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Current Developments in the US District Court for the
Eastern District of New York
Posted: November 27, 2018

Schlam Stone Announces the Launch of the Same-Day Justice Program

Schlam Stone & Dolan LLP is pleased to announce the launch of the Same-Day Justice Program, an arbitration service where participants can participate in an evidentiary hearing and receive a decision in their case that same day.

The Same-Day Justice Program is designed to give parties with disputes in the $50,000-$500,000 range an efficient and affordable solution for resolution of their commercial disputes. Parties who use the program will waive their right to go to court and agree instead to arbitrate their dispute before a private neutral arbitrator, who has binding authority to issue an award resolving the matter.

Each side pays a flat fee—for a half-day or full day—and the expert arbitrator will carefully consider each side’s evidence at the hearing and then render a decision. That award is enforceable in courts, just like a judgment obtained after years of litigation in the court system. The parties don’t need to use a lawyer, although they are free to do so.

The arbitration hearing takes place in person, unless the parties agree otherwise. The parties bring all their evidence (documents and witnesses) to the hearing for consideration by the arbitrator. Shortly before the hearing, the parties will exchange with each other the documents they intend to use at the hearing as well as a list of the witnesses they will call to testify. The parties may present their case in any manner they chose, whether by narrative or in question-and-answer format.

The arbitrator issues a decision on the day of the session.

* * *
The Same-Day Justice Program is administered by Schlam Stone & Dolan LLP partner Erik Groothuis, who has spent two decades practicing civil litigation—roughly half representing plaintiffs and half representing defendants.

For more information, visit www.same-dayjustice.com or contact Erik S. Groothuis at egroothuis@schlamstone.com.

Posted: November 5, 2018

Judge Korman Holds that the “Foreign Country” and “Intentional Torts” Exceptions to the FTCA Barred Claims by Estate of Panamanian Woman Murdered by U.S. Servicemember

Posted by Solomon N. Klein, Litigation Partner

District Judge Edward R. Korman dismissed an action against the U.S. by the estate and family of a Panamanian woman murdered by a U.S. servicemember in Panama. Rogelio Rodriguez, et al. v. Omar Velez-Pagan, et al. , 17-cv-3911 (E.D.N.Y. Oct. 26, 2018) (ERK) (SJB).

The civil case arose from a “brutal murder” by Omar Velez-Pagan, a U.S. servicemember stationed in Panama to assist in the training of the National Police Force of the Republic of Panama. During his stay in Panama, Velez-Pagan was romantically involved with a local woman, Vanesa Itzel Rodriguez Chavarria (“Rodriguez”). In June 2014, perhaps under the influence of illegal drugs, Velez-Pagan murdered Ms. Rodriguez inside a vehicle that the U.S. embassy had provided to Velez-Pagan. Velez-Pagan was returned to the U.S. for trial and convicted by a military court.

Rodriguez’s estate and family sued various U.S. agencies and the United States. “Broadly, plaintiffs claim that the United States was negligent in hiring and supervising Velez-Pagan and in failing to verify his compliance with regulations governing drug use, ultimately leading to Rodriguez’s death.” Defendants filed a motion to dismiss for lack of subject matter jurisdiction in that, as a sovereign, the United States is immune from suit, except where it has consented to be sued.

A little background on the Federal Tort Claims Act (“FTCA”) would be helpful. The United States passed the FTCA as a limited waiver of sovereign immunity that allows for monetary claims against the government “for . . . personal injury or death caused by the negligent or wrongful act or omission of any employee of the United States while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant . . ..”

However, the FTCA does not apply to events outside the U.S. Additionally, the FTCA does not waive immunity for intentional torts. Counsel for plaintiffs attempted to get around these exceptions with two primary arguments: First, they argued that the murder occurred in the vehicle provided to Velez-Pagan by the U.S. embassy (thus the event occurred inside property of the U.S.). Second, although the murder was intentional, the claims against the U.S. were styled as negligent hiring and supervision claims.
However, the Court rejected both arguments:

The plaintiffs, however, argue that because “the murder . . . occurred inside [a] vehicle owned by the United States,” Am. Compl. ¶ 30, and, because “the diplomatic vehicle where Velez-Pagan injured and later murdered [her] is considered . . . territory of the United States,” the murder did not actually occur in a foreign country, Opp. Br. 10-11. . ..

Control of property is not the appropriate benchmark for determining whether an event arose in a foreign country. United States v. Spelar, 338 U.S. 217 (1949), is on point. The Supreme Court there held that, even though an accident occurred on an airbase leased by the United Kingdom to the United States, torts arising from that accident were not permitted under the FTCA because the lease did not transfer sovereignty of the area to the United States. Spelar, 338 U.S. at 219. Similarly, here, events that occurred inside the vehicle did not occur in the United States simply because the United States owned the vehicle. Even American embassies are treated as being in foreign countries for purposes of the FTCA. See Asmah v. U.S. Consulate Accra Ghana, No. 15-CV-3742 (JPO), 2016 WL 2993203, at *4 (S.D.N.Y. May 23, 2016) (collecting cases holding that a tort committed at an American embassy or consulate arose in a foreign country under the FTCA); see also McKeel v. Islamic Republic of Iran, 722 F.2d 582, 588 (9th Cir. 1983) (holding in an analogous context that “[a] United States embassy . . . does not constitute territory of the United States”), cited with approval in Harrison v. Republic of Sudan, 838 F.3d 86, 95 (2d Cir. 2016); Restatement (Third) of Foreign Relations § 466 cmt. a (1987) (“That [consular] premises are inviolable does not mean that they are extraterritorial. Acts committed on those premises are within the territorial jurisdiction of the [host] state.”). Thus, events that transpire inside a vehicle owned by the U.S. Embassy while it is being driven on a Panamanian road occur in a “foreign country” for FTCA purposes.

The Court similarly rejected plaintiffs’ argument regarding the intentional torts exception.

Section 2680(h) of the FTCA forecloses any claims arising out of intentional torts, including “[a]ny claim arising out of assault [or] battery,” 28 U.S.C § 2680(h), even if the claim otherwise sounds in negligence. United States v. Shearer, 473 U.S. 52, 55 (1985) (plurality opinion). “In determining the applicability of the § 2680(h) exception”—that is, the bar on claims arising out of intentional torts—“a court must look, not to the theory upon which the plaintiff[s] elect[] to proceed, but rather to the substance of the claim.” Dorking Genetics v. United States, 76 F.3d 1261, 1265 (2d Cir. 1996) (quoting Lambertson v. United States, 528 F.2d 441, 443 (2d Cir. 1976)).

