schermerhorn Street, Brooklyn, New York and to close the case in this court. 28 U.S.C. § 1447(c).

 

SO ORDERED.

 

THOSE CERTAIN UNDERWRITERS AT LLOYD’S LONDON SUBSCRIBING TO POLICY NO.: B0501 HF10AAZT 999 a/s/o ESTATE OF DAVID SMITH,

 

Plaintiff,

 

against

 

ART CRATING, INC., MASTERPIECE INTERNATIONAL LTD., ABC COMPANIES 1–: 5 (said corporations being fictitious, the true: names unknown, responsible for the design of the: crate used to transport Horizontal 9/5/52), ABC: COMPANIES 6–10 (said corporations being: fictitious, the true names unknown, said: corporations being responsible for the packing, re-: packing, crating and re-crating of Horizontal: 9/4/52), JOHN DOES 1–10 (said names being: fictitious, the true names unknown, said persons: being employees, agents or individuals: responsible for the design of the crate used to: transport Horizontal 9/5/52), and JOHN DOES: 11–20 (said names being fictitious, the true names: unknown, said persons being employees, agents: or individuals responsible for the packing, re: packing, crating and re-crating of Horizontal: 9/4/52),:

 

Defendants.

 

ART CRATING, INC.,

 

Cross–Claimant,

 

against

 

MASTERPIECE INTERNATIONAL, LTD., ABC COMPANIES 1–5, ABC COMPANIES 6–10, JOHN DOES 1–10, and JOHN DOES 11–20,

 

Cross–Defendants.

 

MASTERPIECE INTERNATIONAL, LTD.,

 

Cross–Claimant,

 

against

 

THOSE CERTAIN UNDERWRITERS AT LLOYD’S LONDON SUBSCRIBING TO POLICY NO.: B0501 HF10AAZT 999 a/s/o ESTATE OF DAVID SMITH,

 

Cross–Defendants.

 

ART CRATING, INC.,

 

Third-party Plaintiff,

 

against

 

DELTA AIR LINES, INC.,

 

Third-party Defendant.

 

REPORT AND RECOMMENDATION

SCANLON, VERA M., United States Magistrate Judge.

Before the Court on referral from District Judge Nicholas G. Garaufis are two motions: the motion of Plaintiff Those Certain Underwriters at Lloyd’s London Subscribing to Policy No. B0501 HF10AAZT 999 (“Plaintiff” or “Lloyd’s”) to remand its complaint to the Supreme Court of the State of New York, Kings County, and the motion of Third-party Defendant Delta Air Lines, Inc. (“Delta”) to sever from Lloyd’s first-party action and stay the third-party action brought by Defendant/Third-party Plaintiff Art Crating, Inc. (“Art Crating”) against Delta. For the following reasons, the undersigned respectfully recommends that Plaintiff’s motion be granted, that Third-party Defendant’s motion be denied as moot, and that the entire action be remanded to state court.

 

I. BACKGROUND

The following description is drawn from parallel language in the Verified Complaint and Verified Amended Complaint, unless otherwise noted. Verified Compl. (“Compl.”), No. 17790/2012 (N.Y. Sup.Ct., Kings Cnty., Sept. 4, 2012) (available in the present action at ECF No. 1, pages 6–10); Verified Am. Compl. (“Am.Compl.”), No. 17790/2012 (N.Y. Sup.Ct., Kings Cnty., Oct. 5, 2012) (available in the present action at ECF No. 25–4). “When considering a motion to remand, the district court accepts as true all relevant allegations contained in the complaint and construes all factual ambiguities in favor of the plaintiff.” Weiss v. Hager, No. 11 Civ. 2740(VB), 2011 WL 6425542, at *2 (S.D.N.Y. Dec.19, 2011).

 

*3 Mr. David Smith (“Mr.Smith”) is a renowned American sculptor, painter, draftsman and photographer. Compl. ¶ 8; Am. Compl. ¶ 9. The Estate of David Smith (the “Estate”) allowed Mr. Smith’s sculpture titled Horizontal 9/4/52 (the “Sculpture”) to be exhibited by the Institut Valencia d’Art Modern in Valencia, Spain (the “Institut”). Compl. ¶ 9; Am. Compl. ¶ 10. Art Crating was hired to provide professional services relating to crating the Sculpture for safe transport from New York City to Valencia. Compl. ¶ 10; Am. Compl.¶ 11; see Art Crating Inc.’s Answer to Am. Compl. (“Art Crating Answer”) ¶ 11, Oct. 19, 2012, ECF No. 4. These services were to begin on or about October 22, 2009. Compl. ¶ 10; Am. Compl. ¶ 11; Art Crating Answer ¶ 11. Defendant Masterpiece International, Ltd. (“Masterpiece”) was also hired FN1 to provide professional consulting services related to transporting the Sculpture. Am. Compl. ¶ 12; but see Verified Answer, Affirmative Defenses & Cross–Claims of Masterpiece Int’l, Ltd. (“Masterpiece Answer”) ¶ 12, Dec. 14, 2012, ECF No. 9 (denying this allegation).

 

FN1. In its pleadings and brief, Lloyd’s states that Art Crating and Masterpiece were “hired on behalf of” the Institut, but Lloyd’s does not specify who hired these companies. Compl. ¶ 10; Am. Compl. ¶¶ 11–12; Pl.’s Mem. in Supp. of Mot. to Remand (“Pl.Mem.”) 4, Apr. 2, 2013, ECF No. 25–2.

 

At some point between November 2010 and January 2011, the Sculpture was damaged in transport, while in its crate. Compl. ¶ 15; Am. Compl. ¶ 17. During a hearing before the District Judge, Plaintiff’s counsel further alleged that the Sculpture, which is made of brass, has “a center[ ] piece and then two arms that came out, and they both broke off, [because] there wasn’t proper support underneath them.” Tr. of Civil Cause for Mot. Conf. (“Tr.”) 5:23–6:3, Dec. 18, 2012. Plaintiff’s counsel stated that the Sculpture “wasn’t packed properly” by Art Crating, that the packing was not properly overseen by Masterpiece, and that “all that happened in New York.” Id. at 5:5–14. According to counsel, the arms were welded back on, but the damage decreased the Sculpture’s value. Id. at 5:23–6:3.

 

Prior to being damaged, the Sculpture was valued at $3.5 million. Compl. ¶ 17; Am. Compl. ¶ 19. The Sculpture’s value decreased by 75% after the damage. Compl. ¶ 18; Am. Compl. ¶ 20. Lloyd’s, which had insured the Estate against the risk of damage to the Sculpture, paid the Estate $2.625 million, or 75% of the Sculpture’s pre-damage value. Compl. ¶ 19; Am. Compl. ¶ 21.

 

On September 4, 2012, Plaintiff filed this action in the Supreme Court of New York, Kings County, against Art Crating, Inc. (“Art Crating”); ABC Companies 1–5, fictitious names for the corporations responsible for the design of the crate used to transport the Sculpture; ABC Companies 6–10, fictitious names for the corporations responsible for the packing, re-packing, crating and re-crating of the Sculpture; John Does 1–10, fictitious names for the employees, agents or individuals responsible for the design of the crate used to transport the Sculpture; and John Does 11–20, fictitious names for the employees, agents or individuals responsible for the packing, re-packing, crating and re-crating of the Sculpture. Compl.; see Docket for Underwriters at Lloyd’s v. Art Crating, Inc., 17790/2012 (“State Court Docket”) (N.Y. Sup., Kings Cnty. Sept. 4, 2012) (available in the present action at ECF No. 30) (documenting that the Verified Complaint was filed in state court on September 4, 2012). Plaintiff served this pleading on Art Crating on September 18, 2012. Aff. of Service upon a Corporation, Sept. 21, 2012 (available in the present action at ECF No. 1, page 13). Plaintiff alleged in its complaint that Art Crating and the unnamed defendants were negligent in, inter alia, their design of the crate and packing of the Sculpture. Compl. ¶¶ 13–15; see Am. Compl. ¶¶ 15–17.

 

*4 On October 5, 2012, Plaintiff filed in state court a Verified Amended Complaint that added as a defendant Masterpiece International, Ltd. (“Masterpiece”). Am. Compl.; State Court Docket (documenting that the Verified Amended Complaint was filed in state court on October 5, 2012).FN2 Plaintiff served the Verified Amended Complaint on Art Crating on October 11, 2012, and on Masterpiece on October 22, 2012. See Aff. of Service, Dec. 3, 2013, ECF No. 27 (attaching documents corroborating Plaintiff’s service by email on Art Crating and attaching process server’s affidavit concerning Masterpiece).

 

FN2. At the time of its amendment, Plaintiff was within the twenty-day deadline for amendment as of right. See N.Y. C.P.L.R. 3025(a).

 

Besides naming Masterpiece, the Verified Amended Complaint provided more detail on the alleged breaches of Defendants’ duties to Plaintiff. Compare Compl. ¶¶ 11–14 and Am. Compl. ¶¶ 13–16. In addition, while the Verified Complaint alleged the Sculpture “was damaged in transport from New York City to Valencia, Spain,” Compl. ¶ 15, the Verified Amended Complaint alleged the Sculpture “was damaged while in its crate.” Am. Compl. ¶ 17.

 

On October 10, 2012, Defendant Art Crating removed this action to the Eastern District of New York, pursuant to 28 U.S.C. § 1446. Notice of Removal, Oct. 10, 2013, ECF No. 1. Thus, as the time of the filing of the notice of removal, Plaintiff had filed but not served its Amended Complaint. See Aff. of Service, Dec. 3, 2013, ECF No. 27.FN3 Art Crating did not mention the Verified Amended Complaint in its Notice of Removal and stated that “[t]he annexed Summons and Complaint constitute[ ] all of the process, pleadings or orders served upon Art Crating in the State Court proceeding.” Notice of Removal ¶ 2; see 28 U.S.C. § 1446(a). In addition, Art Crating’s counsel affirmed that Art Crating did not appear in the state court action until October 12, 2012, when it filed in state court its Notice to Party of Removal. Aff. of Eliot L. Greenberg, Dec. 4, 2013, ECF No. 29.

 

FN3. The removal statutes require consent of all defendants properly served. Since Co-defendant Masterpiece was not served prior to removal, Art Crating did not need Masterpiece to consent to removal. 28 U.S.C. § 1446(b)(2)(A).

 

After filing its Notice of Removal in federal court, Art Crating filed its Answer, which included cross-claims against Defendants Masterpiece, ABC Companies 1–5, ABC Companies 6–10, John Does 1–10 and John Does 11–20, alleging that any damage to the Sculpture was caused by these Defendants and that they were liable to contribute to or indemnify Art Crating for any judgment entered against it. Art Crating Answer ¶¶ 48–49. Masterpiece likewise filed an Answer that included cross-claims against Defendants Art Crating, ABC Companies 1–5, ABC Companies 6–10, John Does 1–10 and John Does 11–20. Masterpiece Answer ¶¶ 12–13.FN4

 

FN4. Masterpiece’s Answer appears to be incorrectly docketed as a cross-claim against Plaintiff. See ECF Docket Text at No. 9. Masterpiece should contact the Clerk’s Office to correct any error.

