N. Hills Vill. LLC v. LNR Partners, LLC

• Decision Date: 17 August 2020
• Docket Number: 2:20-cv-00431
• Citation: 479 F.Supp.3d 189
• Parties: NORTH HILLS VILLAGE LLC, Plaintiff, v. LNR PARTNERS, LLC, et al., Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

479 F.Supp.3d 189

NORTH HILLS VILLAGE LLC, Plaintiff,

v.LNR PARTNERS, LLC, et al., Defendants.

2:20-cv-00431

United States District Court, W.D. Pennsylvania.

Signed August 17, 2020

Daren S. Garcia, Mark C. Zheng, Vorys, Sater, Seymour and Pease LLP, Mary-Jo Rebelo, Burns White LLC, Pittsburgh, PA, Joseph R. Miller, Pro Hac Vice, Vorys, Sater, Seymour & Pease, John M. Kuhl, Pro Hac Vice, Columbus, OH, for Plaintiff.

Joel M. Walker, Duane Morris, Gerald J. Schirato, Jr., Rachel Good, Duane Morris LLP, Pittsburgh, PA, Elinor Murarova, Pro Hac Vice, Paul E. Chronis, Pro Hac Vice, Duane Morris LLP, Chicago, IL, Meagen Leary, Pro Hac Vice, Duane Morris LLP, San Francisco, CA, for Defendant LNR Partners, LLC.

Elinor Murarova, Pro Hac Vice, Paul E. Chronis, Pro Hac Vice, Duane Morris LLP, Chicago, IL, Meagen Leary, Pro Hac Vice, Duane Morris LLP, San Francisco, CA, Rachel Good, Duane Morris, LLP, Pittsburgh, PA, for Defendant Wells Fargo Bank, National Association.

Mark R. Hornak, Chief United States District Judge

This matter primarily encompasses state law breach of contract claims, which the Plaintiff asserts by invoking the Court's diversity jurisdiction under 28 U.S.C. § 1332, with reference to § 1348. Now before the Court is the Defendants’ Motion to Dismiss brought for both lack of subject matter jurisdiction and for failure to state a claim under Civil Procedure Rules 12(b)(1) and 12(b)(6). (ECF No. 34.) For the reasons set out in this Opinion, the Court will grant the Defendants’ Motion and dismiss this action without prejudice because the Plaintiff cannot satisfy the requirements for diversity jurisdiction. Accordingly, the Court does not address whether the Plaintiff would have adequately stated a claim per Rule 12(b)(6).

I. BACKGROUND

The Plaintiff, North Hills Village LLC ("NHV"), operates a shopping mall in Allegheny County, Pennsylvania that has been in business for more than sixty (60) years providing retail space for local and national tenants, to include Burlington Coat Factory. (ECF No. 32, at 1–2.) NHV entered into a Loan Agreement ("Loan") and Cash Management Agreement ("CMA") in 2016 with Defendant Wells Fargo Bank, N.A. ("WFB") and JPMorgan Chase Bank, N.A. ("JPMC"), the latter of which is not a party here. (Id. at 3.) NHV alleges that JPMC assigned its rights to service the Loan to WFB and LNR Partners, LLC ("LNR") (collectively "the Defendants"). (Id. ) Other rights that JPMC had in the Loan and CMA were assigned to yet another entity, Wilmington Trust, N.A., which is also not a party here. (Id. )

An issue arose in early 2020 after the Plaintiff renewed a lease with one of its tenants, Burlington Coat Factory. (Id. at 5.) That set in motion a series of events concerning whether a "Cash Sweep Event" had been triggered under the terms of the Loan by Burlington Coat Factory's lease renewal. (Id. ) Whether that Cash Sweep Event was in fact triggered and whether the Plaintiff had "cured" it were central to the underlying dispute, which resulted in the Plaintiff filing its Complaint along with a Motion for a Temporary Restraining Order and Preliminary Injunction. (ECF Nos. 1, 6.)

Since this action was filed, the parties reached two (2) separate standstill agreements and attended a mediation that failed to resolve the case. The Court nearly held a hearing on the requests for equitable relief on two separate occasions, which were both cancelled at the eleventh hour due to the consummation of the standstill agreements. (ECF Nos. 7, 20, 27, 41). Finally, the parties reached an indefinite standstill agreement to engage in discovery and allow the Court to resolve the pending Motion to Dismiss, as well as prepare for a full-blown hearing, which the parties requested take place in August 2020 if it were necessary. (ECF No. 63.)

II. LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the Court's subject matter jurisdiction over the plaintiff's claims. Fed. R. Civ. P. 12(b)(1). "At issue ... is the court's ‘very power to hear the case.’ " Judkins v. HT Window Fashions Corp. , 514 F. Supp. 2d 753, 759 (W.D. Pa. 2007) (quoting Mortensen v. First Fed. Savings & Loan Ass'n , 549 F.2d 884, 891 (3d Cir. 1977) ). By contrast, a Rule 12(b)(6) motion "tests the legal sufficiency of plaintiff's claim. In other words ... the question is whether the plaintiff would be able to prevail even if she were able to prove all of her allegations." Petruska v. Gannon Univ. , 462 F.3d 294, 302 (3d Cir. 2006). The party asserting jurisdiction (here, the Plaintiff) bears the burden of proving its claims are properly before the Court. Dev't Fin. Corp. v. Alpha Housing & Health Care , 54 F.3d 156, 158 (3d Cir. 1995).

