FHL, Inc. et al v. Walker et al

Filing 20

MEMORANDUM OPINION AND ORDER directing that plaintiffs FHL and Yannon shall file an amended complaint within 14 days from the entry of this Memorandum Opinion and order, as further set out in order; DENYING Cleveland's 10 motion to dismiss with leave to refile following the filing of plaintiffs amended complaint, as further set out in order. Signed by Honorable Judge Mark E. Fuller on 3/14/14. (djy, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
FHL, INC., and CHRISTOPHER
YANNON,
Plaintiffs,
v.
HARRY JAMES WALKER, and
CLIFFORD CLEVELAND,
Defendants.

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CASE NO. 2:13-cv-555-MEF
(WO - Do Not Publish)

MEMORANDUM OPINION AND ORDER
Plaintiffs FHL, Inc. (“FHL”) and Christopher Yannon (“Yannon”) (collectively,
“Plaintiffs”) filed their complaint against Defendants Harry James Walker (“Walker”) and
Clifford Cleveland (“Cleveland”) (collectively, “Defendants”) on August 5, 2013. (Doc. #1.)
The complaint asserts three claims against Defendants. The first claim seeks a preliminary
and permanent injunction, the second claim seeks a declaratory judgment, and the third claim
seeks an accounting. (Doc. #1.) All of these claims arise out of Defendants’ involvement
with FHL and the handling of FHL’s investments and management.
The complaint alleges that the Court has subject-matter jurisdiction over this action
under 28 U.S.C. § 1332, which is the diversity statute.1 (Doc. #1, ¶ 5.) Specifically,

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Plaintiffs also assert that the Court has subject-matter jurisdiction over this action pursuant
to the Declaratory Judgment Action, 28 U.S.C. § 2201. However, this statute alone does not provide
an independent basis for federal subject-matter jurisdiction, but rather only establishes a separate
remedy available in cases where jurisdiction otherwise exists. See Seibert v. Baptist, 594 F.2d 423,
428 (5th Cir. 1979); Bonner v. Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (adopting as binding
precedent all Fifth Circuit decisions handed down prior to the close of business on September 30,

Plaintiffs allege that FHL is “a corporation, incorporated in the Republic of Panama with a
business address of Dorado Mall Building, Primer Alto, Suites 26 and 27 Bethania, Panama
City, Republic of Panama,” that Yannon is a “resident” of Florida, and that Walker and
Cleveland are “residents” of Alabama. (Doc. #1, ¶¶ 1–4.)
Now before the Court is a Motion to Dismiss and Memorandum of Law in Support
(Doc. #10) filed by Cleveland on September 4, 2013. Cleveland argues therein that this
entire action is due to be dismissed because the Court lacks diversity jurisdiction. (Doc.
#10.) Specifically, Cleveland argues that FHL’s principal place of business, or its “nerve
center,” is in Alabama, and, therefore, complete diversity between the parties is lacking.
(Doc. #10.) FHL, on the other hand, argues that its principal place of business or “nerve
center” is in Florida, and, therefore, this Court has diversity jurisdiction. (Doc. #16.) Both
parties have submitted affidavits in support of their respective positions. (Docs. #10, 16-1.)
After reviewing the complaint, Cleveland’s motion, and the parties’ arguments, the
Court does not find it necessary, at least at this time, to resolve the issue of whether FHL’s
principal place of business or “nerve center” is in Alabama or Florida. That is because
Plaintiffs’ complaint fails to set forth the basic allegations needed to establish diversity
jurisdiction. Under § 1332, a corporation is “a citizen of any State by which it has been
incorporated and of the State where it has its principal place of business.” E.g., Sweet Pea
Marine, Ltd. v. APJ Marine, Inc., 411 F.3d 1242, 1247 (11th Cir. 2005) (citing 28 U.S.C. §

1981).
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1332). However, Plaintiffs do not allege where FHL’s principal place of business is. All
Plaintiffs allege is that “FHL, Inc. is a Panamanian company qualified to do business in
Alabama” and that its business address is in Panama. (Doc. #1, ¶¶ 1, 7.) While the parties
suggest in their briefs on Cleveland’s motion to dismiss that FHL’s principal place of
business is located in either Alabama or Florida, this does not obviate the fact that no such
allegations are contained in the complaint.
Moreover, even if Plaintiffs had alleged FHL’s principal place, or the affidavits
submitted on Cleveland’s motion to dismiss established that,2 diversity jurisdiction is still
lacking because Plaintiffs have only alleged the residencies of Yannon, Walker, and
Cleveland, as opposed to their citizenship. (Doc. #1, ¶¶ 2–4.) For diversity purposes,
citizenship means domicile; mere residence in a State is not sufficient. See Taylor v.
Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994) (“Citizenship, not residence, is the key fact
that must be alleged in the complaint to establish diversity for a natural person.”). Thus, the
allegations that Yannon is “a resident of Florida,” Walker is “a resident of Montgomery,
Alabama,” and Cleveland is “a resident of Prattville, Alabama” are insufficient to establish
diversity between the parties.
Accordingly, it is hereby ORDERED that Plaintiffs FHL and Yannon shall file an
amended complaint within fourteen (14) days from the entry of this Memorandum Opinion
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Factual attacks challenge the existence of subject matter jurisdiction in fact, regardless of
the pleadings. Where there is a factual challenge to jurisdiction, as Cleveland makes here, matters
outside the pleadings, such as affidavits and testimony, may also be considered. Vision Bank v.
Dynamicair, Inc., 2011 WL 1475939, at *1 (S.D. Ala. Mar. 30, 2011) (citing Lawrence v. Dunbar,
919 F.2d 1525, 1529 (11th Cir. 1990)).
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and Order properly setting forth the subject-matter jurisdiction of the Court, including
diversity jurisdiction and, in addition, whether the claims in this action should be pursued
directly or derivatively. It is further ORDERED that Cleveland’s Motion to Dismiss (Doc.
#10) is DENIED with LEAVE TO REFILE following the filing of Plaintiffs’ amended
complaint. Finally, Plaintiffs are hereby advised that if they fail to timely file an amended
complaint in compliance with this Memorandum Opinion and Order, this matter will be
dismissed without prejudice for lack of subject-matter jurisdiction.
DONE this the 14th of March, 2014.
/s/ Mark E. Fuller
UNITED STATES DISTRICT JUDGE

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