4900 Morse Land Tr. v. Occidental Petroleum Corp

• Decision Date: 14 February 2023
• Docket Number: 2:23-cv-40-PPS-JPK
• Parties: 4900 MORSE LAND TRUST, Plaintiff, v. OCCIDENTAL PETROLEUM CORPORATION, and OXY USA, INC., Defendants.
• Court: U.S. District Court — Northern District of Indiana

4900 MORSE LAND TRUST, Plaintiff,
v.
OCCIDENTAL PETROLEUM CORPORATION, and OXY USA, INC., Defendants.

No. 2:23-cv-40-PPS-JPK

United States District Court, N.D. Indiana, Hammond Division

February 14, 2023

OPINION AND ORDER

JOSHUA P. KOLAR, MAGISTRATE JUDGE

On December 27, 2022, Plaintiff 4900 Morse Land Trust (“the Trust”) filed a complaint in state court against Defendants Occidental Petroleum Corporation and Oxy USA, Inc. alleging that Defendants released hazardous substances and/or petroleum at a property located at 4900 Morse Street, Gary, Indiana 46406, and then, rather than fully addressing the issues caused by their contamination, left them to be addressed by the Trust, who is the current owner of the property. [DE 8 ¶ 1]. The complaint alleges that the Trust brought this action to recover the costs it has incurred in addressing the contamination and the costs it will incur to address the contamination in the future. [Id.]. On February 2, 2023, Defendants removed the Trust's state court complaint, alleging federal jurisdiction under the diversity statute, 28 U.S.C. § 1332. [DE 1 ¶ 12].

The Court must continuously police its subject matter jurisdiction and remand a removed action over which the Court lacks subject matter jurisdiction. See Hay v. Ind. State Bd. of Tax Comm'rs, 312 F.3d 876, 879 (7th Cir. 2002); 28 U.S.C. § 1447(c). For the Court to have diversity jurisdiction, no defendant may be a citizen of the same state as any plaintiff, and the amount in controversy must exceed $75,000.00 exclusive of interest and costs. See 28 U.S.C. § 1332(a); Webb v. Fin. Indus. Regulatory Auth., Inc., 889 F.3d 853, 856 (7th Cir. 2019). As the party seeking

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federal jurisdiction, Defendants have the burden of establishing that subject matter jurisdiction exists. Smart v. Local 702 Int'l Bhd. of Elec. Workers, 562 F.3d 798, 802-03 (7th Cir. 2009). The Court is unable to determine from the current allegations in the record if either requirement for diversity jurisdiction-complete diversity or the jurisdictional minimum-has been met. Accordingly, the Court issues this order sua sponte to address those questions.

A. Complete Diversity

The Notice of Removal alleges that both Defendants (Occidental Petroleum Corporation and Oxy USA Inc.) are Delaware corporations, with their principal places of business in Houston, Texas. [DE 1 ¶¶ 6-7]. A corporation is “deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business.” 28 U.S.C. § 1332(c)(1). By the term “Delaware corporation,” the Court assumes Defendants mean that both Defendants are incorporated in that state. With that assumption, Defendants are citizens of Delaware and Texas.

The Notice of Removal alleges there is complete diversity in this case because the Trust is an Indiana citizen. The factual bases for that allegation are the further allegations that the Trust is “an Indiana land trust, managed and administered in Indiana,” and that “Todd Hansen, an Indiana citizen who resides in Avon, Indiana, is the trustee of [the Trust].” [DE 1 ¶ 5]. The alleged facts, however, are insufficient for the Court to determine that the Trust is an Indiana citizen.

To the extent that Defendants' allegation of Indiana citizenship is premised on the rule that a trust's citizenship for purposes of the diversity statute turns on the citizenship of the trustee, their reliance on that rule is understandable. See, e.g., Grede v. Bank of N.Y. Mellon, 598 F.3d 899, 901 (7th Cir. 2010); Hicklin Eng'g, L.C. v. Bartell, 439 F.3d 346, 348 (7th Cir. 2006); May Dep't Stores Co. v. Fed. Ins. Co., 305 F.3d 597, 599 (7th Cir. 2002);

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Downey v. State Farm Fire & Cas. Co., 266 F.3d 675, 680 (7th Cir. 2001). But the unqualified statements in these cases to that effect do not account for the Supreme Court's decision in Americold Realty Trust v. ConAgra Foods, Inc., 577 U.S. 378 (2016), which clarified that the Court's earlier decision in Navarro Savings Association v. Lee, 446 U.S. 458 (1980), does not “establish[ ] a rule applicable to all kinds of trusts.” RTP LLC v. ORIX Real Estate Capital, Inc., 827 F.3d 689, 691 (7th Cir. 2016).