 

On December 20, 2012, Art Crating filed a Third-party Complaint against Delta, alleging that Delta was liable for contribution to or indemnification of any damages awarded against Art Crating. Art Crating, Inc.’s Third-party Compl. (“Third-party Compl.”), Dec. 20, 2012, ECF No. 11. In response, Delta filed an Answer denying its liability and raising several affirmative defenses. Delta Air Lines, Inc.’s Answer to Third-party Compl. (“Third-party Answer”), Jan. 14, 2013, ECF No. 13. Delta also filed an affidavit declaring its joinder in Art Crating’s Notice of Removal. Delta Air Lines, Inc.’s Joinder in Art Crating, Inc.’s Notice of Removal (“Joinder in Notice of Removal”), Jan. 14, 2013, ECF No. 14.

 

*5 Plaintiff timely filed its motion to remand this action. See 28 U.S.C. § 1447(c) (“If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.”); Pl.’s Letter Requesting Pre-motion Conference (“Pl.’s Pre-motion Letter”), Nov. 20, 2012, ECF No. 6; Pl. Mem.; see also Pl.’s Mem. in Reply to Def.’s Opp. to Mot. to Remand (“Pl. Reply Mem.”), Apr. 2, 2013, ECF No. 25–11.

 

Defendant Art Crating opposed Plaintiff’s motion. See Art Crating’s Mem. in Opp. to Pl.’s Mot. to Remand (“Def.Mem.”), Apr. 2, 2013, ECF No. 25–5. Masterpiece and Delta did not join in Art Crating’s opposition to the motion to remand. See Delta’s Mem. in Supp. of Mot. to Sever (“Third-party Mem.”), Apr. 4, 2013, ECF No. 26–3 (“Delta takes no position with regard to plaintiff’s remand motion….”).

 

In addition, Delta filed a motion requesting that, regardless of the outcome of Plaintiff’s motion to remand, the claims against Delta be severed and remain before the District Court for resolution, pursuant to Federal Rule of Civil Procedure (“FRCP”) 14(a)(4). Third-party Mem. 3. Delta further requested that the third-party action be stayed pending the outcome of the first-party action. Id. at 8.

 

II. LEGAL ANALYSIS

For the reasons discussed below, this Court respectfully recommends that Plaintiff’s motion be granted; that Third-party Defendant’s motion be denied; and that the entire action be remanded to the New York State Supreme Court, Kings County.

 

A. Lloyd’s Motion To Remand

“[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. § 1441(a). The burden of proving that jurisdiction is proper is on the party that removed the action. See Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 327 (2d Cir.2011). The statutes concerning removal are strictly and narrowly construed, “resolving any doubts against removability.” Purdue Pharma L.P. v. Kentucky, 704 F.3d 208, 213 (2d Cir.2013) (quoting Lupo v. Human Affairs Int’l, Inc., 28 F.3d 269, 274 (2d Cir.1994)); see Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108, 61 S.Ct. 868, 85 L.Ed. 1214 (1941) (requiring “strict construction” of removal legislation); Cutrone v. Mortgage Elec. Registration Sys., Inc., No. 13 Civ. 3075(ENV)(VMS), 2013 WL 5960827, at *3 (E.D.N.Y. Nov. 6, 2013) (“removal statutes are to be strictly construed”); Fed. Ins. Co. v. Tyco Int’l Ltd., 422 F.Supp.2d 357, 368 (S.D.N.Y.2006) (“[T]he removal statute is to be narrowly construed to limit the exercise of federal jurisdiction at the expense of state jurisdiction.”).

 

“[I]n our federal system of limited jurisdiction any party or the court sua sponte, at any stage of the proceedings, may raise the question of whether the court has subject matter jurisdiction.” United Food & Commercial Workers Union, Local 919, AFL–CIO v. CenterMark Props. Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir.1994) (quoting Manway Constr. Co. v. Housing Auth. of Hartford, 711 F.2d 501, 503 (2d Cir.1983)).

 

1. The Relevant Pleading For Purposes of Removal and Remand Is the Complaint, Because It Was Filed and Served Prior to Removal

*6 As a preliminary matter, this Court must address the Parties’ contentions as to whether the Verified Complaint or the Amended Verified Complaint is the relevant document for the purposes of removal and remand. Courts “generally evaluate jurisdictional facts … on the basis of the pleadings, viewed at the time when [the] defendant files the notice of removal.” Blockbuster, Inc. v. Galeno, 472 F.3d 53, 56–57 (2d Cir.2006); see Pullman Co. v. Jenkins, 305 U.S. 534, 536–38, 59 S.Ct. 347, 83 L.Ed. 334 (1939) (district court erred by considering the second amended complaint, which was filed in federal court, in determining the right to remove); Vera v. Saks & Co., 335 F.3d 109, 119 (2d Cir.2003) (considering the plaintiff’s complaint “at the time defendant filed its removal notice,” despite the plaintiff’s attempt to later “disavow or at least minimize” an allegation implicating the interpretation of federal law); Fed. Ins. Co., 422 F.Supp.2d at 368 (listing cases). In this case, Lloyd’s filed but had not served the amended pleading before Art Crating filed its Notice of Removal, which raises the question of whether proper service of, in addition to filing, a pleading is necessary to render it the relevant pleading “at the time of removal.”

 

The Parties did not identify any authority on point. See Def. Mem. 4–5 (asserting, without citing any legal support, that the original pleading is the operative pleading). When considering amended pleadings filed after removal-a slightly different scenario than the case at bar-the Second Circuit has found it need not determine which pleading was operative when those pleadings were substantively similar. See Gardner & Florence Call Cowles Found. v. Empire Inc., 754 F.2d 478, 481 n. 3 (2d Cir.1985) (“[W]e need not reach the issue here since the original complaint, although containing but a single count, alleged the substance of each element of the amended complaint, but for the default claim, as to all defendants.”); see also Law Offices of K.C. Okoli, P.C. v. BNB Bank, N.A., 481 F. App’x 622, 625 (2d Cir.2012) (noting, without indicating which pleading controlled, both an allegation in the plaintiff’s complaint made “at the time of removal” and the same allegation made in the post-removal amended complaint).FN5 Concerning amended pleadings filed prior to removal, as occurred in this case, courts from other circuits have reached conflicting conclusions, but the majority favors requiring service.FN6

 

FN5. In the context of post-removal amendments, district courts in this Circuit have offered conflicting guidance on whether pleadings become operative at the time of their filing or of their service. Compare Nab Const. Corp./Design–Cast Stone Sys., Inc. v. Design–Cast, Inc., No. 90 Civ. 4124(RR), 1991 WL 87370, at *2 (E.D.N.Y. May 16, 1991) (stating, in the context of a request to amend a complaint after removal, that “jurisdiction is generally decided on the basis of pleadings filed at the time of removal” (emphasis added); not discussing whether service is also required), with Burns Int’l Sec. Servs., Inc. v. BBC Brown Boveri Co., Inc., 539 F.Supp. 147, 149 n. 2 (S.D.N.Y.1982) (in the context of an amended complaint filed in federal court after removal, quoting Gos hen Litho, Inc. v. Fortune Marketing, Inc., No. 80 Civ. 1637(LBS) (S.D.N.Y. June 2, 1980), for the proposition that jurisdiction “is decided by the pleadings served as of the time when the petition for removal was filed” (emphasis added)).

 

FN6. Compare Bellinder v. Microsoft Corp., No. 99 Civ. 2578(KHV), 2000 WL 575021, at *3 (D.Kan. Mar.24, 2000) (recognizing precedent that an amended pleading need only be filed at the time of removal, but noting that the defendant offered no proof of the plaintiff’s failure to serve the amended pleading); Ruiz v. Farmers Ins. Co., 757 F.Supp. 1196, 1197 (D.Kan.1991) (where the notice of removal was filed less than three hours after the filing of the amended complaint, and service had not yet occurred, the court relied on the allegations of the amended complaint; citing Pullman Co., 305 U.S. at 540), with Momans v. St. John’s Nw. Military Acad., Inc., No. 99 Civ. 8510, 2000 WL 33976543, at *2 (N.D.Ill. Apr.20, 2000) (“Although an amended complaint ordinarily supersedes an earlier pleading, service of the amended complaint must be completed to effectuate the amended pleading.”); Thompson v. Victoria Fire & Cas. Co., 32 F.Supp.2d 847, 848 (D.S.C.1999) (amended pleadings must be served prior to removal); Pritt v. Republican Nat’l Comm., 1 F.Supp.2d 590, 591 (S.D.W.Va.1998) (considering only the original complaint when the amended complaint was filed but not served prior to removal); see also Rubel v. Pfizer Inc., 276 F.Supp.2d 904, 905 (N.D.Ill.2003) (the original complaint was not superseded by the amended complaint when the plaintiff failed to follow state procedural requirements in filing the amended complaint; declining to consider whether the plaintiff’s failure to serve the amended complaint warranted the same conclusion).

 

Support for a rule requiring service as well as filing in removal cases can be found in the text of 28 U.S.C. § 1446, which concerns the procedure for removal. Several subsections of that statute rely specifically on the time of service as the operative starting point for removal proceedings. For example, under subsection (a), the removing defendant must file a copy of all pleadings “served upon such defendant,” and subsection (b)(2)(A) requires consent from “all defendants who have been properly joined and served.” See 28 U.S.C. § 1446; see also Fed.R.Civ.P. 81(c)(3)(B) (“If all necessary pleadings have been served at the time of removal, a party entitled to a jury trial under Rule 38 must be given one ….” (emphasis added)). When Congress intended to allow receipt by means other than service to start the operative period, Congress stated that exception explicitly. Under subsection (b)(2) (B), the defendants’ time to serve begins “after receipt by or service on that defendant of the initial pleading,” and subsection (b)(3) mandates that the time for removal after receipt of an amended pleading runs “after receipt by the defendant, through service or otherwise, of a copy of an amended pleading.” See 28 U.S.C. § 1446 (emphasis added).

 

*7 If Congress had intended to allow removal based on pleadings not yet served, it would have required in 28 U.S.C. § 1446(a) that the defendant append all pleadings “recei[ved] by or serv[ed] on that defendant”-the language Congress used in subsection (b)(2) (B)-rather than the language it chose, which required appending only the pleadings “served upon such defendant.” 28 U.S.C. § 1446. Therefore, where case law guides courts to consider the pleadings “at the time when defendant file[d] the notice of removal,” Blockbuster, 472 F.3d at 56–57, that guidance is best understood as referring to the pleadings Congress required be filed with the notice of removal-in other words, those pleadings “served upon such defendant.” 28 U.S.C. § 1446(a).

 

More generally and in an unrelated context, the Second Circuit considered “the point in time at which the superseding of the original by the amended complaint occurs.” Int’l Controls Corp. v. Vesco, 556 F.2d 665, 669 (2d Cir.1977). The Court found that where service of an amended complaint is required under FRCP 5(a), the initial complaint is not superseded until the amended complaint is served. Id. at 668–69. The Court limited this holding to the facts and legal requirements at issue in that case, id., and it will not always apply in the context of removal and remand.FN7 However, it provides support for requiring service of the amended pleading.

 

FN7. Exceptions exist where a court might consider jurisdictional facts not alleged in pleadings served at the time of removal. For example, in Yong Qin Luo v. Mikel, 625 F.3d 772 (2d Cir.2010), the Second Circuit recognized a jurisdictional fact that was not filed-let alone served-at the time of the notice of removal. The Court noted that “New York’s rules of civil procedure prohibit a plaintiff from pleading a specific monetary demand in [cases] where the complaint alleges personal injury.” Id. 775–76. To determine the amount in controversy where diversity jurisdiction was the basis for removal, the district court asked the plaintiff during a post-removal initial conference whether her damages exceeded $75,000; the Second Circuit then treated her response as her pleading at the time of removal. Id.

