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The Supreme Court on Monday agreed to hear a case that could have wide ramifications for where plaintiffs can file certain types of suits. The justices granted review in the case of Roche v. Lincoln Property Co. The central question in Roche is which court should hear the case — federal or state. When plaintiffs file suit in state court, defendants have the option of removing the case to federal court under federal law (28 U.S.C. �1447). This is to avoid local court prejudice. Removal, however, requires that the parties be “diverse,” or from different states. The holding of the 4th U.S. Circuit Court of Appeals in Roche, which is in line with the 7th and 9th circuits, could foreclose the option of the alternate federal forum for certain business entities. At stake are “perhaps 5,000 diversity cases in the [4th Circuit] alone among the approximately 60,000 diversity cases litigated nationwide,” writes Lincoln’s counsel of record, David Frederick of D.C.’s Kellogg, Huber, Hansen, Todd, Evans & Figel. In Roche, plaintiffs Christophe and Juanita Roche originally filed suit in Virginia state court, claiming personal injury and property damage from “toxic levels of mold” in their apartment, which was owned by the defendants. Lincoln, a Texas-based corporation, asked that the case be moved to federal court. After the federal court ruled in favor of Lincoln, the Roches appealed to the 4th Circuit, arguing that the case should be in state court because the diversity requirement for federal court was lacking. In other words, they claimed both parties were citizens of the same state — Virginia. A unanimous three-judge 4th Circuit panel agreed in its June 30 decision and sent the case back to Virginia state court. The decision, written by Judge Roger Gregory, turned on the definition of “citizenship.” The court said that despite Lincoln’s Texas incorporation, the company was in fact a citizen of Virginia. The court found that Lincoln owned a subsidiary in Virginia and that the subsidiary, though unnamed in the petition, was the “real and substantial party in interest.” The court further reasoned that the subsidiary owned land and conducted business in Virginia, creating a “very close nexus” with the state. In its appeal, Lincoln argues that the subsidiary was never mentioned in the complaint and so cannot be a basis for denying diversity. The attorneys for Lincoln write, “here the Fourth Circuit not only considered the citizenship of such a non-party; it actively sought out that non-party to create a basis for declaring … that diversity jurisdiction was improper.” Lincoln attorneys also argue that the 4th Circuit “concocted out of whole cloth an additional ‘nexus’ factor not found in any of … [the Supreme Court's] decisions.” Lincoln and a host of real estate businesses that filed an amicus brief in support claim that the 4th Circuit’s decision, if left to stand, will deepen “an existing conflict among the circuits.” Lincoln and amicus attorneys also say the decision will lead to uncertainty about jurisdiction. Hogan & Hartson’s Bruce Parmley writes in the amicus brief, “Uncertainty leads to business risks which create new costs. Lenders, investors, and other market participants in the real estate industry accordingly abhor unnecessary risks.” The Roches, on the other hand, argue that Lincoln failed in its burden to prove its Texas citizenship and, thus, the diversity necessary for removal to federal court. And they claim that Lincoln is exaggerating the split among appeals courts to persuade the Court to take the case. “The ‘very close nexus’ words used by the Petitioner were … spun by Petitioner in its attempt to hopefully make its petition ‘certworthy,’ ” writes Jerry Phillips of Fairfax, Va.’s Phillips, Beckwith, Hall and Chase, who represents the Roches.

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