Branson Label, Inc. v. City of Branson

Citation793 F.3d 910
Decision Date17 July 2015
Docket NumberNo. 14–3051.,14–3051.
PartiesThe BRANSON LABEL, INC., a Florida Corporation, Plaintiff–Appellant v. CITY OF BRANSON, MISSOURI ; Empire District Electric Co.; HCW Development Company, LLC ; HCW Private Development, LLC ; HCW North, LLC, Defendants–Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

793 F.3d 910

The BRANSON LABEL, INC., a Florida Corporation, Plaintiff–Appellant
v.
CITY OF BRANSON, MISSOURI ; Empire District Electric Co.; HCW Development Company, LLC ; HCW Private Development, LLC ; HCW North, LLC, Defendants–Appellees.

No. 14–3051.

United States Court of Appeals, Eighth Circuit.

Submitted: Feb. 12, 2015.
Filed: July 17, 2015.


793 F.3d 912

Gregory E. Ostfeld, Greenberg Traurig, LLP, Chicago, IL, argued (Paul T. Fox, Brett Doran, Paul A. Del Aguila, Greenberg Traurig, LLP, Chicago, IL, Randy P. Scheer, S. Jacob Sappington, Sanders & Warren, Springfield, MO, on the brief), for appellant.

Joshua B. Christensen, Lathrop & Gage, LLP, Springfield, MO, argued (Dan Nelson, on the brief), for appellee Empire District Electric Co.

Jill R. Rembusch, Summers Compton Wells, LLC, St. Louis, MO, argued (Daniel J. Welsh, Stephen C. Hiotis, on the brief), for appellees HCW Development Co., LLC, HCW Private Development, LLC, and HCW North, LLC.

William L. Sauerwein, Sauerwein Simon & Hein P.C., St. Louis, MO, argued (Sarah E. Holdener, on the brief), for appellee City of Branson, Missouri.

Before RILEY, Chief Judge, LOKEN and SMITH, Circuit Judges.

Opinion

SMITH, Circuit Judge.

The Branson Label, Inc., a Florida corporation (“Florida Branson Label”), appeals the district court's1 dismissal of its suit. The district court found that Florida Branson Label collusively manufactured subject-matter jurisdiction in violation of 28 U.S.C. § 1359. Florida Branson Label argues that the district court erred by adopting the wrong legal test for determining collusion. Further, it argues that the corporate acts leading up to the commencement of this action were not done to manufacture diversity but were motivated by legitimate business purposes. We affirm.

793 F.3d 913

I. Background

This action and related actions in Missouri state court chronicle the decade-long dispute over ownership of 27 acres of land in Branson, Missouri. Florida Branson Label claims that it has an unbroken chain of title to this land that can be traced back to the 1950s. Through a quitclaim deed, the land was passed from the original owners to Tori, Inc. (“Tori”). Tori was administratively dissolved, and through various quitclaim transactions, Peter and Darlene Rea acquired the land. In 1992, the Reas quitclaimed the deed to the Branson Label, a Missouri corporation (“Missouri Branson Label”) that they owned. Florida Branson Label was merged with Missouri Branson Label, therefore acquiring the ownership interest in the land. Thus, Florida Branson Label alleges that the City of Branson, Missouri; the Empire District Electric Company; HCW Development Company, LLC; HCW Private Development, LLC; and HCW North, LLC (collectively, “Appellees”) infringed on its property rights by breaking ground on its land on May 15, 2004, to develop the Branson Landing, a mixed-use retail, residential, and entertainment complex.

In addition to Florida Branson Label's claim, Douglass Coverdell also claims ownership of the disputed land. Coverdell's claim to title arises from Tori's quitclaim of the deed to him in 1999.2 Coverdell's claim of ownership has spurred at least two actions in the Circuit Court of Taney County.3

Marvin Elfant, a businessman living in Florida, has funded Coverdell's lawsuits through his businesses Nekome, LLC (“Nekome”) and ME Holdings, LLC (“ME Holdings”). Both Nekome and ME Holdings are Delaware LLCs, but Elfant runs their operations from his home in Florida. Elfant's investment in the Coverdell actions, however, suffered setbacks in May, June, and August 2013, when Missouri state courts issued rulings adverse to Coverdell's claim of ownership.

In the spring of 2013, the Reas entered negotiations with Elfant for Nekome to buy Missouri Branson Label. On July 18, 2013—after the Coverdell actions sustained negative decisions from the state courts—an oral agreement was reached for Nekome to acquire Missouri Branson Label. In a memorandum to Elfant, his tax advisors described “the acquisition of the stock of [Missouri Branson Label]” as being “deemed by [Elfant] to be an important element in the legal strategy to realize a success[ ] on [his] investment.” The Reas did not initially comply with the oral agreement, and Elfant had to sue the Reas to settle the matter.

On May 2, 2014, Nekome finally acquired Missouri Branson Label. Only days before, Elfant sought and received advice from his tax advisors that merging Missouri Branson Label into an out-of-state corporation would be sufficient to avoid Missouri state taxes on any legal award that might come from Missouri Branson Label's claim to the land. On May 8, 2014, Nekome became the sole member in a newly formed company, Florida Branson Label. On May 9, Nekome merged Missouri Branson Label into Florida Branson Label, effectively transferring the former's legal claim of owning the

793 F.3d 914

disputed land to the latter. A few days later on May 14, 2014, Florida Branson Label filed the instant suit in federal district court asserting diversity jurisdiction on account of its Florida citizenship and the Appellees' Missouri citizenships. Since filing suit, Elfant has admitted that the only business activity that Florida Branson Label conducts includes “directing and overseeing this lawsuit and a second lawsuit pertaining to the [disputed land] ...; conferring with and directing counsel in connection with the Branson Label Lawsuits; reviewing and revising pleadings, declarations, and other court papers in connection with the Branson Label Lawsuits; and funding the Branson Label Lawsuits.”

