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Keywords

plaintiffdefendantjurisdictionappealtrustcorporation

contractbreach of contractplaintiffdefendantjurisdictionlitigation

Related Cases

Gardner and Florence Call Cowles Foundation v. Empire Inc., 754 F.2d 478

Facts

Empire Incorporated, a Missouri corporation, issued approximately $25,000,000 in convertible debentures in January 1981. Following a leveraged buy-out, the value of the debentures' conversion rights diminished significantly. The plaintiffs, holders of these debentures, alleged that Empire breached its obligations under the trust indenture by refusing to adjust the conversion ratio after the buy-out, which they claimed was induced by the takeover defendants.

The facts giving rise to this litigation are alleged to be as follows. In January, 1981, Empire issued approximately $25,000,000 in convertible debentures.

Issue

The main legal issue was whether the federal court had jurisdiction over the plaintiffs' claims, given that some defendants were citizens of New York, the state where the action was originally filed.

In the instant case, there is not complete diversity between all plaintiffs and defendants and some defendants are citizens of the state in which the action was brought.

Rule

The court applied the rule that for federal jurisdiction to exist under 28 U.S.C. § 1441(c), there must be a separate and independent claim that is removable, which was not the case here due to the lack of complete diversity among the parties.

If federal jurisdiction exists, therefore, it must be based on the grounds that plaintiffs' breach of contract action against Empire is a 'separate and independent claim' under § 1441(c).

Analysis

The court analyzed the claims and determined that the plaintiffs' allegations arose from an integrated transaction involving the actions of various defendants. The claims against the non-diverse takeover defendants depended on a prior finding that Empire breached its obligations, thus failing to establish a separate and independent claim for federal jurisdiction.

The injury for which relief is sought thus arises from an integrated transaction involving acts by various defendants.

Conclusion

The court vacated the judgment and remanded the case to the district court with instructions to remand it back to the New York state courts due to the lack of federal jurisdiction.

Vacated and remanded to the district court with instructions to remand to the New York state courts.

Who won?

The plaintiffs prevailed in the appeal as the court found that the case should not have been removed to federal court due to jurisdictional issues.

Empire removed the Shubik action to the District Court for the Southern District of New York.

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