Capps v. Newmark S. Region, LLC

• Decision Date: 25 April 2023
• Docket Number: 5:18-CV-133-FL
• Parties: TIMOTHY CAPPS, Plaintiff, v. NEWMARK SOUTHERN REGION, LLC, and NEWMARK &COMPANY REAL ESTATE, INC. Defendant.
• Court: U.S. District Court — Eastern District of North Carolina

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TIMOTHY CAPPS, Plaintiff, v. NEWMARK SOUTHERN REGION, LLC, and NEWMARK &COMPANY REAL ESTATE, INC. Defendant.

No. 5:18-CV-133-FL

United States District Court, E.D. North Carolina, Western Division

April 25, 2023

ORDER

LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE

This matter is before the court on plaintiff's motion for attorneys' fees and costs (DE 270) and motion for hearing (DE 275). The issues raised are ripe for ruling. For the following reasons, the motions are denied.

STATEMENT OF THE CASE

The court sets forth the procedural history of this case as pertinent to the instant motions, which follow the opinion and judgment of the United States Court of Appeals for the Fourth Circuit, vacating this court's judgment and remanding with instructions to dismiss the matter without prejudice for lack of subject matter jurisdiction. See Capps. v. Newmark S. Region, LLC, 53 F.4th 299 (4th Cir. 2022).

Plaintiff a former independent contractor of defendant Newmark Southern Region, LLC (“Newmark”), commenced this action on March 29, 2018, asserting state-law claims, including breach of contract, based upon allegations that defendant Newmark improperly terminated its relationship with plaintiff. With respect to jurisdiction, plaintiff alleged, “[u]pon information and belief,” that defendant Newmark “is a limited liability company incorporated in Georgia with its principal place of business at 3424 Peachtree Road, Atlanta Georgia,” and that it and defendant Newmark &amp Company Real Estate, Inc. “are wholly owned subsidiaries of BGC Partners, Inc., a major global financial services and real estate brokerage firm.” (Compl ¶¶ 14, 17). In addition, plaintiff asserted, “[t]his Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332 as there is complete diversity of citizenship between [plaintiff] and the Defendants.” (Compl. ¶ 18).

In the introductory paragraphs of his complaint, plaintiff also asserted that the instant case was “necessarily related to - and arises out of the same facts that form the basis for” a separate lawsuit commenced December 22, 2017, between plaintiff and his former business “partner,” Gregory Katz (“Katz”), (compl. ¶¶ 1-2), captioned Gregory Katz v. Timothy Capps and Kacie Van Hine, Case No. 7:18-CV-47-FL (E.D. N.C. ) (the “Katz action”).^[1] In the Katz action, Katz asserted state-law claims and one claim under the federal Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and plaintiff counterclaimed.

Defendants filed financial disclosure reports, prior to the deadline for responsive pleadings, identifying, as pertinent to the instant analysis, defendant Newmark's parent as NGA, LLC; grandparent as Newmark Partners, L.P.; and great-grandparents as Newmark Holdings, L.P. (“Newmark Holdings L.P.”) and Newmark Group., Inc. (DE 14). Defendants also moved to dismiss all claims against them for failure to state a claim upon which relief can be granted, and the court dismissed all of plaintiff's claims except for breach of contract against defendant Newmark, November 26, 2018.^[2] Defendant Newmark filed an answer to the complaint December 10, 2018, which admitted plaintiff's allegations regarding defendant Newmark's identity, but which denied plaintiff's allegations regarding its owners. Defendant Newmark also admitted “for jurisdictional purposes only” plaintiff's allegations regarding diversity jurisdiction. (Answer (DE 57) ¶ 18).

In the meantime, the court consolidated the instant case with the Katz action and entered a case management order governing discovery before and after resolution of the motion to dismiss. During the discovery period, the parties to the Katz action stipulated to dismissal of their claims against one another, and plaintiff and defendant Newmark proceeded to bench trial on their breach of contract claims. In advance of the trial, the parties filed a proposed pretrial order and proposed stipulated findings of fact and conclusions of law, as pertinent here, that stated “[a]ll parties are properly before the court,” and “[t]he court has jurisdiction of the parties and of the subject matter.” (DE 202 at 1; DE 219 at 21). In addition, the parties stipulated to their identities as follows: 1) plaintiff is “a citizen and resident of Wake County, North Carolina,” and 2) defendant Newmark is “a Georgia limited liability company with a principal place of business in Atlanta, Georgia.” (DE 219 at 1; DE 222 at 1). Following bench trial, the court entered findings of fact and conclusions of law, which included those stipulated facts, and entered judgment in favor of defendant.