Plaintiffs urge me to adopt the holding in Bennett v. United States, 803 F.2d 1502, 1504 (9th Cir. 1986), which held that the assault and battery exception does not bar negligent hiring and supervision claims where the “negligence amounts to almost reckless disregard.” Putting aside the fact that plaintiffs do not allege negligence amounting to reckless disregard, the Second Circuit has repeatedly held that, even where a government agency is aware of an individual’s prior misconduct or hostility, the “broad . . . scope of section 2680(h) in the context of mixed claims of negligent and intentional conduct” requires dismissal where “the allegation of negligence merely present[s] the assault claim in artfully redrawn form.” Guccione v. United States, 847 F.2d 1031, 1034 (2d Cir. 1988) (discussing Miele v. United States, 800 F.2d 50 (2d Cir. 1986)); see also, e.g., Johnson ex rel. Johnson v. United States, 788 F.2d 845 (2d Cir. 1986). But where the government assumes responsibility over an individual’s conduct outside the employment relationship—such as “voluntarily undertaking to provide care to a person who [is] visibly drunk and visibly armed”—the United States may be held responsible for torts committed by that individual. Sheridan v. United States, 487 U.S. 392, 401-03 (1988). In sum, where the “complaint does not allege a claim based on negligence ‘independent’ of defendant’s hiring and supervision of its employee,” the “claim is within the § 2680(h) exception” and is not permitted by the FTCA. Kenna v. United States, 927 F. Supp. 62, 66 (E.D.N.Y. 1996).

Here, plaintiffs’ three negligence claims and their wrongful death claim are not “‘independent’ of defendant’s hiring and supervision” of Velez-Pagan. Id. Plaintiffs’ claims are based on the assertion that, had defendants not acted negligently in hiring, deploying, and supervising Velez-Pagan, Rodriguez “would not have been assaulted and murdered.” Am. Compl. ¶¶ 34-38; see also id. ¶¶ 40, 44-45, 47, 52, 61, 63; Opp. Br. 13-15. The substance of each claim arises out of an assault or battery claim, and the United States’ alleged negligence is predicated on its employment of Velez-Pagan.

Rogelio Rodriguez, et al. v. Omar Velez-Pagan, et al. , 17-cv-3911 (E.D.N.Y. Oct. 26, 2018) (ERK) (SJB).

Posted by Solomon N. Klein, Litigation Partner

Posted: September 4, 2018

Recent Rulings By Judges Johnson And Feuerstein Highlight The Jurisdictional Pitfalls When Removing Personal Injury Cases Based On Diversity

Posted by Solomon N. Klein, Litigation Partner

Two rulings on the same day by District Judges Sterling Johnson and Sandra J. Feuerstein highlight the jurisdictional difficulties that can arise when removing personal injury cases to federal court on diversity grounds. Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML). Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS).

In the ruling by Judge Feuerstein, the Court sua sponte remanded the case back to state court because defendant jumped the gun by removing the case before the amount in controversy threshold was established. Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS). In the ruling by Judge Johnson, the Court denied plaintiff’s motion to remand the case to state court where plaintiff argued that defendants waited too long before removing the case to federal court. Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML).

Some background: Most attorneys are aware that removal based on diversity jurisdiction is only available if the amount at issue is more than $75,000. But New York CPLR 3017(c) prohibits personal injury plaintiffs from stating an amount of damages in the complaint – meaning the complaint will usually not establish the jurisdictional minimum of $75,000.

Timing is also an issue. The removal statute (U.S.C. § 1446) provides that defendant has 30 days from the date of service to remove the case. However, where the complaint does not evident the existence of diversity jurisdiction, defendant has 30 days “from which it may first be ascertained” that diversity jurisdiction exists to remove the case to federal court. In any event, the ability to remove to federal court normally ends one year after commencement of the action.

In Mekhi, one of defendants removed the case soon after it was served with the complaint, asserting that “there is a ‘reasonable probability’ that Plaintiff’s claim is in excess of the jurisdictional limit of $75,000, exclusive of interest and costs.” Judge Feuerstein sua sponte determined that defendant failed to establish that the amount in controversy exceeds $75,000.

The complaint here does not specify the damages sought since New York law prohibits statements regarding “the amount of damages to which the pleader deems himself entitled” in a personal injury action. N.Y. C.P.L.R. §3107(c). . . . [Defendant] notes that since Plaintiff has alleged “serious injury” within the meaning of New York Insurance Law §§5102(a) and 5104(a), she is seeking damages in excess of $50,000 for economic loss, plus pain and suffering. Notice ¶11. Coupling this threshold economic loss with Plaintiff’s generalized allegation of pain and suffering, Area Storage summarily concludes that “[c]onsequently, there is a reasonable probability” that the amount in controversy exceeds $75,000. Id. ¶13. The Court disagrees.

[Defendant’s] arguments are speculative and are extrapolated from boilerplate allegations of injury. In considering whether remand is appropriate, “boilerplate pleadings do not suffice to establish that this action involves an amount in controversy adequate to support federal diversity jurisdiction.” [citations omitted] . . . Defendant has provided no other basis upon which the Court can conclude that the jurisdictional limit has been met. Given its conclusory assertions and the lack of any detail regarding Plaintiff’s specific damages, there is simply insufficient information to “intelligently ascertain removability.” DeMarco v. MGM Transp., Inc., No. CV 06-0307, 2006 WL 463504, at *1 (E.D.N.Y. Feb. 24, 2006) (quotation marks and citations omitted). As this Court lacks subject matter jurisdiction, remand is required.

[Defendant] is not without recourse. Although New York law prohibits inclusion of an ad damnum clause in a personal injury complaint, it also allows a defendant to “at any time request a supplemental demand setting forth the total damages to which the pleader deems himself entitled.” N.Y. C.P.L.R. § 3017(c). A plaintiff is required to provide the supplemental demand within fifteen (15) days of the request, and may be compelled by the court to comply. Id. The Second Circuit, recognizing a defendant’s dilemma where the complaint fails to specify the amount of damages sought has held that “the removal clock does not start to run until the plaintiff serves the defendant with a paper that explicitly specifies the amount of money damages sought.” Moltner v. Starbucks Coffee Co., 624 F.3d 34, 38 (2d Cir. 2010) (per curiam). Defendant should have availed itself of the supplemental demand procedure rather than prematurely removing the action to this court.

Mekhi v. Area Storage & Transfer, Inc. et al., 18-cv-4654 (E.D.N.Y. Aug. 24, 2018) (SJF) (AYS).

In Alvarado, defendants almost waited too long to remove. The action was commenced on January 19, 2018. Plaintiff served a bill of particulars identifying $44,140 in special damages plus pain and suffering. On March 9, 2018, Plaintiff served a statement of damages alleging $1 million in damages. Defendants removed on April 5, 2018 – less than 30 days after the statement of damages but more than 30 days from the bill of particulars.

