Gainey Ranch Community Association et al v. Kraft et al

Filing 24

ORDER granting 7 Plaintiffs' Motion to Dismiss for lack of subject matter jurisdiction. Defendant Rune Kraft's motion to dismiss (Doc. 2 ), motion for extension of time (Doc. 6 ), and motion for sanctions (Doc. 20 ) are DENIED. This matter be remanded to Maricopa County Superior Court. Signed by Magistrate Judge Michelle H Burns on 9/26/17. (Attachments: # 1 Remand Letter)(EJA)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Gainey Ranch Community Association, an)
Arizona-nonprofit corporation; and The)
Pavilions Council of Co-owners, an)
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Arizona non-profit organization,
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Plaintiff,
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vs.
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Rune Kraft, an individual; Trancycle;)
Inland Concrete Enterprises, Inc.)
Employee Stock Ownership Plan;)
Oldcastle Precast, Inc.; John Does and)
Jane Does I through X; Black)
Corporations I through X; and White)
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Partnerships I through X,
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Defendants.
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CIV 17-2092-PHX-MHB

ORDER

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Pending before the Court is Plaintiffs’ Motion to Dismiss for lack of subject matter

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jurisdiction (Doc. 7). Plaintiffs contend that “the Superior Court is the proper venue in which

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to litigate this matter.” The Court construes Plaintiff’s Motion to Dismiss for lack of subject

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matter jurisdiction as a “motion to remand” to state court. After considering the arguments

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raised by the parties in their briefings, this Court finds that it lacks subject matter jurisdiction

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over the matter, and, as such, this matter should be remanded to state court.

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BACKGROUND

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On September 1, 2015, Plaintiff Gainey Ranch Community Association (“Gainey

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Ranch”) filed their original Complaint in the McDowell Mountain Justice Court. Plaintiffs

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alleged that Rune Kraft and Trancycle breached contractual obligations to pay past due

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assessments and late fees relating to the property located at 7272 E. Gainey Ranch Rd., Unit

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Number 100, Scottsdale, Arizona 85250 (“Unit 100"), as well as pay attorneys’ fees and costs.

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At the time that the Complaint was filed, the total amount owed to Gainey Ranch was $4,306.62

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(the “loss amount”), and therefore fell under the Justice Court’s jurisdiction, pursuant to A.R.S.

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§ 22-201(C).

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The case remained in the Justice Court until Plaintiff realized that its loss amount then

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exceeded the Justice Court’s jurisdictional limit of $10,000, pursuant to A.R.S. § 22-201(C).

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On December 7, 2016, Plaintiff filed a motion to transfer the case to state court. The Justice

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Court granted Plaintiff’s Motion, and the case was transferred to the Maricopa County Superior

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Court on December 28, 2016.

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Plaintiff thereafter discovered that Unit 100 was eligible for foreclosure, and as such

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ordered a “litigation Guarantee” which revealed Defendants Kraft and Trancycle as record

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owners. As such, Plaintiff amended its complaint to add a foreclosure claim, and to add co-

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plaintiff Pavilions Council of Co-Owners, and defendants Inland Concrete Enterprises, Inc.

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Employee Stock Ownership Plan (“Inland Concrete”) and OldCastle Precast, Inc. (“OldCastle”).

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In their Amended Complaint, dated March 30, 2017, Plaintiffs assert a loss amount of

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$43,554.57.

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On June 30, 2017 Defendant Kraft filed a Petition for Removal to the United States

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District Court for the District of Arizona. In his petition, Defendant Kraft alleges there exists

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diversity between the parties, and the amount in controversy exceeds the statutory jurisdictional

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amount. On July 14, 2017, Plaintiffs filed their motion to remand, disputing the existence of

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subject matter jurisdiction. Plaintiffs assert that the parties in this case are not completely

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diverse - that they are all citizens of Arizona. Plaintiffs also assert that the amount in

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controversy is below the statutory threshold. There is no dispute that on the date Defendant

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Kraft removed this matter, Plaintiffs claimed that the total loss amount was $62,824.64.

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In his response, Defendant Kraft responds and alleges that diversity of citizenship exists

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as he and co-Defendants Island Concrete and OldCastle are not Arizona citizens. Further, he

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alleges that the amount in controversy will soon exceed the statutory minimum.
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DISCUSSION

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Federal courts are courts of limited jurisdiction; the Constitution and Congress authorize

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which matters federal courts may preside over. U.S. Const. art. III, § 2, cl. 1; e.g., Kokkonen

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v. Guardian Life Ins., 511 U.S. 375, 377 (1994). “In general, removal statutes are strictly

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construed against removal.” Luther v. Countywide Home Loans Serv., L.P., 533 F.3d 1031,

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1034 (9th Cir. 2008). Federal courts are "presumed to lack jurisdiction in a particular case

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unless the contrary affirmatively appears." Stock West, Inc. v. Confederated Tribes, 873 F.2d

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1221, 1225 (9th Cir. 1989). Accordingly, any doubt as to the right of removal should be

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resolved in favor of remand to state court. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)

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(per curiam).

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However, a case filed in state court may be removed to federal court by the defendant

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if the federal court otherwise would have had original jurisdiction. 28 U.S.C. 1441(a). There is

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a presumption that “a cause lies outside this limited jurisdiction,” and the “burden of

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establishing the contrary rests upon the party asserting jurisdiction.” Kokkonen, 511 U.S. at 377

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(citation omitted).

