Kimberly-Clark v. Delaware County Regional Water, Civil Action No. 07-2688.

• Decision Date: 20 December 2007
• Docket Number: Civil Action No. 07-2688.
• Citation: 527 F.Supp.2d 430
• Parties: KIMBERLY-CLARK PENNSYLVANIA, LLC, a Delaware Limited Liability Company v. DELAWARE COUNTY REGIONAL WATER QUALITY CONTROL AUTHORITY, a Pennsylvania Municipal Authority.
• Court: U.S. District Court — Eastern District of Pennsylvania

527 F.Supp.2d 430

KIMBERLY-CLARK PENNSYLVANIA, LLC, a Delaware Limited Liability Company v. DELAWARE COUNTY REGIONAL WATER QUALITY CONTROL AUTHORITY, a Pennsylvania Municipal Authority.

Civil Action No. 07-2688.

United States District Court, E.D. Pennsylvania.

December 20, 2007.

Bonnie Allyn Barnett, Sarah S. McInnes, Drinker, Biddle & Reath, Philadelphia, PA, David M. Stahl, Reeghan W. Raffals, Eimer, Stahl, Klevorn & Solberg, LLP, Chicago, IL, for Kimberly-Clark Pennsylvania, LLC, a Delaware Limited Liability Company.

Francis X. Crowley, Blank, Rome, Comisky & McCauley, LLP, Philadelphia, PA, for Delaware County Regional Water Quality Control Authority, a Pennsylvania Municipal Authority.

MEMORANDUM OPINION

SAVAGE, District Judge.

In this declaratory judgment action implicating principles of abstention and ripeness, the questions are whether the federal court should abstain from determining the same issue that is pending in a state administrative proceeding, and whether a similar claim that the state agency is still considering is ripe for judicial review. Before answering those questions, I must decide whether a limited liability company's citizenship for diversity jurisdiction purposes is determined by its or its sole member's principal place of business.

Delaware County Regional Water Quality Control Authority ("DELCORA"), which manages and administers the Delaware County wastewater treatment plan, billed Kimberly-Clark Pennsylvania, LLC ("Kimberly Clark") for both wastewater and solid waste discharge¹ that it contends were unreported. It also fined Kimberly Clark for underreporting wastewater. Kimberly Clark responded by taking an administrative appeal and filing this action seeking a declaration that it did not underreport its wastewater discharge and does not owe any additional sums for solid waste discharge.

In moving to dismiss the amended complaint, DELCORA argues that, if there is jurisdiction, this action should be dismissed for two reasons. First, it contends that Kimberly Clark's claim that it does not owe for underreporting of total suspended solids is not ripe for adjudication because no enforcement action has been taken. Second, it argues that I should refrain from determining the other claim related to the underreporting of wastewater because the pending state proceedings and this action do not raise a single question of federal law. Thus, DELCORA makes a ripeness and an abstention argument for dismissal.

Having determined that there is subject matter jurisdiction, I shall exercise my discretion under the Declaratory Judgment Act and decline to entertain this action. Kimberly Clark's claim concerning funds owed for underreporting of solids is not ripe for review. With respect to the dispute concerning underreporting of wastewater, there is no reason to interfere with the pending state administrative proceedings. Therefore, the action will be dismissed.

Diversity Jurisdiction

As a threshold matter, DELCORA has moved to dismiss the amended complaint for lack of subject matter jurisdiction, alleging the absence of complete diversity of citizenship. In determining if diversity exists in this case, the dispositive question is whose, the limited liability company or its member's, principal place of business controls the diversity test.

There is no dispute that DELCORA is a Pennsylvania corporation with its principal place of business in Pennsylvania. DELCORA contends that Kimberly Clark's principal place of business is in Pennsylvania. If so, there is no diversity. On the other hand, Kimberly Clark contends that, as a limited liability company ("LLC"), its citizenship is determined by the citizenship of its sole member, Kimberly Clark Corporation, which is incorporated in Delaware and has its principal place of business in Texas.

Neither the Supreme Court nor the Third Circuit has determined whether a LLC is deemed a corporation or a partnership for diversity jurisdiction purposes. However, every circuit that has addressed the issue treats an LLC as a partnership rather than a corporation, determining an LLC's citizenship from the citizenship of all of its members. See Pramco, LLC v. San Juan Bay Marina, Inc., 435 F.3d 51, 54 (1st Cir.2006); Handelsman, v. Bedford Vill. Assocs. Ltd. P'ship, 213 F.3d 48, 51-52 (2d Cir.2000); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 121 (4th Cir.2004); Homfeld LLC v. Comair Holdings, Inc., 53 Fed.Appx. 731, 732 (6th Cir.2002); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.1998); GMAC Comm. Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 829 (8th Cir.2004); Johnson v. Columbia Prop. Anchorage, LP, 437 F.3d 894, 899 (9th Cir.2006); Rolling Greens MHP, LP v. Comcast SCH Holdings, LLC, 374 F.3d 1020, 1022 (11th Cir. 2004).

