Janvey v. Proskauer Rose, LLP
59 F. Supp. 3d 1
D.D.C.2014Background
- The Receiver (Janvey) sued Proskauer Rose, Chadbourne & Parke, and an individual partner in D.C., alleging negligence and aiding/abetting in connection with the Stanford Ponzi scheme. Plaintiffs concede the D.C. court lacks diversity jurisdiction.
- The JPML conditionally transferred the case to the Northern District of Texas; the Texas court recommended remand to D.C. so D.C. could rule on a requested transfer under 28 U.S.C. § 1631.
- Plaintiffs moved in D.C. to transfer the case to the Northern District of Texas under § 1631; Defendants cross-moved to dismiss for lack of jurisdiction and argued transfer was improper because Plaintiffs filed in D.C. in bad faith/forum-shopped.
- Jurisdictional defect: two defendant law firms have U.S. citizen partners domiciled abroad, rendering the firms "stateless" and defeating complete diversity for § 1332 purposes.
- The Northern District of Texas has jurisdiction over receiver claims under 28 U.S.C. § 754, and the D.C. court found that, as a factual matter, transfer to Texas would have been possible on the statutory elements other than the § 1631 discretionary inquiry.
- The D.C. court denied transfer under § 1631 as not being "in the interest of justice," concluded Plaintiffs’ choice of forum showed lack of good faith/forum-shopping, and granted Defendants’ motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether D.C. lacked subject-matter jurisdiction | Janvey concedes D.C. lacks diversity jurisdiction due to unexpected facts about defendants | Defendants agree D.C. lacks jurisdiction because firms have stateless partners | Court: D.C. lacks subject-matter jurisdiction (agreed) |
| Whether transferee court (N.D. Tex.) could have heard the case when filed | Janvey: N.D. Tex. has jurisdiction under § 754 and transfer would preserve claims | Defendants: Even if N.D. Tex. has jurisdiction now, statute-of-limitations/timeliness if filed there then could bar claims | Court: N.D. Tex. could be a proper forum; timeliness issues should be decided by transferee court and do not preclude transferability analysis |
| Whether transfer under 28 U.S.C. § 1631 is "in the interest of justice" | Janvey: Plaintiffs reasonably believed diversity existed and transfer would prevent forfeiture of claims | Defendants: Plaintiffs with sophisticated counsel filed in D.C. to exploit a longer limitations period; failure to investigate defendants’ "stateless" partners shows bad faith/forum shopping | Court: Transfer denied — not in the interest of justice due to Plaintiffs’ counsel sophistication, minimal diligence available, prior related filings in Texas, and forum-shopping concerns |
| Remedy: transfer vs. dismissal | Janvey: transfer preserves filing date and claims | Defendants: dismissal appropriate given bad faith filing; transfer would reward forum shopping | Court: Grant Defendants’ motion; deny transfer; dismiss action (Plaintiffs’ related Texas suit remains available) |
Key Cases Cited
- Carden v. Arkoma Assocs., 494 U.S. 185 (statutory rule that partnership citizenship depends on citizenship of all members)
- Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (complete diversity requirement for § 1332)
- Swiger v. Allegheny Energy, Inc., 540 F.3d 179 (3d Cir.) (American partners domiciled abroad render a partnership "stateless" and defeat diversity)
- Hyun Min Park v. Heston, 245 F.3d 665 (8th Cir.) (§ 1631 cannot cure filing that was untimely in transferee court at time of original filing)
- Liriano v. United States, 95 F.3d 119 (2d Cir.) (courts must weigh equities when deciding whether dismissal or § 1631 transfer is in the interest of justice)