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Analysis: VPG Grp. Holdings LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA - Litigation News

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Litigation News

Posted on: Nov 25, 2020

By Ian Goodman, Paganelli Law Group

The Southern District of Indiana, in VPG Grp. Holdings LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, No. 1:20-cv-01505 (S.D. Ind. 2020), recently issued a ruling that serves as a cautionary tale for a practice likely used at some point by most litigators who have removed a case to federal court.

In VPG, National Union, which VPG had sued in Indiana state court, removed the case to the Southern District. VPG was a limited liability holding company. In its notice of removal, per the Court, National Union “set forth what it believed was the citizenship of all the members and sub-members of VPG based on publicly available filings….” But, as the Court stated, “[u]ltimately, National Union was wrong.” Publicly available filings had not accounted for the many layers of members and sub-members of VPG, and, indeed, VPG itself stated it was “unable to verify” the membership and citizenship of two of its members. One thing was certain: diversity did not, in fact, exist.

Consequently, once the case was before the Southern District on VPG’s motion to remand, the only remaining issue was whether VPG was entitled to attorneys fees and costs under 28 U.S.C. § 1447(c), which were recoverable if National Union lacked an objectively reasonable basis for seeking removal. 

Despite National Union’s seemingly reasonable efforts to initially ascertain the citizenship of VPG, its members and sub-members, and notwithstanding VPG’s own admission that even it could not account for all its members, the court awarded fees and costs to VPG. It held that National Union had employed a “remove-first-and-examine-whether-complete-diversity-exists-later approach.” 

I readily admit I’ve done exactly as National Union did, by removing a case, in good faith, based on publicly available filings. But the holding in VPG instructs me, and the rest of our membership, that this approach is fraught and ill-advised. Before removing, one must account for, and be sure of, all members and sub-members of a limited liability company and where they are citizens. If this information cannot be ascertained, VPG instructs, do not remove.

The court’s entire opinion can be found here.

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