Plaintiff moved to remand the case back to state court, arguing that the removal was untimely because had Defendant used a “reasonable amount of intelligence” the bill of particulars would have evidenced the existence of diversity jurisdiction.

Judge Johnson disagreed and denied the motion to remand:

Plaintiff argues that Defendants’ removal was untimely and that the notice of removal failed to show complete diversity of the parties. Plaintiff contends that the first paper from which removability could be ascertained was Plaintiff’s bill of particulars, served on Defendants on February 16, 2018, which contains allegations referencing special damages in an amount not less than $44,140.00, and an unspecified amount of damages for pain and suffering. . . Defendants contend that the first paper from which removability could be ascertained was Plaintiff’s statement of damages, served on Defendants on or about March 9, 2018. If Plaintiff’s statement of damages is the “motion, order or other paper from which it [might] first be ascertained that the case is one which is or has become removable,” then removal was timely. See 28 U.S.C. § 1446(b)(3). The issue, therefore, is whether the case was removable on February 16, 2018.

In determining whether the thirty-day removal clock has begun to run, courts in this circuit have declined to impose on defendants an affirmative duty to investigate the possible federal features of a poorly drafted pleading. See Soto v. Apple Towing, 111 F. Supp. 2d 222, 224–26 (E.D.N.Y. 2000). But defendants may not willfully ignore grounds for removal that can be “intelligently ascertain[ed].” Id. at 226. “‘[A]scertained’ as used in section 1446(b) means a statement that should not be ambiguous or one which requires an extensive investigation to determine the truth.” Id. (quotation marks and internal citation omitted). Further, “the facts warranting removability” must be “explicit,” and “the elements of removability must be specifically indicated in official papers.” Id. at 225 (quoting Riggs v. Cont’l Baking Co., 678 F. Supp. 236, 238 (N.D. Cal. 1988). Put another way, a “defendant need not guess as to whether the Plaintiff’s claim reaches the $75,000 threshold for . . . diversity jurisdiction purposes, and may wait to file a notice of removal until the Plaintiff provides specific information about the amount in controversy.” Moltner v. Starbucks Coffee Co., 2009 WL 510879, at *1 (S.D.N.Y. June 18, 2007).

In the bill of particulars, Plaintiff specifies damages that are less than the jurisdictional threshold, but argues that its unspecified request for compensatory damages related to pain and suffering put Defendants on notice that the amount of Plaintiff’s claim exceeds $75,000. But Plaintiff’s position that Defendants could have utilized a “reasonable amount of intelligence” to ascertain that its claim for pain and suffering exceeds the jurisdictional threshold asks this Court to impose upon Defendants a duty to speculate as to the amount of those unspecified damages. This heightened standard would require Defendants to risk remand by removing an action where the amount in controversy has not been clearly established. As Defendants are not authorized to prematurely remove an action, such a result would effectively allow Plaintiff to have it both ways. . . . Accordingly, the Court finds that the action was not removable based on Plaintiff’s bill of particulars.

. . .

The Court finds that the statement of damages is the first paper from which removability could be ascertained, as it claimed an amount in controversy above the jurisdictional threshold. Defendant’s removal on April 5, 2018 was therefore timely.

Rita Alvarado v. New England Motor Freight, Inc. et al., 18 CV 2027 (E.D.N.Y. Aug. 24, 2018) (SJ) (RML).

Posted by Solomon N. Klein, Litigation Partner

Posted: August 15, 2018

Judge Cogan Denies Motion To Dismiss Discrimination Action, Finding That Plaintiffs’ EEOC Complaint Satisfied Exhaustion Requirements Even Where Lawsuit Expanded On Allegations

Posted by Solomon N. Klein, Litigation Partner

District Judge Brian M. Cogan denied a motion to dismiss where defendant argued that plaintiff failed to exhaust his administrative remedies before filing his lawsuit. Anderson v. Alclear, LLC, 18-cv-1525 (E.D.N.Y. Aug. 10, 2018) (BMC) (RML). (Interestingly, the Court ruled directly on defendant’s pre-motion conference letter, deeming the pre-motion conference letter to constitute the motion to dismiss.)

Defendant argued that plaintiff’s EEOC complaint – an administrative process that plaintiff was required to exhaust prior to bringing the action – omitted a number of the alleged discriminatory acts that were subsequently alleged in the federal lawsuit at issue. The Court denied the motion, noting the “loose pleading” requirements for EEOC complaints “based on the recognition that ‘EEOC charges frequently are filled out by employees without the benefit of counsel and that their primary purpose is to alert the EEOC to the discrimination that a plaintiff claims [he] is suffering. Deravin v. Kerik, 335 F.3d 195, 201 (2d Cir. 2003).’”

This is not a case in which a claimant administratively raised one basis for illegal discrimination and then sought to sue on another, e.g., race discrimination versus sex discrimination. Instead, plaintiff has pleaded three new facts demonstrating his claim of discrimination on the basis of national origin. Each one is reasonably related to the facts included in plaintiff’s EEOC charge.

First, defendant claims that the EEOC did not have adequate notice of a statement allegedly made by one of plaintiff’s supervisors that “Jamaicans are taking over.” The Court fails to see why. Plaintiff indicated in the EEOC charge that he was discriminated on the basis of his national origin, that he was Jamaican, and that he was verbally harassed “more than any other worker” during his time of employment. Plaintiff’s use of the word “worker” in this instance indicates that the individuals whom plaintiff believes verbally harassed him (and his coworkers) were his superiors. This Court is confident that the EEOC can put two and two together and would think to investigate whether members of management made inflammatory statements directed at plaintiff about his Jamaican national origin based on the details provided in plaintiff’s charge.

Second, defendant claims that the EEOC did not have adequate notice of plaintiff’s claim that defendant provided health insurance benefits to every other employee except him. Defendant’s argument for dismissal is strongest with respect to this fact, because the narrative portion of plaintiff’s charge does not state that defendant denied him health insurance. However, under the section of plaintiff’s charge entitled “Acts of alleged discrimination,” plaintiff checked a box indicating that the company denied him services. Given the “loose pleading” standard permitted in this analysis, the Court will equate “services” with “benefits” here. There is presumably a discrete number of benefits that defendant offers to all of its employees. Health insurance is one example, and this box should have signaled to the agency that plaintiff may have been denied certain benefits. All the agency had to do was look at the defendant’s limited universe of benefits and confirm whether plaintiff received them. In addition, plaintiff’s charge even describes a medical condition, which suggests that there may have been issues with his health. Here, plaintiff sufficiently directed the agency to the facts that he had medical issues and was denied services; as a result, an alleged denial of health care benefits can reasonably be expected to fall within the scope of the agency’s investigation into his claims.