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Plaintiffs’ Amended Complaint asserts a cause of action based on the breach of private

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contractual obligations, which is not an independent basis for federal jurisdiction. See 28 U.S.C.

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§ 1331. Therefore, in order for the Court to have jurisdiction over Plaintiffs’ claims, jurisdiction

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must be predicated on another independent source. To establish subject matter jurisdiction

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otherwise, the party asserting jurisdiction must show (1) an amount in controversy exceeding

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$75,000, and (2) complete diversity among opposing parties. 28 U.S.C. § 1332(a). Defendant

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contends that this action meets both requirements, and therefore removal is appropriate.

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I.

AMOUNT IN CONTROVERSY

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Courts should discourage premature removal. Abrego Abrego v. Dow Chem. Co., 443

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F.3d 676, 691 (9th Cir. 2006). The conditions necessary must exist at the time of the removal.

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Id.; see also Budget Rent-A-Car, Inc. v. Higashiguchi, 109 F.3d 1471, 1473 (9th Cir. 1997).

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“[T]he court may demand that the party alleging jurisdiction justify his allegations by a

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preponderance of the evidence.” See Gaus, 980 F.2d at 567 (citing McNutt v. General Motors
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Acceptance Corp., 298 U.S. 178, 189 (1936)). When a the party asserting jurisdiction fails to

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present to the court any concrete factual evidence that establishes jurisdiction, it is “well within

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the court’s discretion to remand to state court rather than ordering jurisdictional discovery” even

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if there is “knowledge that later-discovered facts may prompt a second attempt at removal.”

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Abrego, 443 F.3d at 691.

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In their Amended Complaint, Plaintiffs asserted a loss arising out of Defendants’ failure

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to pay of $43,554.57. In their July, 2017, motion to remand, Plaintiffs provide supporting

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evidence that the loss amount had increased to $62,824.64. Defendant Kraft does not dispute

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these figures, but projects that the loss amount will exceed $75,000.00 by September, 2017. He

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bases this prediction on trends in how much the amount has increased each month.

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The amounts in controversy as set forth in Plaintiffs’ amended complaint and motion

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to remand is less than $75,000.00 This Court is not required to consider speculation as to how

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that amount will vary in deciding this jurisdictional issue. Accordingly, Plaintiff has failed to

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meet his burden of proving the amount in controversy requirement of subject matter jurisdiction.

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II.

DIVERSITY OF CITIZENSHIP

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Because the amount in controversy requirement for subject matter jurisdiction fails, it

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is not necessary to determine diversity of citizenship. Nonetheless, Plaintiff also fails to

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establish citizenship diversity.

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For purposes of diversity jurisdiction, there need be complete diversity between all

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parties, in which no plaintiff shares the same state citizenship with any of the defendants. Exxon

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Mobil Corp. v. Allapattah Aervs., Inc., 545 U.S. 546, 553 (2005). A corporation is deemed to

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be a citizen of its state of incorporation and the state where it has its principal place of business.

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28 U.S.C. § 1332(c)(1). The citizenship of an individual is determined by his or her domicile.

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Kanter v. Warner-Lambert Co., 265 F.3d 853, 851 (9th Cir. 2001). An individual’s domicile is

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his permanent home, where he intends to remain, or return to, indefinitely. Id.

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Both Plaintiffs are incorporated in Arizona, and have their principal places of business

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in Arizona, and as such, are citizens of Arizona. Plaintiffs assert that all of the Defendants are

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Arizona citizens: Trancycle was incorporated in Arizona in 1993, and is the record owner of
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Unit 100; OldCastle Precast, Inc. is incorporated in Arizona and in good standing; Inland

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Concrete Enterprise, Inc. was a California corporation, but merged with OldCastle; Rune Kraft

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is the record owner of Unit 100, and an address search lists Unit 100 as his residence. Plaintiffs

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provide documentation in support of these assertions.

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Defendant Kraft does not dispute that Plaintiffs are Arizona citizens. He disputes

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however, Plaintiffs’ assertions regarding Defendants’ citizenship: he claims he is not an

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Arizona citizen because he lives outside of the United States, and has a business address in

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Delaware. He claims that Inland Concrete is based in California, and that OldCastle is a

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Washington corporation registered as a foreign corporation in Arizona. He is silent as to the

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citizenship of Trancycle. Defendant Kraft does not, however, provide any evidence of these bare

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assertions. The unsupported assertions in Defendant Kraft’s Response are insufficient to

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establish diversity of citizenship.

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Thus, as Plaintiffs have not met their burden of demonstrating that the amount in

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controversy in this matter exceeds $75,000.00, or that there is diversity of citizenship, this Court

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lacks subject matter jurisdiction to preside over this action. Accordingly, Plaintiffs’ motion to

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remand will be granted.

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CONCLUSION
IT IS ORDERED that Plaintiffs' Motion to Dismiss for lack of subject matter
jurisdiction (Doc. 7), be GRANTED;
IT IS FURTHER ORDERED that Defendant Rune Kraft’s motion to dismiss (Doc. 2),
motion for extension of time (Doc. 6), and motion for sanctions (Doc. 20) are DENIED;
IT IS FURTHER ORDERED that this matter be remanded to Maricopa County
Superior Court.
DATED this 26th day of September, 2017.

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