NY Federal Court Denies Motion to Vacate Remand of Bitcoin ATM Venture Lawsuit to State Court

News | May 10, 2024 By:

On Friday, April 26, 2024, the US District Court for the Southern District of New York denied a motion seeking to vacate a previous order remanding a lawsuit related to a failed Bitcoin ATM venture back to state court.

The lawsuit was originally filed in February 2022 in the New York State Supreme Court by entrepreneur Robert Taylor against businessmen Aniello Zampella, Chad Russo, Pierre Basmaji, and the company Cottonwood Vending LLC. Taylor alleged he had formed an oral joint venture with Zampella and Russo to operate automated teller machines where customers could buy or sell bitcoin for cash. They planned to conduct the business through Cottonwood Vending, which held a license to operate such machines, and Blue Tree Management, a company in which Taylor and Russo would each own a 37% stake.

However, the joint venture allegedly fell apart after Cottonwood severed its ties with Blue Tree. Taylor sued in state court on behalf of himself and Blue Tree, bringing claims of breach of contract, unjust enrichment, fraud, breach of fiduciary duty, and seeking an accounting from the defendants.

In September 2023, Cottonwood removed the case to federal court, claiming it was related to a bankruptcy proceeding filed by Cottonwood in the Eastern District of New York the previous month. Taylor filed a motion to remand the case back to state court in December, arguing the issues were purely matters of state law that did not implicate bankruptcy proceedings.

In February 2024, with no opposition from the defendants, Judge Lewis J. Liman granted the remand back to state court. He found the claims did not involve any federal issues, and retaining jurisdiction in federal court would prejudice Taylor and potentially deny him a jury trial. The case file was sent to the state court.

In April, Zampella filed a motion under Federal Rule of Civil Procedure 60(b)(1) seeking to vacate the remand order. He argued “mistake, inadvertence, surprise, or excusable neglect” justified vacating the order because neither he nor Basmaji had been served Taylor’s remand motion and the lawyer who removed the case no longer represented Cottonwood due to the appointment of a bankruptcy trustee.

However, in its decision on Friday, the court rejected Zampella’s arguments. It found Taylor was not required to serve parties like Zampella and Basmaji who had not appeared in the case. And even if a mistake was made, it would not have changed the outcome of the remand order, which was justified on the merits. The core issues remained ones of state law that did not interfere with administering the Cottonwood bankruptcy estate.

With the motion to vacate denied, Taylor’s lawsuit against Zampella, Russo, Basmaji, and Cottonwood Vending will proceed in the New York State Supreme Court.

Please contact BlockTribune for access to a copy of this filing.