Dig. Media Sols. v. ZeetoGrp.

• Decision Date: 02 November 2022
• Docket Number: 22-CV-1184 JLS (AHG)
• Parties: DIGITAL MEDIA SOLUTIONS, LLC, Plaintiff, v. ZEETOGROUP, LLC, Defendant.
• Court: U.S. District Court — Southern District of California

DIGITAL MEDIA SOLUTIONS, LLC, Plaintiff, v. ZEETOGROUP, LLC, Defendant.

No. 22-CV-1184 JLS (AHG)

United States District Court, S.D. California

November 2, 2022

ORDER (1) DISMISSING CASE WITHOUT PREJUDICE FOR LACK OF SUBJECT-MATTER JURISDICTION; (2) OVERRULING PLAINTIFF'S EVIDENTIARY OBJECTIONS; AND (3) DENYING AS MOOT MOTION FOR SUMMARY JUDGMENT (ECF NOS. 1, 6, 7 17)

HON JANIS L. SAMMARTINO UNITED STATES DISTRICT JUDGE

Presently before the Court is Plaintiff Digital Media Solutions LLC's Complaint (“Compl.” ECF No. 1). Plaintiff contends that this Court has subject-matter jurisdiction over the case under 28 U.S.C. § 1332 Compl. at 2, otherwise known as “diversity jurisdiction.” Plaintiff's Complaint, however, did not present the Court with enough information to determine whether diversity jurisdiction exists. See generally ECF No. 7 (the “Order” or “OSC”). On September 15, 2022, the Court ordered Plaintiff to show cause as to why subject-matter jurisdiction existed. See generally id. Plaintiff filed a Response to the Order (“Response,” ECF No. 8), and Defendant Zeetogroup, LLC filed a Reply^[1] to Plaintiff's Response (“Reply,” ECF No. 9). Plaintiff then filed an Objection to Defendant's Reply (“Obj.,” ECF No. 17). Having considered the Parties' arguments and the law, the Court DISMISSES WITHOUT PREJUDICE Plaintiff's Complaint.

BACKGROUND

Plaintiff and Defendant Zeetogroup, LLC are limited liability companies (“LLCs”) that provide digital advertising services. Compl. *'*' 5-6. Plaintiff alleges that on August 23, 2018, Plaintiff and Defendant “entered into a written contract . . ., whereby the parties agreed that [Plaintiff] would manage its general consumer website using [Defendant's] ad-serving technology.” Id. ¶ 7. Part of the agreement, according to Plaintiff, was to share revenue earned through Defendant's monetization of Plaintiff's online traffic. Id. ¶ 8. Plaintiff claims that both parties performed under the agreement for about three years, but Defendant then withheld $944,176.27 owed to Plaintiff for revenue that Plaintiff generated using Defendant's platform between July and September of 2021. Id. 9-10. Plaintiff filed the Complaint on August 12, 2022, asserting state law causes of action for breach of contract, breach of the implied duty of good faith and fair dealing, and violation of California's unfair competition law. Id. ¶¶ 12-26.

Plaintiff claims the Court has subject-matter jurisdiction over this case on the basis of diversity jurisdiction. Id. ¶ 3. As discussed in further detail below, for one LLC to sue another LLC, the members of each LLC must be completely diverse for a court to exercise subject-matter jurisdiction over the case. See Johnson v. Columbia Properties Anchorage, 437 F.3d 894, 899 (9th Cir. 2006). Here, both Plaintiff and Defendant are LLCs, but Plaintiff's Complaint provided no information on the citizenship of each LLC's members. See generally Compl. Noting this deficiency, the Court ordered Plaintiff to show cause as to why diversity jurisdiction existed over this matter. See generally OSC. Both parties responded to the OSC, with Plaintiff alleging complete diversity between the members and Defendant objecting. See generally Response; Reply.

LEGAL STANDARD

“Courts have an independent obligation to determine whether subject-matter urisdiction exists, even when no party challenges it.” Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010). Federal courts are “presumed to lack subject matter jurisdiction in a particular case unless the contrary affirmatively appears.” Cohen v. Syme, 120 Fed.Appx. 746 (9th Cir. 2005). If a district court lacks subject-matter jurisdiction over an action, the action must be dismissed. Fed.R.Civ.P. 12(h)(3).

District courts have “original jurisdiction” over civil actions where the amount in controversy exceeds $75,000 and is between “citizens of different States.” 28 U.S.C. § 1332(a)(1). “The party seeking to invoke federal jurisdiction under 28 U.S.C. § 1332 bears the burden of demonstrating that grounds for diversity exist, that diversity is complete, and its claim is supported with ‘competent proof' by a preponderance of the evidence.” Baja Devs. LLC v. Loreto Partners, No. CV-09-756-PHX-LOA, 2010 WL 1758242, at *2 (D. Ariz. Apr. 30, 2010), report and recommendation adopted sub nom. Baja Devs. LLC v. TSD Loreto Partners, 2010 WL 2232196 (June 3, 2010); see also Raghav v. Wolf, 522 F.Supp.3d 534, 546 (D. Ariz. 2021) (“It is presumed that a cause of action lies outside the Court's limited jurisdiction and, therefore, the burden of establishing subject matter jurisdiction is on the party bringing suit.”); Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001) (“Absent unusual circumstances, a party seeking to invoke diversity jurisdiction should be able to allege affirmatively the actual citizenship of the relevant parties.”).

