United States District Court, E.D. Louisiana
MICHELLE NOGESS, ET AL.
POYDRAS CENTER, LLC, ET AL.
ORDER AND REASONS
MICHAEL B. NORTH UNITED STATES MAGISTRATE JUDGE.
are currently two matters before the Court, both of which
arise from the improper removal of this action by Defendant,
Velocity Consulting, Inc. (“Velocity”). The first
matter is Velocity's Motion for Leave to File Amended
Notice of Removal (rec. doc. 38), which seeks to correct
omissions in its original Notice of Removal (the
“Notice”). (Rec. doc. 1). That Motion and the hearing
thereon have, in turn, precipitated the second matter
currently before the Court, which is a Rule to Show Cause
issued by the Court directing that Velocity and/or its
counsel, Matthew J. Ungarino (“Ungarino”), David
Bordelon (“Bordelon”) and their firm, Ungarino
& Eckert, L.L.C. (“U&E”)(collectively the
“Respondents”), show cause why they should not be
assessed costs and/or fees or otherwise sanctioned under 28
U.S.C. §1447(c), 28 U.S.C. §1927, and/or Federal
Rule of Civil Procedure 11, for the filing of the original
improper Notice of Removal in this consolidated matter. (Rec.
Court has received briefing on both matters and has now held
hearings on each. Based upon the submissions of the parties,
the arguments of counsel at the hearings and the Court's
review of the record of this case as well as the applicable
law, the Court issues the following ruling as to both the
Motion for Leave to Amend and the Rule to Show Cause on
THE RELEVANT PROCEDURAL HISTORY OF THE CASE
case was filed in state court on February 10, 2016 against
Poydras Center LLC; Poydras Center Manager, Inc.
(“Poydras Defendants”); Bobby Schloegel; and the
Travelers Casualty Company (collectively the “Original
Defendants”). (Rec. doc. 1-1 at p. 1). The Original
Defendants each answered the Petition and conducted discovery
in the state-court proceeding. (Id.).
10, 2016, Plaintiff, Michelle Nogess, filed her First
Supplemental and Amending Petition, adding Velocity and EMG
Corporation (“EMG”) as Defendants. (Rec. doc. 1-1
at p. 31). The Original Defendants answered that petition.
(Id. at 56). After being served with process on
September 13, 2016, Velocity removed the matter to this Court
on October 5, 2016. (Rec. doc. 1).
November 3, 2016, both Plaintiffs filed Motions to Remand,
arguing in part that Velocity had failed to properly allege
the citizenship of the Poydras LLC members under applicable
United States Fifth Circuit precedent, rendering the Notice
“defective on its face and making remand
mandatory.” (Rec. doc. 16-1)(citing Harvey v. Grey
Wolf Drilling, 542 F.3d 1077 (5th Cir.
2008)). Apparently recognizing that its Notice
was, indeed, defective due to its failure to identify any
members of Poydras LLC or to allege their citizenship,
Velocity responded to these Motions to Remand in part by
filing its Motion for Leave to File Amended Notice of
Removal, to specifically allege the identity and citizenship
of each of the LLC members. (Rec. doc. 38).
Michelle Nogess, filed an opposition to the Motion for Leave
and the Court set the matter for hearing. (Rec. docs. 42,
40). Prior to that hearing, the District Judge stayed the
outstanding Motions to Remand pending this Court's
determination on Velocity's effort to amend the Notice.
(Rec. doc. 41).
THE HEARING ON VELOCITY'S MOTION
fully understand the details and importance of the issues
raised at the hearing on Velocity's motion and
the follow-on hearing on the Rule to Show Cause, one must
first understand the extraordinary and unfortunate personal
jurisprudence that has developed over many years surrounding
Ungarino's and U&E's history of improper
removals. The recitation of at least part of this history
will provide necessary context for a discussion of the issues
currently before this Court.
Ungarino & Eckert's “Long Line of Fraudulent
and Improper Removals”
case is not one involving an isolated improvident removal by
a law firm that made a simple, one-time mistake or omission
in its removal papers. Rather, it is the latest in a
“long line of fraudulent and improper removals that
Ungarino & Eckert, and more specifically Matthew
Ungarino, have filed in this and other districts.”
Hollier v. Willstaff Worldwide, Inc., No.
08-CV-1382, 2009 WL 256503 at *2 (W.D. La. Feb. 3,
2009)(Melancon, J.). It was this history of improper removals
that prompted the Court to order Ungarino to appear at the
December 21 hearing.
Hollier, Judge Melancon, citing more than 20
separate cases involving improper removals by Ungarino and
his law firm, declared “[e]nough is enough.”
