Preferred Sands of Wisconsin, LLC v. Momentive Specialty Chemicals, Inc.
ORDER Regarding Jurisdiction. Proof of Diversity Citizenship due 4/22/2013. Signed by District Judge William M. Conley on 3/6/13. (rep)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
PREFERRED SANDS OF WISCONSIN, LLC,
MOMENTIVE SPECIALTY CHEMICALS, INC.,
In this civil action, plaintiff Preferred Sands of Wisconsin, LLC (“Preferred
Sands”) has asserted breach of contract claims against defendant Momentive Specialty
Chemicals, Inc. (“Momentive”), claiming damages in excess of $1 million dollars. The
complaint was originally filed in the Circuit Court for Dane County, Wisconsin, and
subsequently removed to federal court by Momentive, citing this court’s diversity
jurisdiction. 42 U.S.C. § 1332. Unfortunately, the pleadings and notice of removal fail
to allege facts sufficient to establish diversity jurisdiction.
Given that even Preferred
Sands appears to be uncertain about its own jurisdictional citizenship, the court requires
competent proof of complete diversity before allowing this case to proceed. See Hertz
Corp. v. Friend, 130 S. Ct. 1181, 1193 (2010) (federal courts “have an independent
obligation to determine whether subject-matter jurisdiction exists, even when no party
Diversity jurisdiction is present when a complaint alleges complete diversity of
citizenship among the parties and an amount in controversy exceeding $75,000.
U.S.C. § 1332. The pleadings certainly allege an adequate amount in controversy ($1
million+), as well as the citizenship of Momentive (a New Jersey Corporation that
maintains its principal place of business in Columbus, Ohio). However, the pleadings do
not adequately allege the citizenship of Preferred Sands, a Limited Liability Company
that takes on the citizenship of all of its members. Meyerson v. Harrah’s E. Chi. Casino,
299 F.3d 616, 617 (7th Cir. 2002) (“The citizenship of unincorporated associations
must be traced through however many layers of partners or members there may be.”)
Momentive’s notice of removal does not cure this defect either, stating merely that
“[t]hough Preferred [Sand]’s complaint does not disclose the identity or citizenship of its
members, through investigation Momentive has a good-faith belief based on public
corporate documents that none of Preferred’s members are citizens of New Jersey or
Ohio.” (Removal Notice, dkt. #1 at 2.)
This is insufficient for two reasons. First, complete diversity requires more than
just the absence of a New Jersey or Ohio citizen on the other side of the caption. If the
LLC is comprised of any member that is either a stateless alien or a United States citizen
domiciled in no state, complete diversity is destroyed.
Newman-Green, Inc. v. Alfonzo-
Larrain, 490 U.S. 826, 828-29 (1989). Second, the court is unwilling to expend time
and resources on this case when there is a possibility that -- Momentive’s good faith
belief notwithstanding -- one of Preferred Sands’ members may nevertheless turn out to
have a diversity-destroying citizenship. The advantages of establishing jurisdiction early
on are particularly significant here, where it appears that Preferred Sands is not certain of
its own members’ citizenship and chose to file in state court for that very reason. (See
Momentive will have 45 days from the date of this order to produce competent
evidence of Preferred Sands’ citizenship. See Smart v. Local 702 Int’l Bhd. of Elec. Workers,
562 F.3d 798, 802-03 (7th Cir. 2009) (the party seeking to invoke federal jurisdiction
bears the burden of establishing that jurisdiction is present).
It will be allowed to
conduct narrow discovery on this issue on an expedited basis, and Preferred Sands is
expected to cooperate to achieve a speedy resolution of this jurisdictional question.
Although it should be a mere formality, Momentive must also supply proof of its own
citizenship (the evidence submitted to date establish that it is a Delaware corporation,
but not the location of its principal place of business).
IT IS ORDERED that:
1) defendant will have until April 22, 2013, to file an affidavit, declaration under
penalty of perjury, or other competent proof showing complete diversity of
citizenship between the parties; and
2) failure to timely submit the required proof will result in prompt dismissal of
this matter for lack of subject matter jurisdiction.
Entered this 6th day of March, 2013.
BY THE COURT:
WILLIAM M. CONLEY
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