 

As mentioned above, Lloyd’s served the Amended Verified Complaint on Art Crating the day after Art Crating removed the action to federal court. Art Crating contends that the Court should consider the original complaint, which states that the Sculpture “was damaged in transport from New York City to Valencia, Spain.” Compl. ¶ 15; Def. Mem. 4–5.FN8 Lloyd’s asks the Court to consider the phrasing used in the amended complaint, which states that the Sculpture was “damaged while in its crate,” but argues that both pleadings satisfy the well-pleaded-complaint rule, as discussed in detail below. Am. Compl. ¶ 17; Pl. Mem. 4, 9–10.

 

FN8. Art Crating argues in footnotes 1 and 2 of its brief that Plaintiff filed the Verified Amended Complaint after Art Crating informed Plaintiff of Art Crating’s intent to remove the matter, and therefore the Court should consider only the Verified Complaint. Defs. Mem. 4 n. 1, 5 n. 2; see id. at 2. To the contrary, Defendant’s notice of its intent to remove is of no import. Cf. Thompson, 32 F.Supp.2d at 848 (the plaintiff’s verbal notice to the defendants of his intent to file the amended complaint did not satisfy the requirement of proper service); Burns Int’l Sec. Servs. ., 539 F.Supp. at 149 n. 2 (litigant’s intent to amend the complaint was irrelevant).

 

The situation is akin to that in Burns International Security Services, in which the court denounced as “a tempest in a teapot” the defendant’s argument that the court must disregard amended pleadings that the plaintiffs filed after removal. Burns Int’l Sec. Servs., 539 F.Supp. at 148–89. That court explained that the plaintiffs were not advancing a new theory, a new party or changed circumstances in their amended pleading; instead, “the amended complaint merely clarifie[d] and amplifie[d] their initial intent,” which was not “precisely articulated” in the initial pleading. Id.; see Gardner & Florence Call Cowles Found., 754 F.2d at 481 n. 3 (declining to decide whether to consider original or amended complaint where the “substance of each element” was present in both complaints).

 

Likewise, there is little significance in Lloyd’s original and amended complaints stating alternately that the Sculpture was “damaged in transport from New York City to Valencia, Spain,” Compl. ¶ 15, or was “damaged while in its crate,” Am. Compl. ¶ 17. The amended pleading simply clarifies a factual statement already present in Plaintiff’s original pleading. This Court would reach the same conclusions in its Report and Recommendation regardless of whether the operative pleading was the Verified Complaint or the Amended Verified Complaint.

 

*8 Nevertheless, this Court respectfully recommends following the example of International Controls Corp. and looking to the initial complaint in evaluating the record, because Lloyd’s both filed and served that pleading on Art Crating prior to Art Crating’s removal of the action. Service of the amended pleadings was within Lloyd’s control, and requiring Art Crating to remove based on pleadings filed and not served would be to require Art Crating to remove based on pleadings it had not yet received,FN9 through no fault of its own. Instead, it would best accord with the procedures of 28 U.S.C. § 1446(a) to consider the pleadings Congress required Art Crating to append to its notice of removal. Thus, we look to the Verified Complaint to consider whether jurisdiction exists for removal.

 

FN9. Although it would not change this Court’s analysis, there is no evidence that Art Crating received the amended pleading by other means before removal.

 

2. Federal Question Jurisdiction Did Not Provide a Proper Basis for Art Crating to Remove This Action

In its Notice of Removal, Defendant Art Crating asserted, as the basis of removal, this Court’s original jurisdiction over federal questions, pursuant to 28 U.S.C. § 1331, which provides original jurisdiction over “all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331; Notice of Removal ¶ 7. After a case is removed based on federal question jurisdiction, “[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).

 

As discussed below, the pleadings allege exclusively state common law claims, but Art Crating contends removal was proper due to complete preemption by federal law. Notice of Removal ¶¶ 5–7; Def. Mem. 1–4. Art Crating further alleges that Delta is an indispensable party to Plaintiff’s action and that the relevant claims against Delta concern federal law. Def. Mem. 1–4. Lloyd’s responds that the four-corners of its pleading do not implicate federal law, denies that Delta is an indispensable party and requests remand to state court. Pl. Mem. 7–13.

 

i. Lloyd’s Pleadings Meet the Requirements of the Well–Pleaded–Complaint Rule

For federal question jurisdiction to provide a basis for removal, the well-pleaded-complaint rule requires that the plaintiff’s own statement of its action be based on federal law. See Calabro v. Aniqa Halal Live Poultry Corp., 650 F.3d 163, 166 (2d Cir.2011). “[T]he plaintiff is ‘the master of the complaint.’ ” Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826, 831, 122 S.Ct. 1889, 153 L.Ed.2d 13 (2002) (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)). Therefore, a plaintiff “is free to avoid federal jurisdiction by ‘pleading only state claims even where a federal claim is also available.’ ” Romano v. Kazacos, 609 F.3d 512, 518 (2d Cir.2010) (quoting Marcus v. AT & T Corp., 138 F.3d 46, 52 (2d Cir.1998)).

 

“[I]t is well established that a defendant may not evade [the well-pleaded-complaint] rule by raising a federal question in its responsive pleadings and then attempting to remove on that basis.” Calabro, 650 F.3d at 166. Federal defenses, “including the defense of pre-emption” cannot be the basis for removal, “even if both parties concede that the federal defense is the only question truly at issue.” Caterpillar, 482 U.S. at 393; see Holmes Grp. ., 535 U.S. at 831 (whether a federal question is presented depends on the complaint, not the answer or any counterclaims); Sullivan v. Am. Airlines, Inc., 424 F.3d 267, 271–73 (2d Cir.2005) (“anticipated defenses” are not a basis for federal question jurisdiction); Singh v. N. Am. Airlines, 426 F.Supp.2d 38, 42 (E.D.N.Y.2006) (under the well-pleaded complaint rule, the court may not consider the defense of federal preemption). Similarly, third-party pleadings do not provide a basis for removal of the initial action in almost all cases.FN10 In Calabro, the Second Circuit upheld an award of attorneys’ fees based on the defendant’s “objectively unreasonable” argument “that the presence of federal claims in its third-party complaint rendered the entire action removable under 28 U.S.C. § 1441(c).” Id.; see In re Agent Orange Prod. Liab. Litig., 635 F.2d 987, 990 n. 6 (2d Cir.1980) (“[T]he jurisdiction of the district court over the claims of the plaintiffs is not enhanced by third party complaints.”); Allfour v. Bono, No. 11 Civ. 1619(JFB)(ARL), 2011 WL 2470734, at *3 (E.D.N.Y. June 22, 2011) (“[C]laims made in a Third Party Complaint cannot provide a basis for federal jurisdiction.”).

 

FN10. There is a statutory exception in 28 U.S.C. § 1441(d) allowing removal by third-party defendants that are foreign states, see, e.g., Kully v. Aircraft Serv. Int’l Grp., Inc., 662 F.Supp.2d 259, 260 (E.D.N.Y.2009); of course, this exception does not apply in this case.

 

*9 Art Crating does not allege there are federal claims on the face of Plaintiff’s pleadings, but instead argues that Plaintiff’s state common law claims are completely preempted-an issue addressed in the following section. Def. Mem. 2–5. Lloyd’s urges that it should be allowed “to pursue its cause of action in the manner it chooses and against those parties it believes the proofs properly support.” Pl. Mem. at 11. Lloyd’s also argues that removal based on Art Crating’s defenses is improper. Id. at 10–11.

 

Looking at the four corners of Lloyd’s pleadings and putting aside the question of complete federal preemption, remand is warranted under the well-pleaded-complaint rule. As the master of its complaint, Lloyd’s chose to assert claims sounding in negligence against, inter alia, Art Crating and Masterpiece (and not Delta); Lloyd’s also chose to not assert any federal claims. To the extent Art Crating asserts a defense of federal preemption (rather than complete preemption), it is well-settled that removal cannot be based on a federal defense. See Caterpillar, 482 U.S. at 393. Art Crating also cannot generate federal question jurisdiction for purposes of removal by filing a third-party complaint stating a federal claim. See Calabro, 650 F.3d at 166. Removal was not warranted based on Plaintiff’s well-pleaded complaint.

 

ii. Lloyd’s Claims are Not Completed Preempted by the Montreal Convention

Art Crating alleges that Plaintiff amended its complaint to avoid federal question jurisdiction, but that it cannot alter through “artful pleading” what, in both versions of the pleadings, Art Crating contends, is an essentially federal claim. Def. Mem. 4–5 (quoting Travelers Indem. Co. v. Sarkisian, 794 F.2d 754, 758 (2d Cir.1986)). A plaintiff cannot use artful pleading to evade federal question jurisdiction “when Congress has either (1) so completely preempted, or entirely substituted, a federal law cause of action for a state one that plaintiff cannot avoid removal by declining to plead necessary federal questions, or (2) expressly provided for the removal of particular actions asserting state law claims in state court.” Romano, 609 F.3d at 519 (citation and quotation removed); see Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63–64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987) (“Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character.”); Montefiore Med. Ctr., 642 F.3d at 327 (same).

 

In this case, the question of complete preemption concerns the Montreal Convention,FN11 a treaty of the United States that, at a minimum, raises federal questions for jurisdictional purposes. See 28 U.S.C. § 1331; Best v. BWIA W. Indies Airways Ltd., 581 F.Supp.2d 359, 362 (E.D.N.Y.2008). “The Montreal Convention entered into force in the United States on November 4, 2003, updating and replacing the uniform system of liability for international air carriers previously established by the Warsaw Convention.” In re Nigeria Charter Flights Contract Litig., 520 F.Supp.2d 447, 452 (E.D.N.Y.2007). Rather than amending the Warsaw Convention,FN12 “the Montreal Convention is an entirely new treaty that unifies and replaces the system of liability that derives from the Warsaw Convention.” Ehrlich v. Am. Airlines, Inc., 360 F.3d 366, 371 n. 4 (2d Cir.2004).FN13

 

FN11. Convention for the Unification of Certain Rules for International Carriage by Air, May 28, 1999 (entered into force on Nov. 4, 2003), reprinted in S. Treaty Doc. No. 106–45, 1999 WL 33292734 (2000).

 

FN12. Convention for the Unification of Certain Rules Relating to International Transportation by Air, Oct. 12, 1929, 49 Stat. 3000, T.S. No. 876 (1934), note following 49 U.S.C. § 1502.

 

FN13. Art Crating alleges that federal question jurisdiction is based on the Montreal Convention and/or the Warsaw Convention. Notice of Removal ¶ 6. Since the events at issue postdate the enactment of the Montreal Convention, this Report and Recommendation will consider that treaty.

 

*10 The Montreal Convention “applies to all international carriage of … cargo performed by aircraft for reward,” and it limits an air carrier’s liability to damage occurring while “the cargo is in the charge of the carrier.” Montreal Convention, 1999 WL 33292734, at *29, 34 (Articles 1 and 18). The Montreal Convention also limits an air carrier’s liability if “it proves that the … damage to[ ] the cargo resulted from … defective packing of that cargo performed by a person other than the carrier or its servants or agents.” Id. at *34 (Article 18(2)).

