Platinum-Montaur Life Scis., LLC v. Navidea Biopharmaceuticals, Inc.
| Decision Date | 25 November 2019 |
| Docket Number | August Term, 2019,Docket No. 18-3535-cv |
| Citation | 943 F.3d 613 |
| Parties | PLATINUM-MONTAUR LIFE SCIENCES, LLC, Plaintiff-Appellant, v. NAVIDEA BIOPHARMACEUTICALS, INC., Defendant-Third-Party-Plaintiff-Appellee, v. Platinum Partners Credit Opportunities Master Fund, LP, Third-Party-Defendant. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert J. Burns (Warren E. Gluck, Barbara P. Parlin, and Kathryn B. Daly on the brief), Holland & Knight LLP, New York, New York for Plaintiff-Appellant.
Robert C. Folland, Barnes & Thornburg, LLP, Columbus, Ohio for Defendant-Appellee.
Before: Katzmann, Chief Judge, Walker and Park, Circuit Judges.
Platinum-Montaur Life Sciences, LLC ("Platinum-Montaur") sued Navidea Biopharmaceuticals, Inc. ("Navidea") in state court over a contract dispute. Navidea removed the case to the United States District Court for the Southern District of New York (Caproni, J. ). Navidea asserted that the district court had diversity jurisdiction under 28 U.S.C. § 1332 but it did not identify Platinum-Montaur’s citizenship. The parties conducted limited informal jurisdictional discovery but failed to determine Platinum-Montaur’s citizenship. Instead of ordering further jurisdictional discovery, the district court assumed that it had subject-matter jurisdiction, stating that it could proceed because it had no "good faith basis to believe that there is not complete diversity."
We hold that the district court erred by failing to determine whether it had diversity jurisdiction before deciding Navidea’s motion to dismiss. Accordingly, we VACATE and REMAND for further proceedings consistent with this opinion.
In 2017, Platinum-Montaur sued Navidea in New York state court to collect on a debt. Navidea then filed a notice of removal in the United States District Court for the Southern District of New York. Navidea claimed that the federal court had "diversity jurisdiction under 28 U.S.C. § 1332(a)." Section 1332(a) gives federal courts jurisdiction to hear controversies "between ... citizens of different States." Navidea stated that it was "a Delaware corporation, with a principal place of business in Ohio," making it a citizen of Delaware and Ohio. 28 U.S.C. § 1332(c)(1) ().
But Navidea’s notice of removal did not fully specify Platinum-Montaur’s citizenship. Platinum-Montaur is a limited liability company ("LLC"), which takes the citizenship of all of its members. See Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012). Navidea stated that Platinum-Montaur was an LLC with three members—two individual residents of New Jersey and Platinum Partners Value Arbitrage Fund, L.P. ("PPVA"), a Cayman Islands Limited Partnership ("LP"). For the purposes of diversity jurisdiction, a partnership takes the citizenship of all of its partners. See Carden v. Arkoma Assocs. , 494 U.S. 185, 195–96, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). Therefore, Platinum-Montaur is a citizen of every state of which PPVA’s partners are citizens. Navidea did not identify these partners in its notice of removal, leaving Platinum-Montaur’s citizenship uncertain.
Because it was unclear whether the parties before it were diverse, the district court ordered "informal jurisdictional discovery in order to determine the citizenship of [PPVA]." After looking into its own citizenship, Platinum-Montaur determined that one of PPVA’s partners was Platinum Partners Value Arbitrage Funds (USA) L.P. ("PPVA Onshore"), a "feeder fund intended for U.S. investors" with around 220 limited partners and which took the citizenship of each partner. Carden , 494 U.S. at 195–96, 110 S.Ct. 1015. Platinum-Montaur stated that it had tried but failed to determine whether any of PPVA Onshore’s partners was a citizen of either Delaware or Ohio, which would destroy diversity of citizenship between Platinum-Montaur and Navidea.1
At a status conference, Platinum-Montaur told the court that it was "seeing ... hundreds of feeder funds, multiple LLCs, [and] unincorporated entities," in its ownership structure. After contacting some of PPVA Onshore’s partners in an effort to identify their citizenship, Platinum-Montaur decided to stop and wait on the district court’s direction because it was "unclear" to them "when you are just one cog in the chain of the uphill ownership structure how that affects diversity jurisdiction."