Id. at *2-3. Judge Melancon found that “[a]s
warnings and lesser sanctions in the past have failed to
deter the firm of Ungarino & Eckert from its vexatious
practices, the Court is left to consider whether a more major
sanction is necessary to achieve the desired result.”
Id. He granted Plaintiffs' motion for
attorneys' fees and costs under 28 U.S.C. § 1447(c)
and set a rule to show cause why the court: (1) should not
impose sanctions of at least $25, 000 against U&E and (2)
should not recommend to the District Judges of the Western
District of Louisiana that U&E be barred from practicing
in the Western District. Id. at 3. Judge Melancon
ordered U&E to file a brief explaining why these
sanctions should not be ordered, which the firm did on March
2, 2009. (Rec. doc. 43 in No. 08-CV-1382).
after U&E's brief was filed in the Hollier
case, another judge of the Western District of Louisiana
issued an opinion finding that U&E had failed to properly
allege the citizenship of its own client and allowing the
firm additional time to amend its notice of removal in that
case. Tyler v. Granite State Ins. Co., No.
09-CV-8065, 2009 WL 799696 (W.D. La. March 25, 2009). In that
case, Magistrate Judge Hornsby also cited his own previous
decisions in which he issued orders to U&E that carefully
spelled out the rules for alleging corporate citizenship
because “[a]lmost every notice of removal filed by the
firm in recent years has been defective for one reason or the
other, with the most common problems being failure to
meet the minimal requirements of pleading the parties'
citizenship and failure to plead or point to facts
adequate to satisfy the amount in controversy
requirement.” Id. at *1 (emphasis
Judge Hornsby ultimately declined to impose sanctions against
U&E in Tyler, “trusting that Judge
Melancon will have gained the firm's attention in
Hollier when he put at issue the possibility that
the members of the firm will be barred from practicing in the
Western District of Louisiana.” Id. Notably,
he also pointed to the fact that the firm had recently filed
a brief in Hollier in which it represented that it
would conduct training in removal practice and would
“form a committee of partners who will review any
notice of removal before it is filed.” Id.
Judge Hornsby then expressed “the sincere wish of the
court that the training and committee are successful . . .
and end the firm's long history of filing deficient and
time-wasting notices of removal.” Id. at *2.
in Hollier, Judge Melancon held a hearing on the
rule to show cause, at which Ungarino apologized to the Court
for his “improper removal” in that case,
admitting that the “inquiry conducted into the
jurisdictional facts set forth in the notice of removal was
unreasonable.” (Rec. doc. 51, p. 4 in No. 08-CV-1382).
Ungarino also assured Judge Melancon that his firm had
“undertaken significant remedial measures” to
avoid future improvident removals, including hiring two law
professors to conduct training on ethics and removal
procedure and - most notably for purposes of this case -
creating a “professional responsibility committee of
equity partners who coordinate in-house ethics and removal
training, review the form and content of all notices of
removal and opposition to remand, and otherwise serve as a
ready resource for ethics and removal issues.”
(Id. at pp. 5-6).
conclusion of the hearing, Judge Melancon found that Ungarino
“failed to conduct a reasonable inquiry under the
circumstances prior to the removal of this matter to federal
court, as admitted here today by Mr. Ungarino, based on the
record of the proceeding, as well as the filings that were
made pursuant to the Court's order.” (Id.
at p. 7). In declining to bar U&E from practicing in the
Western District, Judge Melancon made the following comments,
germane to the present matter:
I'm not sure why it took so long to learn the lesson, but
I really do believe, from what you have said here today and
what you did before you got here today, as far as trying to
bring your firm up to snuff, that you obviously got it, and I
believe that. If I didn't believe it, I wouldn't say
it, and I might not do what I'm about to do. But because
I do believe that, if there is a violation in the future -
and again, I'm not - wouldn't want to deter you or
anybody in your firm from zealously representing your
clients' interests in the future to the full extent of
your ability to do so - it would certainly be a very, very
heavy price to pay for this judge, and I would suspect -
again, not speaking for my colleagues at the district or
magistrate judge level in the Western District. I suspect it
would be a very, very, very heavy price to pay with them. So,
again, you have got the tools. Your firm has gotten the tools
to be able to dot your Is and cross your Ts and represent
your clients to the fullest extent of the law consistent with
whatever ethical obligations that good lawyers should use in
their zealous representation of their client. So, like I say,
it's a good thing, but it's a double-edged sword, and
I'm sure you understand that. I trust that the other
attorney in your firm understand that.
Court reiterates at this point that the foregoing history is
not cited as a cause for any sanction or discipline in this
case but to provide necessary context to these proceedings.