In Navarro, eight individual trustees of a trust organized under Massachusetts law sued a savings association in federal court on a breach of contract claim. 446 U.S. at 459. While the citizenship of the trustees differed from that of the savings association, some of the trust's beneficiaries were citizens of the same state as the savings association. Id. at 460. In examining whether the citizenship of the trustees or the trust beneficiaries controlled the diversity question, the Supreme Court observed that the trustees who initiated the lawsuit “possesse[d] certain customary powers to hold, manage, and dispose of” trust properties, and therefore the trustees were permitted “to sue in their own right.” Id. at 464-66. The Court held that when trustees initiate a lawsuit in their own name or are the target of a suit, courts consider only the citizenship of the trustees for purposes of determining diversity jurisdiction. Id. at 465-66.

After Navarro, the Supreme Court decided Carden v. Arkoma Assocs., 494 U.S. 185 (1990), a case involving a limited partnership which brought a contract dispute to federal court based on diversity jurisdiction. Id. at 186. The limited partnership argued that its citizenship should be determined solely by the citizenship of its general partners, without regard to the limited partners, because the general partners “have exclusive and complete management and control of the operations of the partnership[,]” akin to the approach taken with the trust at issue in Navarro. Id. at 192 (citation omitted). The Supreme Court declined to extend its reasoning from Navarro, however, saying that “Navarro had nothing to do with the citizenship of the ‘trust,' since it was a

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suit by the trustees in their own names.” Id. Carden, in contrast, concerned determining the citizenship of “an artificial entity, [i.e., a limited partnership,] suing or being sued[.]” Id. Ultimately, the Court held that the citizenship of a limited partnership is based on the citizenship of all its partners; that is, the citizenship of each general and limited partner. Id. at 195-96.

Following Navarro and Carden, the Supreme Court decided Americold Realty, a case involving a real estate investment trust (“REIT”), which removed a lawsuit against it to federal court based on diversity jurisdiction. 577 U.S. at 379. The Supreme Court likened the REIT to other unincorporated business associations, like joint-stock companies or partnerships, each of which has as its citizenship the citizenship of its members. Id. at 381. The Court declined to apply the rule in Navarro that based diversity on the citizenship of the trustee, because it “ha[s] reminded litigants before ... [that] Navarro had nothing to do with the citizenship of [a] “trust.” Id. at 382. “Rather, Navarro reaffirmed a separate rule that when a trustee files a lawsuit in her name, her jurisdictional citizenship is the State to which she belongs-as is true of any natural person.” Id. at 382-83 (emphasis in original). According to the Court, “[t]his rule coexists with” the Court's holding in Carden that “when an artificial entity is sued in its name, it takes the citizenship of each of its members.” Id. at 383 (emphasis in original). Nevertheless, the Court acknowledged that “confusion regarding the citizenship of a trust is understandable and widely shared.” Id. As the Court further explained:

The confusion can be explained, perhaps, by tradition Traditionally, a trust was not considered a distinct legal entity, but a “fiduciary relationship” between multiple people. Such a relationship was not a thing that could be haled into court; legal proceedings involving a trust were brought by or against the trustees in their own name. And when a trustee files a lawsuit or is sued in her own name, her citizenship is all that matters for diversity purposes. For a traditional trust, therefore, there is no need to determine its membership, as would be true if the trust, as an entity, were sued.

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Id. (internal citations omitted). The Court went on to distinguish business trusts from traditional trusts, as follows:

Many States, however, have applied the “trust” label to a variety of unincorporated entities that have little in common with this traditional template. Maryland, for example, treats a real estate investment trust as a “separate legal entity” that itself can sue or be sued. So long as such an entity is unincorporated, we apply our “oft-repeated rule” that it possesses the citizenship of all its members. But neither this rule nor Navarro limits an entity's membership to its trustees just because the entity happens to call itself a trust.

Id. (internal citations omitted).

Courts have acknowledged that it is not entirely clear what the Supreme Court meant by the statement in Americold Realty that “[f]or a traditional trust, therefore, there is no need to determine its membership, as would be true if the trust, as an entity, were sued.”^[1] Nevertheless, “one thing seems clear: the Court was declaring that, because a business trust is an artificial legal entity and a traditional trust is not, the citizenship of a traditional trust must be determined differently than that of a business trust.” GBForefront, L.P., 888 F.3d at 38-39 (footnotes omitted). Similarly, following Americold Realty, the Seventh Circuit acknowledged that, while its previous decisions in Hicklin Engineering, 439 F.3d 346, and May Department Stores, 305 F.3d 597, “understood Nava...