 

Although neither the Supreme Court nor the Second Circuit has specifically held that the Montreal Convention completely preempts state law claims, the Supreme Court in El Al Israel Airlines, Ltd. v. Tsui Yuan Tseng, 525 U.S. 155, 119 S.Ct. 662, 142 L.Ed.2d 576 (1999), held that recovery for an injury falling within the scope of the Warsaw Convention “if not allowed under the Convention, is not available at all.” Id. at 161; see Singh, 426 F.Supp.2d at 42–48 (the Warsaw Convention preempted the plaintiff’s claims when the injury-causing event, a mislabeling of the plaintiff’s luggage, occurred during embarkation). The Warsaw Convention and the Montreal Convention have “substantially the same preemptive effect.” Paradis v. Ghana Airways Ltd., 348 F.Supp.2d 106, 111 (S.D.N.Y.2004), aff’d, 194 F. App’x 5 (2d Cir.2006). Thus, several district courts have held that the Montreal Convention “preempts state law claims falling within its scope.” In re Nigeria Charter Flights Contract Litig., 520 F.Supp.2d at 453; see Mateo v. JetBlue Airways Corp., 847 F.Supp.2d 383, 386 (E.D.N.Y.2012) (the Montreal Convention “has complete preemptive power”); Best, 581 F.Supp.2d at 362 (same).

 

The Montreal Convention’s preemptive scope does not encompass every injury arising during international transportation, and it is limited to the terms of the treaty. See, e.g., Seagate Logistics, Inc. v. Angel Kiss, Inc., 699 F.Supp.2d 499, 506 (E.D.N.Y.2010) (plaintiff’s breach-of-contract claims were outside the Convention’s scope); In re Nigeria Charter Flights Contract Litig., 520 F.Supp.2d at 455 (the Montreal Convention “was not intended to cover claims for nonperformance”).FN14 For example, in Samsung Austin Semiconductor, LLC v. Integrated Airline Services, No. 12 Civ. 688(JM), 2013 WL 105380 (N.D.Tex. Jan.9, 2013), the defendants removed the plaintiff’s state law claims concerning cargo damaged during ground handling after an international flight. The court remanded the claims, finding that defendants had not met their burden of proving that the claims fell within the preemptive scope of the Montreal Convention. Id. at *4. Specifically, the defendants had failed to establish that the ground handler was acting as the air carrier’s agent at the time the cargo was damaged. Id. Likewise, in Railroad Salvage of Connecticut, Inc. v. Japan Freight Consolidators (U.S.A.) Inc., 556 F.Supp. 124 (E.D.N.Y.1983), aff’d sub nom. R.R. Salvage of CT v. Japan Freight, 779 F.2d 38 (2d Cir.1985), the Warsaw Convention did not apply when goods were “lost somewhere between the airport and their scheduled destination,” outside the control of the air carrier. Id. at 126.FN15

 

FN14. See also Nankin v. Cont’l Airlines, Inc., No. 09 Civ. 7851(MMM)(RZx), 2010 WL 342632, at *7–8 (C.D.Cal. Jan. 29, 2010) (claims involving nonperformance of contract were not preempted by the Montreal Convention); Kamanou–Goune v. Swiss Int’l Airlines, No. 08 Civ. 7153(SCR)(GAY), 2009 WL 874600, at *4–5 (S.D.N.Y. Mar. 27, 2009) (same); cf. Pflug v. Egyptair Corp., 961 F.2d 26, 28–29 (2d Cir.1992) (the Warsaw Convention “does not apply to all claims of injuries suffered in conjunction with international air travel”).

 

FN15. See Donkor v. British Airways, Corp., 62 F.Supp.2d 963, 967–70 (E.D.N.Y.1999) (the Warsaw Convention did not preempt state law claims concerning, inter alia, damage to baggage outside the air carrier’s control); see generally Buonocore v. Trans World Airlines, Inc., 900 F.2d 8, 10 (2d Cir.1990) (passenger injury claims were outside the scope of the Warsaw Convention when the passenger was not in the process of embarking or disembarking); Brauner v. British Airways PLC, No. 12 Civ. 343(JG)(JO), 2012 WL 1229507, at *6 (E.D.N.Y. Apr. 12, 2012) (same); Hunter v. Deutsche Lufthansa AG, 863 F.Supp.2d 190, 207 (E.D.N.Y.2012) (same).

 

*11 In this case, according to Art Crating, removal based on federal question jurisdiction was proper because Plaintiff’s state common law claims implicated damage to cargo during international air travel and are therefore completely preempted by the Warsaw Convention and/or the Montreal Convention. Notice of Removal ¶¶ 5–7; Def. Mem. 1–4. Lloyd’s alleges that Art Crating takes the phrase “was damaged in transport from New York City to Valencia, Spain” out of context and fail to account for Lloyd’s claims being exclusively based on state common law and directed at Defendants, not Delta. Pl. Mem. 7–9.

 

The present case is not one of “artful pleading,” where “plaintiff has pled what must necessarily be a federal claim, [and] has no state law available to choose as the basis for his suit.” Travelers Indem. Co., 794 F.2d at 758; see Romano, 609 F.3d at 518–19. Art Crating ignores that the Montreal Convention’s preemptive scope is bound to the terms of that treaty, including the provision limiting liability to damage occurring while “the cargo is in the charge of the carrier.” Montreal Convention, 1999 WL 33292734, at *34; see Samsung Austin Semiconductor, LLC, 2013 WL 105380, at *4.

 

It cannot be determined from the pleadings that, as a matter of law, the injury-causing event occurred while the Sculpture was “in the charge of” Delta, and not while it was being packed or unpacked or while it was being transported to or from the airport. Plaintiff alleges only that the Sculpture was damaged during transport, while in its crate, at some point between November 2010 and January 2011. Compl. ¶ 15; Am. Compl. ¶ 17.FN16 Art Crating relies heavily on the slight differences between the original and amended pleadings, suggesting that the language in the former is an admission that the damage occurred on Delta’s watch. See Notice of Removal ¶ 6. In any event, the language in both pleadings may be fairly read to encompass periods before and after the Sculpture was in Delta’s control because these periods include time when entities other than an entity protected by the Montreal Convention’s limitations had control and/or access to the Sculpture. As it cannot be concluded from either the original or the amended complaint that Plaintiff’s claims fall under the Montreal Convention, Art Crating’s argument based on complete preemption fails.

 

FN16. It is certainly possible that the damage occurred while the Sculpture was in Delta’s control, but there is no basis to so find on the face of the pleadings. Indeed, Delta alleges that it had control of the Sculpture for only two days, January 11–12, 2011. See Aff. of Norma I. Bayron ¶¶ 3–5, Apr. 4, 2013, ECF No. 26–1.

 

iii. Delta Is Not An Indispensable Party

Art Crating further argues that removal was proper because Delta is allegedly an indispensable party to Plaintiff’s claims and any claims against Delta would be completely preempted by the Montreal Convention. Def. Mem. 1–4. Under FRCP 19(a), an entity must be joined, if feasible, if in its absence, “the court cannot accord complete relief among existing parties” or it “claims an interest relating to the subject of the action and is so situated that disposing of the action in the [entity]’s absence may: (i) as a practical matter impair or impede the [entity]’s ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations.” Fed.R.Civ.P. 19(a); see Fed.R.Civ.P. 19(b) (concerning when joinder is not feasible).

 

*12 A defendant’s “desire to seek indemnification from [a third-party] does not make [the third-party] an indispensable party.” Marathon Int’l Petroleum Supply Co. v. I.T.I. Shipping, S.A., 740 F.Supp. 984, 987 (S.D.N.Y.1990); see Cronin v. Adam A. Weschler & Son, Inc., 904 F.Supp.2d 37, 42 (D.D.C.2012) ( “[Defendant’s] potential right to contribution or indemnity from [a third-party] … does not make the latter a required party under Rule 19.”). “It has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit.” Temple v. Synthes Corp., Ltd., 498 U.S. 5, 7, 111 S.Ct. 315, 112 L.Ed.2d 263 (1990); Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343, 358 (2d Cir.2000) (same). “The reasons for this general rule are that joint and several liability permits the plaintiff to recover full relief from any one of the responsible parties, which party then has the option of suing for contribution or indemnity. Thus, there is no legitimate fear of multiple obligations.” City of New York v. Waterfront Airways, Inc., 620 F.Supp. 411, 413 (S.D.N.Y.1985); see Tross v. Ritz Carlton Hotel Co., LLC, 928 F.Supp.2d 498, 508 (D.Conn.2013) (finding no risk of multiple or inconsistent obligations where “the defendants may subsequently seek to recover from third parties they believe were joint tortfeasors or from third parties against which they believe they are indemnified”); Lee v. Trans Am. Trucking Serv., Inc., 111 F.Supp.2d 135, 142 (E.D.N.Y.1999) (joint tortfeasors were not indispensable parties because, if the defendants were found liable, the defendants could seek contribution). Thus, a separate action may be “less convenient” for the defendant, but “it is nonetheless ‘a means of resolving [defendant’s] claim of the risk of inconsistent obligations.’ ”   Cronin, 904 F.Supp.2d at 42 (quoting Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306, 320 (3d Cir.2007)). Joinder of such tortfeasors is properly accomplished through FRCP 20, not FRCP 19. See Fed.R.Civ.P. 19 (advisory committee note) (“[A] tortfeasor with the usual ‘joint-and-several’ liability is merely a permissive party to an action against another with like liability.”).

 

Based on Lloyd’s allegation in its original complaint that the Sculpture “was damaged in transport from New York City to Valencia, Spain,” Art Crating claims that Delta is an indispensable party. Def. Mem. 1–4; Compl. ¶ 15. Lloyd’s denies that Delta is an indispensable party and suggests Delta is “at most,” a joint tortfeasor. Pl. Mem. 12.

 

Although any claims by Lloyd’s against Delta would likely fall within the scope of the Montreal Convention-and, if so, would be sufficient to confer federal jurisdiction had Delta been a defendant in the original action-Lloyd’s was not required to name Delta as a defendant. Instead of looking to FRCP 19, Art Crating erroneously suggests a same-case-or-controversy standard for indispensable parties, alleging Delta was an indispensable party because facts related to Delta’s and Defendants’ handling of the Sculpture were “intrinsically intertwined.” Def. Mem. 5. However, it is well-established that defendant’s ability to seek contribution or indemnification against other tortfeasors does not make them indispensable parties. See Temple, 498 U.S. at 7.FN17 Art Crating cites no case law to the contrary, nor does Art Crating attempt to establish that Delta is a required party within the meaning of FRCP 19(a). See Def. Mem. 5. Art Crating also raised no objection to Delta’s motion to sever the claims against Delta from the main action, which further calls into question Art Crating’s argument that Delta is an indispensable party to main action.

 

FN17. See generally Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 375 n. 17, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978) (in the context of incomplete diversity between the plaintiff and an impleaded third-party defendant whom the plaintiff then named as a defendant, stating that “there is nothing necessarily collusive about a plaintiff’s selectively suing only those tortfeasors of diverse citizenship” and recognizing that a defendant “would surely try to limit his liability by impleading any joint tortfeasors for indemnity or contribution”).