Plaintiff appealed, raising arguments on the merits of this court's judgment. In the jurisdictional statement of his opening brief, plaintiff stated “[t]he district court had jurisdiction over this matter under 28 U.S.C. § 1332 because there was complete diversity.” (No. 21-1196 Doc. 36 at 17).

During the course of oral argument, on September 16, 2022, panel members had the following exchange with plaintiff's counsel:

Q. As a district court judge myself, switching gears here, to another issue, the first concern I've got here is subject matter jurisdiction, and the information before us does not allow us to confirm the existence of diversity jurisdiction. Can you give us some more information to establish the citizenship of the parties, before we get into too many other issues?

A. That's fine, your honor, at the beginning there were numerous other parties that were involved, some of them dismissed. Frankly, I believe Newmark might be an LLC, or maybe they were at the time of this case, and I understand, that would determine where its members lived, and unfortunately I don't know that information, and it wasn't contested below, and so -

Q. You didn't allege it right, you alleged that the principal place of business was in Georgia, which would be helpful if they were a corporation, but that doesn't matter for an LLC, right?

A. That's right, you need to look at the location of the members and unfortunately I don't have that information.

Q. We don't know where the citizenship of Newmark Southern Region LLC is?

A. I do not, your honor. Once again, it wouldn't be based upon principal place of business, it would be based on the location of the members. My assumption is that one of the members was a wholly owned subsidiary of the other, but that is merely an assumption, on my part.

Q. Well who are the members of Newmark, don't know that?

A. Again, your honor, I'm sorry, I have to defer to Newmark's counsel for that information.

(Oral Argument 6:30-8:02).^[3] Then, later in oral argument, panel members had the following exchange with defendant Newmark's counsel:

Q. If you don't mind starting with Judge Hendricks's question, about the LLC and its members and their citizenship?

A. Absolutely not. The LLC that is the appellee, which is Newmark Southern Region, is not a citizen of North Carolina. Its members are corporate entities venued in Delaware and New York, and so there never has been an issue about diversity of citizenship among the parties.

Q. Would you be so kind as to help us be sure of that by submitting a letter of the members of the LLC and information about their citizenship?

A. Absolutely.

(Oral Argument 18:05-18:45).

The court of appeals also entered a written order on the day of argument directing defendant Newmark to submit a letter pursuant to Rule 28(j) of the Federal Rules of Appellate Procedure “regarding the membership of Newmark Southern Region, LLC and their citizenship.” (No. 21-1196 Doc. 65). Defendant Newmark responded by letter to the Fourth Circuit on September 20, 2022, identifying the entities that were set forth in its financial disclosure statement, and, for the first time, noting that the limited partners of Newmark Holdings, L.P. resided in multiple states, including North Carolina. Four days later, plaintiff moved for an order vacating the judgment and remanding the case for dismissal without prejudice. In opposition, defendant Newmark argued that this court had “supplemental jurisdiction” over the claims in the instant case, that jurisdictional defects prior to consolidation are moot, and that plaintiff has been aware for years of his basis for challenging diversity jurisdiction. (No. 21-1196 Doc.71-1 at 2). In reply, plaintiff argued consolidation and supplemental jurisdiction cannot cure jurisdictional defects, and that the “[b]lame [l]ies” with defendant Newmark. (Id. Doc. 72 at 12).

In its November 16, 2022, opinion vacating this court's judgment and remanding, the Fourth Circuit noted that the parties “agree that complete diversity did not exist between them at the time of filing, given the North Carolina citizenship of at least one limited partner of Newmark Holdings, L.P.-a great-grandparent entity to Newmark.” Capps, 53 F.4th at 302. “Consequently, the district court lacked subject-matter jurisdiction over Capps's claims against Newmark pre- consolidation, so it lacked the power to consolidate the lawsuits in the first place,” and “consolidation could not cure the defect.” Id. The Fourth Circuit also addressed defendant Newmark's additional argument that the court should forgive the jurisdictional defect. Id. at 303. In closing, the Fourth Circuit noted “[n]either side of this dispute lacked the means to ascertain Newmark's citizenship at any point.” Id. “Whether mutual contentment with the federal forum or genuine obliviousness brought the parties to this unfortunate juncture, this Court will not condone the exercise of jurisdiction where it did not truly exist.” Id.

Following remand and this court's entry of judgment dismissing the case without prejudice for lack of subject matter jurisdiction, plaintiff filed the instant motion for attorney...