Versatech, Inc. v. Fla. Caribbean Distillers, LLC., CASE NO. 19-1916 (GAG)
| Decision Date | 30 December 2020 |
| Docket Number | CASE NO. 19-1916 (GAG) |
| Citation | 511 F.Supp.3d 139 |
| Parties | VERSATECH, INC., Plaintiff, v. FLORIDA CARIBBEAN DISTILLERS, LLC., Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
Jose J. Gueits-Ortiz, Francis & Gueits Law Offices, Caguas, PR, for Plaintiff.
Mario E. Davila-Acevedo, Nestor Mendez-Gomez, Pietrantoni, Mendez & Alvarez LLC, Isabel C. Frau-Nicole, Condominio Capitolio Plaza, San Juan, PR, Giselle Lopez-Soler, PMB 257 Rd 19 1353, Guaynabo, PR, for Defendant.
Pending before the Court are Florida Caribbean Distillers, LLC. ("Defendant" or "FCD")’s motions to dismiss and to transfer venue regarding Versatech, Inc. ("Plaintiff" or "Versatech"). (Docket No. 14). Plaintiff opposed said motions. (Docket No. 17). With leave of Court, Defendant replied and Plaintiff sur-replied. (Docket Nos. 19, 22).
Defendant argues that this action should be dismissed for lack of subject matter-jurisdiction because complete diversity does not exist between the parties. (Docket No. 14). FCD is a limited liability company ("LLC") created under the laws of the state of Florida and Defendant avers that Versatech is incorporated in both the Commonwealth of Puerto Rico and the state of Florida.1 (Docket Nos. 14 at 8-9; 19 at 3-4).
To support its contention, Defendant submits documentary evidence from the Florida State Department's Division of Corporations establishing that, when this action was filed, there existed a corporation with the same name, principal place of business, mailing address, and incorporator than that of Plaintiff. (Docket Nos. 14-1; 14-2). Notwithstanding, this Florida Corporation appears under an "inactive" status. (Docket No. 14-3). According to the Florida State Department's Division of Corporations, the aforementioned Florida Corporation was "administratively dissolved" on September 22, 2017. Id.
In response, Versatech acknowledges that this Florida Corporation is indeed the same corporation as Plaintiff to the extent that both entities have identical Internal Revenue Service's Employer Identification Numbers (EIN). (Docket No. 17 at 4). In Plaintiff's view, however, this fact, by itself, does not automatically make Versatech a resident of both Puerto Rico and Florida, which would thereby destroy complete diversity. Id. Versatech argues that it is solely incorporated in the Commonwealth of Puerto Rico because it has operated continuously under its laws since 2005 and Versatech's principal place of business as well as the residence of its officers and shareholders has always been the Commonwealth. Id. To support this assertion, Plaintiff submits: (1) a document from the Commonwealth State Department's Registry of Corporations and Entities that classifies Versatech as an "active" corporation and (2) an unsworn statement under penalty of perjury from the corporation's President validating said information. (Docket No. 17-1; 17-2).
Defendants replied, "[i]f Plaintiff's argument is that both are the same corporation then, for jurisdictional purposes, Plaintiff is domiciled both in Puerto Rico and Florida, which automatically defeats complete diversity with [FCD]." (Docket No. 19 at 2). Versatech disagrees and avers that the Florida Corporation is not considered "local" for purposes of Florida corporate state law. (Docket No. 22 at 2-3). Moreover, because said corporation was dissolved before the filing of this action in 2017, Versatech's previous incorporation should not factor in any "dual corporate citizenship" analysis. Id.
In light of these arguments, the Court had the parties brief the following issues:
If a corporation is incorporated in two U.S. jurisdictions and its corporate status has been classified as "defunct, dissolved or inactive" in one of them, does that corporation cease to be a "citizen" of the jurisdiction where its corporate status has changed for purposes of 28 U.S.C. § 1332(c)(1) ? Under Florida state law, can a corporation's "life" be extended past dissolution, inactivity or defunction for purposes of prosecuting and defending suits, similar to Delaware state law? Is there any legal difference between a "defunct, dissolved or inactive" corporate status, under Florida state law? The parties need not address the legal analysis regarding "a corporation's principal place of business" nor the Supreme Court's decision in Hertz Corp. v. Friend, 559 U.S. 77, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010), which are inapplicable to the present case.
(Docket No. 25). The parties complied with the Court's directive (Docket Nos. 28 and 29) and these filings are hereby NOTED .
