Ag Navigator, LLC v. Top Gun AG LLC
| Decision Date | 17 June 2020 |
| Docket Number | 8:20CV119 |
| Parties | AG NAVIGATOR, LLC, FORELAND AG, LLC, FORELAND REAL ESTATE, LLC, FORELAND REAL ESTATE II, LLC, and FORELAND REAL ESTATE III, LLC, Plaintiffs, v. TOP GUN AG LLC, TIMOTHY C. BARKER, LANCE FULTON, RYAN RUSSELL, JOHN DOE 1-10, and JANE DOE 1-10, Defendants. |
| Court | U.S. District Court — District of Nebraska |
This matter is before the court on the motion to remand filed by Plaintiffs Ag Navigator, LLC, Foreland Ag, LLC, Foreland Real Estate, LLC, Foreland Real Estate II, LLC, and Foreland Real Estate III, LLC (collectively, "Plaintiffs").
For the following reasons, Plaintiffs' motion for remand, (Filing No. 34), should be granted.
On November 20, 2019, Plaintiffs filed a complaint in the District Court of Phelps County, Nebraska alleging claims for breach of fiduciary duty and the duty of loyalty, unjust enrichment, fraudulent concealment, breach of oral and written contracts, conversion, and civil conspiracy against Top Gun AG, LLC, Timothy C. Barker, Lance Fulton, and Ryan Russell (collectively, "Defendants"). (Filing No. 1 at CM/ECF p. 6).
On March 27, 2020, Defendants removed. (Filing No. 1). In their notice of removal, Defendants claim that the federal district court "has original jurisdiction over this action under 28 U.S.C. [§] 1332(a), because this is a civil action between citizens of different States where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs[.]" (Id. at CM/ECF p. 2).
After they removed, Defendants also moved to dismiss, claiming this court lacks personal jurisdiction over all defendants. (Filing Nos. 13, 15, 17 and 19). In response to Defendants' motions to dismiss, Plaintiffs moved to remand, claiming that this court lacks subject matter jurisdiction. (Filing No. 34). Put differently, both parties argue that this court lacks jurisdiction, on different bases, on simultaneous motions.
The court stayed Plaintiffs' response deadlines to the motions to dismiss, (Filing No. 37), and will first resolve Plaintiffs' Motion to Remand and the challenge it raises to this court's subject matter jurisdiction.
In support of remand, Plaintiffs claim that the notice of removal was supported by insufficient proof and lacked an objectively reasonable basis. (Filing No. 34 at CM/ECF p. 1). Plaintiffs argue that Defendants' notice was defective, as it failed to allege the citizenship of each member of each party-LLC. Without that information, Plaintiffs argue, the court cannot determine from the notice whether there is complete diversity, and Defendants have therefore failed to carry their burden of proof. Moreover, Plaintiffs claim that even if Defendants were given the opportunity to amend their notice to include the members' citizenships, some plaintiffs and some defendants are citizens of Kansas (for the purposes of 28 U.S.C. § 1332), which destroys complete diversity of citizenship. (Id. at CM/ECF p. 3).
Upon review of the record, the undersigned magistrate judge finds that Defendants have failed to sufficiently establish federal subject matter jurisdiction and this case must be remanded to the District Court of Phelps County.
Removal of civil actions from state court to federal court is authorized by 28 U.S.C. § 1441(a), which provides, in relevant part, that:
any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
28 U.S.C. § 1441(a); see also Mensah v. Owners Ins. Co., 951 F.3d 941, 943 (8th Cir. 2020) () (internal citation omitted). The federal district courts have original jurisdiction over questions of federal law, pursuant to 28 U.S.C. § 1331, or where there is a complete diversity of parties, pursuant to 28 U.S.C. § 1332.
