Orchid Quay, LLC v. Suncor Bristol Bay, LLC

• Decision Date: 08 April 2016
• Docket Number: CASE NO.: 15-14109-CIV-MARRA
• Parties: Orchid Quay, LLC, Plaintiff, v. Suncor Bristol Bay, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

178 F.Supp.3d 1300

Orchid Quay, LLC, Plaintiff,

v.Suncor Bristol Bay, LLC, et al., Defendants.

CASE NO.: 15-14109-CIV-MARRA

United States District Court, S.D. Florida.

Signed April 8, 2016

Filed April 11, 2016

Christopher Kimbrough Smith, Morgan, Lewis, Bockius LLP, Robert Mark Brochin, Morgan, Lewis & Bockius LLP, Joshua C. Prever, Morgan Lewis & Bockius, Miami, FL, for Plaintiff.

Kenneth Scott Pollock, Shendell & Pollock, P.L., Donald J. Thomas, Bearden Eltringham Lewis & Thomas LLP, Boca Raton, FL, Craig Alan Brand, The Brand Law Firm, P.A., Coconut Grove, FL, Glen Shrayer, Shrayer Law Firm, LLC., Fort Lauderdale, FL, Lee H. Goldberg, Ocean Ridge, FL, for Defendants.

OPINION AND ORDER GRANTING MOTION TO DISMISS

KENNETH A. MARRA

, UNITED STATES DISTRICT JUDGE

This matter is before the Court on Defendant, Suncor Bristol Bay, LLC's Amended Motion to Dismiss (DE 62). The motion is ripe for review. For the following reasons, the motion is granted.

I. Background

Plaintiff, Orchid Quay, LLC (“Orchid”) brought this action asserting various state-law claims against Defendants Suncor Bristol Bay, LLC (“Suncor”) and Malbec Investments, LLC (“Malbec”). The Court dismissed Orchid's amended complaint for lack of subject-matter jurisdiction because it did not sufficiently invoke the Court's diversity jurisdiction. (DE 58.) Attempting to plead the parties' citizenship, Orchid alleged the state of formation and principal place of business of each party. This was inadequate because the parties are all limited liability companies and, as such, diversity jurisdiction is determined by the citizenship of their respective members.

Orchid then filed a second amended complaint. Orchid has multiple layers of membership; its sole member is a limited partnership whose partners include several unincorporated entities, who in turn have members or partners that are unincorporated entities. In its second amended complaint, Orchid alleges the citizenship of each of its members through all layers of membership. As alleged in Orchid's complaint, one of Orchid's submembers (i.e., a member or partner of a member) is the California Public Employees' Retirement System (“CalPERS”).

Based on the revelation that CalPERS is a member of Orchid, Defendant Suncor moved to dismiss for lack of subject-matter jurisdiction. Suncor argues that CalPERS's membership in Orchid precludes diversity jurisdiction because CalPERS is an arm of the state of California and therefore it is not a citizen of any state for diversity purposes.

II. Legal Standard

Federal courts have limited subject-matter jurisdiction, and the party invoking the court's jurisdiction bears the burden of proving it exists. McCormick v. Aderholt , 293 F.3d 1254, 1257 (11th Cir.2002)

(per curiam). Attacks on a court's subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) may be facial or factual. Lawrence v. Dunbar , 919 F.2d 1525, 1528–29 (11th Cir.1990) (per curiam). Facial attacks require the court to determine whether the allegations in the complaint taken as true adequately establish subject-matter jurisdiction. Id. at 1529. Factual attacks challenge the existence of subject-matter jurisdiction in fact, and the court is permitted to look beyond the pleadings and (so long as an element of the cause of action is not implicated) weigh evidence to determine whether it has subject-matter jurisdiction. Id. Here, Suncor's attack is facial because it is based solely on the allegations in the complaint.

III. Discussion

Diversity jurisdiction does not exist when a state or the arm of a state is a party. Univ. of S. Ala. v. Am. Tobacco Co. , 168 F.3d 405, 412 (11th Cir.1999)

. When it is a real party in interest, “a State's presence as a party will destroy complete diversity.” Mississippi ex rel. Hood v. AU Optronics

Corp. , ––– U.S. ––––, 134 S.Ct. 736, 745, 187 L.Ed.2d 654 (2014) (citing Mo., Kan. & Tex. Ry. Co. v. Hickman , 183 U.S. 53, 58–59, 22 S.Ct. 18, 46 L.Ed. 78 (1901) ). The diversity jurisdiction statute applies to actions between “(1) citizens of different States; (2) citizens of a State and citizens or subjects of a foreign state...; (3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and (4) a foreign state... as plaintiff and citizens of a State or of different States.” 28 U.S.C. § 1332(a). States do not fall into any of these categories. States are clearly not foreign states or citizens or subjects thereof. And it is well-established that a state is not a citizen of a state for the purpose of diversity jurisdiction. Moor v. Alameda Cty. , 411 U.S. 693, 717, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973)

(citing Postal Tel. Cable Co. v. Alabama , 155 U.S. 482, 487, 15 S.Ct. 192, 39 L.Ed. 231 (1894) ). The same is true for “the arm or alter ego” of a state because an action by or against the arm or alter ego of a state is in effect by or against the state itself. State Highway Comm'n of Wyo. v. Utah Const. Co. , 278 U.S. 194, 198–99, 49 S.Ct. 104, 73 L.Ed. 262 (1929).

