JOSEPH F. BIANCO, District Judge:
Plaintiff Gurney's Inn Resort & Spa Ltd. ("plaintiff" or "Gurney's") commenced this action in New York State Supreme Court, Suffolk County, against Linda Benjamin ("Benjamin"), Thomas Carusona ("Carusona"), and Christopher Bennett ("Bennett") seeking a declaratory judgment to determine the respective rights of the members of Gurney's Board of Directors ("the Board").
On August 13, 2010, Gurney's filed a complaint against the three members of Gurney's Board of Directors—Benjamin, Carusona, and Bennett—seeking a declaratory judgment to determine the respective rights of the Board members to vote concerning whether to increase, reduce, change, modify, or terminate services or expenditures at Gurney's. (Compl. ¶ 1.) Gurney's alleges that Benjamin has taken the "erroneous position that she had the exclusive right" to vote on such issues (id. ¶ 3), thereby harming Gurney's by undermining the ability of the Board to function. (Id. ¶ 56.) Gurney's, however, believes that each member of the Board had equal voting rights and seeks a declaratory judgment to that effect. (Id. ¶ 5.) Significantly, Carusona, acting in his capacity as Gurney's President, verified the complaint against himself, Benjamin, and Bennett. (See Compl. Verification.)
Prior to the commencement of this action, Benjamin had filed a complaint on November 23, 2009 in the Southern District of New York ("the SDNY action") naming Carusona and Bennett as defendants and Gurney's as a nominal defendant. Benjamin brought the SDNY action pursuant to Section 720(a) of the New York Business Corporation Law, alleging that Carusona and Bennett had breached their fiduciary duties to Gurney's and seeking, inter alia, a declaratory judgment, a reorganization of the Board, an accounting, damages, and a "permanent injunction ... prohibiting defendants from interfering with plaintiff's right ... to control the level of services provided by Gurney's." (Notice of Removal Ex. B ¶¶ 2-3.) At issue in the SDNY action is, in part, the same contractual provision relied upon by Gurney's in its complaint in the current action. (Compare id. ¶ 30 with Gurney's
Benjamin removed the instant action to this Court on September 1, 2010. Jurisdiction was asserted solely on the basis of diversity. (Notice of Removal ¶ 10.) After removal, Benjamin requested a pre-motion conference in anticipation of filing a motion to transfer venue to the Southern District of New York, where her action against Carusona and Bennett was pending. (See ECF No. 2.) Gurney's, however, opposed Benjamin's request to file a motion to transfer on the grounds that removal of the action was improper because of lack of complete diversity between the parties and because Benjamin failed to join defendants Carusona and Bennett in the removal. The parties agree that, as currently aligned, there is no complete diversity. Benjamin argues, however, that the parties should be realigned as per the alignment in the SDNY action, where there is diversity between Benjamin (a Connecticut resident), on the one hand, and Carusona (a New York resident), Bennett (a New York resident), and Gurney's (a New York corporation), on the other hand.
At the pre-motion conference, the Court determined that it had to address the remand issue prior to addressing Benjamin's proposed motion to transfer and, accordingly, set a briefing schedule for the motion to remand.
