Wolf Block Claims N.J. Roots in Move to Exit Federal Court

, The Legal Intelligencer

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Wolf Block

Wolf Block, the defunct firm that had its headquarters in Philadelphia, has said in court papers it is a New Jersey firm for purposes of diversity jurisdiction.

The firm, a Philadelphia legal icon that dissolved in 2009 and is still winding up its affairs, is trying to get a suit it filed against its insurer brought back to state court in Philadelphia. And in an effort to negate diversity of citizenship for federal jurisdiction, the firm says that, like its insurer, Federal Insurance Co., it too is a New Jersey resident.

In Wolf Block v. Federal Insurance, the firm sued its insurer for denying coverage of an underlying case—Budin v. Wolf Block—in which a former partner sued the firm when it stopped paying him his severance payments post-dissolution. The Budin matter has since settled for undisclosed terms.

Federal Insurance removed the case against it from the Philadelphia Court of Common Pleas to the U.S. District Court for the Eastern District of Pennsylvania, noting it was an Indiana corporation with its principal place of business in New Jersey, according to Wolf Block's motion for remand.

Now Wolf Block wants to head back to the state court of its choice—Philadelphia Court of Common Pleas—and is attempting to get there by arguing both it and its insurer are New Jersey citizens.

"Since Wolf Block had at least 29 partners who were New Jersey residents at the time of dissolution, Wolf Block submits that it is a citizen of New Jersey for diversity jurisdiction purposes," the firm said in the motion to remand. "Accordingly, there is no complete diversity of the parties ... and this case should be remanded to the Philadelphia Court of Common Pleas."

In order to achieve complete diversity for purposes of federal jurisdiction, every partner must be "completely diverse from its opponent," Wolf Block argued in its motion. The firm further noted that it is still in the process of winding up its affairs, which means the court must look at the partnership as of Nov. 18, when Federal Insurance removed the case to federal court. Wolf Block said all of the partners at the time of the dissolution are still partners now for certain purposes and all of their states of citizenship must be examined for purposes of determining jurisdiction.

The firm said Federal Insurance misunderstood partnership law when it said Wolf Block was a partnership in dissolution with no current partners. The firm said case law has determined a partnership in dissolution continues until all pre-existing matters are terminated.

"Because Wolf Block's affairs are not wound up and because Wolf Block's future affairs are directed by a wind-down committee comprised (in part) of two partners who are residents of New Jersey [Patrick Matusky and Stuart Pachman], Wolf Block is a citizen of New Jersey for federal diversity jurisdiction purposes," the firm said in its motion.

The firm is seeking costs and expenses it incurred in fighting the removal and seeking remand.

Wind-Down Committee Still Winding Up

In detailing how the firm is still a partnership in the midst of dissolution, Wolf Block outlined some of its activities over the past four-and-a-half years.

The firm still employs six full- and part-time employees and contractors. As of the time of removal, Wolf Block was still engaged in active litigation, including some that named former partners of the firm as co-defendants and were pending in Pennsylvania, New Jersey, New York, Massachusetts and before the American Arbitration Association, the firm said.

Wolf Block also has claims for contingency fees relating to pre-dissolution work for matters that are pending in courts in New Jersey, New York and Texas, the firm said. Wolf Block regularly engages in collection efforts for receivables for pre-dissolution work, according to the motion.

Aside from litigation matters, Wolf Block has been responding to requests from former clients and former attorneys for files created pre-dissolution, preparing and filing its own tax returns with state and local taxing authorities and responding to subpoenas and requests for information from government authorities, third parties and former Wolf Block attorneys regarding pre-dissolution work and employees, the firm said in its motion.

In a declaration by Wolf Block General Counsel Susan French that was attached to the motion, French said Wolf Block has also been dealing with threatened litigation in New Jersey, pending insurance coverage claims, negotiations with creditors related to pre-dissolution debts, a "routine" Internal Revenue Service audit of Wolf Block's now-closed 401(k) plan and issuing K-1 tax forms to former partners.

A call to Wolf Block's counsel, Jodi Cagan Murland, was not returned. Nor was a call to Federal Insurance's attorney, Stanley J. Lehman of Sherrard, German & Kelly in Pittsburgh.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.

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