Had it not been for this history, for this “long line
of fraudulent and improper removals, ” U&E would
likely not have felt it necessary to create its
“professional responsibility committee, ” the
ostensible purpose of which is to avoid the exact situation
now before the Court. The firm's extensive history and
experience in initiating improper and/or premature removals
and being repeatedly admonished for that conduct is also
germane to the question whether, under Rule 11, Ungarino and
Bordelon should be subject to sanctions for failing to
conduct a reasonable inquiry into the facts supporting
removal under Rule 11.
The Hearing on Velocity's Motion
noted, the hearing on Velocity's Motion to Amend
initially went forward December 21, 2016. (Rec. doc. 48). In
advance of that hearing, the Court issued an Order directing
that Ungarino, as lead counsel and the attorney who signed
the Notice, appear personally at the hearing. (Rec. doc. 43).
In response to that Order, Ungarino wrote the Court (copying
all counsel of record), asking that he be excused from
attending the hearing because, among other reasons, he had
“no personal knowledge of the citizenship of the
co-defendants' clients, ” despite having signed
both the Notice and the proposed Amended Notice
(“Amended Notice”). (Rec. doc. 47). The Court
declined that request.
December 21 hearing, the Court questioned Ungarino and
Bordelon concerning the Notice and the shortcomings therein
that prompted Velocity's Motion for Leave to Amend that
Notice. The Court noted U&E's well-established
reputation for and history of premature and improper removals
and the fact that this history had prompted the firm to
create its “Professional Responsibility
Committee” (the “Committee”), which is
comprised of four equity partners who are said to review for
form and content every notice of removal filed by the firm.
(Rec. doc. 53 at p. 6).
questioning by the Court, Ungarino advised that the Committee
still exists today, identified its members and stated that it
had, indeed, reviewed the Notice in this case. (Id.
at p. 7). Ungarino was then asked by the Court whether the
four equity partners on that Committee realized at the time
the case was removed that there were material jurisdictional
allegations missing from the Notice because there were LLCs
involved as defendants in the case. Ungarino responded,
“No. I had no knowledge as to any LLC or memberships -
members that were missing.” (Id. at p. 7).
When asked in a follow-up question whether he and the
Committee knew at the time of removal that established Fifth
Circuit precedent holds that the citizenship of an LLC for
diversity purposes is determined by the citizenship of all of
its members, Ungarino stated “Yes, Judge, we knew
the Court pressed Ungarino and Bordelon on why the firm
removed the case without knowing the facts required to do so
properly, it was met with two seemingly inconsistent
statements. First, Ungarino insisted that his firm was asking
for the information regarding members' citizenship
“way in advance” from counsel for
Poydras and they were not getting it - he even offered to
submit emails and the firm's time sheets to prove they
were “asking for the information and  not getting
it.” (Id. at pp. 10, 12). Then, however, in
his very next statement to the Court, Ungarino stated:
“Well, frankly, Judge, we were unaware that the LLC
membership was a problem.” (Id.). Then,
finally, Ungarino admitted that “…to be fair,
Judge, let's face it, we were focusing on the individual,
these last two statements as possible admissions that the
Committee was unaware of the necessity of alleging the
identity and citizenship of the LLC members at the time of
removal, despite Ungarino's assurances otherwise, the
Court became concerned that Ungarino's earlier statements
to the Court that the firm had been trying without success to
obtain the necessary information from co-defense counsel were
not true, i.e., why would they be asking for
information they didn't know they needed? For that
reason, the Court set the aforementioned Rule to Show Cause
and ordered both U&E and counsel for Poydras LLC to
separately produce for in camera inspection the
copies of all emails or other written communications that
were exchanged between them and counsel for the Poydras LLC
defendants in connection with the drafting of the original
notice of removal and the proposed amended notice of removal,
including all efforts to ascertain jurisdictional facts
pertaining to the members of each LLC.
(Rec. doc. 48).
being told in open court that the foregoing Rule to Show
Cause would be set, Ungarino asked that it be sealed and
stated repeatedly that he believed it was unfair for the
Court to issue the Rule before reviewing the aforementioned
documents. (Rec. doc. 53 at pp. 19-21). The Court declined
Court also deferred ruling on the merits of the Motion for
Leave to Amend the Notice, at the suggestion of
Plaintiffs' counsel, who argued that, should the
Court's review of the aforementioned documents reveal
that U&E had not actually requested the LLC
members' citizenship information until after the motions
to remand were filed, there may be additional grounds to deny
Velocity's request to amend the Notice. (Id. at
EVENTS FOLLOWING THE HEARING
in the day on December 21, 2016, before the Rule to Show
cause was entered into the record by the Clerk's office,
the Court was copied on an email from the District
Judge's Law Clerk to Ungarino and all counsel in the case
that read as follows:
Dear Mr. Ungarino,
In response to your phone call today, I am informing you that
the proper procedure of this court is for Judge North to
first issue a ruling on the Rule to Show Cause on the Rule 11
Motion. Then, should you disagree with Judge North's
ruling, you may appeal to Judge Zainey. At this point in the
process, however, it would be premature for Judge Zainey to
intervene. Please let me know if you have any questions.
