Jakks Pac., Inc. v. Accasvek, LLC

• Citation: 270 F.Supp.3d 191
• Decision Date: 15 September 2017
• Docket Number: Miscellaneous Action No. 16–1977 (JDB)
• Parties: JAKKS PACIFIC, INC., Plaintiff, v. ACCASVEK, LLC, Defendant.
• Court: U.S. District Court — District of Columbia

270 F.Supp.3d 191

JAKKS PACIFIC, INC., Plaintiff,

v.ACCASVEK, LLC, Defendant.

Miscellaneous Action No. 16–1977 (JDB)

United States District Court, District of Columbia.

Filed September 15, 2017

Joseph Walter Santini, Friedlander Misler, PLLC, Washington, DC, Jonathan Honig, Feder Kaszovitz LLP, New York, NY, for Jakks Pacific, Inc.

Kelly D. Hine, Andrew J. Victor, Hayden M Schottlaender, Perkins Coie, LLP, Dallas, TX, for Fortress Credit Co. LLC.

Ayesha N. Khan, Potomac Law Group, PLLC, Washington;, DC, John R. Snyder, Potomac Law Group, PLLC, Boston, MA, for Matthew Cunningham.

MEMORANDUM OPINION

JOHN D. BATES, United States District Judge

Before the Court are several motions, none of which can be addressed until the Court resolves a preliminary issue: whether it has subject-matter jurisdiction. The plaintiff, Jakks Pacific, Inc., obtained a default judgment against Accasvek, LLC, in the Central District of California, which it then registered in this District. Jakks now invokes this Court's jurisdiction to compel discovery in aid of enforcing that judgment. A non-party witness, Matthew Cunningham, and another interested non-party, Fortress Credit Co., LLC, assert that the default judgment is void because the Central District of California lacked subject-matter jurisdiction. This Court only has subject-matter jurisdiction to enforce that judgment insofar as the default judgment is itself valid. After conducting a hearing and requiring declarations from the appearing parties and non-parties, the Court agrees that the Central District of California lacked subject-matter jurisdiction. The default judgment is therefore void, and thus this Court has no authority to enforce it. This Court will therefore vacate the default judgment and dismiss the case filed in this District.

BACKGROUND

Jakks filed a complaint against Accasvek in the Central District of California on March 15, 2016, asserting that Accasvek breached a contract with Jakks. See Compl., 16–cv–1432–R–AGR (C.D. Ca.), Dkt. No. 8.¹ Jakks alleged that the court had diversity jurisdiction, but did not plead any facts regarding the citizenship of the members of the defendant Limited Liability Company (LLC). Id. ¶¶ 2, 3. Instead, Jakks pleaded facts that would support diversity jurisdiction if both parties were corporations: namely, that Jakks is incorporated in Delaware and has its principal place of business in California, and that Accasvek is "a Texas limited liability company, with its principal place of business in Longview, Texas." Id. ¶¶ 1–2. In June 2016, after Accasvek failed to enter an appearance or respond to the complaint, the court granted Jakks a default judgment and awarded it $678,867.88. Order, June 23, 2016, 16–cv–1432–R–AGR (C.D. Ca.), Dkt. No. 29; Judgment, Aug. 8, 2016, 16–cv–1432–R–AGR (C.D. Ca.), Dkt. No. 32. In its written opinion, the court did not analyze jurisdiction or make any findings regarding jurisdiction or the citizenship of the parties.

On September 20, 2016, Jakks registered that judgment in this Court. Registration of a Foreign Judgment, Sept. 20, 2016 [ECF No. 1 ]. Jakks now seeks to discover assets that it believes Accasvek acquired in a different litigation proceeding, and then hid to avoid satisfying this judgment by transferring them to another entity, Fortress. Jakks has filed a motion to compel Matthew Cunningham, a former COO and CFO of Accasvek, to produce a contract between Fortress and either Accasvek or its parent company, Medici Portfolio, LLC, that allegedly concerns transferring those assets. See Pl.'s Mot. to Compel [ECF No. 12 ]; Cunningham Opp'n [ECF No. 17] at 2. Both Cunningham and Fortress oppose Jakks's motion. See Cunningham Opp'n; Fortress's Notice of Lack of Subject Matter Jurisdiction [ECF No. 14] ("Fortress's Notice").

Fortress filed with this Court a "Notice of Lack of Subject Matter Jurisdiction and Opposition to Plaintiff's Motion to Compel" pursuant to Federal Rule of Civil Procedure 12(h)(3). See Fortress's Notice at 1–2. Rule 12(h)(3) states that "[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fortress argues that Jakks did not plead any facts in the Central District of California that would give that court diversity jurisdiction, because the citizenship of an LLC is determined by the citizenship of its members, but Jakks did not plead any facts regarding Accasvek's members. Fortress's Notice at 1–2. Fortress also contends, in the alternative, that if the default judgment is not void, the motion to compel should be denied for various other reasons. Id. at 4. Cunningham opposes the motion to compel and adopts Fortress's arguments to that end. Cunningham's Opp'n at 2.

