Vericorr Packaging v. Osiris Innovations Group

• Decision Date: 10 August 2007
• Docket Number: No. 07-12415.,07-12415.
• Citation: 501 F.Supp.2d 989
• Parties: VERICORR PACKAGING, LLC, Plaintiff, v. OSIRIS INNOVATIONS GROUP, LLC, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

501 F.Supp.2d 989

VERICORR PACKAGING, LLC, Plaintiff, v. OSIRIS INNOVATIONS GROUP, LLC, Defendant.

No. 07-12415.

United States District Court, E.D. Michigan, Southern Division.

August 10, 2007.

Michael G. Brady, Warner, Norcross, Southfield, MI, for Plaintiff.

Lawrence J. Murphy, Honigman, Miller, Detroit, MI, for Defendant.

ORDER OF DISMISSAL FOR WANT OF JURISDICTION

LAWSON, District Judge.

On June 5, 2007, plaintiff Veri-Corr Packaging, LLC filed this case against Osiris Innovations Group, LLC. The complaint alleges that this Court has jurisdiction pursuant to 28 U.S.C. § 1332, which requires complete diversity of citizenship. The defendant does not dispute subject matter jurisdiction. However, "federal courts are not allowed simply to assume jurisdiction and then proceed to resolve a case on the merits." Patterson v. Haskins, 470 F.3d 645, 667 (6th Cir. 2006). In every case, "`the first and fundamental question is that of jurisdiction.... This question the court is bound to ask and answer for itself, even when not otherwise suggested, and without respect to the relation of the parties to it.'" Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (quoting Great So. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 453, 20 S.Ct. 690, 44 L.Ed. 842 (1900)). The "Court has an obligation to address jurisdiction in every case," Sault Ste. Marie Tribe of Chippewa Indians v. Granholm, 475 F.3d 805, 811 (6th Cir.2007), "even if the parties fail to properly present the issue," Vill. of Oakwood v. State Bank & Trust Co., 481 F.3d 364, 366 (6th Cir.2007). "In the absence of jurisdiction, the court's only function is to announce the lack of jurisdiction and dismiss or remand the case." Vill. of Oakwood, 481 F.3d at 366-67.

As a general rule, "a limited liability company is not treated as a corporation and has the citizenship of its members." Homfeld L.L.C. v. Comair Holdings, Inc., 53 Fed.Appx. 731, 732 (6th Cir.2002) (unpublished) (citing Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.1998)); Trident-Allied Assoc., LLC. v. Cypress Creek Assoc., LLC., 317 F.Supp.2d 752, 753 (E.D.Mich.2004) ("For purposes of diversity, the citizenship of limited liability companies is the citizenship of each of its members."); Int'l Flavors and Textures, LLC v. Gardner, 966 F.Supp. 552, 554-55 (W.D.Mich.1997) (holding that "citizenship of an unincorporated association, at least for purposes of diversity jurisdiction, is the citizenship of each of its members" and this rule "applies to entities created pursuant to the Michigan limited liability act."). The jurisdiction statement in the complaint indicated only the principal place of business of each LLC but does not identify the citizenship of the LLC members. So on June 20, 2007 and July 12, 2007, the Court issued orders requiring the parties to disclose the citizenship of their members to determine whether diversity jurisdiction exists.

On June 29, 2007, the plaintiff filed a statement disclosing the requested information. According to the submission, the plaintiff has eleven members situated as follows:

                Member                  Citizenship
                Sabeli, LLC             North Carolina LLC whose
                                        sole member is North
                                        Carolina citizen
                Knot Tee Time,          LLC North Carolina LLC whose
                                        sole member is Florida citizen
                MarBry Holdings, LLC    Florida LLC whose sole member
                                        is Florida citizen
                Janet B. Simpson        North Carolina
                John G. Sutlive         Georgia
                John Blanton            North Carolina
                Adriana Avila           Michigan
                Rick Nickerson          Michigan
                Larry Larkin            Georgia
                Kathy McClure           Illinois
                Keith Souther           North Carolina
                

Pl.'s Statement of LLC Membership [dkt # 7]. On July 20, 2007, the defendant filed a statement indicating it has one member, David A. Saroli, who is a citizen of Michigan. Def.'s Statement of LLC Membership [dkt # 10].