The district court asked Platinum-Montaur whether it planned to move for a remand to state court, and Platinum-Montaur responded that it was "really trying to follow the Court’s directives" on this issue. The court decided to conclude its jurisdictional inquiry and stated,
Having assumed subject-matter jurisdiction, the district court later granted Navidea’s motion to dismiss, finding that as a matter of contract law, Platinum-Montaur had assigned away all of its rights to Navidea’s debts and therefore lacked standing to sue. Platinum-Montaur appealed that ruling, and both parties briefed the issue of standing but not subject-matter jurisdiction.
This court may "sua sponte delve into the issue of whether there is a factual basis to support" subject-matter jurisdiction. Velez v. Sanchez , 693 F.3d 308, 314 (2d Cir. 2012) (cleaned up). We consider "questions of subject matter jurisdiction de novo " and are "not limited in our right to refer to any material in the record." Id. (citations omitted).2
" ‘It is a fundamental precept that federal courts are courts of limited jurisdiction’ and lack the power to disregard such limits as have been imposed by the Constitution or Congress." Durant, Nichols, Houston, Hodgson & Cortese-Costa P.C. v. Dupont , 565 F.3d 56, 62 (2d Cir. 2009) (quoting Owen Equipment & Erection Co. v. Kroger , 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978) ). Perhaps the most important limit is subject-matter jurisdiction, which defines "a court’s competence to adjudicate a particular category of cases." Wachovia Bank v. Schmidt , 546 U.S. 303, 305, 126 S.Ct. 941, 163 L.Ed.2d 797 (2006). "[B]ecause it involves a court’s power to hear a case," subject-matter jurisdiction cannot be forfeited, waived, or conferred by consent of the parties. See United States v. Cotton , 535 U.S. 625, 630, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002) ; Cable Television Ass’n of New York v. Finneran , 954 F.2d 91, 94 (2d Cir. 1992). "It is well-settled that the party asserting federal jurisdiction bears the burden of establishing jurisdiction," and it must prove jurisdiction by a "preponderance of evidence." Blockbuster, Inc. v. Galeno , 472 F.3d 53, 57 (2d Cir. 2006) ; Liranzo v. United States , 690 F.3d 78, 84 (2d Cir. 2012).
This case involves diversity jurisdiction. Under 28 U.S.C. § 1332, federal courts have jurisdiction to hear civil actions between "citizens of different States" as long as "the matter in controversy exceeds ... $75,000." The Supreme Court has interpreted "citizens of different States" to grant jurisdiction only "if diversity of citizenship among the parties is complete, i.e. , only if there is no plaintiff and no defendant who are citizens of the same State." Wis. Dep’t of Corr. v. Schacht , 524 U.S. 381, 388, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998). The issue presented in this case is how a district court should proceed when a defendant seeks to remove an action from state court on the basis of diversity jurisdiction, but the notice of removal and underlying pleadings do not establish whether complete diversity exists between the parties.
We have remanded or dismissed cases when a plaintiff has invoked the original diversity jurisdiction of a federal district court but failed to include adequate allegations of diversity in the complaint and the record does not allow us to determine the citizenship of one of the parties. In Durant, Nichols, Houston, Hodgson & Cortese-Costa P.C. v. Dupont , 565 F.3d 56 (2d Cir. 2009), the parties disputed the citizenship of the defendant, and the court remanded "for supplementation of the record with findings" regarding his citizenship. Id. at 65–66. In John Birch Society v. National Broadcasting Co. , 377 F.2d 194 (2d Cir. 1967), we dismissed a suit for lack of subject-matter jurisdiction when the plaintiff failed to plead a defendant’s citizenship with apparent "intent[ ] to delay" after receiving multiple opportunities to do so. Id. at 199; see also Van Buskirk v. United Grp. of Companies, Inc. , 935 F.3d 49, 55 (2d Cir. 2019) ().
"In light of the congressional intent to restrict federal court jurisdiction, as well as the importance of preserving the independence of state governments, federal courts construe the removal statute narrowly, resolving any doubts against removability." Somlyo v. J. Lu-Rob Enters., Inc. , 932 F.2d 1043, 1045–46 (2d Cir. 1991), superseded by rule on other grounds as recognized by Contino v. United States , 535 F.3d 124, 127 (2d Cir. 2008). As a result, "[w]e are not inclined to countenance prolonged preliminary litigation over the removal issue simply because [the defendant] failed in the first instance to aver a proper jurisdictional basis for removal." Lupo v. Human Affairs Intern. , 28 F.3d 269, 274 (2d Cir. 1994).
That being said, a district court has discretion to order jurisdictional discovery in a removal case with improperly pleaded citizenship. For example, in United Food & Commercial Workers Union, Local 919,...
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