In reviewing a Rule 12(b)(1) motion, the Court must determine whether the attack on its jurisdiction is facial or factual. Petruska , 462 F.3d at 302 n.3. A facial attack challenges the Court's jurisdiction without disputing the averred facts in the complaint, and requires the Court to treat those averments as true. Id. A factual attack, however, contests the factual allegations underlying the assertion of jurisdiction, either through the filing of an answer or presenting competing facts. Const Party of Pa. v. Aichele , 757 F.3d 347, 358 (3d Cir. 2014). When a factual challenge is made, the plaintiff's factual allegations receive no presumption of truthfulness. Mortensen , 549 F.2d at 891. "In reviewing a factual attack, the court may consider evidence outside the pleadings." Gould Elecs. Inc. v. United States , 220 F.3d 169, 176 (3d Cir. 2000). In contrast to a 12(b)(6) motion, a Court considering a 12(b)(1) motion may review facts outside the complaint because a federal court must assure itself of its jurisdiction to hear the case. Boyle v. Governor's Veterans Outreach & Assistance Ctr. , 925 F.2d 71, 74 (3d Cir. 1991).

Here, because the Defendants have challenged whether the Plaintiff, as a factual matter, is a traditional trust or a business trust for the purposes of determining the Plaintiff's citizenship, the Court will consider their motion as a factual attack on subject matter jurisdiction. The Court may therefore "inquire by affidavits or otherwise, into the facts as they exist." Land v. Dollar , 330 U.S. 731, 735 n.4, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947). Here, the Court has considered the exhibits of the Plaintiff's trust documents in order to determine the citizenship of the Plaintiff, without holding to an evidentiary hearing, after giving the parties two opportunities to seek a hearing if further facts needed to be developed before the Court ruled on the Motion to Dismiss. (ECF Nos. 80, 82.) In considering a Rule 12(b)(1) motion, "the district court may not presume the truthfulness of plaintiff's allegations, but rather must ‘evaluat[e] for itself the merits of [the] jurisdictional claims.’ " Hedges v. United States , 404 F.3d 744, 750 (3d Cir. 2005) (citing Mortensen v. First Fed Sav. & Loan Ass'n , 549 F.2d at 891 ).

III. DISCUSSION

It is fundamental that the Court must be satisfied that it has subject matter jurisdiction before it can reach the merits of any case. GBForefront, L.P. v. Forefront Mgmt. Grp., LLC , 888 F.3d 29, 34 (3d Cir. 2018). Here, the Plaintiff has invoked the Court's diversity jurisdiction, which broadly speaking requires that all plaintiffs be diverse from all defendants and an amount in controversy exceeding $75,000. Id. ; 28 U.S.C. § 1332(a).¹ While diversity rests on the state citizenship of the parties, and the citizenship of a natural person is wherever that person is domiciled, an LLC such as the Plaintiff is deemed a citizen of every state of which any of its members is a citizen. GBForefront , 888 F.3d at 34.

In its Amended Complaint, NHV pleads that its sole member is the North Hills Village Shopping Center Trust ("NHV Trust"). (ECF No. 32, at 1–2.) The Defendants do not disagree and the Court has no basis to conclude otherwise. Therefore, the citizenship of the Plaintiff for the purposes of diversity jurisdiction is that of NHV Trust. In determining the citizenship status of NHV Trust, the Court is guided by several principles that apply when trusts are involved in a lawsuit. First, "when a trustee sues or is sued on behalf of a trust, the citizenship of the trust is based on that of the trustee alone." GBForefront , 888 F.3d at 37 (citing Navarro Savings Association v. Lee , 446 U.S. 458, 465–66, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980) ). Here, the trustee of NHV Trust is not suing in his own name. So, this principle does not apply of its own force, but does become relevant to the Plaintiff's argument, as discussed below. Second, a traditional trust's citizenship is based solely on the citizenship of the trustee. Id. at 39. And third, a business trust's citizenship is determined by the citizenship of all of its members. Id. at 37. The inquiry here turns on whether NHV Trust is a business trust or a traditional trust, and thus whether its citizenship (and by extension the citizenship of Plaintiff NHV) is determined by that of its trustee or of all of its members.

The Plaintiff's Amended Complaint alleged that the Defendants’ citizenships for diversity purposes are in Maryland, Connecticut, and South Dakota. (ECF No. 34, ¶¶ 5–6.) It then alleges that NHV's citizenship is that of the trustee for NHV Trust, Ira Gumberg, an individual who is domiciled in Pennsylvania. (Id. ¶ 1.) Therefore, all parties would be diverse if NHV Trust is a traditional trust whose citizenship is tied solely to Mr. Gumberg as trustee. However, the Plaintiff went on to plead that none of the beneficiaries of NHV Trust are citizens of Maryland, Connecticut, or South Dakota. (Id. ¶ 3.) That is, the Plaintiff hedged its bets in its Amended Complaint. Effectively, the Amended Complaint spells out that, for diversity purposes, it does not matter whether NHV Trust is a business or traditional trust. Diversity jurisdiction would be satisfied either way from the Plaintiff's...