 

*13 For the reasons stated above, Art Crating’s removal of this action based on federal question jurisdiction was therefore improper.

 

3. Art Crating’s Newly–Asserted Claims of Diversity Jurisdiction Do Not Provide a Basis For Removal

Although in its Notice of Removal, Art Crating stated that “removal is proper pursuant to 28 U.S.C. § 1331,” the federal question provision-not 28 U.S.C. § 1332, the diversity provision-Art Crating implies in its brief that diversity jurisdiction is also present by suggesting that there is complete diversity among the parties. See Notice of Removal ¶ 7; see id. ¶¶ 2 (alleging the Court has original jurisdiction based on 28 U.S.C. § 1331, but not mentioning 28 U.S.C. § 1332), 6 (mentioning the amount in controversy, but not the citizenship of the parties); Civil Cover Sheet, Section II, Oct. 10, 2012, ECF No. 1–1 (identifying the basis of jurisdiction as “Federal Question,” not “Diversity”); Def. Mem. 6 (arguing that “Plaintiff has not established that there is not complete diversity among the parties”). To the extent Art Crating now raises an argument in favor of removal based on diversity jurisdiction, such an argument is untimely. Even if timely raised, diversity jurisdiction would not have provided a basis for removal in this case.

 

Where there is diversity of citizenship among the parties and an amount in controversy exceeding $75,000, district courts have original jurisdiction. 28 U.S.C. § 1332. A defendant seeking to remove a case based on diversity jurisdiction “must aver that all of the requirements of diversity jurisdiction have been met.” Brown v. Eli Lilly & Co., 654 F.3d 347, 356 (2d Cir.2011); see 28 U.S.C. § 1446(a). Where these requirements have not been stated, a defendant may freely amend its notice of removal within thirty days of being served with the relevant pleading. See 28 U.S.C. § 1446(b); Griessel v. Mobley, 554 F.Supp.2d 597, 606 (M.D.N.C.2008) (citing C. Wright & A. Miller, 14C Fed. Prac. & Proc. Civ. § 3733 (3d ed.)). A defendant may also amend its notice of removal after thirty days if the amendment is merely technical. See, e.g., Emeldi v. Univ. of Oregon, 698 F.3d 715, 731 (9th Cir.2012) (allowing untimely amendment of “obvious factual error” in notice of removal). However, a defendant may not amend a notice of removal after thirty days to state a new ground for removal. See Ervast v. Flexible Prods. Co., 346 F.3d 1007, 1017 n. 4 (11th Cir.2003) (declining to consider argument concerning diversity jurisdiction, raised for the first time in petitioner’s appellate brief, because petitioner had “the burden to plead this basis in its notice of removal”).FN18

 

FN18. See also Gavin v. AT & T Corp., 464 F.3d 634, 641 (7th Cir.2006) (remanding case where the court had diversity jurisdiction because the defendants “never suggested diversity as a basis for jurisdiction, insisting instead on placing all their jurisdictional eggs in the [federal question] basket, [and] there we shall leave them”); Lupo, 28 F.3d at 274 (“It would be contrary to any concept of sensible judicial administration to permit [the defendant] to amend its notice of removal at this juncture (well beyond thirty days after [it] first received [the plaintiff’s] complaint[) ]….”); Bernadin v. Am. Airlines, Inc., No. 08 Civ. 1774(NG)(VVP), 2009 WL 1910964, at *3 (E.D.N.Y. July 1, 2009) (remanding case where defendant sought to amend its notice of removal, through its briefs on motion for remand, to include a grounds for jurisdiction not asserted in the notice of removal); State Farm Indem. v. Fornaro, 227 F.Supp.2d 229, 240 (D.N.J.2002) (the defendant could not add an argument based on diversity jurisdiction that was not raised in its notice of removal); Arancio v. Prudential Ins. Co. of Am., 247 F.Supp.2d 333, 336–37 (S.D.N.Y.2002) (“a notice of removal may not be untimely amended” to add new jurisdictional grounds; such an omission is not a procedural defect to which the plaintiff must object within thirty days, per 28 U.S.C. § 1447(c)).

 

In addition, the right to remove may be limited even if diversity exists and the notice of removal is timely filed. An action may not be removed on the basis of diversity jurisdiction “if any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” 28 U.S.C. § 1441(b)(2); see In Suk Chai v. Big Boy Coach, Inc., No. 13 Civ. 746(MKB), 2013 WL 5676484, at *3 (E.D.N.Y. Oct.17, 2013) (finding that removal was improper “because both Defendants are citizens of New York State, where the action was commenced”). However, “section 1441(b) is a rule of procedure and does not state a jurisdictional requirement.” Shapiro v. Logistec USA, Inc., 412 F.3d 307, 313 (2d Cir.2005). Therefore, a plaintiff seeking to remand a case based on a defendant’s citizenship in the forum state must so move within thirty days of the filing of the notice of removal. 28 U.S.C. § 1447(c) (“A motion to remand the case on the basis of any defect other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal under section 1446(a).”); see Shapiro, 412 F.3d at 313 (the plaintiff waived his objection based on 28 U.S.C. § 1441(b) by not raising it within thirty days); Hill v. Hill–Love, 509 F. App’x 605, 606 n. 1 (9th Cir.2013) (same).

 

*14 In its Notice of Removal, Art Crating failed to identify diversity jurisdiction as a basis for removal. See Notice of Removal ¶¶ 2, 6–7; Civil Cover Sheet. Indeed, on the Civil Cover Sheet completed by counsel for Art Crating on October 4, 2012, and filed on October 10, 2012, along with the Notice of Removal, Art Crating identified Lloyd’s as both a “Citizen of This State” and a “Citizen or Subject of a Foreign Country,” and identified Defendants as “Citizen[s] of This State.” Civil Cover Sheet, Section III. While not a party admission, the Civil Cover Sheet reflects an understanding that diversity does not exist in this case.

 

Art Crating never moved to amend its Notice of Removal, and instead relies on arguments raised, for the first time, in its brief. Its argument based on diversity jurisdiction is therefore untimely and should be disregarded. See Lupo, 28 F.3d at 274. Assuming, arguendo, that Art Crating had noticed diversity jurisdiction as grounds for removal, removal on that basis would nevertheless have been improper. As the Parties admit, Defendants Art Crating and Masterpiece are New York corporations. Compl. ¶ 3; Am. Compl. ¶¶ 3–4; Art Crating Answer ¶ 3; Masterpiece Answer ¶ 2. Their New York citizenship renders removal to this district, based on diversity jurisdiction, improper. See 28 U.S.C. § 1441(b) (2).FN19 Lloyd’s noticed its motion to remand more than thirty days after the Notice of Removal, see Pl.’s Pre-motion Letter, which would have been ten days too late to raise any objection based on 28 U.S.C. § 1441(b)(2). See Shapiro, 412 F.3d at 313. This Court will not assume that Lloyd’s would have forfeited an objection to an argument that Art Crating did not actually raise.FN20

 

FN19. The citizenship of the John Doe Defendants in this action is not relevant to determining diversity. See 28 U.S.C. 1441(b) (1) (“In determining whether a civil action is removable on the basis of the jurisdiction under section 1332(a) of this title, the citizenship of defendants sued under fictitious names shall be disregarded.”).

 

FN20. The presence of the subrogor Estate, domiciled in New York, see Compl. ¶ 2; Am. Compl. ¶ 2, could also affect diversity. The Second Circuit in St. Paul Fire and Marine Insurance Co. v. Universal Builders Supply, 409 F.3d 73 (2d Cir.2005), found that the subrogors in that case were interested parties because the insurer subrogee had not reimbursed the subrogors for the full amount of their losses. Id. at 81–82. The Court also found that their presence destroyed diversity, as both the subrogors and a defendant were citizens of New York. Id. In this case, the subrogor is arguably not an interested party; Lloyd’s alleges that the damage to the Sculpture decreased its value by 75% and that Lloyd’s paid that same amount to the Estate. Compl. ¶¶ 17–19; Am. Compl. ¶¶ 19–22.

 

Although it ignores the requirements of 28 U.S.C. § 1441(b)(2), Art Crating takes issue with Lloyd’s refusal to specifically identify two investors, called “Names”,FN21 who were identified in the certification of Lloyd’s Assistant Claims Manager Barry Cole (“Mr.Cole”) as being diversity-destroying residents of New York. Certification of Barry Cole (“Cole Certification”), Mar. 28, 2013, ECF No. 25–11; Def. Mem. 6; Pl. Reply Mem. 2; see generally E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins. Co., 160 F.3d 925, 939 (2d Cir.1998) (discussing individual underwriters’ effect on diversity jurisdiction); Humm v. Lombard World Trade, Inc., 916 F.Supp. 291, 298–99 (S.D.N.Y.1996) (discussing the status of Names as parties in interest). It is not clear from Mr. Cole’s certification, which was made under penalty of perjury, whether the two Names were New York residents when Lloyd’s filed the original complaint on September 4, 2012. Id. ¶ 14.FN22 Lloyd’s has otherwise refused to identify the Names because of Lloyd’s confidentiality rules. Pl. Reply Mem. 2. Art Crating suggests that Lloyd’s has an obligation to provide these two individuals’ names and addresses. See Def. Mem. 6; Art Crating Inc.’s Combined Request for Admissions, Interrogatories, & Request for Production of Documents, Feb. 1, 2013, ECF No. 25–9 (concerning the citizenship of Lloyd’s Names).

 

FN21. Lloyd’s states that over twenty syndicates were involved in underwriting the insurance risk related to the Sculpture; each syndicate is composed of individual investors, or “Names.” Pl. Reply Mem. 2; see generally Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857–59 (5th Cir.2003) (providing a detailed description of Lloyd’s structure and the liability assumed by Names).

 

FN22. To determine diversity jurisdiction, courts look beyond the pleadings to the actual citizenship of the parties at the time of removal. See, e.g., Belleville Catering Co. v. Champaign Mkt. Place, L.L.C., 350 F.3d 691, 692–93 (7th Cir.2003) (vacating jury verdict where parties had incorrectly identified their citizenship in the pleadings and court lacked jurisdiction).

 

*15 Courts have accepted certifications similar to Mr. Cole’s from other Lloyd’s representatives, also signing under penalty of perjury, to establish the citizenship of anonymous Names. See, e.g., St. Charles Prop. Ass’n v. Certain Underwriters at Lloyd’s London, No. 09 Civ. 2504(HGB), 2009 WL 3232034, at *3–4 (E.D.La. Oct.2, 2009) (accepting unsworn affidavit, signed under penalty of perjury, attesting to the Louisiana citizenship of one Name; finding that name and address of this Name was not required because, pursuant to 28 U.S.C. § 1746, the court “must accept the statements contained in [the declarant’s] unsworn declaration as true”); Chase Manhattan Bank, N.A. v. Aldridge, 906 F.Supp. 870, 873 (S.D.N.Y.1995) (finding affidavit concerning citizenship of Lloyd’s Names to be “powerful evidence” of incomplete diversity of the parties, but requiring Lloyd’s to further investigate Names’ citizenship at the time the action commenced, “to remove any doubt”).