Defendant removed this action citing federal diversity jurisdiction under to 28 U.S.C. § 1332(a). (Filing No. 1 at CM/ECF p. 2). Diversity jurisdiction has two requirements: complete diversity of the parties, and an amount in controversy that "exceeds the sum or value of $75,000, exclusive of interest and costs." 28 U.S.C. § 1332(a). Here, the parties disagree as to whether Defendants, as the removing parties, have sufficiently established the first prong - complete diversity ofcitizenship. Complete diversity "exists where no defendant holds citizenship in the same state where any plaintiff holds citizenship." OnePoint Solutions, LLC v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007) (citing 28 U.S.C. § 1332(a)).
Plaintiffs' complaint asserts that each plaintiff-entity is a limited liability company headquartered in, and organized under the laws of, Nebraska. (Filing No. 1 at CM/ECF pp. 6-7). Plaintiffs further pleaded that Defendant Top Gun Ag, LLC is a limited liability company headquartered in, and organized under the laws of, Kansas, and that Defendants Barker, Fulton, and Russell are "residents" of Kansas. (Id. at CM/ECF p. 7). Defendants have incorporated these assertions into their Notice of Removal without further elaboration. (Id. at CM/ECF pp. 2-3).
But the "citizenship" of non-incorporated entities, such as limited liability companies, is not premised solely on where those companies were formed or headquartered. GMAC Commercial Credit LLC v. Dillard Dept. Stores, Inc., 357 F.3d 827, 828-29 (8th Cir. 2004) (citing Carden v. Arkoma Assocs., 494 U.S. 185, 186, 189, 195-96 (1990)); see also Buckley v. Control Data Corp., 923 F.2d 96, 97 (8th Cir. 1991). An LLC is a citizen of every state in which any of its members are citizens. E3 Biofuels, LLC v. Biothane, LLC, 781 F.3d 972, 975 (8th Cir. 2015). Removal, then, is proper only if all plaintiffs -including the members of plaintiff LLCs - are from different states than all defendants -including all members of defendant LLCs.
That said, this case highlights a quandary faced by state court defendants sued by plaintiff LLCs: It is often difficult to determine whether the case can be removed to federal court based on diversity jurisdiction. Here, and in most complaints filed by LLCs, there are no allegations in the complaint related to the identity (much less the citizenship) of each plaintiff LLCs' members. This puts defendants in a tough spot. The membership of LLCs and other unincorporatedentities are often not publicly accessible. And the deadline to remove a case to federal court is typically 30 days after service - undoubtedly limiting the amount of investigation and discovery a defendant can do prior to filing a notice of removal. Thus, defendants are placed in the precarious position of having to include in their notices of removal allegations regarding the members of entities despite having little or no initial access to the entities' membership documents.
Recognizing that difficulty, some circuit courts have adopted a flexible standard for establishing diversity jurisdiction in cases involving unincorporated entities. Carolina Cas. Ins. Co. v. Team Equip., Inc., 741 F.3d 1082, 1087 (9th Cir. 2014) (); Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99 (3d Cir. 2015) (). Those courts recognize "the sensible principle" that at the outset of litigation involving unincorporated entities, "a party should not be required to plead jurisdiction affirmatively based on actual knowledge." Carolina Cas. Ins. Co. v. Team Equip., Inc., 741 F.3d at 1087. In those jurisdictions, the party seeking to establish federal jurisdiction may do so on the "information and belief" that there is complete diversity, with the court reserving the right to readdress jurisdiction, as appropriate thereafter. See, e.g., Medical Assurance Co., 610 F.3d at 376. But others circuits have taken a firmer hand. See, e.g., D.B. Zwirn Special Opportunities Fund, L.P. v. Mehrotra, 661 F.3d 124, 127 (1st Cir. 2011) (). The parties have not cited, and the court has not found, any Eighth Circuit case analyzing this specific facet of the removal process and jurisdiction.
But regardless of whether this court were to adopt the more lenient approach of the Ninth and Third Circuits, or the more exacting standard of First Circuit, the result here would be the same. Defendants have not even attempted - either on information and belief or through specific proof - to address the citizenship of members of the party LLCs. The sole discussion of party-citizenship in Defendants' Notice of Removal is as follows:
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