Diversity jurisdiction requires “that the parties be in complete diversity,” Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089, 1090 (9th Cir. 2003), meaning “all plaintiffs must have citizenship different than all defendants,” Mireles v. Wells Fargo Bank, N.A., 845 F.Supp.2d 1034, 1057 (C.D. Cal. 2012). “[C]orporate citizenship for diversity purposes is determined both by the corporation's place of incorporation and its principal place of business.” China Basin Properties, Ltd. v. One Pass, Inc., 812 F.Supp. 1038, 1040 (N.D. Cal. 1993). On the other hand, “[i]n order to be a citizen of a State within the meaning of the diversity statute, a natural person must both be a citizen of the United States and be domiciled within the State.” Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989).

“A person's domicile is her permanent home, where she resides with the intention to remain or to which she intends to return.” Kanter, 265 F.3d at 857. A person's domicile is determined at the time the suit is filed and is based on a number of factors, including “current residence, voting registration and voting practices, location of personal and real property, location of brokerage and bank accounts, location of spouse and family, membership in unions and other organizations, place of employment or business, driver's license and automobile registration, and payment of taxes.” Lew v. Moss, 797 F.2d 747, 750 (9th Cir. 1986). Moreover, “[t]here is a rebuttable presumption that, once established, a person's last known domicile remains their domicile until and ‘unless rebutted with sufficient evidence of change.'” Buscher v. Edelman, No. CV209680JVSASDX, 2021 WL 969208, at *4 (C.D. Cal. Mar. 4, 2021).

“Under Supreme Court authority, U.S. citizens domiciled abroad are considered ‘stateless' for purposes of § 1332(a) and destroy complete diversity.” Marcus v. Alexandria Real Est. Equities, Inc., No. 2:21-CV-08088-SB-SK, 2022 WL 2815904, at *3 (C.D. Cal. May 3, 2022) (citing Newman-Green, Inc., 490 U.S. at 828-29); see also Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 68 (2d Cir. 1990) (“United States citizens who are domiciled abroad are neither citizens of any state of the United States nor citizens or subjects of a foreign state, and § 1332(a) does not provide that the courts have urisdiction over a suit to which such persons are parties.”). Moreover, “if a party is a dual citizen, the Ninth Circuit requires that a court consider only the American citizenship for purposes of determining diversity jurisdiction”; accordingly, dual citizens living abroad are also considered “stateless” and will destroy complete diversity. Marcus, 2022 WL 2815904, at *3.

For diversity purposes, “an LLC is a citizen of every state of which its owners/members are citizens.” Johnson v. Columbia Properties Anchorage, 437 F.3d 894, 899 (9th Cir. 2006). “[W]here an LLC is a member of another LLC, the citizenship of the ‘sub-member' LLC is likewise defined by the citizenships of its own members.” 19th Cap. Grp., LLC v. 3 GGG's Truck Lines, Inc., No. CV 18-2493 PA (RAOX), 2018 WL 6219886, at *2 (C.D. Cal. Apr. 3, 2018). Thus, for one LLC to sue another in federal court on the basis of diversity jurisdiction, the LLCs' members, including the members of any “submember” LLCs, must be completely diverse. Moreover, because an LLC's citizenship is determined by the citizenship of its members, it necessarily follows that a “stateless” member renders the LLC “stateless” as well. See Galaxy Precision Mfg., Inc. v. Grupo Indus. San Abelardo S.A. de C.V., No. 21-CV-84, 2022 WL 1908978, at *1 (N.D. Ill. June 3, 2022) (finding no diversity jurisdiction where sole member of defendant LLC was stateless); Thompson v. Deloitte & Touche LLP, 503 F.Supp.2d 1118, 1123 (S.D. Iowa 2007) (finding stateless partner would render limited liability partnership stateless as well); Bugsby Prop. LLC v. Alexandria Real Est. Equities, Inc., No. 19-CV-9290 (VEC), 2020 WL 1974147, at *4 (S.D.N.Y. Apr. 24, 2020) (noting plaintiff LLC's sole member was “stateless” citizen and “would have rendered [plaintiff LLC] a non-diverse party for the purposes of establishing subject matter jurisdiction”).

JURISDICTIONAL FACTS AND EVIDENCE

I. Plaintiff's Citizenship

Plaintiff Digital Media Solutions, LLC is wholly owned by Digital Media Solutions Holdings, LLC. Response at 3. As such, it is necessary to determine the citizenship of Digital Media Solutions Holdings, LLC's members to assess this Court's subject-matter urisdiction. See 19th Cap. Grp., LLC, 2018 WL 6219886, at *2.

Digital Media Solutions Holdings, LLC is owned by four entities Aimtell Holdco, Inc. (“Aimtell”); CEP V DMS U.S. Blocker Co. (“CEP”); Clairvest Group, Inc. (“Clairvest”); and Prism Data, LLC. See Response at 3. Aimtell and CEP are corporations incorporated under the laws of the State of Delaware with their...