Federal Rule of Civil Procedure 12(b)(1) governs motions to dismiss for lack of subject-matter jurisdiction. FED. R. CIV. P. 12(b)(1). The "party invoking the jurisdiction of a federal court carries the burden of proving its existence." P.R. Tel. Co. v. Telecomm's Reg. Bd. of P.R., 189 F.3d 1, 7 (1st Cir. 1999). When deciding whether subject-matter jurisdiction exists, the Court follows two general rubrics: (1) when a defendant challenges the legal sufficiency of the facts alleged, the court credits the plaintiffs’ factual allegations and draws reasonable inferences in its favor and (2) when the defendant challenges the truth of facts alleged by the plaintiff and offers contrary evidence, the Court weighs the evidence. Valentin v. Hosp. Bella Vista, 254 F.3d 358, 363 (1st Cir. 2001) ; see also Martínez-González v. Catholic Schools of Archdioceses of San Juan Pension Plan, 235 F. Supp. 3d 334, 337 (D.P.R. 2017). The Court "is not restricted to the face of the pleadings but may consider extra-pleading materials , such as affidavits and testimony to resolve factual disputes concerning the existence of jurisdiction." Fernández Molinary, et als. v. Industrias La Famosa, Inc., et als., 203 F. Supp. 2d 111, 114-115 (D.P.R. 2002) (emphasis added); see also Marrero v. Costco Wholesale Corp., 52 F. Supp. 3d 437, 439 (D.P.R. 2014).
Federal courts have subject-matter jurisdiction over cases in which the amount in controversy exceeds $75,000 and where the parties are "citizens of different States." 28 U.S.C. § 1332(a). Diversity must be complete: "the presence of but one nondiverse party divests the district court of original jurisdiction over the entire action." In re Olympic Mills Corp., 477 F.3d 1, 6 (1st Cir. 2007) ; see also Aponte-Dávila v. Municipality of Caguas, 828 F.3d 40, 46 (1st Cir. 2016). For purposes of diversity, when the party is a "corporation," said legal entity "shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business." 28 U.S.C. § 1332 (a)(c)(1) (emphasis added).
Recently, the federal District Court in Massachusetts held that the use of the word "every" in 28 U.S.C. § 1332 (a)(c)(1) "can be read to treat a corporation that is incorporated in more than one state as a citizen of each of those states." D.S. Brown Co. v. White-Schiavone, JV, Civil No. 19-30095 (NMG), 2020 WL 6363899 at *5 (D. Mass. 2020) (citations omitted); see also H.R. Rep. No. 112-10 § 102, at 10 (2011) (). The District Court explained that:
The statute's use of the present perfect tense "has been" can be read to treat a corporation as a citizen of every state in which it has ever been incorporated. See Colon v. Ashby, 314 F. Supp. 3d 116, 121 (D.D.C. 2018). That could include states in which a company's corporate status has since been dissolved, especially when the applicable state law extends the life of a corporation past dissolution for the purpose of prosecuting and defending suits. See id.; Ripalda v. American Operations Corp, 977 F.2d 1464 (D.C. 1992) ().
D.S. Brown Co., 2020 WL 6363899 at *5. The Court agrees with the Massachusetts District Court's reading of the statute in D.S. Brown Co. and hereby adopts said ruling's reasoning. The Court will now turn its attention to Florida corporate state law.
The Florida Business Corporation Act (FBCA)2 states that: "[a] corporation that has dissolved continues its corporate existence, but the dissolved corporation may not carry on any business except that appropriate to wind up and liquidate its business and affairs." FLA. STAT. § 607.1405 (2020). Furthermore, said statute provides a period of four years for a dissolved corporation to sue or be sued. Id. § 607.1407. This general dissolution provision applies to a "voluntary" dissolution regardless of whether it was done by its incorporators and directors or by the board of directors and the shareholders. Id. §§ 607.1401; 607.1402. Moreover, the FBCA contemplates an "administrative dissolution" and states that: "[t]he department may dissolve a corporation administratively if the corporation does not" (1) "[d]eliver its annual report ... each year," (2) "[p]ay a fee or penalty due to the department under this chapter," and (3) "[a]ppoint and maintain a registered agent and registered office as required ...." Id. § 607.1420. In addition, Section 607.1420 states that: "[a] corporation that has been administratively dissolved continues in existence but may only carry on activities necessary to wind up its activities and affairs, liquidate and distribute its assets, and notify claimants under [ Sections] 607.1405, 607.1406, and 607.1407." FLA. STAT. § 607.1420 (5). In other words, a statutory interpretation of these provisions equates both "voluntary" and "administrative...
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