Federal Court Remands CoinBTM Bitcoin Kiosk Venture Lawsuit Back to New York State Court
On Monday, February 5, 2024, the United States District Court for the Southern District of New York granted a motion to remand a removed state court lawsuit back to New York state court. The lawsuit involves claims brought by entrepreneur Robert Taylor against his former business partners in a Bitcoin kiosk venture.
Taylor had originally filed the lawsuit in February 2022 in New York Supreme Court against Aniello Zampella, Chad Russo, Pierre Basmaji, and Cottonwood Vending LLC. The suit alleges breach of contract, unjust enrichment, fraud, breach of fiduciary duty, and seeks an accounting related to a failed joint venture starting in 2015 to set up and operate Bitcoin kiosks, known as BTMs, in New York City under the name CoinBTM.
In August 2023, Cottonwood Vending filed for Chapter 11 bankruptcy in the Eastern District of New York bankruptcy court. Cottonwood then removed Taylor’s state lawsuit to the Southern District of New York federal court in September, claiming the lawsuit was related to Cottonwood’s bankruptcy case.
However, in November the bankruptcy court converted Cottonwood’s Chapter 11 restructuring to a Chapter 7 liquidation and appointed a trustee to investigate and bring claims against Zampella, who is the owner of Cottonwood, and liquidate any remaining assets. Taylor subsequently filed a motion in December to remand the case back to state court.
In its decision granting Taylor’s remand motion, the federal district court analyzed several factors for equitable remand under the bankruptcy removal statute. The court found the factors weighed in favor of remanding the case back to state court. Specifically, the court noted the claims are purely based on state law and predate the bankruptcy filing, so the state court is more familiar with the issues. It also noted retaining the case in federal court could prejudice Taylor by denying his right to a jury trial.
The district court rejected Cottonwood’s argument that the case was a core bankruptcy matter, finding the claims arose under state law prior to bankruptcy and were only remotely related to the bankruptcy case. The court also noted how remand would not interfere with the bankruptcy trustee’s duties to liquidate assets in the Chapter 7 proceeding.
Overall, the district court concluded the state court had the strongest interest in resolving the state law claims, comity required deference to the state court, and Taylor and the other defendants would not be prejudiced by litigating in state court after the action had already progressed for some time there. As no party opposed Taylor’s remand motion, the court ordered the case be promptly remanded back to New York Supreme Court.
Please contact BlockTribune for access to a copy of this filing.