Generally, a case may be removed from state court to federal court "only if it could have originally been commenced in federal court on either the basis of federal question jurisdiction or diversity jurisdiction." Citibank, N.A. v. Swiatkoski, 395 F.Supp.2d 5, 8 (E.D.N.Y.2005) (citing 28 U.S.C. § 1441(a)); see also 28 U.S.C. § 1441. If a federal district court determines that it lacks subject matter jurisdiction over a case removed from state court, the case must be remanded. 28 U.S.C. § 1447(c). "When a party challenges the removal of an action from state court, the burden falls on the removing party to establish its right to a federal forum by competent proof." In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., No. 1:00-1898, MDL 1358(SAS), M 21-88, 2006 WL 1004725, at *2 (S.D.N.Y. Apr. 17, 2006) (internal quotation marks and citations omitted). Further, "[i]n light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of
Additionally, "[a]lthough there is no statutory requirement that all defendants either must join the petition for removal or consent to removal, courts have consistently interpreted 28 U.S.C. § 1446 as requiring that all defendants consent to removal within the statutory thirty-day period, a requirement known as the `rule of unanimity.'" Beatie & Osborn LLP v. Patriot Sci. Corp., 431 F.Supp.2d 367, 383 (S.D.N.Y.2006) (citations omitted); see also Sleight v. Ford Motor Co., No. 10-cv-3629 (BMC), 2010 WL 3528533, at *1 (E.D.N.Y. Sept. 3, 2010) ("[I]n cases where there are multiple defendants, the Rule of Unanimity requires that `all named defendants over whom the state court acquired jurisdiction must join in the removal petition for removal to be proper.'") (quoting Burr ex rel. Burr v. Toyota Motor Credit Co., 478 F.Supp.2d 432, 437 (S.D.N.Y.2006) (additional citations omitted)); Sherman v. A.J. Pegno Constr. Corp., 528 F.Supp.2d 320, 330 (S.D.N.Y.2007) ("There is general agreement among the courts that all the defendants must join in seeking removal from state court." (internal quotation marks and alterations omitted)). However, courts may excuse the failure to join all defendants in the removal petition or to otherwise obtain their consent for removal where the non-consenting defendants "have not been served, [are] unknown defendants, [or have been] fraudulently joined." Sherman, 528 F.Supp.2d at 330. Likewise, courts also have excused noncompliance with the rule of unanimity where the parties were misaligned, and the defendants who did not join in the removal were more properly aligned with the interests of the plaintiffs than with those of the defense. See, e.g., Schouman v. Schouman, No. Civ. A. 96-11588-REK, 1996 WL 721195, at *4 (D.Mass. Dec. 10, 1996) (finding consent of all defendants not required for removal where defendants' interests were "more closely aligned with [those] of the plaintiff"); Still v. DeBuono, 927 F.Supp. 125, 130 (S.D.N.Y.1996) (excusing failure to join all respondents where "the parties' alignment is misleading since State respondents' real interest lies in petitioners prevailing").
It is axiomatic that federal courts only have diversity jurisdiction when there is complete diversity between the parties—that is, when all plaintiffs are citizens of different states from all defendants. See 28 U.S.C. § 1332; Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89, 126 S.Ct. 606, 163 L.Ed.2d 415 (2005); Advani Enters., Inc. v. Underwriters at Lloyds, 140 F.3d 157, 160 (2d Cir.1998). In other words, if any plaintiff shares citizenship of the same state as any defendant, complete diversity does not exist, and diversity jurisdiction is lacking. However, as the Second Circuit has made clear, "a plaintiff may not defeat a federal court's diversity jurisdiction and a defendant's right of removal by merely joining as defendants parties with no real connection with the controversy." Pampillonia v. RJR Nabisco, Inc., 138 F.3d 459, 460-61 (2d Cir.1998). Furthermore, in order for there to be diversity jurisdiction, the amount in controversy must exceed $75,000. See 28 U.S.C. § 1332(a).
In analyzing whether subject matter jurisdiction exists, the Court is permitted to look to materials outside of the pleadings. See Bldg. & Const. Trades Council of Buffalo, N.Y. & Vicinity v. Downtown Dev., Inc., 448 F.3d 138, 150 (2d Cir.2006) ("Although [the district
"In assessing the alignment of the parties, `[d]iversity jurisdiction cannot be conferred upon the federal courts by the parties' own determination of who are plaintiffs and who [are] defendants.'" Garbers-Adams v. Adams, No. 10-cv-726 (RPP), 2010 WL 2710622, at *2 (S.D.N.Y. July 8, 2010) (quoting City of Indianapolis v. Chase Nat'l Bank of N.Y., 314 U.S. 63, 69, 62 S.Ct. 15, 86 L.Ed. 47 (1941)). Instead, it is the duty of the Court "to look beyond the pleadings, and arrange the parties according to their sides in the dispute." City of Indianapolis, 314 U.S. at 69, 62 S.Ct. 15 (internal quotation marks and citation omitted). The purpose of the realignment doctrine "is to ensure that the case truly involves the kind of adversarial relationship constitutionally required in a case or controversy in the federal courts." James W. Moore et al., Moore's Federal Practice ¶ 0.74[1], at 771 (2d ed. 1993) (cited with approval and quoted in Md. Cas. Co. v. W.R. Grace & Co., 23 F.3d 617, 622 (2d Cir.1994)).