 

Art Crating’s argument also ignores that it would need to establish that each individual Name met the required amount in controversy, without aggregation. See E.R. Squibb & Sons, 160 F.3d at 933 (“[T]he fact that the several liability of the Names derives from a single insurance policy does not alter the jurisdictional analysis.”). Given the over twenty syndicates involved in this action, each comprised of numerous Names, see Pl. Reply Mem. 2, the amount in controversy may be yet another significant roadblock to diversity jurisdiction.

 

This Court respectfully recommends that Art Crating’s request for the names and addresses of the New York Names be denied, because Mr. Cole’s declaration may be accepted by the Court. See 28 U.S.C. § 1746. If Art Crating’s argument based on diversity jurisdiction were otherwise viable (which, for many reasons, it is not), this Court might recommend that Mr. Cole’s certification be amended to confirm the citizenship of the New York Names as of September 4, 2012. As Art Crating did not request this specific relief and it would make no difference, it will not be entertained here.

 

4. Delta’s Joinder in the Notice of Removal Does Not Support Removal

Delta’s purported joinder in Art Crating’s Notice of Removal does not merit a different outcome. The propriety of removal must be determined based on the pleadings at the time of removal, see Fed. Ins. Co., 422 F.Supp.2d at 368, which in this case predates the Third-party Complaint. Delta’s standing to join in removing an action to which, at the relevant time, it was not a party, is questionable at best. Regardless, Delta’s support has no significance because Delta, as a third-party defendant, has no standing to remove an action to federal court.

 

If “the jurisdiction of the district court over the claims of the plaintiff [ ] is not enhanced by third party complaints,” In re Agent Orange Prod. Liab. Litig., 635 F.2d at 990 n. 6, it is doubtful that a third-party defendant’s support for removal has any bearing on jurisdiction. Likewise, a third-party defendant’s joinder in the Notice of Removal is immaterial because that party has no standing to remove. The more detailed discussion of this issue that follows is relevant to the present case because it speaks to what support, if any, Delta may lend to Art Crating’s Notice of Removal; it will be also be relevant to the discussion below concerning jurisdiction over the third-party complaint.

 

*16 The clear majority of federal courts has held that third-party defendants are not “defendants” within the meaning of 28 U.S.C. § 1441(a) and therefore may not remove an action to federal court. 28 U.S.C. § 1441(a) (“[A]ny civil action … may be removed by the defendant or the defendants ….”); see Fed. Ins. Co., 422 F.Supp.2d at 372–77 (discussing the majority and minority views in detail; adopting majority view and noting the “vast sea of authority strongly suggesting that third-party defendants have no statutory right to remove cases”); see also Palisades Collections LLC v. Shorts, 552 F.3d 327, 332 (4th Cir.2008) (“For more than fifty years, courts applying Shamrock Oil have consistently refused to grant removal power under § 1441(a) to third-party defendants….”); First Nat’l Bank of Pulaski v. Curry, 301 F.3d 456, 461–66 (6th Cir.2002) (adopting the majority view); St. John’s Univ. v. Certain Underwriters at Lloyd’s, 760 F.Supp.2d 381, 383 (S.D.N.Y.2011) (same); Arrow Fin. Servs., LLC v. Massil, No. 08 Civ. 437(NGG)(VVP), 2009 WL 348553, at *5–6 (E.D.N .Y. Feb. 11, 2009) (same); see also Hamilton v. Bd. of Educ. of the Jordan–Elbridge Cent. Sch. Dist., No. 11 Civ. 986(LEK), 2012 WL 2402884, at *3 (N.D.N.Y. June 25, 2012) (the cross-claim defendant could not remove the action where cross-claim, but not original action, involved a federal question); Moss Land & Mineral Corp. v. Fid. & Cas. Co. of N.Y., No. 03 Civ. 845(WMA), 2003 WL 21360803, at *3 (N.D.Ala. June 6, 2003) (concerning removal by cross-claim defendant, “[n]o metamorphosis took place to make the ugly non-removable caterpillar into a beautiful removable butterfly”).FN23 “To allow removal of an entire suit on the basis of a third-party claim is to bring into federal court an action the main part of which is not within that court’s original jurisdiction, and is thus to enlarge federal at the expense of state jurisdiction in rather a dramatic way.” Fed. Ins. Co., 422 F.Supp.2d at 375 (quoting Thomas v. Shelton, 740 F.2d 478, 486 (7th Cir.1984)).

 

FN23. Cf. Fisherman’s Harvest, Inc. v. PBS & J, 490 F.3d 1371, 1374–75 (Fed.Cir.2007) (a “subsequent third-party complaint … does nothing to change the jurisdictional inquiries presented by [the original] action”); Metro Ford Truck Sales, Inc. v. Ford Motor Co., 145 F.3d 320, 328 (5th Cir.1998) (a third-party claim cannot provide removal jurisdiction and therefore qualifies as an “otherwise non-removable claim” under the pre-amendment wording of 28 U.S.C. § 1441(c)).

 

Courts endorsing the minority view typically allow third-party defendants to remove, pursuant to 28 U.S.C. § 1441(c), claims that involve federal subject matter jurisdiction and that are “ ‘separate and independent’ from the primary action, a statutory reference ‘not to the variety of legal theories advanced but to the underlying occurrence or occurrences giving rise to the litigation.’ ” St. John’s Univ., 760 F.Supp.2d at 383 (quoting Gardner & Florence Call Cowles Found., 754 F.2d at 481 (discussing 28 U.S.C. § 1441(c) in the context of a defendant’s improper removal of a case)). “The minority view is based on a reading of the [sic] Section 1441 that interprets subsection (a) as creating a right of removal only for a certain class of parties-which most courts believe does not include third-party defendants-and that goes on to interpret subsection (c) as creating a right of removal for a certain class of claims.” St. Vincent’s Hosp. of Staten Island v. Taylor, No. 07 Civ. 967(ILG)(JO), 2007 WL 2325073, at *3–4 (E.D.N.Y. Aug. 10, 2007) (finding it unnecessary to adopt the majority or minority view where claims should be remanded under either theory). However, courts in the Southern and Eastern Districts of New York “consistently adhere to the majority position that third-party defendants have no right to remove claims under § 1441(c), even if they are separate and independent.” Crawford v. Hosp. of Albert Einstein Coll. of Med., 647 F.Supp. 843, 846 (S.D.N.Y.1986); see Arrow Fin. Servs., LLC, 2009 WL 348553, at *6 (quoting Crawford); see also Fed. Ins. Co., 422 F.Supp.2d at 375–76 (disagreeing with and dismissing as dicta the assertion in Mignogna v. Sair Aviation, Inc., 679 F.Supp. 184, 190–91 (N.D.N.Y.1988), that 28 U.S.C. § 1441(c) allows removal by third-party defendants).

 

*17 Moreover, the statute relied on by the courts endorsing the minority view, 28 U.S.C. § 1441(c), was amended in 2011; that amendment became effective in 2012.FN24 See Moore v. Svehlak, No. 12 Civ. 2727(ELH), 2013 WL 3683838, at *8 (D.Md. July 11, 2013) (discussing amendment); Miley v. Hous. Auth. of City of, Bridgeport, 926 F.Supp.2d 420, 428 (D.Conn.2013) (same). Removal under 28 U.S.C. § 1441(c) no longer requires a “separate and independent” claim. Instead, 28 U.S.C. § 1441(c) provides that, where otherwise-removable federal question claims are paired with claims outside the district court’s original or supplemental jurisdiction, all of the claims may be removed, but the claims beyond the court’s original or supplemental jurisdiction must be severed and remanded.

 

FN24. Prior to its amendment, 28 U.S.C. § 1441(c) stated that,

 

[w]henever a separate and independent claim or cause of action within the jurisdiction conferred by section 1331 of this title is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters in which State law predominates.

 

28 U.S.C. § 1441(c) (2011 version) (emphasis added). Currently, 28 U.S.C. § 1441(c) states,

 

(1) If a civil action includes-

 

(A) a claim arising under the Constitution, laws, or treaties of the United States (within the meaning of section 1331 of this title), and

 

(B) a claim not within the original or supplemental jurisdiction of the district court or a claim that has been made nonremovable by statute,

 

the entire action may be removed if the action would be removable without the inclusion of the claim described in subparagraph (B).

 

(2) Upon removal of an action described in paragraph (1), the district court shall sever from the action all claims described in paragraph (1)(B) and shall remand the severed claims to the State court from which the action was removed. [ … ]

 

28 U.S.C. § 1441(c).

 

The amendment of 28 U.S.C. § 1441(c) calls into question the reasoning of the minority view, not only because that approach is framed, in part, using pre-amendment language, but because 28 U.S.C. § 1441(c) now allows removal only “if the action would be removable without the inclusion of [claims outside the district court’s original or supplemental jurisdiction].” In other words, the question becomes whether the matter may be removed under 28 U.S.C. § 1441(a), which is specific to “defendant or the defendants,” and does not mention third-party defendants. In addition, the House Judiciary Committee Report on the amendment stated that its purpose was “to cure any constitutional problems while preserving the defendant’s right to remove claims arising under Federal law.” H. Comm. on the Judiciary, Report on the Federal Courts Jurisdiction & Venue Clarification Act of 2011, H.R.Rep. No. 112–10, at 12 (2011) (emphasis added). As several courts have noted, “[h]ad Congress intended to permit removal by third-party defendants, it could have amended § 1441(a) to clarify the definition of ‘the defendant or the defendants,’ or added additional language to § 1441(c) specifying that removal under that subsection is available to parties other than original defendants. It did not.” Mut. Pharm. Co., Inc. v. Goldman, No. 12 Civ. 815, 2012 WL 2594250, at *2 (E.D.Pa. July 3, 2012) (finding that third-party defendants may not remove under the amended statute, as “the amendment clarifies that subsection (c) allows removal … only if the action would be removable in the absence of the nonremovable claim”); see U.S. Bank, N.A. v. Ernst, No. 13 Civ. 215(HE), 2013 WL 3353989, at *2 (W.D.Okla. July 3, 2013) (same); Noland v. Energy Res. Tech., Inc., No. 12 Civ. 330(GC), 2013 WL 177446, at *6 (S.D.Tex. Jan.16, 2013) (same).

 

Given the Supreme Court’s guidance that removal legislation be strictly construed, see Shamrock Oil, 313 U.S. at 108, the majority view that third-party defendants lack standing to remove cases to federal court is more persuasive, and has become only more persuasive since the amendment of 28 U.S.C. § 1441(c). Under this approach, contrary to Delta’s contention, see Joinder in Notice of Removal ¶ 9, third-party claims governed by federal law are not a ground for removing the underlying claims. Even applying the minority approach, arguendo, there were no “separate and independent” claims at the time of the Notice of Removal that could be appropriate for removal. In this case, the claims concern a single injury, the damage to the Sculpture occurring between November 2010 and January 2011. See Gardner & Florence Call Cowles Found., 754 F.2d at 481–82 (“[W]here the underlying occurrence or occurrences are so interwoven or so overlap as to be fairly described as inseparable, removal is not permitted.”); Elsis v. Hertz Corp., 581 F.Supp. 604, 608 (E.D.N.Y.1984) (finding no separate and independent third-party claim “where the action arises from a single car accident”). Even courts that would allow third-party defendants to remove under 28 U.S.C. § 1441(c) would not allow removal in these circumstances, because “[a] contribution claim against a joint tortfeasor in a third-party complaint is not ‘separate and independent’ from the allegations of negligence in the plaintiff’s complaint.” Mignogna, 679 F.Supp. at 190. Delta would have no removal rights even under the minority approach, and Delta’s joinder in the Notice of Removal lends no support to Art Crating’s opposition to the motion to remand.

