U.S. Bank National Association v. Edwards et al

Filing 15

ORDER: As it stands, U. S. Bank's 6 Amended Complaint fails to satisfy the prerequisites of subject-matter jurisdiction. Thus, it is ORDERED that, on or before 10/19/2016, U.S. Bank shall file a second amended complaint or, alternatively, move for jurisdictional discovery as discussed herein as further set out in the order and at the 10/13/2016 hearing. Signed by Chief Judge William Keith Watkins on 10/14/2016. (dmn, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
EASTERN DIVISION
U.S. BANK NATIONAL
ASSOCIATION, as Trustee,
Plaintiff,
v.
DWAYNE A. EDWARDS, TODD
BARKER, OPELIKA ALF, LLC,
and THE MEDICAL CLINIC
BOARD OF THE CITY OF
OPELIKA, ALABAMA,
Defendants.

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CASE NO. 3:16-CV-650-WKW
[WO]

ORDER
On August 9, 2016, Plaintiff U.S. Bank National Association (“U.S. Bank”)
filed this action against Defendants Dwayne A. Edwards, Todd Barker, Opelika
ALF, LLC, and the Medical Clinic Board of the City of Opelika. U.S. Bank
amended its complaint on October 3, 2016, predicating subject-matter jurisdiction
on diversity of the parties. See 28 U.S.C. § 1332(a). The court now, in accordance
with its duty, calls attention to U.S. Bank’s failure to plead facts establishing
complete diversity of citizenship. See Kelly v. Harris, 331 F.3d 817, 819 (11th Cir.
2003) (explaining that federal courts “always have an obligation to examine sua
sponte their jurisdiction before reaching the merits of any claim”). Sua sponte

examination of the governing complaint’s jurisdictional allegations is especially
crucial because U.S. Bank has moved, on an expedited basis, for the appointment of
a receiver.
Diversity jurisdiction requires that no plaintiff be a citizen of the same state
as any defendant.

§ 1332(a)(1).

The burden of establishing subject-matter

jurisdiction lies with the plaintiff. Sweet Pea Marine, Ltd. v. APJ Marine, Inc., 411
F.3d 1242, 1247 (11th Cir. 2005). For the following reasons, U.S. Bank has failed
to plead adequately its own citizenship, as well as the citizenship of Edwards,
Barker, and Opelika ALF, LLC, leaving the court unable to determine whether
complete diversity of citizenship exists. The absence of sufficient allegations of
citizenship, however, is not necessarily fatal to the court’s exercise of subject-matter
jurisdiction. “Defective allegations of jurisdiction may be amended, upon terms, in
the trial or appellate courts.” 28 U.S.C. § 1653.
A.

Citizenship of U.S. Bank
U.S. Bank avers that it is a “national banking association formed pursuant to

the laws of the United States of America, having its principal place of business in
St. Paul, Minnesota.” (Doc. # 6, at 1.) National banking associations are “deemed
citizens of the States in which they are respectively located.” 28 U.S.C. § 1348. For
purposes of diversity jurisdiction, the Supreme Court has held that a national

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banking association is a citizen of the state in which its main office is located. See
Wachovia Bank v. Schmidt, 546 U.S. 303, 307 (2006).
U.S. Bank asserts that its principal place of business is in Minnesota, but it
does not allege the location of its main office. Although the Eleventh Circuit has
never ruled on the issue, other circuits have disagreed about whether a bank is
“located” where it keeps its “principal place of business” for purposes of § 1348
citizenship. Compare Wells Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d 702,
709 (8th Cir. 2011) (“[W]e hold that, pursuant to § 1348, a national bank is a citizen
only of the state in which its main office is located.”), with Horton v. Bank One,
N.A., 387 F.3d 426, 436 (5th Cir. 2004), cert. denied, 546 U.S. 1149 (“We hold that
the definition of ‘located’ is limited to the national bank’s principal place of business
and the state listed in its organization certificate and its articles of association.”).
District courts have differed on this issue, but several have interpreted § 1348 and
the Supreme Court’s holding in Schmidt to require that a national bank’s main office
location be specifically asserted before its citizenship can be determined. See, e.g.,
PNC Bank, N.A. v. Bonta Farms, Inc., No. 2:13cv289, 2013 WL 4747085, at *1
(M.D. Fla. Sept. 4, 2013). Given the uncertainty in this area of law, U.S. Bank must
amend its complaint to specifically allege the location of its main office.

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B.

Citizenship of Edwards and Barker
U.S. Bank further alleges that Edwards is a resident of South Carolina and

Barker is a resident of Georgia. (Doc. # 6, at 2.) However, “[r]esidence alone is not
enough” to establish the citizenship of an individual for the purpose of diversity
jurisdiction. Travaglio v. Am. Exp. Co., 735 F.3d 1266, 1269 (11th Cir. 2013). An
individual’s citizenship is determined by his or her domicile, and “domicile requires
both residence in a state and an intention to remain there indefinitely.” Id. (internal
quotation marks omitted). Because U.S. Bank has only alleged the residences of
Edwards and Barker, not their domiciles, it has not properly pleaded their citizenship
for the purpose of diversity jurisdiction.
C.