To determine the proper alignment of the parties, the Second Circuit has adopted a "collision of interests" test, which "require[s] the existence of an actual, substantial controversy" between the parties. Md. Cas. Co., 23 F.3d at 622. In other words, a court must "examine `the realities of the record' to discover the `real interests' of the parties," and must conclude "that there is a bona fide controversy between, as the statute commands, citizens of different states." Id. at 623 (quoting City of Indianapolis, 314 U.S. at 69, 62 S.Ct. 15). "This approach allows the courts `to consider the multiple interests and issues involved in the litigation.'" Garbers-Adams, 2010 WL 2710622, at *2 (quoting Md. Cas. Co., 23 F.3d at 622); see also Fed. Ins. Co. v. Safeskin Corp., No. 98-cv-2194 (DC), 1998 WL 832706, at *1 (S.D.N.Y. Nov. 25, 1998) ("In Maryland Casualty, the Second Circuit adopted the `collision of interests' test, which requires `the existence of an actual, substantial controversy, or a collision of interests,' between citizens of different states. The Second Circuit rejected the `primary purpose' test, which aligns parties in accordance with the `primary dispute in the controversy.' Rather, the `broader' and `more flexible' `collision of interests' test permits courts `to consider the multiple interests and issues involved in the litigation.'" (quoting Md. Cas. Co., 23 F.3d at 622)). See generally Fed. Ins. Co., 422 F.Supp.2d at 389 n. 20 (noting Circuit split on question of whether to apply "primary purpose" or "substantial dispute" test to determine realignment). Although diversity questions must be resolved "at the time of the filing of the complaint," the "collision of interests" test requires courts to "look[] to the actual interests of the parties at that time." Oppenheimer & Co.,
The issue of realignment is often raised in the context of a motion to dismiss for lack of subject matter jurisdiction, but it also applies in the removal context to determine either whether complete diversity exists or whether the failure to join all defendants in the removal should be excused. See, e.g., Cleveland Hous. Renewal Project v. Deutsche Bank Trust Co., Nos. 09-3571, 09-3648, 621 F.3d 554, 559-61 (6th Cir.2010) (holding that district court's realignment of defendant as plaintiff to create complete diversity on removal petition was proper); Dev. Fin. Corp. v. Alpha Hous. & Health Care, Inc., 54 F.3d 156, 160 (3d Cir.1995) (noting that realignment is not "associated exclusively with diversity jurisdiction" and instead "represents a broader principle of judicial interpretation of statutes conferring jurisdiction in federal courts, where the statutory conferral of jurisdiction is predicated upon the adversarial relationship of the parties. ... [W]here party designations have jurisdictional consequences, we must align the parties before determining jurisdiction." (citing Chicago, R.I. & P.R. Co. v. Stude, 346 U.S. 574, 74 S.Ct. 290, 98 L.Ed. 317 (1954) (realigning parties for jurisdictional analysis under the removal statute)) (additional citations and internal quotation marks omitted)); Peters v. Standard Oil Co. of Tx., 174 F.2d 162, 163 (5th Cir.1949) (realigning defendant as plaintiff to create diversity jurisdiction for removal purposes); Green Tree Fin. Corp. v. Arndt, 72 F.Supp.2d 1278, 1282 (D.Kan.1999) ("Realignment is usually associated with a federal court's attempt to discern whether diversity jurisdiction is proper. The principle has also been employed by numerous courts in the removal context." (collecting cases)); Schouman, 1996 WL 721195, at *4 ("Consent of all defendants [to removal under § 1441] is also not required when the case involves `separate and independent' causes of action against different defendants, and when an examination of a defendant's `real' interests reveals a misalignment of the parties. Where one defendant's interests are adverse to that of the other, and are in fact more closely aligned with that of the plaintiff, a court will not allow artful pleading to defeat the removal jurisdiction granted by Congress." (citations omitted)); Still, 927 F.Supp. at 131 ("Due to the harmony of interests between petitioners and State respondents in this case, the court realigns State respondents as petitioners for purposes of removal. Thus the removal petition was not defective because of State respondents' failure to join in it."); Oppenheimer & Co., Inc., 1993 WL 546673, at *3 ("Under 28 U.S.C. § 1441, all defendants must join in a petition for removal. ... The Second Circuit has held that where the removal jurisdiction of a federal court is invoked on the basis of diversity, the parties should be aligned according to their actual interests. Therefore ... `misaligned parties may be realigned,' and realigned parties need not have joined in a removal petition where a defendant below is properly re-aligned as a plaintiff." (internal citations omitted)); Charles A. Wright, Arthur R. Miller, Edward H. Cooper & Joan E. Steinman, 14B Fed. Prac. & Proc. Juris. § 3723 (4th ed.) ("Before determining removability under Section 1441(b) on the basis of diversity of citizenship jurisdiction, a district court will realign the parties according to their true interests in the outcome of the litigation, as it would were the case originally brought in the federal court.").
