Janvey v. Proskauer Rose, LLP

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
RALPH S. JANVEY, et al.,
Plaintiffs,
v. Civil Action No. 12-155 (CKK)
PROSKAUER ROSE, LLP, et al.,
Defendants.
MEMORANDUM OPINION
(July 24, 2014)
Presently before the Court is Plaintiffs’ [15] Motion to Transfer Case to the United States
District Court for the Northern District of Texas. In response, Defendants filed a [29] Cross-
Motion to Dismiss for Lack of Jurisdiction. Upon consideration of the pleadings,1 the relevant
legal authorities, and the record as a whole, the Court finds that transferring this case to the
United States District Court for the Northern District of Texas is not in the interest of justice.
Accordingly, Plaintiffs’ [15] Motion is DENIED and Defendants’ [29] Cross-Motion is
GRANTED and this case is DISMISSED.2
1
Plaintiffs’ Motion to Transfer Under 28 U.S.C. § 1631 (“Pl.s’ Mot.”), ECF No. [15];
Defendants’ Memorandum of Points and Authorities in Opposition to Plaintiffs’ Motion to
Transfer Under 28 U.S.C. § 1631 and in Support of Defendants’ Cross-Motion to Dismiss for
Lack of Jurisdiction (“Def.s’ Opp’n.”), ECF No. [30]; Plaintiffs’ Reply in Support of Motion to
Transfer Under 28 U.S.C. § 1631 (“Pl.s’ Reply”), ECF No. [37].
2
Pending before the Northern District of Texas District Court at the time this matter was
transferred back to this Court were two motions: (1) Plaintiff Ralph S. Janvey’s Motion to
Substitute Attorney, N.D. Tex., ECF No. [66], and (2) Defendants Proskauer Rose LLP and
Thomas V. Sjoblom’s Cross-Motion to Compel Discovery, N.D. Tex., ECF No. [70]. Both
motions are opposed. Defendants oppose Plaintiffs’ substitution of counsel because “they
believe that proposed replacement counsel, Neligan Foley LLP, co-counsel and/or Janvey may
have received actual or imputed knowledge of confidential government information [about the
SEC investigation], including information concerning Proskauer and Sjoblom, in violation of
I. BACKGROUND
This case arises from the Ponzi scheme of Allen Stanford, who controlled Stanford
International Bank (“SIB”) which sold billions of dollars in fraudulent certificates of deposit to
more than 50,000 people over a period of more than two decades. Pl.s’ Mot. ¶ 2. Plaintiff Ralph
S. Janvey was appointed by the United States District Court for the Northern District of Texas,
Dallas Division, to serve as the Receiver for the Stanford Receivership Estate. Compl. ¶ 2. In his
capacity as Court-Appointed Receiver, Janvey filed suit on behalf of the Stanford Receivership
Estate and the Official Stanford Investors Committee (collectively, “Plaintiffs”) against
Proskauer Rose, LLP, Chadbourne & Parke, LLP, and Thomas V. Sjoblom (collectively,
“Defendants”) on January 27, 2012, asserting negligence, aiding and abetting in breaches of
fiduciary duties, and aiding and abetting in a fraudulent scheme, among other claims, by
assisting SIB in evading regulatory oversight and obstructing the government investigation. Id.
at ¶¶ 209-221; Pl.s’ Mot., ¶ 3. Although Plaintiffs filed sixty-one lawsuits on behalf of the
Stanford Receivership Estate in the United States District Court for the Northern District of
Texas, Plaintiffs filed the present cause of action in this Court. See Def.s’ Opp’n. at 1-2;
Rouhandeh Decl., ECF No. [31-1].
Texas Disciplinary Rule of Professional Conduct 1.10 and ABA Model Rule of Professional
Conduct 1.11.” Joint Status Report (Feb. 6, 2014), ECF No. [20], at 6. In their Cross-Motion to
Compel Discovery, Defendants seek discovery to “determine the extent of the improper
transmission of that information,” if any. Def.s’ Cross-Mot. at 7. This Court has determined
there is no need to evaluate the parties’ motions to substitute counsel and to compel discovery
because Defendants’ concerns about replacement counsel’s knowledge of confidential
information about the SEC investigation have no bearing on the purely procedural motion to
transfer presently before the Court. Moreover, as this case is being dismissed for lack of
jurisdiction, the Court finds Plaintiffs’ [66] Motion to Substitute Counsel and Defendants’ [70]
Cross-Motion for Discovery MOOT. Accordingly, the Court also denies as MOOT the recent
Motion for Admission Pro Hac Vice filed on behalf of attorney Douglas J. Buncher as proposed
counsel to represent Plaintiff Ralph S. Janvey. See ECF No. [38].
