Wolf Block Can't Claim New Jersey Base, Insurer Argues

, The Legal Intelligencer

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Wolf Block's claim that some of its partners' New Jersey roots make it a New Jersey firm for diversity jurisdiction purposes is belied by the defunct firm's own statements that it has no partners, Wolf Block's insurance company argued in an effort to keep the case against it in federal court.

Federal Insurance Co. said in its opposition to Wolf Block's motion for remand that the former law firm had expressly told the insurer in prior communications that it has no partners to speak of since its May 2009 dissolution. The firm has also reported in certificates of annual registration with the state of Pennsylvania that it has had no partners for the years 2009 through 2012, according to the motion in Wolf Block v. Federal Insurance.

Wolf Block sued Federal Insurance in the Philadelphia Court of Common Pleas over the insurer's denial of coverage in the underlying case Budin v. Wolf Block. In Budin, 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 from the common pleas court 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.

Wolf Block then filed a motion for remand to the Philadelphia Court of Common Pleas, 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."

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.

In its brief in opposition to Wolf Block's motion for remand, Federal Insurance now argues that Wolf Block is avoiding the answer to the core question it posed in its motion—who are the partners as of Nov. 18.

Federal Insurance said Wolf Block discussed who its partners were at the date of its dissolution vote in March 2009 and inappropriately relied on a U.S. Court of Appeals for the Second Circuit opinion, Schiavone Construction v. City of New York, in arguing the partnership at the date of dissolution is considered the partnership at the date the case was removed to federal court.

Federal Insurance argued in its brief that Schiavone held all matters pre-existing the dissolution continue until the firm is completely wound down and that all who were partners prior to the dissolution are partners until the wind-down is complete when it comes to pre-existing matters.

"This lawsuit involves matters that arose post-dissolution," Federal Insurance argued, noting the facts that are the basis for the Budin action arose in 2010, after the firm dissolved.

"Because Wolf Block had no partners as of the date Federal filed its notice of removal, Federal respectfully submits that this honorable court should accept Wolf Block's representation in this action that it is a resident of Pennsylvania," Federal Insurance said in its brief.

Federal Insurance noted in its brief that Wolf Block alleged in its complaint that it was a resident of Pennsylvania with a principal place of business at 1650 Arch St. in Philadelphia.

Federal Insurance also attached as an exhibit Wolf Block's last two certificates of annual registration filed with the Pennsylvania Department of State. In each of those, the firm wrote a zero next to the number of general partners that would have to pay the annual $340 registration fee.

"The determination that Wolf Block has no Pennsylvania partners presumably resulted in Wolf Block not paying the annual base fee exceeding $300 per partner per year set forth in the certificates of annual registration," Federal Insurance said. "Despite Wolf Block's assertion in its motion for remand that 'all of its partners on the date it voted to dissolve are still partners for certain purposes,' Wolf Block has obviously taken a contrary position in filing its certificates of annual registration with the commonwealth of Pennsylvania."

As a separate exhibit, Federal Insurance attached a declaration of one of its outside counsel, Stanley J. Lehman of Sherrard, German & Kelly. Lehman said in the declaration that during the course of his representation of Federal Insurance in this case, Wolf Block's general counsel, Susan J. French, specifically represented to Lehman that the firm had no partners. He also noted that French told Lehman that Wolf Block incurred approximately $300,000 in defense costs for the Budin action, according to the declaration.

Wolf Block counsel Jodi Murland declined to comment and Lehman did not return a call seeking comment.

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

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