On July 20, 2007, the plaintiff filed a brief in which it argues that a limited liability company is a citizen of the state where it is organized and has its principal place of business under the Entity Rule. The plaintiff believes the Sixth Circuit has abandoned what the plaintiff refers to as the Members Composing Rule. The plaintiff points to cases in which jurisdiction is based on diversity of citizenship and identifying the principal place of business of an LLC party rather than the citizenship of its membership. The plaintiff also argues that the so-called Entity Rule is easier to apply and the results are fairer because corporations and LLCs are similarly-situated entities.

Although there may be some merit to the plaintiff's ease-of-application argument, it does not reflect prevailing law. The Supreme Court has never ruled on the issue of diversity jurisdiction involving LLC parties. However, it has noted that the federal courts of appeals determine diversity jurisdiction by looking to the citizenship of the LLC members. Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 585 n. 1, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) (stating that "[a]lthough the Court has never ruled on the issue, Courts of Appeals have held the citizenship of each member of an LLC counts for diversity purposes"). The First, Second, Fourth, Seventh, Eight, Ninth, and Eleventh Circuit Courts of Appeals have all held in published cases that the citizenship of an LLC for diversity purposes is determined by looking to the citizenship of its members. See Wetmore v. MacDonald, Page, Schatz, Fletcher & Co., LLC, 476 F.3d 1, 1 (1st Cir.2007) (holding that parties were diverse because none of LLC's members shared plaintiff's citizenship); Handelsman v. Bedford Val. Assoc. Ltd. P'ship, 213 F.3d 48, 52 (2d Cir.2000) (holding that LLCs "for diversity purposes [were] citizens of Florida because both entities have Florida members"); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir.2004) (holding that an LLC "has the citizenship of its members"); Thomas v. Guardsmark, LLC, 487 F.3d 531, 534 (7th Cir.2007) (stating that "[f] or diversity jurisdiction purposes, the citizenship of an LLC is the citizenship of each of its members"); One-Point Solutions, LLC v. Borchert, 486 F.3d 342, 346 (8th Cir.2007) (holding that LLC's citizenship, for purposes of diversity jurisdiction, is the citizenship of each of its members"); Johnson v. Columbia Prop. Anchorage, LP, 437 F.3d 894, 899 (9th Cir.2006) ("We therefore join our sister circuits and hold that, like a partnership, an LLC is a citizen of every state of which its owners/members are citizens."); Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir.2004) (joining all other federal circuits "that have answered this question ... in the same way: like a limited partnership, a limited liability company is a citizen of any state of which a member of the company is a citizen"). Unpublished circuit court or district court cases from the remaining circuits have made similar holdings that the citizenship of an LLC is determined by its members. Pippett v. Waterford Dev., LLC, 166 F.Supp.2d 233, 236 (E.D.Pa.2001); Deep Marine Tech., Inc. v. Conmaco/Rector, L.P., No. H-05-3690, 2007 WL 1850423, *2 (S.D.Tex.2007) (unpublished); Homfeld L.L.C. v. Comair Holdings, Inc., 53 Fed.Appx. 731, 732 (6th Cir.2002) (unpublished); Trident-Allied Assoc., LLC. v. Cypress Creek Assoc., LLC., 317 F.Supp.2d 752, 753 (E.D.Mich.2004); Birdsong v. Westglen Endoscopy Ctr., L.L.C., 176 F.Supp.2d 1245, 1248 (D.Kan.2001); Wright v. Herman, 230 F.R.D. 1, 6 (D.D.C.2005).

As contrary authority, the plaintiff cites cases in which the courts made reference to the place of business of the LLC parties. See Kalamazoo Acquisitions, L.L.C. v. Westfield Ins. Co., Inc., 395 F.3d 338 (6th Cir.2005); Ferrer v. MedaSTAT USA, LLC, 145 Fed.Appx. 116 (6th Cir.2005). In neither...