2
On February 16, 2012, Defendants filed a Notice of Potential Tag-Along Action with the
United States Panel on Multidistrict Litigation, seeking transfer of this case to the United States
District Court for the Northern District of Texas. See Remand Order (Dec. 23, 2013), ECF No.
[14]. Subsequently, on March 2, 2012, this case was transferred to the United States District
Court for the Northern District of Texas by the Panel on Multidistrict Litigation pursuant to 28
U.S.C. § 1407, which provides that civil actions that involve one or more common questions of
fact and are pending in different districts may be transferred to any district for coordinated or
consolidated pretrial proceedings. The Clerk of the Panel entered a conditional order transferring
the case to the Northern District of Texas. See Conditional Transfer Order (Mar. 1, 2012), ECF
No. [11].
On October 24, 2012, Defendants filed Motions to Dismiss for Lack of Jurisdiction in the
Northern District of Texas. See N.D. Tex. (Dallas), ECF Nos. [49], [50], [53]. Defendants
argued that the Northern District of Texas did not have subject matter jurisdiction because the
parties were not diverse due to the “statelessness” of Defendants Proskauer Rose and
Chadbourne & Parke. Def.s’ Mot. to Dismiss, N.D. Tex. (Dallas), ECF No. [49], at 13-23.
Additionally, Defendants contended that, because Plaintiffs originally chose to file in the District
of Columbia, they could not assert jurisdiction in the Northern District of Texas pursuant to 28
U.S.C. § 754 and must instead establish an independent ground for federal subject matter
jurisdiction, which they failed to do. Id. at 23-26. On December 12, 2012, Plaintiffs moved for a
recommendation of remand of the case to the District of Columbia, arguing that the District of
Columbia court could cure any jurisdictional defects by ordering a 28 U.S.C. §1631 transfer in
the “interest of justice” to a court with jurisdiction. See Pl.s’ Mot. for Recommendation of
Remand, N.D. Tex. (Dallas), ECF No. [55]. On August 21, 2013, the United States District
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Court of the Northern District of Texas issued an order denying Defendants’ motions to dismiss
and recommending that the United States Judicial Panel on Multidistrict Litigation remand the
case back to the United States District Court for the District of Columbia to determine Plaintiff’s
§ 1631 transfer request. See Order (Aug. 21, 2013), N.D. Tex. (Dallas), ECF No. [71]. On
December 23, 2013, a Remand Order was issued by the Judicial Panel on Multidistrict Litigation
directing remand of the case from the U.S. District Court for the Northern District of Texas to
the U.S. District Court for the District of Columbia. See Remand Order (Dec. 23, 2013), ECF
No. [14]. The Panel gave weight to the Northern District of Texas’ determination that remand
was necessary to provide Plaintiffs “the opportunity to present to the District of Columbia court
evidence and argument that a transfer to this Court [the Northern District of Texas] would be in
the interest of justice.” Id. at 3.
On February 5, 2014, Plaintiffs filed in this Court a Motion to Transfer Case to the
United States District Court for the Northern District of Texas pursuant to 28 U.S.C. §1631. On
February 20, 2014, Defendants filed a Cross-Motion to Dismiss for Lack of Jurisdiction and a
Memorandum in Opposition to Plaintiffs’ Motion to Transfer and in Support of Defendants’
Cross-Motion to Dismiss. Plaintiffs concede that this court does not have jurisdiction over this
action, but argue that this case should be transferred to the Northern District of Texas pursuant to
§1631 because Plaintiffs reasonably believed that diversity jurisdiction existed at the time of
filing in this court and if transfer to a court of proper jurisdiction is denied, “there is a risk that
the Receiver’s negligence claims may be barred.” Pl.’s Mot. ¶ 14. Defendants contend that this
action should be dismissed because Plaintiffs filed this action in this court in bad faith and thus it
is not in the interest of justice to transfer the action. On March 27, 2014, Plaintiffs filed a
Motion for Leave to Late-File Reply. See ECF No. [33]. The Court granted Plaintiffs’ Motion
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on June 30, 2014, and Plaintiffs’ Reply was subsequently docketed. Accordingly, this motion is
now ripe for review.