Finally, defendant claims there was inadequate notice of plaintiff’s allegation that defendant did not discipline plaintiff’s Indian coworker for a policy violation. This is wrong. Plaintiff states in his charge that he was unfairly written up more than any other employee and that he knows that other employees were not disciplined for certain actions. The EEOC does not need to be told the nationality of other employees to successfully investigate whether plaintiff was subject to disparate treatment on the basis of his Jamaican heritage. The point of the administrative charge is to allow the agency to conduct a meaningful investigation; it is not for the plaintiff to conduct this investigation himself

Anderson v. Alclear, LLC, 18-cv-1525 (E.D.N.Y. Aug. 10, 2018) (BMC) (RML).

Posted by Solomon N. Klein, Litigation Partner

Posted: June 25, 2018

Judge Brodie Denies Criminal Defendant’s Motion To Require Government To Apply Forfeited Funds To Reduce Restitution Amount

Posted by Solomon N. Klein, Litigation Partner

District Judge Margo K. Brodie rejected a defendant’s request to require the government to apply the amount of forfeited funds as a credit to his restitution obligation. United States v. Pratt, 17-cr-00262 (E.D.N.Y. June 11, 2018) (MKB).

The defendant is a former postal employee who pled guilty to stealing approximately $30,000 in USPS funds. The government obtained a forfeiture order of the full amount, but refused to credit the forfeited amount to the restitution owed by defendant. Defendant moved the Court to “‘order the crediting of any forfeited funds to restitution’ because ‘the amounts of forfeiture and restitution are exactly the same . . . and no purpose is served by requiring him to make in effect a double payment, doubling the just under $30,000 that he stole[.]’”

While defendant’s argument may have some commonsensical appeal, the Court rejected it – explaining that the statutory framework and Second Circuit precedent is clear: the government in its discretion may apply the forfeiture funds to the restitution, but the Court has no authority to compel the government to do so.

Defendant acknowledges in his application to the Court that restitution and forfeiture serve different purposes. (See id. at 3 (“Forfeiture rids a defendant of his ill-gotten gains . . . while restitution ‘compensates victims for their losses.’” (alteration omitted) (first citing United States v. Kalish, 626 F.3d 165 (2d Cir. 2010); and then quoting United States v. Pescatore, 637 F.3d 128, 138 (2d Cir. 2011))).)
. . .
The Second Circuit recognized that other circuits had rejected similar requests, and noted that “these remedies are authorized by separate statutes, and their simultaneous imposition offends no constitutional provision.” Id.
. . .
While the government has discretion and can decide to apply forfeited funds to restitution, the Court is not aware of any authority to order the Government to exercise its discretion in a particular case. See United States v. Torres, 703 F.3d 194, 204–05 (2d Cir. 2012) (“[A]lthough the government is not required to apply any payments that [the defendant] makes toward the forfeiture award to reduce her restitution obligation (or vice versa), [the defendant] may seek such relief, and the Attorney General may apply one payment as credit against the other obligation.” (first citing Pescatore, 637 F.3d at 138; and then citing Kalish, 626 F.3d at 169–70)); Pescatore, 637 F.3d at 138 (noting that the DOJ’s Asset Forfeiture Policy Manual provided that “discretion may be exercised to transfer forfeited assets to victims ‘where . . . other property is not available to satisfy the order of restitution’”). Indeed, other circuits have consistently held that district courts generally have no authority to apply forfeited funds to restitution. See, e.g., United States v. Joseph, 743 F.3d 1350, 1354 (11th Cir. 2014) (“In light of the statutory framework governing restitution and forfeiture, we hold that a district court generally has no authority to offset a defendant’s restitution obligation by the value of forfeited property held by the government, which is consistent with the approach taken by the Fourth, Seventh, Eighth, Ninth, and Tenth Circuits.” (collecting cases)).
. . .
Thus, absent “specific statutory authorization,” Bodouva, 853 F.3d at 78–79, this Court has no basis to order the Government to apply forfeited funds to any restitution order.

United States v. Pratt, 17-cr-00262 (E.D.N.Y. June 11, 2018) (MKB).

Posted by Solomon N. Klein, Litigation Partner

Posted: June 7, 2018

Judge Feuerstein Grants Motion To Dismiss Where Plaintiffs Failed To Take Timely Steps To Identify Jane Doe Defendant

Posted by Solomon N. Klein, Litigation Partner

District Judge Sandra J. Feuerstein dismissed an action against a Jane Doe defendant after finding that plaintiffs failed to take reasonable steps to discover the identity of the Jane Doe defendant. The Court held that “while courts ‘typically resist dismissing suits against John Doe defendants until the plaintiff has had some opportunity for discovery to learn the identities of responsible officials’”, plaintiffs must be reasonably diligent and timely in identifying the unnamed defendant. Conley v. Copiague Union Free Sch. Dist., 16-cv-4546 (E.D.N.Y. June 4, 2018) (SJF) (AYS).

In this case, Plaintiffs – a student and his father – initially sued the Copiague Union Free School District (the “District) alleging civil rights violations. Plaintiffs’ claims arose from alleged “racially charged statements made to [the student] by an unidentified ‘school nurse’”.

The Court had previously dismissed the claim against the District itself, but allowed plaintiffs to amend their complaint to allege claims solely against the unidentified school nurse (the Jane Doe 2 defendant). Defendant moved to dismiss the complaint arguing that Jane Doe had not received sufficient notice of the action as she had not been identified and that plaintiffs had two years to identify the Jane Doe.

The Court agreed:

It is beyond dispute that “[u]sing ‘Doe’ in place of specifically naming a defendant does not serve to sufficiently identify the defendant.” Kearse v. Lincoln Hosp. , No. 07–CV–4730, 2009 WL 1706554, at *3 (S.D.N.Y. June 17, 2009); Cruz v. City of New York, 232 F. Supp. 3d 438, 448 (S.D.N.Y. 2017). In addition, while courts “typically resist dismissing suits against John Doe defendants until the plaintiff has had some opportunity for discovery to learn the identities of responsible officials . . . [w]here a plaintiff has had ample time to identify a John Doe defendant but gives no indication that he has made any effort to discover the [defendant’s] name, . . . the plaintiff simply cannot continue to maintain a suit against the John Doe defendant.” Cruz, 232 F. Supp. 3d at 448 (internal citation omitted); see Harewood v. City of New York, No. 09-CV-2874, 2012 WL 12884356, at *2 (E.D.N.Y. Feb. 10, 2012) (same); Coward v. Town & Vill. of Harrison, 665 F. Supp. 2d 281, 300 (S.D.N.Y. 2009) (same); see also Abreu v. City of New York, 657 F. Supp. 2d 357, 363 (E.D.N.Y. 2009) (“Where a plaintiff names ‘John Doe’ as a placeholder defendant because he does not know the identity of an individual defendant, he generally is required to replace the placeholder with a named party within the applicable statute of limitations period.”).

