Presenting a live 90 ‐ minute webinar with interactive Q&A Federal Court Jurisdiction: Diversity Federal Court Jurisdiction: Diversity and Removal Complexities Navigating the Intricate Jurisdiction Standards and Removal Process THURS DAY, DECEMBER 2, 2010 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Justin M. S her, Partner, Sher , New Y ork Jared M. Katz, Partner, Mullen & Henzell , S anta Barbara, Calif. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Federal Court Jurisdiction: Diversity and J y Removal Complexities Justin M. Sher S Sher LLP Justin sher@sherllp com Justin.sher@sherllp.com 212.202.6000 4
Biography of Justin M Sher Biography of Justin M. Sher • Justin M. Sher is the Founder and Managing Partner of Sher LLP, a litigation boutique based in New York City boutique based in New York City. Mr. Sher and his firm represent executives, Mr Sher and his firm represent executives entrepreneurs, public officials and businesses of all sizes in complex commercial disputes, white collar criminal matters and regulatory investigations. Mr. Sher has handled matters involving insider trading, market manipulation, accounting fraud, antitrust violations, complex contract disputes, claims of breach of fiduciary duty and , p p , y y allegations of securities fraud. Mr. Sher graduated from Harvard College with honors . Following his graduation, Mr. Sher worked for the Frauds Bureau of the New York County District Attorney’s Office, where he analyzed complex facts for high profile white collar grand jury investigations where he analyzed complex facts for high-profile white collar grand jury investigations and criminal prosecutions. Mr. Sher received his law degree, also with honors, from New York University, where he served as Staff Editor for NYU’s Journal of Legislation and Public Policy and as a member of the Federal Defender Clinic. Prior to founding Sher LLP, Mr. Sher clerked for Hon. George B. Daniels in the Southern District of New York and was associated with the law firm of Davis Polk & Wardwell LLP in New York City. 5
Advantages of Federal Jurisdiction Advantages of Federal Jurisdiction • General: – Faster – Quality of judges • For Plaintiff: – Interstate discovery – Interstate domestication / enforcement Interstate domestication / enforcement • For Defendant: – Higher pleading standards / more cases dismissed Higher pleading standards / more cases dismissed before trial – Rules limit discovery 6
Diversity Jurisdiction Basics Diversity Jurisdiction Basics • 28 U.S.C. 1332 28 U.S.C. 1332 • Conceived to protect out-of-state parties from local prejudice from local prejudice • Requires: – Threshold amount: Amount in controversy Threshold amount: Amount in controversy greater than $75,000 – Diversity: Citizens of different states, citizens y of state and citizens of foreign state, action brought by foreign state 7
Amount in Controversy Amount in Controversy • $75,000 threshold $75,000 threshold – Based on good-faith allegations in complaint ( Horton v. Liberty Mut. Ins. Co. , 367 U.S. 348, 354 (1961)) – Jurisdiction not retroactively revoked if amount of damages is lower, but court may impose costs on plaintiff plaintiff – Cannot consider counterclaims – Declaratory or injunctive actions -- amount in y j controversy measured by the value of the object of the litigation ( Hunt v. Washington State Apple Advertising Com'n 432 U S 333 347 (1977)) Advertising Com n, 432 U.S. 333, 347 (1977)) 8
Diversity Diversity • Complete diversity Complete diversity – If a single plaintiff has the same citizenship as a single defendant diversity will be defeated a single defendant, diversity will be defeated • Class actions over $5 million – Complete diversity not required Complete diversity not required – Any member of class of plaintiffs from a state different from any defendant different from any defendant 9
Citizenship of Individuals Citizenship of Individuals • Individuals Individuals – Citizenship based on place of domicile – Domicile = place of residence along with Domicile = place of residence along with intent to reside for indefinite period – Determined according to facts at time lawsuit – Determined according to facts at time lawsuit is commenced 10
Corporations Corporations • Corporations are citizens of: Corporations are citizens of: – State of incorporation – Principal place of business “Principal place of business” – Citizens of both 11
Principal Place of Business Principal Place of Business • Hertz Corp. v. Friend , 130 S.Ct 1181 (2010) Hertz Corp. v. Friend , 130 S.Ct 1181 (2010) – Class action brought by California citizens in California state court; Hertz sought removal – Hertz: citizen of New Jersey, where it maintained its headquarters and where core executive and administrative functions took place administrative functions took place – District court applied the “business activity test” and held that Hertz was CA citizen because amount of business activity in CA was significantly larger than the next closest state – Ninth Circuit affirmed – Ninth Circuit affirmed 12
Nerve Center Test Nerve Center Test • Supreme Court adopts the “nerve center” test and p p reverses: • the “‘principal place of business’ is best read as referring to the place where a corporation's officers direct, control, to the place where a corporation s officers direct, control, and coordinate the corporation's activities.” • should normally be the place where the corporation maintains its headquarters maintains its headquarters • Should not be a “mail drop box, a bare office with a computer, or the location of an annual executive retreat” • Court motivated by simplicity and predictability • Burden of persuasion rests on party seeking diversity jurisdiction jurisdiction 13
Partnerships Partnerships • A partnership is a citizen of each A partnership is a citizen of each jurisdiction of which a partner is a citizen ( Great Southern Fire Proof Hotel citizen. ( Great Southern Fire Proof Hotel Co. v. Jones , 177 U.S. 449, 456 (1900)) • Must look to citizenship of each and every • Must look to citizenship of each and every partner 14
Limited Liability Companies Limited Liability Companies • “[L]ike a partnership an LLC is a citizen of [L]ike a partnership, an LLC is a citizen of every state of which its owners/members are citizens are citizens. ( Johnson v. Columbia ( Johnson v Columbia Properties Anchorage, LP 437 F.3d 894, 899 (9th Cir. 2006)) 899 (9th Cir 2006)) • Must look to each and every member or M t l k t h d b partner 15
Omitting Defendants Strategically Omitting Defendants Strategically • Question: As plaintiff seeking federal Question: As plaintiff seeking federal jurisdiction, can you strategically omit defendant in order to obtain complete p diversity? • Answer: Yes, but . . . • Court will not have jurisdiction over claims by plaintiff against third-party defendant, y p g p y intervenor or other parties subsequently joined. 28 USC 1367(b). 16
Including Defendants Strategically Including Defendants Strategically • Question: Can a plaintiff name a Question: Can a plaintiff name a defendant from the same state in order to avoid removal from state court? avoid removal from state court? • Answer: Not if it is fraudulent or improper. 17
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