II. LEGAL STANDARD
Pursuant to 28 U.S.C. § 1631, courts have authority to transfer a civil action filed in the
wrong jurisdiction, “if it is in the interest of justice” to do so. When a case is transferred
pursuant to 28 U.S.C. § 1631, it “proceed[s] as if it had been filed in . . . the court to which it is
transferred on the date upon which is was actually filed in . . . the court from which it is
transferred.” Id. “There are three elements to a section 1631 transfer: (1) there must be a lack of
jurisdiction in the district court; (2) the transfer must be in the interest of justice; and (3) the
transfer can be made only to a court in which the action could have been brought at the time it
was filed or noticed.” Fasolyak v. The Cradle Soc’y, Inc., No. 06-1126, 2007 WL 2071644, at
*11 (D.D.C. July 19, 2007) (quoting Ukiah Adventist Hosp. v. FTC, 981 F.2d 534, 549 (D.C. Cir.
1992)). As the party requesting transfer, Plaintiffs bear the burden of establishing that the
elements of a § 1631 transfer have been met. See Osage Tribe of Indians of Okla. v. U.S., No. 04-
283, 2005 WL 578171, at *2 (D.D.C. Mar. 9, 2005) (rejecting defendants’ transfer request under
§ 1631 because defendants failed to make the necessary threshold showing that the court lacked
subject matter jurisdiction). Pursuant to 28 U.S.C. § 1631, “federal courts [have the] authority to
make a single decision upon concluding that it lacks jurisdiction – whether to dismiss the case . .
. or, in the interest of justice, to transfer it . . . .” Maxwell v. Lappin, No. 10-1613, 2011 WL
1897175 at *2 fn. 1 (D.D.C. May 18, 2011) (internal quotation marks omitted). The Court shall
consider the three § 1631 requirements in turn.
III. DISCUSSION
A. Jurisdiction in the District of Columbia District Court
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The first requirement of a § 1631 transfer—that the district court in which the action was
originally filed lack jurisdiction—has clearly been met in this case, and both parties agree that
this Court lacks jurisdiction. See Pl.s’ Mot. Mem. ¶ 3 (“The parties agree that the District of
Columbia district court did not and does not have diversity jurisdiction to hear this case.”);
Def.s’ Opp’n. at 8 (“[T]here is no dispute that this Court lacks federal subject-matter jurisdiction
over this case.”). In their Complaint, Plaintiffs originally alleged that this Court had jurisdiction
over this action under 28 U.S.C. § 1332(a)(1) because “Plaintiffs and Defendants are citizens of
different states.” Compl. ¶ 7. However, both parties now concede that this Court lacks subject-
matter jurisdiction over this case because some of the defendants are in fact “stateless” for the
purposes of diversity jurisdiction. See Pl.s’ Mot. Mem. ¶ 3 (“[T]he District of Columbia district
court did not and does not have diversity jurisdiction . . . Plaintiffs did not know the facts about
the law firms ‘stateless partners’ at the time.”); Def.s’ Opp’n. at 7 (“[E]ach defendant law firm
has at least one partner who is a ‘stateless’ person, precluding diversity jurisdiction.”).
Specifically, two of the defendants are law firms with partners who are American citizens
domiciled abroad. See Def. Chadbourne & Parke, LLP’s Mot. to Dismiss, N.D. Tex. (Dallas),
Mecz Decl. and Greenwald Decl., ECF No. [49-1]; Def. Proskauer Rose LLP’s Mot. to Dismiss,
N.D. Tex. (Dallas), Spitzer Decl., ECF No. [51].3 The Supreme Court has held that the
citizenship of a partnership for the purposes of establishing diversity jurisdiction “depends on the
citizenship of ‘all the members.’” Carden v. Arkoma Assocs., 494 U.S. 185, 195 (1990) (quoting
Chapman v. Barney, 129 U.S. 677, 682 (1889)). “Partnerships which have American partners
living abroad pose a special problem. . . . An American citizen domiciled abroad, while being a
3
Defendants incorporate into their present Opposition and Motion to Dismiss all
arguments made in their Motions to Dismiss the First Amended Complaint filed before the
Northern District of Texas. See Def.s’ Opp’n. at 7 fn. 3.