The underlying incident giving rise to this matter occurred on May 19, 2015, see generally Am. Compl., the initial Complaint was filed on August 15, 2016. See Compl. Thus, Plaintiffs have had over three years from time of the incident and almost two years from the time the Complaint was filed to exercise due diligence in order to ascertain the identity of Jane Doe 2. Despite this significant passage of time, the docket does not reflect nor do Plaintiffs assert that any affirmative steps were taken to attempt to ascertain the identity of Jane Doe 2 during the intervening period. Indeed, although Plaintiffs have indicated that they would file a motion to compel in order to obtain the necessary materials to unearth Jane Doe 2’s identity, see Pls.’ Opp’n at 9, to date, no such motion has been filed. However, it is Plaintiffs’ burden to take reasonable steps to discover the identity of a Jane Doe defendant. See Kearse, 2009 WL 1706554, at *3 (recognizing that it is plaintiff who must take steps to identify a John Doe defendant); Reed v. Doe, No. 9:11-CV-250, 2015 WL 902795, at *5 (N.D.N.Y. Mar. 3, 2015) (“plaintiff was directed to take reasonable steps to ascertain the identity of defendant John Doe” and was warned that “failure to ascertain the identity of Defendant John Doe # 1 will result in the dismissal of this action”); see also Doe v. New York, 97 F. Supp. 3d 5, 19 (E.D.N.Y. 2015) (considering viability of relation back doctrine as set forth in CPLR § 1024 to § 1983 claim, recognizing that due diligence within the meaning of CPLR § 1024 “requires that a plaintiff show that he or she made timely efforts to identify the correct party before the statute of limitations expired,” and concluding that “plaintiff cannot satisfy that [ ] requirement, as he failed to act with due diligence in identifying the John Doe Defendants prior to the filing of the Third Amended Complaint”).” Moreover, discovery has not been stayed in this matter pending the Court’s determination of either the instant motion or Defendant’s previously adjudicated motion to dismiss. Thus, Plaintiffs have had an ample opportunity to make full use of the discovery devices set forth in the Federal Rules of Civil Procedure as well as any other alternative means in order to ferret out Jane Doe 2’s identity. Nevertheless, Plaintiffs failed to act.

In light of the fact that Plaintiffs have failed to present the Court with (1) reasonable efforts made to discover Jane Doe 2’s identity or (2) good cause for this failure, their suit against the Jane Doe 2 defendant cannot be maintained. See Watkins v. Doe, No. 04–CV–0138, 2006 WL 648022, at *3 (S.D.N.Y. Mar. 14, 2006) (dismissing without prejudice claims against “John Doe” defendants where “despite having the full opportunity to conduct discovery, plaintiff has not yet identified and served [those] defendants . . . within 120 days of filing the complaint . . . [and] has not sought an extension of the time allowed”); Harewood, 2012 WL 12884356, at *2 (Harewood has had ample time since filing his complaint in July 2009 to identify John Doe . . . [and] [t]here is nothing in the record to show that Harewood has expended any effort to discover the defendant’s identity. Accordingly, Harewood’s claims against John Doe are dismissed.”); United States v. Callard, No. 11-CV-4819, 2013 WL 6173798, at *4 (E.D.N.Y. Nov. 19, 2013) (denying plaintiff’s request to reinstate fictitious parties as defendants where “[p]laintiff has not demonstrated that it has determined or attempted to determine the identities of ‘XYZ Corporation’ or ‘John Does # 1–10,’” after being given a sufficient opportunity to do so).

Conley v. Copiague Union Free Sch. Dist., 16-cv-4546 (E.D.N.Y. June 4, 2018) (SJF) (AYS).

Posted by Solomon N. Klein, Litigation Partner

Posted: May 11, 2018

Judge Hurley Continues Sua Sponte Dismissals Of Cases Involving LLCs That Fail To Properly Plead Diversity Jurisdiction

Posted by Solomon N. Klein, Litigation Partner

We previously wrote about District Judge Denis R. Hurley’s sua sponte dismissal of cases involving LLCs that fail to properly plead diversity jurisdiction. Judge Hurley has recently dismissed yet another case involving an LLC for lack of subject matter jurisdiction. Encompass Group, LLC v. Oceanside Inst’l Indus., Inc., 16-cv-2560 (E.D.N.Y May 3, 2018) (DRH) (AYS).

(As explained in our previous post, the citizenship of an LLC is determined based on the citizenship of its members – unlike traditional corporations where citizenship is based on the principal place of business and state of incorporation. However, many attorneys assume that diversity jurisdiction exists based on the LLC’s state of organization and principal place of business, resulting in cases where jurisdiction is improperly pled or nonexistent.)

The anecdotal tally of Judge Hurley’s effort to establish jurisdictional order in his Court (at least three dismissals of LLC cases since early April) suggests that the overall number of such cases in the federal court system may be quite high. Indeed, it is the view of the author that this problem will not be resolved absent legislative change in how LLCs are treated for diversity purposes or, at least, a change in the “civil cover sheet” that accounts for the citizenship requirements of LLCs.

In this most recent case, Judge Hurley explained that “[t]his case is but just one of the numerous cases filed in this Court in which diversity jurisdiction is not properly alleged.” The Court noted that “the problem is such that this Court has, in the past year, issued numerous orders to show cause pointing out the deficiencies in a pleading’s jurisdictional allegations and directing that the relevant party show cause why the action should not be dismissed for lack of jurisdiction.”

The case at issue had been filed almost two years ago and discovery was complete. Apparently, while reviewing the plaintiff’s motion for summary judgment, the Court recognized that the plaintiff had failed to properly plead diversity jurisdiction.

[T]he Court issued the following Order to Show Cause on April 13, 2018:

“In connection with the pending motion for summary judgment, it has come to the Court’s attention that subject matter jurisdiction based on diversity of citizenship is not properly alleged in this matter. According to the Complaint ‘[Plaintiff] Encompass is a limited liability company organized and existing under the laws of State of Delaware and maintains a principal place of business at 615 Macon Street, McDonough, Georgia 30253.’ However, the citizenship of a limited liability company (LLC) is determined by the citizenship of each of its members. See, e.g., Bayerische Landesbank, New York Branch v. Aladdin Capital Management LLC, 692 F.3d 42, 49 (2d Cir. 2012); Handelsman v. Bedford Vill. Assocs. Ltd Pship, 213 F.3d 48, 51-52 (2d Cir. 2000). . . . Accordingly, IT IS HEREBY ORDERED THAT Plaintiff file an amended complaint, on or before May 1, 2018, setting forth the citizenship of each of its members.”
. . .
Encompass has not taken advantage of the opportunity afforded it to amend its complaint to correctly assert its citizenship for diversity purposes. Accordingly, based on the record before the Court, this action must be dismissed for lack of subject matter jurisdiction.