Moreover, as certain of the above-cited cases indicate, realignment may be used to either create or destroy diversity. See Safeco Ins. Co. of Am. v. City of White House, Tn., 36 F.3d 540, 545 (6th Cir.1994) ("A plaintiff's alignment of the parties ... is not determinative. In considering whether there is complete diversity, a federal
Benjamin removed this case to federal court solely on the basis of diversity jurisdiction.
Benjamin argues, however, that the Court should realign the parties to reflect their true interests in the litigation, thus curing the lack of complete diversity and excusing Benjamin's failure to obtain Carusona's consent to remove. Specifically, Benjamin contends that the "actual controversy" lies not between Gurney's and the members of the Board, but between Benjamin, on the one hand, and Carusona and Bennett, on the other. (Notice of Removal ¶ 10.)
As an initial matter, the Court notes that, despite plaintiff's claims to the contrary, Benjamin's argument is not that Carusona and Bennett were "fraudulently joined" in the action. Fraudulent joinder occurs when, for the purposes of destroying diversity jurisdiction, a plaintiff joins a party who has "no real connection with the controversy." Pampillonia, 138 F.3d at 460-61. Such is not the case here. Indeed, both parties agree that Carusona and Bennett are necessary to the action, albeit for slightly different reasons.
Instead, Benjamin contends that Carusona and Bennett should be parties in this case but that their alignment in the case as codefendants with Benjamin is improper. (See Def.'s Opp. at 16-17; Notice of Removal ¶ 10.)
Although it is true that mere agreement between opposing parties "in one respect"
The Court, therefore, realigns Carusona and Bennett as plaintiffs in this matter. This realignment cures the defects in the removal notice by creating complete diversity and excusing Benjamin's failure to comply with the rule of unanimity. See Cleveland Hous. Renewal Project, 621 F.3d 554, 559-61 (affirming district court's realignment of defendant as plaintiff to create diversity jurisdiction in removal context); Peters, 174 F.2d at 163 ("[F]or jurisdictional purposes [on removal petition], [defendant] should be aligned with the [plaintiff-] appellants against the defendant-appellee, which, being regarded as done, reveals a separable controversy wholly between citizens of different states. It is well settled that federal courts are not bound by the alignment of the pleader as to parties plaintiff or defendant; but that they will work out the relation of each party to the suit according to the nature of his real interest, and then decide the question of jurisdiction."); McKeen v. Cont'l Cas. Co., No. 10-10624, 2010 WL 3325200, at *2 (E.D.Mich. Aug. 19, 2010) (where codefendant was realigned as plaintiff, "[s]oliciting [co-defendant's] consent prior to removal would ... have required a meaningless act," and thus failure to obtain codefendant's consent to removal was immaterial); Schouman, 1996 WL 721195, at *5 ("Although Michael Shouman is `necessary' as a defendant in Maureen Shouman's suit to reform the Security Agreement, I find that Michael's interest in the outcome of the present suit is more properly aligned with Maureen's interest, and their interests are completely different from those of Lewis G. Mosburg, as Trustee. Therefore, for the purpose of determining the adequacy of the removal petition at this time, I conclude that it is appropriate to realign Michael Schouman as a plaintiff and to hold that removal will not be defeated solely because of his failure to consent."); Still, 927 F.Supp. at 130-31 ("[T]he parties alignment is misleading since State respondents' real interest lies in petitioners prevailing. Whereas [the other] respondent... wants the judgment of [the lower court] upheld ... petitioners and State respondents both want it annulled. This is not a matter of ambiguity or conjecture.... Due to the harmony of interests between petitioners and State respondents in this case, the court realigns State respondents as petitioners for purposes of removal. Thus the removal petition was not defective because of State respondents' failure to join in it."); Oppenheimer & Co., Inc., 1993 WL 546673, at *5 (excusing failure to join defendant in removal and also realigning defendant as plaintiff to establish diversity jurisdiction for purposes of removal where defendant "was Oppenheimer's employee and their combined interests [were] adverse to the interests of the removing parties"). Given that Carusona's and Bennett's interests are so
For the foregoing reasons, plaintiff's motion to remand for lack of federal jurisdiction is denied.
SO ORDERED.