Citizenship of Opelika ALF, LLC
U.S. Bank alleges that Opelika ALF, LLC, is a “limited liability company

organized under the laws of the State of Georgia having its principal place of
business located in Lee County, Alabama.” (Doc. # 6, at 2.) A limited liability
company is a citizen of every state of which any of its members is a citizen. See
Rolling Greens MHP, L.P. v. Comcast SCH Holidays, L.L.C., 374 F.3d 1020, 1022
(11th Cir. 2004); accord Mallory & Evans Contractors & Engineers, LLC v.
Tuskegee Univ., 663 F.3d 1304, 1305 (11th Cir. 2011) (per curiam). Moreover,
“[t]he burden of pleading diversity of citizenship is upon the party invoking federal
jurisdiction, and if jurisdiction is properly challenged, that party also bears the
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burden of proof.” Ray v. Bird & Son & Asset Realization Co., 519 F.2d 1081, 1082
(5th Cir. 1975).1 Thus, the burden of pleading here is on U.S. Bank because, as a
plaintiff filing suit in federal court, it is invoking this court’s jurisdiction.2
A potential problem arises, however, if under Georgia law the ownership
structure of limited liability companies is not information that is publicly available
and U.S. Bank is not otherwise privy to facts revealing the citizenship of the
Defendant LLC. In this scenario, the law appears to require that which is practically
impossible––that is, for a plaintiff to allege the domiciles of each member of a
defendant LLC so as to plead properly this court’s diversity jurisdiction, when that
plaintiff has no knowledge of who the members are or where they maintain
domiciles. See Rolling Greens, 374 F.3d at 1022 (“To sufficiently allege the
citizenships of these unincorporated business entities, a party must list the
citizenships of all the members of the limited liability company . . . .”).
The conundrum is that, for purposes of pleading in federal court, the plaintiff
finds itself between the rock of Rule 11 and the hard place of alleging diversity
jurisdiction. If there is no mechanism for tracing the potentially multiple layers of a

1

See Bonner v. City of Pritchard, 661 F.2d 1206, 1207 (11th Cir. 1981) (holding that Fifth
Circuit decisions handed down prior to the close of business on September 30, 1981, are binding
on the Eleventh Circuit).
2

U.S. Bank has not perfected service on all Defendants, and the time for Defendants to
answer or otherwise respond to the amended complaint has not run. Thus, presently subject-matter
jurisdiction is unchallenged.
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Defendant’s LLC citizenship prior to filing a complaint in federal court, a plaintiff
could run the risk of violating Rule 11 for alleging unsupported jurisdictional
allegations. See Fed. R. Civ. P. 11. The court is not aware of any authority, and in
the short time since the filing of the amended complaint has not found any, that
makes an accommodation in federal pleading for the convergence of Rule 11 and
the apparent necessity of pleading unknown and unknowable member identities in
LLC parties.3 Cf. Lowery v. Ala. Power Co., 483 F.3d 1184, 1215 n.63 (11th Cir.
2007) (“We think it highly questionable whether a defendant could ever file a notice
of removal on diversity grounds in a case such as the one before us—where the
defendant, the party with the burden of proof, has only bare pleadings containing
unspecified damages on which to base its notice—without seriously testing the limits
of compliance with Rule 11.”), overruled on other grounds by Pretka v. Kolter City
Plaza II, Inc., 608 F.3d 744, 752 (11th Cir. 2010)).

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Mallory & Evans Contractors & Engineers, LLC, and Rolling Greens did not confront
this potential problem. In each case, the LLC was the party asserting federal jurisdiction, and the
LLC had failed to allege properly its own citizenship of which it obviously would have been aware.
See Mallory & Evans Contractors & Eng’rs, LLC, 663 F.3d at 1305; Rolling Greens, 374 F.3d at
1022. Moreover, Rolling Greens is a removal case, not a case originally filed in federal court.
Although Rolling Greens has not garnered negative treatment, a subsequent Eleventh Circuit
decision addressing the sufficiency of diversity jurisdictional facts in the notice of removal
potentially casts a cloud on a requirement that the original notice of removal identify with
specificity the citizenship of all parties. See Corp. Mgmt. Advisors, Inc. v. Artjen Complexus, Inc.,
561 F.3d 1294, 1297 (11th Cir. 2009) (A notice of removal alleging “‘that the controversy . . . is
entirely between citizens of different states,’ although conclusory in nature and possibly not
sufficient if not amended, is sufficient to confer jurisdiction on the federal courts to permit the
curing of the defect by amendment.” (quoting Firemen’s Ins. Co. v. Robbins Coal Co., 288 F.2d
349, 350 (5th Cir. 1961))).
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But there may be a simpler answer in the facts of this case. It may be that
U.S. Bank has obtained the names and identifying information of Opelika ALF,
LLC’s members and therefore can allege such in an amended complaint. It may be
then that the amended complaint’s defect reflects merely deficient allegations of
jurisdiction of which U.S. Bank has knowledge and can correct.

The court

nevertheless notes the near impossibility of sufficiently alleging domicile for
members of an LLC for which U.S. Bank has no or only limited information. This
prickly problem is potentially a potent one for our parliament to ponder, a
conundrum for Congress, but not this court, to put right. See Rolling Greens, 374
F.3d at 1021–22 (“Congress, if it so chooses, is capable of adjusting the rules of
diversity jurisdiction to account for unincorporated associations.”).
As discussed at the hearing on October 13, 2016, if U.S. Bank has sufficient
information to plead the citizenship of each member of Opelika ALF, LLC, it should
file an amended complaint specifically alleging the LLC’s citizenship. See 28
U.S.C. § 1653. Should U.S. Bank require jurisdictional discovery to ascertain the
identity and citizenship of the members of Opelika ALF, LLC, it should move for
jurisdictional discovery and that motion will be granted.
D.

Conclusion
As it currently stands, U.S. Bank’s amended complaint (Doc. # 6) fails to

satisfy the prerequisites of subject-matter jurisdiction. Thus, it is ORDERED that,
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on or before October 19, 2016, U.S. Bank shall file a second amended complaint
or, alternatively, move for jurisdictional discovery as discussed herein and at the
October 13, 2016 hearing.
DONE this 14th day of October, 2016.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE

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