(Rec. doc. 49)(emphasis added).
that day, and shortly after the Minute Entry setting the Rule
to Show Cause was entered in the record, Ungarino, apparently
unaware the Minute Entry had been issued, replied to the
I am requesting a status conference before a rule to show
cause is issued. The emails with codef attys indicate that we
requested that codef counsel on October 4 confirm the
domicile of defendants. Codef Counsel signed the consent to
remove subsequent to that email and the removal was filed.
This is unfair. The emails should be reviewed before a rule
to cause is issued.
(Id.)(emphasis in original).
Court took no action on these emails at the time except to
have the Clerk's office enter them into the record.
primarily to the receipt of the aforementioned emails, on
December 27, 2016, the Court issued an Order supplementing
the scheduled Rule to Show Cause, directing that in their
brief responding to the Rule, Ungarino, Bordelon and U&E
specifically address the following issues and explain therein
why they and/or their law firm should not be sanctioned under
28 U.S.C. §§1927 and 1447 and/or Federal Rule of
Civil Procedure 11 in connection with them:
1. Whether Mr. Ungarino knew when he signed the original
Notice of Removal (the “Notice”) that the notice
did not contain sufficient jurisdictional facts as to the
Poydras LLC defendants to support removal at that time.
2. Whether Mr. Ungarino or any attorney reviewing the
proposed Notice knew that Fifth Circuit precedent required in
this case that the Notice set forth the identity of the
Poydras LLC members as well as their citizenship.
3. Whether Ungarino & Eckert actually inquired as to the
identity and/or citizenship of the Poydras LLC members before
filing the Notice.
4. Why Mr. Ungarino signed the Notice despite having
“no personal knowledge of the citizenship of the
co-defendants' clients” (Rec. doc. 47).
5. The explanation for and details concerning the apparent
ex parte communication with the District Judge's
staff concerning this case on December 21, 2016.
(Rec. doc. 51).
THE PARTIES' SUBMISSIONS IN ADVANCE OF THE HEARING ON THE
RULE TO SHOW CAUSE
The Poydras LLC Submission
January 3, 2017, counsel for Poydras LLC, Guyton Valdin, Jr.
(“Valdin”), complied with the Court's order
of December 21, 2016, providing the Court for in
camera review numerous documents representing the
written communications between his firm and U&E
concerning removal issues, particularly the citizenship of
Poydras LLC and its members. The Court's review of those
documents revealed what the Court had suspected after the
original hearing: not only did U&E fail to inquire about
the Poydras LLC members' citizenship before it filed the
Notice on October 5, 2016, it did not ask Valdin for that
information for the first time until November 7, 2016 -
after both Motions to Remand had been filed by
Plaintiffs. (Rec. doc. 58-3). As will be discussed below, the
documents submitted by U&E with its memorandum confirmed
Ungarino & Eckert's Submission
January 6, 2017, U&E, through counsel, submitted its
brief in connection with the Rule to Show Cause. (Rec. doc.
55). Simultaneously, and as ordered, U&E submitted, for
in camera review, the documents it relied upon in
drafting both the original and amended Notices of Removal.
The Court's in camera review of the documents
submitted by both the Poydras Defendants and U&E reveal
them to be virtually identical and the Court is satisfied it
has received everything it ordered to be produced. As noted
above, the U&E submission confirms that U&E first
requested the Poydras LLC membership information after
Plaintiffs had filed their motions for remand.
to U&E's arguments in brief against the imposition of
sanctions, they can be fairly summarized with this language
from the Introduction to their brief:
Respondents recognize and admit they should have properly
listed the citizenship of Poydras Center, LLC and Poydras
Center Manager, Inc. in the original notice of removal or, in
the alternative, should have amended the notice as soon as
possible after removal to cure the defect. While the removal
was ultimately proper and complete diversity exists,
Respondents further recognize and admit their failure caused
unnecessary time and expense to be expended by
plaintiffs' counsel and the Court and sincerely apologize
to all involved for this wasted time and effort. While
Respondents accept full responsibility for their actions ...