Keach v. Poole et al

Filing 10

Order for Armory Mobile to file, by 2/14/2013, whatever supplemental material it deems appropriate and adequate to carry its burden of demonstrating the existence of subject matter jurisdiction. The plaintiff is ordered to file his response by 2/21/2013. The Court will take under submission the issue of its subject matter jurisdiction on 2/21/2013. Signed by Chief Judge William H. Steele on 2/5/2013. (sdb)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
TIMOTHY KEACH,
Plaintiff,
v.
RODNEY A. POOLE, et al.,
Defendants.

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) CIVIL ACTION 13-0038-WS-C
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ORDER

This action was removed on the basis of diversity of citizenship by defendant
Armory Capital Mobile I, LLC (“Armory Mobile”). (Doc. 1). “A removing defendant
bears the burden of proving proper federal jurisdiction.” Adventure Outdoors, Inc. v.
Blomberg, 552 F.3d 1290, 1294 (11th Cir. 2008) (internal quotes omitted); accord
Friedman v. New York Life Insurance Co., 410 F.3d 1350, 1353 (11th Cir. 2005).
“Courts have an independent obligation to determine whether subject-matter
jurisdiction exists, even when no party challenges it.” Hertz Corp. v. Friend, 130 S. Ct.
1181, 1193 (2010); accord Smith v. GTE Corp., 236 F.3d 1292, 1299 (11th Cir. 2001).
Furthermore, “once a federal court determines that it is without subject matter
jurisdiction, the court is powerless to continue.” Underwriters at Lloyd’s, London v.
Osting-Schwinn, 613 F.3d 1079, 1092 (11th Cir. 2010) (internal quotes omitted). Thus, “a
court should inquire into whether it has subject matter jurisdiction at the earliest possible
stage in the proceedings.” University of South Alabama v. American Tobacco Co., 168
F.3d 405, 410 (11th Cir. 1999). The Court questions both the existence of complete
diversity of citizenship and the existence of the requisite amount in controversy.

A. Diversity of Citizenship.
The complaint does not allege the plaintiff’s citizenship. Armory Mobile suggests
that he may be a Tennessee citizen, based on a December 2012 letter from counsel for
non-party Compass Bank that indicates one of the recipients as the plaintiff at a
Murfreesboro address. (Doc. 1, Exhibit A at 20). Armory Mobile has not demonstrated
that a party’s citizenship can be established for jurisdictional purposes by so slender a
reed.
Armory Mobile asserts that co-defendant Rodney Poole is a citizen of Illinois,
based on an allegation in the complaint that he “is a resident of Illinois.” (Doc. 1, Exhibit
A at 12). “Citizenship, not residence, is the key fact that must be alleged in the complaint
to establish diversity for a natural person.” Taylor v. Appleton, 30 F.3d 1365, 1367 (11th
Cir. 1994). An allegation of residence but not citizenship exposes a complaint to
dismissal for want of subject matter jurisdiction. Beavers v. A.O. Smith Electrical
Products Co., 265 Fed. Appx. 772, 778 (11th Cir. 2008).
Armory Mobile is a limited liability company. (Doc. 1, Exhibit B at 1). For
purposes of assessing diversity of citizenship, “a limited liability company is a citizen of
any state of which a member of the company is a citizen.” Rolling Greens, MHP, L.P. v.
Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004). “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 and all the partners of the
limited partnership.” Id.
Armory Mobile identifies its two members as a trust and a limited liability
company (“Armory Capital”). (Doc. 1, Exhibit B at 1-2). Armory Mobile provides an
affidavit for the proposition that “[a]ll members of [Armory Capital] are resident citizens
of Illinois,” (id. at 2), but without identifying the nature of the members, the Court cannot
accept this assertion at face value. As to any member of Armory Capital that is itself a
limited liability company or other unincorporated entity, Armory Mobile must establish
the citizenship of each of its members, and as to any member of Armory Capital that is a
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corporation, Armory Mobile must establish its place of incorporation and principal place
of business. 28 U.S.C. § 1332(c)(3). General assurances of the citizenship of an artificial
entity, unaccompanied by such detail, are insufficient.
As to the trust, Armory Mobile’s proffered affidavit states only that the trustee is a
citizen of Illinois and that “[n]o beneficiary of the trust is a resident or citizen of Alabama
or Tennessee.” (Doc. 1, Exhibit B at 2). Citizenship of the trust presumably is based on
the citizenship of either the trustee or the beneficiaries,1 but Armory Mobile has not
satisfactorily shown the citizenship of the beneficiaries because it has not shown that
none of the beneficiaries is an artificial entity, the citizenship of which must be evaluated
as discussed above.
B. Amount in Controversy.
The complaint demands compensatory and punitive damages, but it does not
specify an amount sought. “[W]e hold that where a plaintiff has made an unspecified
demand for damages in state court, a removing defendant must prove by a preponderance
of the evidence that the amount in controversy more likely than not exceeds the $[75],000
jurisdictional requirement.” Tapscott v. MS Dealer Service Corp., 77 F.3d 1353, 1357
(11th Cir. 1996), overruled on other grounds, Cohen v. Office Depot, Inc., 204 F.3d 1069
(11th Cir. 2000). Because the plaintiff has made an unspecified demand for damages, the
Tapscott standard applies here.
“When the complaint does not claim a specific amount of damages, removal from
state court is proper if it is facially apparent from the complaint that the amount in
controversy exceeds the jurisdictional requirement. If the jurisdictional amount is not
facially apparent from the complaint, the court should look to the notice of removal and
may require evidence relevant to the amount in controversy at the time the case was