Jakks, in turn, responds that the default judgment cannot be "reopened" through this collateral attack, and that Fortress lacks standing to raise its arguments. See Pl.'s Reply [ECF No. 18] at 1–3 & n.1–2. Jakks further contends that Cunningham and Fortress have the burden of showing that the parties were actually non-diverse, i.e., by producing evidence that a member of Accasvek is a citizen of California or Delaware. Id. at 2. Because they have not produced any such evidence, Jakks argues, this Court must presume that the default judgment is valid and enforceable.

Also before the Court are two other motions. Jakks has filed a motion to strike Fortress's reply in support of its initial motion. Pl.'s Mot. to Strike [ECF No. 23 ].

Jakks has also filed a motion for sanctions against another non-party witness, Michael Connelly. See Pl.'s Mot. for Sanctions [ECF No. 13 ].²

On September 6, 2017, the Court held a hearing with Jakks, Cunningham, and Fortress regarding whether this Court has jurisdiction to enforce the foreign judgment.³ The parties reiterated and expanded upon the legal arguments presented in their briefs. In addition, Jakks proffered that it believes none of the members of Accasvek are (or were at the time the complaint was filed in the Central District of California) citizens of Delaware or California for the purpose of diversity jurisdiction. Thus, Jakks argued, the Central District of California actually had subject-matter jurisdiction regardless of any pleading defect. Fortress, on the other hand, proffered that at least at least one member of an LLC that is a member of Accasvek is or was a citizen of California or Delaware, and thus the Central District of California actually lacked jurisdiction. The Court ordered Jakks, Cunningham, and Fortress to each submit a sworn declaration or affidavit providing any knowledge each respectively has regarding whether Accasvek's members are or were citizens of California or Delaware for the purposes of diversity jurisdiction—and if Accasvek's members are or were LLCs, whether the members of those LLCs are or were citizens of California or Delaware. See Order, Sept. 6, 2017 [ECF No. 26 ].

In response to the Court's order, Fortress submitted a declaration from Michele Moreland, an asset manager employed by "an affiliate of Fortress." See Moreland Decl. [ECF No. 27] ¶ 1. Moreland attests that The Medici Portfolio, LLC, is a member of Accasvek; that the members of Medici include CF DB EZ LLC; that the members of CF DB EZ include CF EZ LLC and Drawbridge Special Opportunities Fund LP; and (at long last) that the members of CF EZ include "at least one natural person who is a citizen of California" and that "Drawbridge has over five hundred limited partners, and those limited partners include both natural persons and legal entities that are citizens of California." Id. ¶¶ 2–5. Cunningham submitted a declaration stating that Medici was the sole member of Accasvek at the time the complaint was filed; that Michael Connelly, Cunningham, and CF DB EZ LLC were the sole members of Medici at the time; that Connelly was a citizen of Maryland; and that he has no knowledge of the members of CF DB EZ LLC. Cunningham Decl. [ECF No. 28–1] ¶¶ 3–6.

Jakks submitted a supplemental memoranda stating that it has no knowledge of the members of Accasvek and their citizenship, and reiterating the legal arguments that it previously raised. See Jakks' Supp. Mem. [ECF No. 29] at 1–3. It also argues that the Court should not consider Fortress's affidavit because it only references the current members of Accasvek and of Medici, not the members at the time that the complaint was filed, because it does not actually identify the natural persons or legal entities that are citizens of California, and because Moreland's knowledge of those persons' and entitles' citizenship must be hearsay. Id.

Based on the parties briefing, the hearing held on September 6, and the parties' post-hearing submissions, the Court concludes that the Central District of California did not have an "arguable basis" for subject-matter jurisdiction and therefore the default judgment is void. The Court therefore will vacate the default judgment in the Central District of California and dismiss the case in this Court.

ANALYSIS

"Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). A court has an independent obligation to assure itself of its subject-matter jurisdiction, and "[t]he objection that a federal court lacks subject-matter jurisdiction, may be raised by a party, or by a court on its own initiative, at any stage in the litigation, even after trial and the entry of judgment." Arbaugh v. Y & H Corp., 546 U.S. 500, 506, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (internal citation omitted); see also Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.").

A federal court has diversity jurisdiction under 28 U.S.C. § 1332"only if diversity of citizenship among the parties is complete, i.e., only if there is no plaintiff and no defendant who are citizens of the same State." Wisconsin Dept. of...