 

5. The Original Action Should Be Remanded, Without an Award of Attorneys’ Fees

*18 Pursuant to 28 U.S.C. § 1447(c), a case “shall” be remanded to state court when it “appears that the district court lacks subject matter jurisdiction.” 28 U.S.C. § 1447(c) (emphasis added). All doubts are resolved against removability. See Purdue Pharma L.P., 704 F.3d at 213. Thus, for the reasons previously stated, this Court respectfully recommends that the motion to remand be granted and that “[a] certified copy of the order of remand shall be mailed by the clerk to the clerk of the State court.” 28 U.S.C. § 1447(c).

 

“The process of removing a case to federal court and then having it remanded back to state court delays resolution of the case, imposes additional costs on both parties, and wastes judicial resources.” Martin v. Franklin Capital Corp., 546 U.S. 132, 140, 126 S.Ct. 704, 163 L.Ed.2d 547 (2005). Therefore, under 28 U.S.C. § 1447(c), “[a]n order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). Thus, in Martin, the Supreme Court held that an award of attorneys’ fees was permissible “where the removing party lacked an objectively reasonable basis for seeking removal.” Martin, 546 U.S. at 141; see Calabro, 650 F.3d at 166 (awarding attorneys’ fees). Whether to grant the award is within the district court’s discretion. See Town of Haverstraw v. Barreras, 361 F.Supp.2d 317, 320 (S.D.N.Y.2005) (“Federal law allows, but does not require, that the court award costs when a case is remanded to state court.”).

 

In this case, Lloyd’s did not argue that the grounds for removal were objectively unreasonable, nor did Lloyd’s request an award under 28 U.S.C. § 1447(c). This Court does not find Art Crating’s argument based on federal jurisdiction to be objectively unreasonable, and respectfully recommends that no costs or expenses be awarded. See Russo v. Lanuto, No. 12 Civ. 4169(CCC)(JAD), 2012 WL 4490660, at *3 (D.N.J. Sept. 27, 2012) (declining to award costs, sua sponte); Graham v. Rockford Fabricators, No. 01 Civ. 50347(PGR)(PMM), 2002 WL 31618295, at *2 (N.D.Ill. Nov. 5, 2002) (same).

 

B. Delta’s Motion to Sever

Delta petitions the Court to sever Art Crating’s action against Delta from Plaintiff’s action, pursuant to FRCP 14(a)(4), and to stay the third-party claims pending resolution of the original action. Third-party Mem. 8. For the reasons stated below, this Court respectfully recommends that Delta’s motion be denied as moot.

 

1. This Court Lacks Jurisdiction Over The Third–Party Action And Delta’s Motion Should Therefore Be Denied as Moot

As a prerequisite to considering Delta’s motion, this Court must have jurisdiction over the third-party claims, despite never having had removal or subject matter jurisdiction over the original action. “A court lacks discretion to consider the merits of a case over which it is without jurisdiction….” Firestone Tire & Rubber Co. v. Risjord, 449 U.S. 368, 379, 101 S.Ct. 669, 66 L.Ed.2d 571 (1981). Thus, a holding that the court lacks removal jurisdiction “would end our inquiry” and preclude consideration of other pending motions.   Broder v. Cablevision Sys. Corp., 418 F.3d 187, 194 (2d Cir.2005); see In Suk Chai, 2013 WL 5676484, at *2–4 (finding motion to transfer venue moot where court lacked removal jurisdiction); Cnty. of Nassau v. New York, 724 F.Supp.2d 295, 307 (E.D.N.Y.2010) (same). Likewise, “subject matter jurisdiction is an unwaivable sine qua non for the exercise of federal judicial power….” E.R. Squibb & Sons, 160 F.3d at 929 (citing Curley v. Brignoli, Curley & Roberts Assocs., 915 F.2d 81, 83 (2d Cir.1990)); see Fed R. Civ. P. 12(h)(3); Adkins v. Illinois Cent. R. Co., 326 F.3d 828, 834 (7th Cir.2003) (“[A] district court’s conclusion that an initial acceptance of a claim of ‘complete preemption’ was erroneous [means] that the federal court never had jurisdiction of the case to begin with.”); Vasura v. Acands, 84 F.Supp.2d 531, 536 (S.D.N.Y.2000) (citing Jackson v. Allen, 132 U.S. 27, 34, 10 S.Ct. 9, 33 L.Ed. 249 (1889)) (remanding case for lack of diversity jurisdiction at time of the filing of the notice of removal, even though the non-diverse defendant was later dismissed, because “[i]f the removal was not proper in the first instance, the state court was never divested of jurisdiction and the federal court consequently has no jurisdiction to exercise”); Mignogna, 937 F.2d at 40 (“[I]f the federal court never could have exercised original jurisdiction over the case, remand is required even after the entry of final judgment.”).

 

*19 There is some authority suggesting that, after disposing of an original action for lack of subject matter jurisdiction, the court has discretion to adjudicate a third-party claim over which it has subject matter jurisdiction. FN25 However, in the context of removal, the court must also consider the extent of its removal jurisdiction. Concerning federal counterclaims, several courts have held that a court has discretion to retain the counterclaim after the original action has been remanded for want of subject matter jurisdiction. See Constantin Land Trust v. Epic Diving & Marine Servs., LLC, No. 12 Civ. 259(JCW), 2013 WL 1292275, at *17–20 (E.D.La. Mar.28, 2013) (listing cases where “federal courts have held that retention of a counterclaim is [ ] discretionary when the removed complaint was remanded for lack of subject matter jurisdiction” and finding that remand of federal counterclaim was warranted using factors articulated in 28 U.S.C. § 1367 for evaluating supplemental jurisdiction).FN26

 

FN25. See generally Corporacion Venezolana de Fomento v. Vintero Sales Corp., 477 F.Supp. 615, 621 (S.D.N.Y.1979) (“[A] third party action that is supported by an independent basis of subject matter jurisdiction may be adjudicated even after the dismissal of the main action for lack of jurisdiction.”); Ferreira v. Sawayama–Kisen K K, 171 F.Supp. 96, 98 (S.D.N.Y.1959) (where the court had diversity jurisdiction over the third-party claims, but not original claims, granting the plaintiff’s motion to transfer entire case to admiralty calendar); C. Wright & A. Miller, 6 Fed. Prac. & Proc. Civ. § 1444 (3d ed.) (“If the principal claim has been dismissed because of a lack of subject-matter jurisdiction, the third-party claim always must be dismissed unless it can be supported by independent jurisdictional grounds.”); see also McLaughlin v. Mississippi Power Co., 376 F.3d 344, 355 (5th Cir.2004) (“If an independent jurisdictional ground exists for a counterclaim, the district court can retain jurisdiction over the counterclaim even if the original claims are dismissed for lack of subject-matter jurisdiction.”).

 

FN26. But see Crowe v. Lucky Stores, Inc., 9 F. App’x 741, 743, 743 n. 1 (9th Cir.2001) (stating in dicta that district court correctly remanded entire action for lack of subject matter jurisdiction because the federal counterclaim was insufficient to create removal jurisdiction); Mem’l Hosp. for Cancer & Allied Diseases v. Empire Blue Cross & Blue Shield, No. 93 Civ. 6682(JSM), 1994 WL 132151, at *5 (S.D.N.Y. Apr.12, 1994) (noting that “[r]emoval jurisdiction cannot be created by pleading a federal counterclaim” and that authority permitting a court discretion to continue to adjudicate counterclaims concerned “the dismissal (not the remand) of plaintiff’s complaint for lack of subject matter jurisdiction”).

 

Concerning third-party federal claims, the Parties identified no precedent establishing the scope of the court’s jurisdiction after the remand of an original action over which the Court never exercised jurisdiction. Delta cited to Adkins, 326 F.3d at 844–51, for the proposition that the court “should not” remand a third-party action over which it has original jurisdiction, Third-party Mem. 6, but Delta’s citation was to the dissenting opinion. The dissent suggested that where subject matter jurisdiction exists, “the exercise of that jurisdiction is mandatory, not discretionary,” and therefore argued the district court erred by remanding a third-party complaint containing federal claims. Adkins, 326 F.3d at 850–51. The majority opinion included no such prohibition against remand. Although the majority held that it had no appellate jurisdiction because dismissal was premised on a lack of subject matter jurisdiction, id. at 834; 28 U.S.C. § 1447(d), it concluded in the alternative that remand of the entire action was proper due to lack of subject matter jurisdiction over the main action. Adkins, 326 F.3d at 834–36. FN27 Thus, the majority disagreed with the dissent that the exercise of jurisdiction over the third-party claims was mandatory, despite concurring that those claims were federal in nature. Id. at 835–36.

 

FN27. The majority in Adkins suggested that the district court had discretion to exercise supplemental jurisdiction over the first-party action based on the federal third-party claim. Id. at 836. This Court will not address that argument, as the Parties did not raise it.

 

In accordance with Broder, 418 F.3d at 194, where a lack of subject matter jurisdiction over the initial complaint warrants remand, the court may not consider additional motions. Thus, courts in this Circuit have declined to exercise jurisdiction over and remanded third-party claims that could implicate original jurisdiction, once the main action was remanded for lack of subject matter jurisdiction. See, e.g., St. John’s Univ., 760 F.Supp.2d at 384 (remanding the entire case because it was improperly removed based on third-party claims; adding that the state court “can then decide if [the defendant’s] impleader action should be dismissed because of exclusive federal jurisdiction”); Calabro v. Aniqa Halal Live Poultry Corp., 09 Civ. 4859(JG)(JMA) (E.D.N.Y. Dec. 4, 2009) (ECF No. 11) (Minute Order granting the motion to remand and finding the court lacked subject matter jurisdiction to decide the motion to dismiss the third-party complaint); Arrow Fin. Servs., LLC, 2009 WL 348553, at *8 (“Since the action was not properly removed to federal court and the court lacks subject matter jurisdiction, the court does not reach the [third-party defendant’s] Motion to Dismiss the third party claims, and [third-party plaintiff’s] Motion to Amend his Third–Party Complaint.”); cf. Prop. Clerk, N.Y.C. Police Dep’t v. Fyfe, 197 F.Supp.2d 39, 41 (S.D.N.Y.2002) (remanding entire case where removal was improperly based on federal counterclaims).

 

*20 In this case, Art Crating alleges in its Third-party Complaint and Delta admits in its Answer that the district court has federal question jurisdiction over the third-party action. Third-party Compl. ¶ 6; Third-party Answer ¶ 3; see Third-party Mem. 4–6. The third-party action concerns damage to cargo while in Delta’s control, and it arguably thereby implicates the Montreal Convention. See Third-party Mem. 4–6. The Court need not decide whether Art Crating’s third-party claims raise a federal question because, as discussed above, the improperly removed action against Defendants was never within this Court’s jurisdiction.FN28 Having determined that the Court lacks jurisdiction, the Court respectfully recommends that Delta’s motion to sever and stay be denied as moot, and the entire action be remanded to state court.