Encompass Group, LLC v. Oceanside Inst’l Indus., Inc., 16-cv-2560 (E.D.N.Y May 3, 2018) (DRH) (AYS).

Posted by Solomon N. Klein, Litigation Partner

Posted: May 10, 2018

Judge Garaufis denies insurer’s motion to dismiss in lawsuit involving “ordinary traffic accident with an international twist”

Posted by Solomon N. Klein, Litigation Partner

District Judge Nicholas G. Garaufis denied an insurer’s motion to dismiss a lawsuit brought directly by a plaintiff against the insurer of a vehicle that belonged to the Principality of Monaco. The Court ruled that the lawsuit was proper under the Diplomatic Relations Act of 1978, despite the fact that plaintiffs typically may not bring a direct lawsuit against the insurer of an alleged tortfeasor. Green v. First Liberty Insurance Corporation, 17-cv-6975 (E.D.N.Y May 8, 2018) (NGG)(CLP).

Plaintiff in this case alleged injuries resulting from a traffic accident that involved a jeep owned by Monaco and alleged driven by a member of the Monegasque mission. Plaintiff sued the jeep’s insurer directly in order to bypass the diplomatic immunities available to the registrant and driver of the jeep. Defendant moved to dismiss, arguing that plaintiff improperly brought a direct action against the insurer. The Court denied the motion – explaining the history of the Diplomatic Relations Act and holding that it provided for a direct action against the insurer in this case.

Under the common law, a tort victim had no right of action against a tortfeasor’s liability insurer, because the two were not in privity of contract. Lang v. Hanover Ins. Co., 820 N.E.2d 855, 857 (N.Y. 2004); 7A Steven Plitt et al., Couch on Insurance § 104:2 (3d ed. updated 2017). Consistent with this common-law rule, most states prohibit a party injured in a traffic accident from bringing suit solely and directly against the alleged tortfeasor’s liability insurer. 13F Charles A. Wright et al., Federal Practice and Procedure § 3629, at 186 n.4 (3d ed. 2009). Some states—among them New York—have softened this prohibition on direct actions by permitting a tort victim to sue the alleged tortfeasor’s liability insurer, provided that, among other things, the victim first obtains a judgment against the tortfeasor. N.Y. Ins. Law § 3420; see also, e.g., Md. Code., Ins. § 19-102(b)(2); Va. Code § 38.2-2200(2).

These rules had unfortunate consequences for Americans injured in domestic traffic accidents with foreign diplomats. After such accidents, these victims were often left without legal recourse. As a diplomat, the actual tortfeasor could claim immunity from suit. See Windsor v. State Farm Ins. Co., 509 F. Supp. 342, 344 (D.D.C. 1981); Diplomatic Privileges and Immunities: Hearings Before the Subcomm. on Int’l Operations of the House Comm. on Int’l Relations, 95th Cong, 1st Sess., at 3, 5-6 (1977) (hereinafter Diplomatic Privileges Hearings) (statement of Rep. Fisher). Even if the plaintiff could bring a direct action against the diplomat’s liability insurer, the insurer could escape liability by asserting the insured’s diplomatic immunity as a defense to the suit. S. Rep. 95-1108, at 3 (1978) (statement of Sen. Mathias).

Partly to address “the inequities associated with the immunity of members of diplomatic missions in civil court proceedings, “Congress enacted the Diplomatic Relations Act, which substantially revised the law of diplomatic immunity. Rodriguez v. Hanover Ins. Co., No. 14- CV-1478 (GJH), 2014 WL 3405258, at *3 (D. Md. July 9,2014) (internal quotation marks and citation omitted); see also Windsor, 509 F. Supp. at 343; S. Rep. No. 95-958, at 1 (1978). Three provisions of the Diplomatic Relations Act are relevant to this lawsuit. See Rodriguez, 2014 WL 3405258, at *3. The first, Section 5 (codified at 22 U.S.C. § 254d), “continues the long-standing concept of diplomatic immunity by providing for the dismissal of any action or proceedings brought against an individual entitled to such protection” under the Vienna Convention on Diplomatic Relations of April 18,1961, 23 U.S.T. 3227 (entered into force with respect to the U.S. Dec. 13,1972), the Diplomatic Relations Act itself, or any other laws extending diplomatic immunity or privileges. Windsor, 509 F. Supp. at 344. The second. Section 6 (codified at 22 U.S.C. § 254e), requires diplomatic missions in the United States, members of those missions, and members’ families to maintain adequate liability insurance against the risks of bodily injury, death, and property damage arising from their use of motor vehicles, vessels, or aircraft in the United States. See generally 22 C.F.R. §§ 151.11-151.11 (implementing this provision). The third. Section 7 (codified at 28 U.S.C. § 1364), provides that someone injured by certain diplomatic personnel—namely, a member of a diplomatic mission, a senior United Nations official, or a family member of either—can sue the alleged tortfeasor’s liability insurer directly in federal court, and that such a suit is tried without a jury and is not subject to the defense that the insured is protected by diplomatic immunity. By requiring individuals who are likely to be entitled to diplomatic immunity to maintain liability insurance and permitting tort victims to bring direct actions against those individuals’ insurers. Sections 6 and 7 of the Diplomatic Relations Act provide an effective remedy for Americans injured by foreign diplomatic personnel. Windsor, 509 F. Supp. at 345.
. . .
Subsection 7(a) of the Diplomatic Relations Act provides that federal courts may hear tort suits brought directly against the insurers of certain diplomatic personnel and their families. In full, this subsection reads as follows:
The district courts shall have original and exclusive jurisdiction, without regard to the amount in controversy, of any civil action commenced by any person against an insurer who by contract has insured an individual, who is, or was at the time of the tortious act or omission, a member of a mission (within the meaning of section 2(3) of the Diplomatic Relations Act (22 U.S.C. [§] 254a(3))) or a member of the family of such a member of a mission, or an individual described in section 19 of the Convention on Privileges and Immunities of the United Nations of February .13,1946, against liability for personal injury, death, or damage to property.
28 U.S.C. § 1364(a).