It is irrelevant whether complete diversity would otherwise exist when disregarding the state's presence as a party. In re Fresenius Granuflo/NaturaLyte Dialysate Prods. Liab. Litig. , 76 F.Supp.3d 268, 272 (D.Mass.2015)

. Because the diversity jurisdiction statute requires complete diversity, Strawbridge v. Curtiss , 7 U.S. (3 Cranch) 267, 267, 2 L.Ed. 435 (1806), the presence of a party who is not a citizen of any state (or a foreign state or citizen or subject thereof) destroys a court's diversity jurisdiction even when there are otherwise diverse parties on the same side of the lawsuit as the “stateless” party.¹

Newman

–

Green, Inc. v. Alfonzo

–

Larrain , 490 U.S. 826, 829, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989) ; see also

Louisiana v. Union Oil Co. of Cal. , 458 F.3d 364, 365–67 (5th Cir.2006) (holding that presence of state of Louisiana as a party destroyed complete diversity, even though Louisiana's co-plaintiff was a diverse citizen). In other words, diversity jurisdiction is properly invoked only if each party falls into one of the categories in 28 U.S.C. § 1332(a). Lee v. Am. Nat'l Ins. Co. , 260 F.3d 997, 1005 (9th Cir.2001) (citing Newman

–

Green , 490 U.S. at 829, 109 S.Ct. 2218 ).

As far as the Court is aware, every federal court to address whether CalPERS is an arm of the state of California, including at least one in this district, has concluded that it is. E.g. , Cal. Pub. Emps. Ret. Sys. v. Moody's Corp. , No. C 09–03628 SI, 2009 WL 3809816, at *6 (N.D.Cal. Nov. 10, 2009)

; Cal. Pub. Emps.'

Ret. Sys. v. Stride Rite Children's Grp. , No. 96–6558, slip op. at 5 (S.D.Fla. Dec. 3, 1996) (ECF No. 45).² Also, courts have held that other state retirement systems are arms of their respective states. Indiantown Cogeneration, L.P. v. Century Coal, LLC , No. 3:09CV398, 2011 WL 3682778, at *5 (W.D.N.C. Aug. 23, 2011) (collecting cases). The Court joins those courts that have concluded that CalPERS is an arm of the state of California. Orchid does not argue to the contrary and thus tacitly concedes the point.

For purposes of determining diversity jurisdiction, all unincorporated associations, regardless of their particular corporate-like features, are treated as partnerships and deemed to possess the citizenship of their partners or members. Americold Realty Trust v. Conagra Foods, Inc. , ––– U.S. ––––, 136 S.Ct. 1012, 1015, 194 L.Ed.2d 71 (2016)

; Carden v. Arkoma Assocs. , 494 U.S. 185, 187 n. 1, 190, 195–96, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) ; Underwriters at Lloyd's, London v. Osting-Schwinn , 613 F.3d 1079, 1087–88 (11th Cir.2010) ; Rolling Greens MHP, L.P. v. Comcast SCH Holdings, L.L.C. , 374 F.3d 1020, 1021–22 (11th Cir.2004) (per curiam). If a partner or member of an unincorporated association is itself an unincorporated association, “the citizenship of unincorporated associations must be traced through however many layers of partners or members there may be.” Zambelli Fireworks Mfg. Co. v. Wood , 592 F.3d 412, 420 (3d Cir.2010) (citation omitted); Meyerson v. Harrah's E. Chi. Casino , 299 F.3d 616, 617 (7th Cir.2002) (per curiam).

Because courts must “count every member of an unincorporated association for purposes of diversity jurisdiction,” Carden , 494 U.S. at 195, 110 S.Ct. 1015

(emphasis added), complete diversity is destroyed when even one partner or member of an unincorporated association is stateless. D.B. Zwirn Special Opportunities Fund, L.P. v. Mehrotra , 661 F.3d 124, 126 (1st Cir.2011) ; Swiger v. Allegheny Energy, Inc. , 540 F.3d 179, 184–85 (3d Cir.2008) ; Indiantown , 2011 WL 3682778, at *8 (W.D.N.C. Aug. 23, 2011). The result is the same regardless of whether the stateless member is a submember. D.B. Zwirn , 661 F.3d at 127 (“[I]f even one of Zwirn's members is another unincorporated association, and if that association has one member or partner that is either a stateless person or an entity treated like a stateless person, we would not have diversity jurisdiction over this matter.”); Scenera Research LLC v. Morris , No. 5:09–CV–412–FL, 2011 WL 666284, at *5 (E.D.N.C. Feb. 14, 2011) (“[A] limited liability company that has even a single stateless member or submember may not sue or be sued in federal court if diversity under § 1332(a)(1) is the only basis for the court's jurisdiction.”).³

It is thus clear that, as a stateless entity, CalPERS's membership in Orchid destroys complete diversity. Orchid argues that this is not so for three independent reasons: (1) the Court may disregard CalPERS's citizenship, (2) diversity jurisdiction exists because Orchid does not share the same citizenship as any defendant, and (3) diversity jurisdiction exists because CalPERS's “stateless” status does not negate Orchid's citizenship of other states. The Court rejects each of these arguments.

While a court should disregard a nominal party's citizenship, Navarro Sav. Ass'n v. Lee , 446 U.S. 458, 461, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980)

, the...