 

FN28. In support of its request for a stay, Delta also cites to City of New Rochelle v. Town of Mamaroneck, 111 F.Supp.2d 353, 371–73 (S.D.N.Y.2000), see Third-party Mem. 8, but in that case, the federal claim being stayed was raised in the plaintiff’s complaint and the court remanded plaintiff’s state law claims after declining to exercise supplemental jurisdiction. Id. at 373. In City of New Rochelle, the court had removal jurisdiction over the claim that was stayed, but in this case, the Court lacks such jurisdiction.

 

Although this Court believes it lacks discretion to retain the claims against Delta, assuming, arguendo, that the Court had such discretion, the Court would not recommend exercising its discretion in this case. Not only is there a prohibition against basing removal on third-party federal claims, see Calabro, 650 F.3d at 166, but there is a “vast sea of authority strongly suggesting that third-party defendants have no statutory right to remove cases,” Fed. Ins. Co., 422 F.Supp.2d at 375. Adjudicating the third-party claim in federal court would circumvent these principles of removal and grant the third-party defendant an opportunity for forum selection that it would not have but for the first-party defendant’s improper removal. The situation is especially problematic considering that the court’s ability to hear the case is based on removal jurisdiction,FN29 which was not obtained from the first-party action and cannot be obtained from the third-party action. See Metro Ford Truck Sales, 145 F.3d at 328 (third-party federal claim “could not, and did not, confer removal jurisdiction”). However, in light of the inconclusive authority on the issue, this court will next address the merits of Delta’s motion to sever; as discussed below, Delta’s contentions do not offer a compelling reason to exercise what discretion, if any, the court has to sever and stay the third-party action.

 

FN29. The fact that Art Crating’s claim against Delta was filed in federal court after removal cannot change that this court’s jurisdiction must be based on removal jurisdiction; “[t]o hold otherwise would unduly grant a defendant the power to manipulate removal jurisdiction once in federal court, despite overwhelming authority proscribing same.” Metro Ford Truck Sales, 145 F.3d at 327 (affirming the remand of third-party federal claims after the dismissal of first-party federal claims); see Knight v. Hellenic Lines, Ltd., 543 F.Supp. 915, 916, 918 (E.D.N.Y.1982) (finding that removal was improper such that the court lacked jurisdiction to decide a motion to dismiss a third-party claim, even though the third-party claim was filed after removal).

 

2. In the Alternative, Severance Is Not Warranted; The Entire Action Should Be Remanded

Although this Court recommends finding Delta’s motion to sever and stay moot for lack of jurisdiction, assuming arguendo that this Court has authority to consider Delta’s motion, I would nonetheless recommend that the motion be denied. FRCP 14(a)(4) provides that, “[a]ny party may move to strike [a] third-party claim, to sever it, or to try it separately.” Fed. R. Civ. Proc. 14(a)(4); see also Fed.R.Civ.P. 42(b) (“For convenience, to avoid prejudice, or to expedite and economize, the court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third-party claims.”). “The decision whether to grant a severance motion is committed to the sound discretion of the trial court.” State of New York v. Hendrickson Bros., Inc., 840 F.2d 1065, 1082 (2d Cir.1988) (finding no abuse of discretion in denial of motion to sever).

 

*21 “Federal courts view severance as a ‘procedural device to be employed only in exceptional circumstances.’ ” William A. Gross Const. Assocs., Inc. v. Am. Manufacturers Mut. Ins. Co., No. 07 Civ. 10639(LAK)(AJP), 2009 WL 427280, at *17 (S.D.N.Y. Feb. 23, 2009) (quoting Wausau Bus. Ins. Co. v. Turner Constr. Co., No. 99 Civ. 0682(RWS), 2001 WL 963943 at *1 (S.D.N.Y. Aug.23, 2001)) (declining to sever supplemental claims), adopted by, No. 07 Civ. 10639(LAK)(AJP) (S.D.N.Y. Mar. 18, 2009) (ECF No. 450). In deciding a severance motion, the court should consider “(1) whether the claims arise out of the same transaction or occurrence; (2) whether the claims present some common questions of law or fact; (3) whether settlement of the claims or judicial economy would be facilitated; (4) whether prejudice would be avoided if severance were granted; and (5) whether different witnesses and documentary proof are required for the separate claims.” Gusinski v. Genger, No. 10 Civ. 4506(SAS), 2010 WL 4877841, at *4–5 (S.D.N.Y. Nov.30, 2010) (quoting In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., 214 F.R.D. 152, 154–55 (S.D.N.Y.2003)) (granting motion to sever claims involving different actors and different transactions); see Kully, 662 F.Supp.2d at 261 (declining to sever third-party claims where “liability on the third-party claims [were] integrally related to the main action”). Severance may be warranted if any one of these factors weighs in favor of trying the action in two parts. See Gusinski, 2010 WL 4877841, at *4.

 

Delta asserts that absent severance, it will be subject to prejudice by not having its federal claims adjudicated in federal court and having to participating in discovery unrelated to the two-day period in which the Sculpture was in its control. Third-party Mem. 6–7. Delta claims that the third-party claims are “essentially different” from the main action because they involve indemnity rather than negligence. Id. 7. In addition, Delta argues that third-party actions “should not be remanded” when the court has original jurisdiction. Third-party Mem. 6. However, the case Delta cites, Adkins, 326 F.3d at 844–51, see Def. Mem. 6, does not support such a blanket rule or any deviation from the well-settled principle that severance is in “the sound discretion of the trial court.” Hendrickson Bros., 840 F.2d at 1082.

 

Contrary to Delta’s contentions, the factors articulated in Gusinski weigh strongly in favor of denying Delta’s motion to sever. To the extent these factors overlap, the Court will discuss them collectively. First, this Court disagrees that the third-party claims are “essentially different” from the original claims when they all concern the same injury: the damage to the Sculpture. See generally Gardner & Florence Call Cowles Found., 754 F.2d at 481–82. Second and third, the claims present common questions of law and fact so that judicial economy is best served by keeping these actions together. See, e.g., Mignogna, 679 F.Supp. at 190 (“A contribution claim against a joint tortfeasor in a third-party complaint is not ‘separate and independent’ from the allegations of negligence in the plaintiff’s complaint.”). The common questions of fact include the necessary inquiry into how the damage occurred, including whether the Sculpture contained any design flaws, how it was packaged and what happened during the international flight. Regardless of severance, all Parties have an interest in the outcome of these inquiries and all Parties will undoubtedly be involved in discovery. The common questions of law include issues of liability and Art Crating’s claims for contribution and indemnification from Delta. Article 18(2) of the Montreal Convention provides a defense to liability if Delta proves that the damage was caused, in whole or part, by defective packing of the Sculpture by Defendants. See Montreal Convention, 1999 WL 33292734, at *34. This defense, which Delta pled as its Seventh Complete Affirmative Defense, see Third-party Answer ¶ 21, overlaps with Plaintiff’s negligence claims against Defendants. Should the claims against Delta be severed, there may be a risk of two fact finders determining Art Crating’s contribution. The interests of conserving judicial resources and obtaining consistent verdicts is best served by having the state court adjudicate both Art Crating’s and Delta’s respective liability, if any.

 

*22 Fourth, Delta’s claims of prejudice are unconvincing. The esteemed courts of the State of New York are not unfamiliar with either Delta as a litigant or with interpreting the Montreal Convention.FN30 Litigating in state court, Delta will not lose any of the protections of the Montreal Convention; it simply will not control the choice of forum. Thus, New York State court may not be Delta’s preferred forum, but it will not prejudice Delta to litigate there. See Adkins, 326 F.3d at 832 (noting the Supreme Court’s “frequent reminders that the state courts are fully capable of adjudicating federal claims and are entitled to respect by federal courts”). To the extent Delta is concerned it will be “forced to participate” in irrelevant discovery, Third-party Mem. 7, New York law limits discovery to matters “material and necessary” to the litigation, see N.Y. C.P.L.R. 3101(a), and provides Delta means for objecting to non-material discovery demands. See N.Y. C.P.L.R. 3122. Fifth, for the reasons discussed above, the discovery relevant to the main and the third-party actions overlaps, and the Parties to the main action would likely seek discovery from Delta even if the third-party claims were severed and stayed. Therefore, the Gusinski factors weigh in favor of denying Delta’s motion to sever.

 

FN30. See Betancourt v. Delta Airlines, Inc., 60 A.D.3d 609, 873 N.Y.S.2d 498 (2d Dep’t 2009) (concerning personal injury action); Mallemat v. Qatar Airways, 22 Misc.3d 130(A), 880 N.Y.S.2d 874 (1st Dep’t 2009) (affirming trial court’s decision interpreting liability under the Montreal Convention); Zamora v. Air France, 20 Misc.3d 142(A), 872 N.Y.S.2d 694 (1st Dep’t 2008) (same); Nunez v. Am. Airlines, 14 Misc.3d 133(A), 836 N.Y.S.2d 487 (1st Dep’t 2007) (same); Jacobson v. Delta Air Lines, Inc., 13 A.D.3d 126, 786 N.Y.S.2d 169 (1st Dep’t 2004) (affirming grant of summary judgment in Delta’s favor in personal injury action); Morales v. Delta Air Lines, Inc., 297 A.D.2d 786, 747 N.Y.S.2d 805 (2d Dep’t 2002) (concerning workplace injury); Kemelman v. Delta Air Lines, Inc., 293 A.D.2d 576, 740 N.Y.S.2d 434 (2d Dep’t 2002) (reversing grant of summary judgment where there were issues of material fact concerning whether claims fell under the Warsaw Convention); Young v. Delta Air Lines, Inc., 78 A.D.2d 616, 432 N.Y.S.2d 390 (N.Y.App.Div.1980) (modifying grant of summary judgment to grant dismissal of additional claims in action concerning transportation and death of plaintiff’s dog); Julius Young Jewelry Mfg. Co., Inc. v. Delta Air Lines, 67 A.D.2d 148, 414 N.Y.S.2d 528 (1st Dep’t 1979) (interpreting Delta’s liability under the Warsaw Convention).

 

In weighing the merits of severance and remand, this Court is mindful of the strict nature of removal jurisdiction, see Purdue Pharma L.P., 704 F.3d at 213, and the fact that Delta, as a third-party defendant, could not remove this action on its own, see Fed. Ins. Co., 422 F.Supp.2d at 372–77. The circumstances demand restraint in withholding from the state court the resolution of Art Crating’s claims against Delta. Ultimately, the goals of efficiency and judicial economy would be best served by adjudicating together these closely related actions. This Court would respectfully recommend that Delta’s motion to sever be denied and the third-party action be remanded to state court with the main action. However, as discussed above, this Court respectfully recommends remand for the separate reason that, having remanded the original action for want of subject matter jurisdiction, this Court lacks the jurisdiction to hear Delta’s motion.

 

III. CONCLUSION

For the foregoing reasons, this Court respectfully recommends that Plaintiff’s motion to remand be granted, that Third-party Defendant’s motion to sever and stay be denied as moot, and that the entire action be remanded to the New York Supreme Court, Kings County. This Court also respectfully recommends denying Art Crafting’s request for the identities of the two New York-resident Lloyd’s Names.

 

IV. OBJECTIONS

Written objections to this Report and Recommendation must be filed within fourteen days of service of this Report and in accordance with the Individual Rules of the Honorable Nicholas G. Garaufis. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b). Failure to file objections within the specified time waives the right to appeal. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Caidor v. Onondaga Cnty., 517 F.3d 601, 604 (2d Cir.2008).