Plaintiff’s allegations easily satisfy Section 7. Plaintiff alleges that Defendant insured the Jeep that crashed into her car (Compl. 2, 6-7), and Defendant concedes not only that it insured the Jeep, but also that it therefore insured the party or parties allegedly responsible for the accident (Answer (Dkt. 6); Def. Mem. at 1). As the head of Monaco’s mission to the United Nations, [the registrant of the vehicle] was a “member” of that mission for purposes of the Diplomatic Relations Act. See 22 U.S.C. § 254a(l)(A). Furthermore, Plaintiff’s allegation that [the driver] worked for the mission (Compl. 6) is sufficient, at least at this stage of the litigation, to allege that he was a “member” of the mission under the Diplomatic Relations Act, which defines that term to include not only the mission’s diplomatic staff, but also its administrative, technical, and service staff. 22 U.S.C. § 254a(l)(A)-(C); see Rodriguez, 2014 WL 3405258, at *3. Defendant thus wisely concedes that “the alleged tortfeasors”—presumably both [the registrant] and [the driver]—“fall within the definitions set forth in 28 U.S.C. § 254a.” (Def. Mem. at 11.)

Green v. First Liberty Insurance Corporation, 17-cv-6975 (E.D.N.Y May 8, 2018) (NGG)(CLP).

Posted by Solomon N. Klein, Litigation Partner

Posted: April 17, 2018

Judge Hurley Sua Sponte Dismisses Two Cases Involving LLCs For Failure to Allege Diversity Jurisdiction

Posted by Solomon N. Klein, Litigation Partner

District Judge Denis R. Hurley sua sponte dismissed two cases in as many days where plaintiffs failed to properly allege diversity jurisdiction in cases involving LLCs. Courtyard Apartments Property 1, LLC, v. Rosenblum, 17-cv-2909 (E.D.N.Y April 3, 2018) (DRH) (SIL); Sienna Ventures, LLC v. Halley Equipment Leasing, LLC, 18-cv-201 (E.D.N.Y April 2, 2018) (DRH) (GRB).

A bit of background: Establishing diversity jurisdiction for an LLC can be tricky because the citizenship of an LLC is determined by the citizenship of all of its members. (Indeed, LLCs with sizeable membership interests will often be ineligible for diversity jurisdiction.) Problem is, many attorneys instinctively think of citizenship in terms of principal place of business and state of organization of the LLC, which are not relevant – unlike traditional incorporated entities where place of business and incorporation determine citizenship. This has led to no shortage of “oops” cases where the parties or the courts realize deep into litigation that there is no subject matter jurisdiction.

Diligent federal judges and clerks have tackled the issue by proactively reviewing jurisdictional pleadings involving LLCs and sua sponte directing litigants to address jurisdictional defects at the outset of the case. Judge Hurley recently dismissed two such cases.

In Courtyard Apartments Property 1, LLC, v. Rosenblum, Judge Hurley, sua sponte, issued an order directing plaintiffs to explain the basis for subject matter jurisdiction, and citing caselaw that “A complaint premised upon diversity of citizenship must allege the citizenship of natural persons who are members of a limited liability company and the place of incorporation and principal place of business of any corporate entities who are members of the limited liability company.”

In accordance with its obligation to ensure that subject matter jurisdiction exists, on January 25, 2018, this Court ordered Plaintiffs to show cause in writing why the action should not be dismissed for lack of subject matter jurisdiction. On February 7, 2018, Plaintiffs filed an Amended Complaint, which again failed to address the citizenship of all of either Plaintiffs’ or Defendants’ members. In the Amended Complaint, Plaintiffs allege that Defendant Rosenblum “formed, and solely owned, or controlled as Managing Member” the corporate defendants. (Amended Complaint ¶ 12.) Plaintiffs make no other allegations concerning the citizenship of Defendants’ members, nor do Plaintiffs distinguish between which of the defendant corporations Rosenblum solely owned and which he just controlled.
. . .
The citizenship of a limited liability company (“LLC”) is determined by the citizenship of each of its members. See, e.g., Bayerische Landesbank, New York Branch v. Aladdin Capital Management LLC, 692 F.3d 42, 49 (2d Cir. 2012); Handelsman v. Bedford Vill. Assocs. Ltd P’ship, 213 F.3d 48, 51–52 (2d Cir. 2000). “A complaint premised upon diversity of citizenship must allege the citizenship of natural persons who are members of a limited liability company and the place of incorporation and principal place of business of any corporate entities who are members of the limited liability company.” New Millennium Capital Partners, III, LLC v. Juniper Grp. Inc., 2010 WL 1257325, at *1 (S.D.N.Y. Mar. 26, 2010), (citing Handelsman, 213 F.3d at 51–52)); Bishop v. Toys “R” Us-NY LLC, 414 F. Supp.2d 385, 389 n.1 (S.D.N.Y. 2006), aff’d, 385 Fed. App’x 38 (2d Cir. 2010).

When viewed against the foregoing principles, diversity jurisdiction has not been properly pled in this case as there are numerous fatal shortcomings in the Amended Complaint that are neither adequately addressed nor remedied by the Response to the Order to Show Cause. First, Plaintiffs make a blanket statement that each of the sixteen Plaintiffs are limited liability companies “with its same natural citizen sole owner and same principal place of business and residential address [] listed as follows[.]” (Amended Compl. ¶ 9.) The Court is unpersuaded that this is sufficient to allege citizenship of each of the members of the sixteen limited liability companies. Moreover, Plaintiffs have failed to even allege the members, let alone the members’ citizenship, of certain of the Plaintiffs such as those of the David J. Keudell Revocable Trust. See Amerigold Logistics, LLC v. ConAgra Foods, Inc., 136 S. Cit. 1012, 1016–17 (2016) (explaining that for purposes of diversity jurisdiction, a trust as an unincorporated entity “possesses the citizenship of all of its members”). This shortcoming alone is fatal to diversity jurisdiction, however, there are also significant issues with Plaintiffs’ allegations regarding the citizenship of all Defendants.

As noted above, Plaintiffs make no allegations concerning the citizenship of each of the Defendants’ members, relying on confusing statements about Defendant Rosenblum’s involvement in the companies. Reference is also made to other non-defendants who apparently have or had some stake in the Defendant companies at some point in time.
. . .
While Plaintiffs ask that the Court provide guidance or further directive as to its Order to Show Cause, the Court declines to do so here. Plaintiffs have had three proverbial “bites at the apple” to properly allege subject matter jurisdiction; in the Complaint, the Amended Complaint, and the Response to the Order to Show Cause. Plaintiffs have failed to do so on all occasions. It is not the Court’s responsibility to do research for Plaintiffs’ counsel on how to properly allege subject matter jurisdiction.

Courtyard Apartments Property 1, LLC, v. Rosenblum, 17-cv-2909 (E.D.N.Y April 3, 2018) (DRH) (SIL)

Similarly, in Sienna Ventures, LLC v. Halley Equipment Leasing, LLC, the court issued a sua sponte directive for the plaintiff to fill in the jurisdictional blanks or have the case dismissed. However, plaintiff’s response failed to identify the members of defendant’s LLC and their citizenship. The court dismissed the action.