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citizen of the United States is, of course, not domiciled in a particular state, and therefore such
person is ‘stateless’ for purposes of diversity jurisdiction.” Swiger v. Allegheny Energy, Inc.,
540 F.3d 179, 183-184 (3rd Cir. 2008). “Because a ‘stateless’ defendant ‘destroy[s] complete
diversity,’” all parties concede, and the Court agrees, Defendants cannot be sued in this Court
based upon diversity jurisdiction. See Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826,
829 (1989). See Swiger, 540 F.3d at 185 (holding that federal courts lacked diversity jurisdiction
over defendant Morgan Lewis, a law firm with a partner who was an American citizen domiciled
abroad because of the partner’s “statelessness”). Accordingly, the Court finds that it lacks
subject matter jurisdiction over Plaintiffs’ claims.
B. Jurisdiction in the Northern District of Texas District Court
The next requirement for a § 1631 transfer is that the transfer be made to a court “in
which the action could have been brought at the time it was filed or noticed.” Fasolyak, WL
2007 2071644, at *11. Both parties appear to agree that the Northern District of Texas has
jurisdiction over these proceedings pursuant to 28 U.S.C. § 754. See Def.s’ Opp’n. at 1-2
(“Unlike the Northern District of Texas, which Plaintiffs concede has ‘jurisdiction over the
Stanford receiver proceedings’ . . .”); Pl.s’ Mot. Mem. ¶ 3. Pursuant to § 754, the Northern
District of Texas, as the court that appointed Plaintiff as Receiver, has jurisdiction over any
claim brought by the Receiver in his execution of Receivership duties. See Def. Chadbourne &
Parke’s Mot. to Dismiss, N.D. Tex. (Dallas), at 18 (“[The Northern District of Texas] has
previously acknowledged that ‘a receiver has standing to bring ancillary recovery actions in the
appointing court . . .’”) (citing Janvey v. Alquire, 846 F. Supp. 2d 662, 668-69) (N.D. Tex.
2011)).
However, the question remains as to whether this action could have been brought in the
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Northern District of Texas at the time it was filed—as required by the statute. In their
Opposition, Defendants raise the specter that had Plaintiff filed the present action in the Northern
District of Texas at the time Plaintiff filed the action in this court, the action would have been
barred by the Texas statute of limitations. See Def.s’ Opp’n at 2. Plaintiffs effectively ignore this
issue in their briefing, focusing instead on whether the Texas statute of limitations would bar this
action if it were filed in the Northern District of Texas District Court today. But whether an
action would have been barred by a statute of limitations in the transferee court if that action had
originally been filed in that court is an essential part of the analysis of the third requirement of a
§ 1631 transfer. See Hyun Min Park v. Heston, 245 F.3d 665, 667 (8th Cir. 2001) (holding that
untimely appeal could not be transferred under § 1631 because transfer “can remedy the mistake
of filing in the wrong court, but not the mistake of filing in an untimely manner”); Briseno v.
United States, No. 08-74, 2009 WL 899697, at *2 (Fed. Cl. Mar. 31, 2009) (transferring case
pursuant to § 1631 because plaintiffs had cited “to a statute of limitations which, in their opinion,
would likely bar a new case filed after the dismissal of plaintiffs’ suit in this court, but which
would not bar plaintiffs’ claims as of the date of their original filing in this court.”). Neither party
sufficiently briefs the statute of limitations issue apparently because both—correctly—agree that
timeliness questions are most prudently resolved not by the transferor court, but by the transferee
court. See Def.s’ Opp’n. at 16; Pl.s’ Reply ¶ 4; see also Sosa v. Sec’y, Dep’t of Def., 47 Fed.