The rationale for treating an LLC as a partnership is founded in the Supreme Court's decision in Carden v. Arkoma Assoc., which held that the citizenship of a limited partnership for diversity jurisdiction purposes is determined by the citizenship of all its members. 494 U.S. 185, 195-96, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). Concluding that fixing the citizenship of artificial entities is a matter of legislative prerogative rather than judicial determination, the Supreme Court declined to expand the definition of "citizens" to include limited partnerships. Id. at 196, 110 S.Ct. 1015. In other words, nonpersonal entities, other than corporations, are not "citizens" for jurisdictional purposes regardless of what they are called, unless Congress says otherwise. Thus, absent a legislative directive, the citizenship of an artificial entity for purposes of diversity jurisdiction is determined by the citizenship of all its members. Id. at 195, 110 S.Ct. 1015.

Although the Third Circuit has not ruled on the citizenship of LLCs in the jurisdictional context, it has recently applied the Carden analysis in holding that the citizenship of a trust is determined by the citizenship of all its trustees and beneficiaries. See Emerald Investors Trust v. Gaunt Parsippany Partners, 492 F.3d 192, 205 (3d Cir.2007). It stated, "it is clear that Carden tells us that a court must take into account not `less than all of the entity's members' when determining the citizenship of an artificial entity." Id.

The Supreme Court's Carden rationale and the Third Circuit's treatment of other nonpersonal entities for diversity jurisdictional purposes dictate that the citizenship of a LLC is determined by the citizenship of all members. Employing this standard, diversity exists in this case. Kimberly Clark, whose only member is a citizen of both Delaware and Texas, and DELCORA, a Pennsylvania citizen, are diverse. Thus, the motion to dismiss for lack of subject matter jurisdiction will be denied.

Factual and Procedural Background

The dispute arose from DELCORA's playing its role in the Delaware County wastewater management plan. Hence, an understanding of DELCORA's purpose and authority is essential.

Established in 1971 by the Delaware County Commissioners to implement the county-wide wastewater treatment plan, DELCORA receives and treats wastewater in Delaware County and then discharges it into waters of the Commonwealth of Pennsylvania. DELCORA is tasked with ensuring "[t]hat the health, safety and welfare of personnel and the general populace and the non-endangerment of the environment is fostered and promoted." DELCORA Standards, Rules and Regulations of 1991, Art. 100 ("General Provisions") § 103(8)(7).² Most relevant to this action, DELCORA has the responsibility to assure "[t]hat the cost associated with administering, operating and maintaining DELCORA Wastewater Management System is equitably distributed in accordance with the benefit enjoyed in its existence and use." Id. § 103(3)(8).

Pursuant to the Municipality Authorities Act of 1945, DELCORA sets standards, rules and regulations to carry out its responsibilities. Id. §§ 103(A), (B)(1). As part of its enforcement powers, DELCORA may issue notices of violation, hold administrative hearings, issue decisions, and commence appropriate legal action to enforce its regulations. Id. § 407. Pursuant to Pennsylvania Local Agency Law, an appeal may be taken from the agency's decision to state court. See 2 Pa.C.S.A. § 702.

DELCORA sent Kimberly Clark an invoice in the amount of $6.01 million for underreporting of excess solids on April 20, 2007. Kimberly Clark paid $5.1 million. It contends it does not owe the balance. DELCORA has not yet determined whether any action will be taken to collect the unpaid balance of the excess solids invoice.

On May 30, 2007, DELCORA sent Kimberly Clark an invoice for the treatment of unreported wastewater flow, issued 32 Notices of Violation for "[f]ailure to accurately monitor and report effluent flow," and imposed a fine for each violation. On the same day, DELCORA instituted an action against Kimberly Clark and Scott Paper Corporation in the Delaware County Court of Common Pleas by way of summons. No complaint has been filed. Nor have the defendants in that action filed a praecipe for a rule to file a complaint.

Exercising its right to appeal the administrative action concerning the wastewater violations, Kimberly Clark requested a hearing on June 28, 2007, one day after filing this action. On August 15, 2007, a prehearing conference was held before DELCORA. The administrative hearing is scheduled to commence on March 19, 2008.

Ripeness and the Solid Waste Claim

A district court has statutory discretion whether to hear actions brought under the Declaratory Judgment Act. 28 U.S.C.A. § 2201(a); see also Wilton v. Seven Falls Co., 515 U.S. 277, 286, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995); Terra Nova Ins. Co. v. 900 Bar, Inc., 887 F.2d 1213, 1222 (3d Cir.1989).³ In exercising this discretion, courts have required final agency action as a prerequisite to a declaratory judgment. CEC Energy Co. v. Public Serv. Comm'n, 891 F.2d 1107, 1109 (3d Cir.19...