Bank v. the Vill. At Fair Oaks Owner Llc

• Decision Date: 14 February 2011
• Docket Number: Civil Action No. 2:10cv333.
• Citation: 766 F.Supp.2d 686
• Court: U.S. District Court — Eastern District of Virginia
• Parties: SUNTRUST BANK, a Georgia corporation, Plaintiff,v.The VILLAGE AT FAIR OAKS OWNER, LLC, a Virginia limited liability company, Philip Pilevsky, individually, Louis P. Mirando, individually, and Raymond L. Zimmerman, individually, Defendants.

766 F.Supp.2d 686

SUNTRUST BANK, a Georgia corporation, Plaintiff,

v.The VILLAGE AT FAIR OAKS OWNER, LLC, a Virginia limited liability company, Philip Pilevsky, individually, Louis P. Mirando, individually, and Raymond L. Zimmerman, individually, Defendants.

Civil Action No. 2:10cv333.

United States District Court, E.D. Virginia,Norfolk Division.

Feb. 14, 2011.

Hunter W. Sims, Jr., Esq., Paul K. Campsen, Esq., Rose E. Coley, Esq., for Plaintiff.Mary T. Morgan, Esq., for Defendants.

OPINION AND ORDER

MARK S. DAVIS, District Judge.

This matter is currently before the Court on a motion filed by defendants The Village at Fair Oaks Owner, LLC, a Virginia limited liability company (“the LLC”), Louis P. Mirando, and Raymond L. Zimmerman pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure to dismiss the complaint filed in this case by plaintiff SunTrust Bank for lack of subject-matter jurisdiction, as well as a motion filed by plaintiff for expedited jurisdictional discovery. After examination of the briefs and the record, the Court has determined that a hearing on the instant motions is unnecessary, as the facts and legal arguments are adequately presented, and the decisional process would not be aided significantly by oral argument. For the reasons stated herein, the court DENIES both motions and ORDERS that, pursuant to 28 U.S.C. § 1653, plaintiff is granted leave to amend the defective allegations of jurisdiction contained in the complaint within seven (7) days of the date of this Opinion and Order. If plaintiff is unable to amend the complaint in such a way as to establish complete diversity of citizenship within that period of time, the Court will DISMISS this matter, without prejudice, for lack of subject-matter jurisdiction.

I. FACTUAL ALLEGATIONS AND PROCEDURAL HISTORY

Plaintiff filed the complaint in this case on July 9, 2010, naming the LLC, Philip Pilevsky, Mirando, and Zimmerman as defendants. Compl. ¶¶ 1–5. The complaint alleges that the LLC breached the terms of two commercial promissory notes, of which the three individual defendants were allegedly absolute and unconditional guarantors.

With respect to subject-matter jurisdiction, the complaint alleges that “[t]his Court has jurisdiction pursuant to 28 U.S.C. § 1332 because the parties are diverse and the amount in controversy exceeds the sum of $75,000.” Compl. ¶ 6. In support of this allegation, plaintiff alleges that it is “a banking corporation organized and operated under the laws of the State of Georgia,” and that plaintiff's “corporate headquarters and its principal place of business are located in Atlanta, Georgia.” Compl. ¶ 1. With respect to the defendants, the complaint alleges that the LLC “is now, and at all times relevant has been, a Virginia limited liability company with its principal office and headquarters located at 5423 Henneman Drive, Suite B, Norfolk, VA 23513,” and further alleges that Pilevsky and Mirando are “resident[s] of the State of New York” and Zimmerman is “a resident of the Commonwealth of Virginia.” Compl. ¶¶ 2–5.

The LLC and Zimmerman have moved to dismiss the complaint pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, arguing that plaintiff's complaint does not allege sufficient facts regarding the citizenship of the LLC to establish the complete diversity of citizenship required for this Court to exercise subject-matter jurisdiction over this case pursuant to 28 U.S.C. § 1332. Specifically, the motion argues that the citizenship of the LLC is not determined by its state of incorporation or principal place of business, as is the case with corporations, but is instead determined by the citizenship of the LLC's member or members, and that, in the absence of any such allegations in the complaint, the Court must dismiss this matter for lack of subject-matter jurisdiction. Mirando has requested, and been granted by the Court, leave to join in the motion to dismiss.

Pilevsky has not joined in the motion to dismiss, but instead has requested (with the consent of plaintiff), and been granted by the Court, several continuances of his deadline to file an answer. The most recent such order gives Pilevsky until March 9, 2011 to file his answer. Docket No. 39. Pilevsky's motions indicate that he is engaging in ongoing settlement negotiations with plaintiff.