Plaintiff responded to the Court’s order to show cause by letter, which alleges simply that “subject matter jurisdiction exists in this case as Sienna Ventures, LLC [] is a New York Limited Liability Company and its sole member is a citizen and resident of New York, and Halley Equipment Leasing, LLC [] is a Texas Limited Liability Company.” Plaintiff makes no other allegations concerning the residency or citizenship of Defendant’s members. Thus, as explained below, the case is dismissed for lack of subject matter jurisdiction.

Sienna Ventures, LLC v. Halley Equipment Leasing, LLC, 18-cv-201 (E.D.N.Y April 2, 2018) (DRH) (GRB).

Posted by Solomon N. Klein, Litigation Partner

Posted: April 11, 2018

Judge Garaufis Denies Motion to Dismiss and Holds that Taiwan is Not bound to Warsaw Convention despite China’s Accession to the Treaty

Posted by Solomon N. Klein, Litigation Partner

In a case of first impression in the Second Circuit, District Judge Nicholas G. Garaufis held that China’s agreement to join the Warsaw Convention does not apply to a dispute involving spoiled cherries shipped from Chile to Taiwan. Allianz Global Risks US Ins. Co. v. Latam Cargo USA, LLC, et al., (E.D.N.Y Mar. 31, 2018) 16-CV-6217 (NGG) (ST).

The lawsuit was brought against a number of cargo transporters, alleging that a shipment of fresh cherries arrived spoiled in Taiwan. The fresh cherries were allegedly delayed in transit after taking a circuitous route and “‘stored for a substantial period of time to the detriment of the fruit.’”

The Warsaw Convention, as amended by the Hague Protocol, governs, among other things, the international carriage by air of cargo. The Court explained that if the Warsaw Convention applied to the dispute then there would be no subject matter jurisdiction. This is because the Warsaw Convention has specific requirements where a suit could be brought based on the carriers’ locations and destination of the shipment – none of which were in the United States.

However, the parties disputed whether Taiwan is bound to Warsaw Convention in the first instance:

Defendants contend that because China acceded to the Warsaw Convention, so did Taiwan. (Cathay Mem. at 6; LAN-Latam. Mem. at 2.) China’s instrument of accession to the Warsaw Convention states “The Government of the People’s Republic of China is the sole legal government representing the Chinese People. The [Warsaw] Convention to which the Government of the People’s Republic of China adhere shall of course apply to the entire Chinese territory including Taiwan.” Warsaw Convention, Reference 10. Defendants thus argue that, as a result of China’s accession to the Warsaw Convention, Taiwan is a signatory to the Convention, and thus that the shipment in question falls within the scope of the Convention.

Defendants are mistaken, however, about Taiwan being bound by the Warsaw convention. Although the Second Circuit does not appear to have ruled on the issue, the majority of case law supports the position that Taiwan is not bound by the Warsaw Convention.

In Atlantic Mutual Insurance Co. v. Northwest Airlines, 796 F. Supp. 1188 (E.D. Wis. 1992), the District Court for the Eastern District of Wisconsin held that Taiwan was part of China, and thus that China’s status as a High Contracting Party to the Convention rendered Taiwan bound by the Convention. Id. at 1190-91. This ruling, however, was questioned by the Bankruptcy Court for the Northern District of Illinois, which stated that “[t]he reasoning in Atlantic Mutual was flawed …. The United States’s recognition of mainland China and derecognition of Taiwan has not had the effect in any legal or practical sense of accepting the PRC’s territorial claim to Taiwan.” Schwinn Plan Comm. v. AFS Cycle & Co., Ltd. (In re Schwinn Bicycle Co.) . 190 B.R. 599,611 (Bankr. N.D. Ill. 1995). Further, the Schwinn Plan Committee court held that “the question of what government is representative of a foreign state is one to be determined by the Executive Branch and is beyond the purview of judicial review. By analogy, it would be beyond a court’s authority to decide … that Taiwan has tacitly been recognized by the United States as a party to any treaty signed by the PRC.” Id. at 612.

Taiwan’s status with regard to the Warsaw Convention then was brought before the Ninth Circuit, which in Mingtai Fire & Marine Insurance Co. v. UPS, 177 F .3d 1142 (9th Cir. 1999) (“Mingtai Fire”), followed in the footsteps of Schwinn Plan Committee. The Ninth Circuit stated that “the Constitution commits to the Executive Branch alone the authority to recognize, and to withdraw recognition from, foreign regimes.” Id. at 1145. The court also then addressed the Taiwan Relations Act, and stated that “despite the absence of official relations, the United States continues to deal separately with Taiwan,” and the Taiwan Relations Act “gave no indication that existing or future agreements with the newly recognized China would be binding upon Taiwan.” Id. at 1146. Indeed, the Executive Branch had expressly stated its position, which was entitled to substantial deference, that the Warsaw Convention did not bind Taiwan. Id. at 1146- 47. Thus, the Ninth Circuit concluded that the Warsaw Convention does not apply to Taiwan.

Other courts in the Ninth Circuit have followed Mingtai Fire without criticism. See, e.g., Am. IC Exch., Inc. v. Fed. Express Corp., 185 F.3d 865, 1999 WL 391000, at *l (9th Cir. 1999) (memorandum disposition) (“Taiwan is not bound by the Warsaw Convention …. “); In re Extradition of Coe, 261 F. Supp. 2d 1203, 1209 (C.D. Cal. 2003); In re Air Crash at Taipei, 211 F.R.D. 374, 380 (C.D. Cal 2002) (holding that Taiwan is not party to the International Civil Aviation Organization, and citing Mingtai Fire’s holding on the Warsaw Convention as precedent).

Because the Second Circuit has not addressed Taiwan’s status under the Warsaw Convention, this court is guided by the reasoning of other courts that have addressed the issue. The court finds persuasive the Ninth Circuit’s thorough discussion and explanation of why Taiwan is not bound by the Warsaw Convention. Mingtai Fire, 177 F.3d at 1145-47. The court knows of no reason to believe that the Executive Branch has changed its position that Taiwan is not bound by China’s accession to the Warsaw Convention. See Br. for the United States as Amicus Curiae, Mingtai Fire, 177 F.3d at 142 (No. 98-15088), available at https://www.state.gov/documents/organization/65731.pdf. In addition, the court notes that Taiwan has not considered itself bound by the Warsaw convention. See Coordination Council for N. Am. Affairs v. Nw. Airlines, 891 F. Supp. 4, 8 (D.D.C. 1995).

For the foregoing reasons, in this court’s view, Taiwan is not bound by the Warsaw Convention.

Allianz Global Risks US Ins. Co. v. Latam Cargo USA, LLC, et al., (E.D.N.Y Mar. 31, 2018) 16-CV-6217 (NGG) (ST).

Posted by Solomon N. Klein, Litigation Partner