Appx. 350, 352 (6th Cir. 2002) (holding that transferee court should resolve the disputed
timeliness of plaintiff’s claim); Hyun Min Park, 245 F.3d at 667 (declining to resolve the “open
question” of whether plaintiff’s petition for review was timely and transferring the case pursuant
to § 1631). Consequently, the Court finds that the facts relevant to the third requirement for a §
1631 transfer do not prevent transfer to the Northern District of Texas. Nevertheless, as
8
explained below, the Court shall deny transfer of this action to the Northern District of Texas
because transfer is not in the interest of justice.
C. Transfer Would Not Be in the Interest of Justice
This Court must finally consider whether transferring this case to the Northern District of
Texas is in the interest of justice. The legislative history of § 1631 indicates that “Congress
contemplated that the provision would aid litigants who were confused about the proper forum
for review.” Am. Beef Packers, Inc. v. I.C.C., 711 F.2d 388, 390 (D.C. Cir. 1983) (per curiam)
(citing S.Rep. No. 275, 97th Cong., 2d Sess. 11 (1981), reprinted in 1982 U.S.C.C.A.N. 11,
21). In determining whether a transfer is in the interest of justice, the equities of dismissing a
claim when it could be transferred should be carefully weighed. Liriano v. United States, 95
F.3d 119, 122 (2d Cir. 1996) (citing Franchi v. Manbeck, 947 F.2d 631, 634 (2d Cir.
1991)). Courts have found that transfer is “in the interest of justice” when, for example, the
original action was misfiled by a pro se plaintiff or by a plaintiff who, in good faith,
misinterpreted a complex or novel jurisdictional provision. See, e.g., Prof’l Managers’ Ass’n v.
U.S., 761 F.3d 740, 745 fn. 5 (D.D.C. 1985) (holding that transfer was in the interest of justice
“because of the complexity of the federal court system and special jurisdictional provisions”);
Besser v. Sec. of HHS, No. 86-1477, 1987 WL 155962 at *1 (D.C. Cir. 1987) (holding transfer
was in the interest of justice because a pro se litigant was confused as to where to file his action).
Courts have also looked to whether it would be time consuming and costly to require a plaintiff
to refile his or her action in the proper court or whether dismissal would work a significant
hardship on plaintiff who would likely now be time barred from bringing his or her action in the
proper court. See Prof’l Managers’ Ass’n, 761 F.3d at 745 fn. 5; Maxwell, 2011 WL 1897175 at
*2 (holding transfer was in the interest of justice because it would be too costly and time-
9
consuming to make prisoner refile his habeas petition); Bailey v. Fulwood, 780 F. Supp. 2d. 20,
27 (D.D.C. 2011) (same).
Weighing these factors, the Court cannot find that transfer is in the interest of justice in
the present case. First, Plaintiffs are not pro se litigants who were simply confused as to the
proper forum in which to file their action. Rather, Plaintiffs are represented by two law firms,
Strasburger & Price, LLP and Neligan Foley, LLP. Cf. Esposito v. C.I.R., 208 F. Supp. 2d. 44,
46 (D.D.C. 2002) (“Confusion about the proper forum is certainly understandable when the
litigants are pro se . . . .”); Besser, 1987 WL 155962, at *1 (holding that “because this pro se
litigant was confused as to where to file his action, we decline to dismiss the petition. Instead, we
transfer this action . . . .”). Nor have Plaintiffs alleged that there were complex or novel
jurisdictional provisions at issue excusing their failure to file this action in the proper court.