Plaintiff opposes the other defendants' motion to dismiss, emphasizing that nowhere in their motion or memorandum in support is there any affirmative claim that the citizenship of any member or members of the LLC would, in fact, destroy complete diversity of citizenship for jurisdictional purposes. Plaintiff explains that it previously requested from the LLC disclosure of the identity and citizenship of the LLC's membership, which plaintiff claims are not matters of public record, but was rebuffed. In this connection, plaintiff has also moved for expedited discovery relating to this jurisdictional issue, and specifically regarding the identity and citizenship of the LLC's membership.

The LLC, Zimmerman, and Mirando argue in reply that expedited jurisdictional discovery is not available to plaintiff in connection with the instant motion to dismiss because the motion challenges the adequacy, and not the veracity, of the complaint. These defendants further argue that even if expedited jurisdictional discovery were available, it would be inappropriate, because plaintiff's allegation of diversity jurisdiction in the complaint, admittedly made without any concrete knowledge as to the actual citizenship of the LLC, was a violation of Rule 11 of the Federal Rules of Civil Procedure, which requires counsel to make reasonable investigation of facts contained in a pleading submitted to the Court.

II. STANDARD OF REVIEW

A. Subject–Matter Jurisdiction

In its consideration of the instant motion to dismiss, the Court notes as an initial matter that Rule 12(h)(3) of the Federal Rules of Civil Procedure provides that “[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3). The burden of alleging facts sufficient to establish such subject-matter jurisdiction lies, of course, squarely with the plaintiff. See, e.g., Pinkley, Inc. v. City of Frederick, Md., 191 F.3d 394, 399 (4th Cir.1999).

B. The Citizenship of Limited Liability Companies

It is well established that, for purposes of federal jurisdictional diversity of citizenship, an LLC is not a corporation, and thus is not considered a citizen of its state of incorporation and principal place of business, but instead shares the citizenship of its members. See, e.g., Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079–80 (5th Cir.2008) (noting that although there is no U.S. Supreme Court decision directly on point, “[a]ll federal appellate courts that have addressed the issue have reached the same conclusion: like limited partnerships and other unincorporated associations or entities, the citizenship of a LLC is determined by the citizenship of all of its members.”) (collecting decisions of the United States Courts of Appeals for the First, Second, Fourth, Sixth, Seventh, Eighth, Ninth, and Eleventh Circuits); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir.2004) (holding that a Virginia LLC shared the citizenship of its members); Nahigian v. Juno–Loudoun LLC, 661 F.Supp.2d 563, 567 (E.D.Va.2009). However, in a recent decision, the Fourth Circuit held that, in the class action context, an LLC is properly considered “an unincorporated association” within the meaning of 28 U.S.C. § 1332(d)(10), and thus is “deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized.” 28 U.S.C. § 1332(d)(10); see Ferrell v. Express Check Advance of SC LLC, 591 F.3d 698 (4th Cir.2010). Although that definition, which was added to 28 U.S.C. § 1332 by the Class Action Fairness Act of 2005 (“CAFA”), Pub. L. No. 109–2, 119 Stat. 4 (codified in scattered sections of 28 U.S.C.), obviously diverges from the well-established rule regarding the citizenship of LLCs discussed above, the Fourth Circuit emphasized in Ferrell that this definition applies only in cases that were brought pursuant to CAFA's special jurisdictional provisions. Since subject-matter jurisdiction in this case is predicated not on the so-called “minimal diversity” jurisdiction created by CAFA and conferred upon federal district courts by 28 U.S.C. § 1332(d)(2) in class action cases, but instead on traditional diversity of citizenship pursuant to 28 U.S.C. § 1332(a)(1), CAFA's definition of the citizenship of unincorporated associations such as LLCs in 28 U.S.C. § 1332(d)(10) is simply not implicated in this Court's analysis of its subject-matter jurisdiction in the instant case.

C. Motions to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1)

A motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject-matter jurisdiction may attack a complaint on its face, insofar as the complaint fails to allege facts upon which the court can base jurisdiction, or it may attack the truth of any underlying jurisdictional allegations contained in the complaint. Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). In the former situation, where the defendant attacks the sufficiency of the complaint, the court is required to accept all of the complaint's factual allegations as true. Id. However, in the latter situation, where the defendant attacks the veracity of allegations in the complaint, or “[w]hen a defendant raises standing as the basis for a motion under Rule 12(b)(1) to dismiss for lack of subject matter jurisdiction ... the district court ‘may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.’ ” White Tail Park, Inc. v. Stroube, 413 F.3d 451, 459 (4th Cir.2005) (quoting Richmond, Fredericksburg &...