1

See generally U.S. Bank National Association v. Cooperative District, 2011 WL
4499309 (S.D. Ala. 2011).
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removed.” Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir. 2001). Armory
Mobile relies on the first avenue.
The complaint alleges in Count One that defendant Poole has breached his
fiduciary duties by not paying off a construction loan as to which the plaintiff has
provided a guaranty. The unpaid portion of the loan exceeds $1.6 million. But the
complaint does not allege that the plaintiff has been required to pay this amount under his
guaranty, or even that he has been requested to do so by the lender. Instead, the
complaint alleges that Poole’s conduct has placed the plaintiff “at risk” of being required
to make good on his guaranty. (Doc. 1, Exhibit A at 15). Apparently no pecuniary loss
has yet occurred, as the complaint alleges that Poole’s conduct “may cause financial
injury to Plaintiff Keach in the future.” (Id.). Armory Mobile emphasizes the plaintiff’s
potential loss, (Doc. 1 at 7), but it has explained neither how the plaintiff can be seeking
recovery for a loss he has not incurred nor how the risk of experiencing such a loss
should be valued for jurisdictional purposes.2
In Count Two, the complaint alleges that Poole, Armory Mobile and several
fictitious defendants acted in concert to “squeeze out” the plaintiff (and the entities in
which he shares ownership interest) from their interest in the construction project. (Doc.
1, Exhibit A at 16). The conduct resulting in this pressure is the same withholding of
payment to the construction lender made the basis of Count One. (Id. at 13-14). There is
no allegation that the plaintiff has in fact been squeezed out and no allegation that the
value of his holdings has declined due to the threat. Again, Armory Mobile has not
explained how the plaintiff can be seeking recovery for losses he has not incurred or how
the risk of experiencing such a loss should be evaluated for jurisdictional purposes.

2

Because the plaintiff has not requested a declaration that he is not required to satisfy the
debt, Armory Mobile cannot look to the value to the plaintiff (potentially $1.6 million) of such a
declaration as establishing the amount in controversy. See generally Cohen v. Office Depot, Inc.,
204 F.3d 1069, 1077 (11th Cir. 2000) (en banc) (the amount in controversy in a declaratory
judgment action “is the monetary value of the benefit that would flow to the plaintiff if the
[declaratory relief] were granted”).
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The complaint demands recovery of compensatory damages, but the only such
damage it alleges as having been sustained is to the plaintiff’s “professional reputation.”
(Doc. 1, Exhibit A at 15). Again, Armory Mobile has not addressed how that element of
damage should be valued for jurisdictional purposes; certainly the complaint does not
quantify it or give guidance as to the magnitude of the alleged loss.
Armory Mobile emphasizes that the complaint also demands punitive damages,
but this is not particularly helpful absent a demonstration – as yet lacking – that
substantial compensatory damages are in controversy and that the alleged conduct is
sufficiently egregious to allow prediction that the amount of punitive damages in
controversy is sufficient to make up the difference. See Lambeth v. Peterbilt Motors Co.,
2012 WL 1712692 at *4 (S.D. Ala. 2012) (“[T]here is nothing talismanic about such a
demand [for punitive damages] that would per se satisfy the amount-in-controversy
requirement and trigger federal subject-matter jurisdiction.”); SUA Insurance Co. v.
Classic Home Builders, LLC, 751 F. Supp. 2d 1245, 1255 (S.D. Ala. 2010) (“The Court
is not free simply to assume, as SUA does, that the Whites are likely to be awarded
substantial punitive damages against Classic.”).3
Finally, Armory Mobile suggests the Court aggregate the damages sought under
Count One with those under Count Two. (Doc. 1 at 8). “In general, to satisfy the
jurisdictional amount a plaintiff’s claims against a defendant may be aggregated.
[citation omitted] However, if these claims are alternative bases of recovery for the same
harm under state law, [the plaintiff] could not be awarded damages for both, and a court
should not aggregate the claims to arrive at the amount in controversy.” Classic Home
Builders, 751 F. Supp. 2d at 1252 (internal quotes omitted). Armory Mobile has not
addressed this principle. Nor has it shown that aggregation, if permissible here, would
satisfy the amount in controversy requirement.
3

In Rogers v. Hartford Life and Accident Insurance Co., 2012 WL 887482 (S.D. Ala.
2012), on which Armory Mobile relies, the complaint demanded $51,000 in unpaid insurance
benefits, plus an unspecified additional amount for other financial loss and emotional distress, in
addition to punitive damages against an insurer for fraud. Id. at *1 n.1. Armory Mobile has not
shown this case to be comparable to Rogers.
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Armory Mobile correctly notes that “courts may use their judicial experience and
common sense in determining whether the case stated in a complaint meets federal
jurisdictional requirements.” Roe v. Michelin North America, Inc., 613 F.3d 1058, 1062
(11th Cir. 2010). But merely opining that, “through the prism of the undersigned’s
experience and common sense,” more than $75,000 is in controversy, (Doc. 1 at 7 n.3),
does not substitute for an actual application of experience and common sense.
For the reasons set forth above, Armory Mobile is ordered to file and serve, on or
before February 14, 2013, whatever supplemental material it deems appropriate and
adequate to carry its burden of demonstrating the existence of subject matter jurisdiction.
The plaintiff is ordered to file and serve his response on or before February 21, 2013.
The Court will take under submission the issue of its subject matter jurisdiction on
February 21, 2013.4
DONE and ORDERED this 5th day of February, 2013.

s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE

4

Armory Capital has filed a motion to dismiss or, in the alternative, to transfer. (Doc. 3).
Should the Court determine that subject matter jurisdiction exists, it will then enter a briefing
schedule concerning this motion.
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