Sidoti v. Housewares America, Inc., No. CIV.A. 10-809 (SDW), 2010 WL 2682849 (D.N.J. July 02, 2010).
A Magistrate Judge in New Jersey recommended that the action be remanded to state court for want of diverse parties holding that the subject matter jurisdiction under CAFA is determined based solely on those defendants presently in the case. The Magistrate Judge also head that untimely service of process is not improper service under 28 U.S.C. §1446(b).
The plaintiff, Jeffrey Sidoti, filed a class action complaint on behalf of New Jersey consumers in New Jersey Superior Court against Housewares America, Inc., and Evert-Fresh, Inc. alleging consumer fraud under the New Jersey Consumer Fraud Act and New Jersey common law.
The plaintiff alleged that the defendants–the registered trademark owners and distributors of the Debbie Meyer brand of Green Bags–falsely advertised that the Green Bags were designed to significantly extend the life of fruits, vegetables, and flowers, without possessing the requisite scientific evidence to substantiate their claims about the Green Bags. (This point would be an appropriate time to make fun of the people who purchased the Green Bags thinking that they really worked. But that would be too easy, so we will pass up the chance.)
On January 6, 2010, a summons was issued for Housewares. On January 11, 2010, the summons and complaint were served on Housewares. On January 14, 2010, the plaintiff filed proof of service as to Housewares with the Clerk of the Superior Court. On January 15, 2010, the Superior Court sua sponte dismissed Evert-Fresh from the action for failure to prosecute.
On February 17, 2010, Housewares, a New Jersey corporation, removed the action to the federal court pursuant to CAFA, 28 U.S.C. §1332(d) claiming that diversity of citizenship existed because Evert-Fresh, the party that had been dismissed because of failure to prosecute, was the citizen of a different state–Texas.
The plaintiff sought to remand, which the Court granted.
First, because the Superior Court dismissed Evert-Fresh from the action before Housewares removed the action, the Magistrate Judge determined the impact of the state court’s dismissal on the federal diversity jurisdiction under CAFA. The Court stated that as described in Conolly v. Taylor, 27 U.S. 556, 565 (1829) federal diversity jurisdiction is generally determined under the “time-of-filing rule.” But Kaufman v. Allstate New Jersey Ins. Co., 561 F.3d 144, 152 (3d Cir. 2009) (citing Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 575 (2004)) stated that the time-of-filing rule admits exceptions in cases where the parties change. (Editors’ Note: See the CAFA Law Blog analysis of Kaufman posted on October 14, 2009).
Applying that exception here, the Court held that the subject matter jurisdiction under CAFA was determined based solely on those defendants presently in the case, and accordingly, concluded that the Superior Court’s dismissal of Evert-Fresh, the only party diverse from the plaintiff, divested the Court of minimal diversity jurisdiction under CAFA. Accordingly, the Court held that it lacked subject matter jurisdiction.
Second, the Court determined if the removal was timely. Under 28 U.S.C. §1446(a), a defendant must remove an action within thirty days of service of the complaint. The Court noted that the plaintiff filed the complaint in June, 2009 but did not issue a summons until six months later in January, 2010. Thus, the plaintiff failed to timely serve Housewares with a copy of the summons and complaint under N.J. COURT R. 4:4-1, which provides that if a summons is not issued within 15 days from the date of the Track Assignment Notice, the action may be dismissed in accordance with R. 4:37-2(a).
Thus, the critical issue before the Court was whether untimely service amounted to improper service such that the time for removal was not triggered under 28 U.S.C. §1446(b). The Court, citing PRESSLER, N.J. COURT RULES, Comment R. 4:4-1 (GANN), and McLaughlin v. Bassing, 51 N.J. 410 (1968), observed that the time period for issuance of the summons is not jurisdictional and violation thereof will not defeat the action when the defendant is not prejudiced, the complaint is apparently meritorious, and the failure is one which is attributable solely to the neglect of plaintiff’s attorney.
The Court, however, found merit in the plaintiff’s case and did not find any prejudice to Housewares due to the plaintiff’s failure to timely issue a summons. In addition, there was no evidence that the failure to timely issue a summons was caused by the plaintiff himself. As such, the Court concluded that Rule 4:4-1 did not render service on Housewares ineffective.
Further, the Court noted that N.J. COURT R. 1:13-7 does not provide a basis here to conclude that service of process was improper. Rule 1:13-7 provides that whenever an action has been pending for four months, without a required proceeding having been taken therein, the court will issue written notice to plaintiff advising that the action as to any/all defendants will be dismissed without prejudice 60 days following the date of the notice unless within said period, required action is taken.
Because the state court never dismissed the action against Housewares although the action was pending for four months, and that the plaintiff served Housewares on January 11, 2010, the Court found that the plaintiff properly served Housewares, consistent with New Jersey Court rules on January 11, 2010.
Accordingly, the Court found that the removal on February 17, 2010–after the lapse of 30 days was untimely.