Instead, Plaintiffs’ failure to recognize that the District of Columbia District Court lacked
jurisdiction over their lawsuit suggests that Plaintiffs filed their suit in this jurisdiction either in
bad faith and/or as an attempt at forum shopping. It is well settled law that a “stateless” partner
can destroy complete diversity. Plaintiffs claim that they “did not know the facts about the law
firms[’] ‘stateless partners’ prior to filing this suit, and such facts are inherently difficult if not
impossible to discover from publicly available information.” Pl.s’ Mot. Mem. ¶ 3. However, it
would have required a minimal amount of research on Defendants’ websites for Plaintiffs to be
alerted to the likelihood that Defendants might be considered “stateless” for the purposes of
diversity jurisdiction. See Def.s’ Opp’n. at 12 (“[E]ven a minimal level of diligence would have
revealed that Proskauer and Chadbourne . . . have fourteen different international offices . . . This
information is prominently and clearly identified on both firms’ websites . . . which also disclose
that U.S. law is practiced in foreign offices, in some cases by partners who have obviously
10
American backgrounds but have lived in the same foreign country for as many as 20 years or
more.”). As Defendants argue, prior to filing this suit, “[P]laintiffs should, at a bare minimum,
have realized that they lacked the information necessary to plead what was required for diversity
jurisdiction under established federal law.” Id. at 20. Instead, despite having sophisticated
counsel, Plaintiffs only alleged jurisdiction was appropriate in this court because Defendants
Proskauer Rose and Chadborne & Parke are “citizen[s] of a state other than Texas.” Compl. ¶¶
10-11. See Kelso v. Luna, 317 Fed. Appx. 846, 848 (10th Cir. 2009) (holding that transfer was
inappropriate because plaintiff’s original action was not filed in good faith where plaintiff
“should have realized” that the district in which he filed was an improper forum because an
action he had previously filed was dismissed for lack of jurisdiction). The Court finds that it is
unlikely that Plaintiffs were simply confused about the propriety of jurisdiction in this court.
Furthermore, the fact that Plaintiffs previously filed sixty-one related lawsuits and, “in an
abundance of caution,” one virtually identical suit in the Northern District of Texas, but only one
suit in the District of the District of Columbia, suggests that Plaintiffs may have been aware that
the District of Columbia was an improper forum. Pl.s’ Mot. Mem. ¶ 4 fn. 1 (“. . . in an
abundance of caution, Plaintiffs filed a second suit in the Northern District of Texas . . . which is
. . . stayed pending the outcome of the D.C. suit.”). The timing of this suit also suggests that
Plaintiffs were attempting to circumvent concerns regarding the constraints of the statute of
limitations in Texas. While the limitations period for negligence claims is two-years in Texas, it
is three-years in the District of Columbia. Kansa Reinsurance Co. v. Cong. Mortg. Corp. of Tex.,
20 F.3d 1362, 1369 (5th Cir. 1994) (citing TEX. CIV. PRAC. & REM. CODE ANN. § 16.003);
Johnson v. Long Beach Mortg. Loan Trust 2001-4, 451 F. Supp. 2d 16, 47 (D.D.C. 2006) (citing
D.C. Code § 12-301). Defendants argue that “by filing in a different district with a longer
11
limitations period, plaintiffs hoped to overcome their delay in filing this action and preserve their
[allegedly] stale claims.” Def.s’ Opp’n at 11. Plaintiff does not respond to any of these
arguments by Defendants. Such forum-shopping plaintiffs are not the type of confused litigants
Congress contemplated in providing for transfer pursuant to § 1631.
Finally, transfer is not in the interest of justice in so far as it would avoid the
inefficiencies involved in dismissing the action and requiring Plaintiffs to refile in the proper
forum as Plaintiffs have already done so. Plaintiffs concede that “in an abundance of caution,”
they already filed a second suit in the Northern District of Texas which has been stayed pending
this decision. Pl.s’ Mot. Mem. ¶ 4 fn. 1. Consequently, dismissal of this case will not require
Plaintiffs to refile and will be neither time-consuming nor potentially costly. See Carson v.
Director, Office of Workers’ Comp. Programs, No. 97-1203, 1997 WL 573483 at *1 (D.C. Cir.
1997), cert. denied, 522 U.S. 1121 (1998) (holding transfer pursuant to 28 U.S.C. § 1631 was not
necessary because petitioner had filed an identical petition with the Ninth Circuit). If this case is
dismissed, Plaintiffs can prosecute the second action. Accordingly, the Court finds it is not in
the interest of justice to transfer this matter to the Northern District of Texas.
IV. CONCLUSION
For the foregoing reasons, the Court finds that transfer of this case to the Northern
District of Texas is not appropriate pursuant to 28 U.S.C. § 1631 because it is not in the interest
of justice. Accordingly, Plaintiffs’ [15] Motion to Transfer is DENIED and Defendants’ [29]
Cross-Motion to Dismiss is GRANTED.
/s/
COLLEEN KOLLAR-KOTELLY
UNITED STATES DISTRICT JUDGE
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