The Appellees moved to dismiss the case for lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), and the district court granted the motion. The court found that Florida Branson Label's corporate maneuvers were done to manufacture diversity in violation of 28 U.S.C. § 1359 ; further, the court found that the purported tax purpose for merging the Missouri and Florida Branson Labels was merely pretextual to obtaining diversity jurisdiction. In coming to this conclusion, the district court utilized the following six-factor test employed by courts outside of this circuit:

(1) whether there was nominal or no consideration involved in the assignment; (2) whether the assignee had any previous connection to the assigned claim; (3) whether there was a legitimate business reason for the assignment; (4) whether the timing of the assignment suggests it was merely an effort to secure federal diversity jurisdiction; (5) whether the assignor exercises any control over the conduct of the litigation; and (6) whether the assignor retains any interest in the action such as receiving a portion of the assignee's recovery.

Hytken Family Ltd. v. Schaefer, 431 F.Supp.2d 696, 699–700 (S.D.Tex.2006) (citing Long & Foster Real Estate, Inc. v. NRT Mid–Atl., Inc., 357 F.Supp.2d 911, 922–23 (E.D.Va.2005) ). After finding that each factor weighed against exercising subject-matter jurisdiction, the district court dismissed the case.

II. Discussion

Florida Branson Label argues on appeal that the district court's adoption of the six-factor test was improper because it did not consider the totality of the circumstances. Further, Florida Branson Label argues that even if the six-factor test was the proper legal standard, the test weighs in favor of exercising subject-matter jurisdiction.

“We review de novo the grant of a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1).” Great Rivers Habitat Alliance v. Fed. Emergency Mgmt. Agency, 615 F.3d 985, 988 (8th Cir.2010) (quotation and citation omitted). First, “[a] court deciding a motion under Rule 12(b)(1) must distinguish between a ‘facial attack’ and a ‘factual attack.’ ” Osborn v. United States, 918 F.2d 724, 729 n. 6 (8th Cir.1990) (quoting Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir.1980) ). In a facial attack, “the court merely [needs] to look and see if plaintiff has sufficiently alleged a basis of subject matter jurisdiction.” Menchaca, 613 F.2d at 511 (citation omitted). Accordingly, “the court restricts itself to the face of the pleadings and the non-moving party receives the same protections as it would defending against a motion brought under Rule 12(b)(6).” Osborn, 918 F.2d at 729 n. 6 (internal citations omitted).

Conversely, in a factual attack, “the existence of subject matter jurisdiction [is challenged] in fact, irrespective of

793 F.3d 915

the pleadings, and matters outside the pleadings, such as testimony and affidavits, are considered.” Menchaca, 613 F.2d at 511 (citation omitted). Thus, the nonmoving party would not enjoy the benefit of the allegations in its pleadings being accepted as true by the reviewing court. See Hastings v. Wilson, 516 F.3d 1055, 1058 (8th Cir.2008) (stating courts must “accept all factual allegations in the pleadings as true” for facial attacks). “Under 28 U.S.C. § 1359, whether an assignment was improperly made to manufacture diversity jurisdiction is a fact-intensive question....” Nat'l Fitness Holdings, Inc. v. Grand View Corporate Centre,...

To continue reading

Request your trial
223 cases
  • Fond Du Lac Band of Lake Superior Chippewa v. Wheeler
    • United States
    • U.S. District Court — District of Minnesota
    • 16 Febrero 2021
    ...a claim. Defendants’ Rule 12(b)(1) motions present a "facial" attack on this Court's jurisdiction. See Branson Label, Inc. v. City of Branson , 793 F.3d 910, 914 (8th Cir. 2015) (distinguishing between a "facial" attack and a "factual" attack). In analyzing a facial attack, the Court "restr......
  • Nygaard v. Taylor
    • United States
    • U.S. District Court — District of South Dakota
    • 24 Septiembre 2021
    ...exists. Stalley, 509 F.3d at 521. The Court's review is limited to the face of the pleadings. Branson Label. Inc. v. City of Branson, Mo., 793 F.3d 910, 914 (8th Cir. 2015). On the other hand, where the defendant attacks the factual basis for subject matter jurisdiction, the court can consi......
  • Blue Cross & Blue Shield of N.C. v. Rite Aid Corp.
    • United States
    • U.S. District Court — District of Minnesota
    • 9 Febrero 2021
    ...challenges only the Complaint's sufficiency, this is a "facial" challenge to subject-matter jurisdiction. Branson Label, Inc. v. City of Branson , 793 F.3d 910, 914 (8th Cir. 2015). In analyzing a facial attack, a court "restricts itself to the face of the pleadings, and the non-moving part......
  • Lower Brule Sioux Tribe v. Haaland
    • United States
    • U.S. District Court — District of South Dakota
    • 12 Septiembre 2022
    ...... also Stathis v. Marty Indian Sch. Bd. Inc., 560. F.Supp.3d 1283, 1298 (D.S.D. 2021) ... is limited to the face of the pleadings. Branson Label,. Inc, v. City of Branson, 793 F.3d 910, 914 ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT