FRS GC Corporation v. Oak Tree Management LLC et al

Filing 49

ORDER denying 45 Motion to Change Venue. The parties shall, on or before 6/25/2018, submit a jointly proposed schedule for expedited discovery on the issue of jurisdiction. Signed by Judge David G Campbell on 6/14/2018.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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FRS GC Corporation,
Plaintiff,

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ORDER

v.

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No. CV-17-02348-PHX-DGC

Oak Tree Management LLC, et al.,

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Defendants.

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Plaintiff FRS GC Corp. filed a complaint against Defendants Oak Tree

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Management LLC, Milagro Consulting LLC, David Harbour, and Abby Harbour,

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asserting various state-law claims related to an alleged misappropriation of funds.

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Doc. 1. Plaintiff has filed a motion to transfer the case to the U.S. Bankruptcy Court for

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the District of New Jersey. Doc. 45. The motion is fully briefed and oral argument will

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not aid the Court’s decision. Fed. R. Civ. P. 78(b); LRCiv 7.2(f). For the reasons that

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follow, the Court will deny the motion.

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I.

Background.

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FRS GC LLC filed a complaint against Defendants in this Court in April 2017

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alleging diversity of citizenship jurisdiction under 28 U.S.C. § 1332. The case was

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assigned to Judge Teilborg. See Case No. 2:17-cv-01189-JAT (“JAT”), Doc. 1. On

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June 1, 2017, Judge Teilborg ordered FRS GC LLC to supplement its complaint with “the

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names and citizenship of every member of each limited liability company” in order to

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confirm that complete diversity of citizenship existed. JAT, Doc. 17 at 2. FRS GC LLC

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filed a supplement (JAT, Doc. 20), but Judge Teilborg concluded that it was insufficient

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(JAT, Doc. 21). Declining an opportunity to file an additional supplement, FRS GC LLC

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chose instead to dismiss the complaint on June 14, 2017. JAT, Docs. 21, 22.

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The next day, FRS GC Corp. (Plaintiff in this case) was incorporated in Delaware.

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Doc. 46-1 at 37. On the following day – June 16, 2017 – FRS GC LLC appears to have

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assigned its rights in this litigation to Plaintiff. Id. at 39. Approximately one month later,

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Plaintiff filed this case, again alleging diversity jurisdiction. Doc. 1 ¶ 22. The complaint

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in this case is nearly identical to the complaint in Judge Teilborg’s case. Compare Doc. 1

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with JAT, Doc. 1.

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II.

Jurisdiction.

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Defendants oppose Plaintiff’s motion to transfer, arguing that the Court lacks

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subject matter jurisdiction to grant such a motion. Doc. 46 at 7-9. “[T]he requirement

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that jurisdiction be established as a threshold matter is inflexible and without exception;

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for jurisdiction is power to declare the law, and without jurisdiction the court cannot

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proceed at all in any cause.” Corral v. Select Portfolio Servicing, Inc., 878 F.3d 770, 773

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(9th Cir. 2017) (quoting Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577 (1999)).

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A.

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Plaintiff appears to argue that the Court could exercise subject matter jurisdiction

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over this case pursuant to 28 U.S.C. § 1334(b). Doc. 47 at 3. That statute grants federal

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courts “original but not exclusive jurisdiction of all civil proceedings . . . related to

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[bankruptcy] cases.” 28 U.S.C. § 1334(b). Because Plaintiff’s parent corporation filed

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for bankruptcy on March 9, 2018 (Doc. 45-1 ¶ 7), Plaintiff contends that this action is

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“related to” the ongoing bankruptcy case in the District of New Jersey. Doc. 47 at 3.

Bankruptcy Jurisdiction.

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Questions of jurisdiction and justiciability ordinarily depend on the facts that exist

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when a complaint is filed. Lujan v. Defenders of Wildlife, 504 U.S. 555, 570 n.4 (1992);

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Dunmore v. United States, 358 F.3d 1107, 1113 (9th Cir. 2004) (applying this standard to

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§ 1334(b) jurisdiction). Because the bankruptcy proceeding did not begin until after

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Plaintiff filed this case, § 1334(b) jurisdiction does not exist in this Court.

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B.

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The complaint alleges diversity jurisdiction (Doc. 1 ¶ 22), but Defendants contend

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that focused discovery is needed to determine whether such jurisdiction actually exists

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(Doc. 46 at 9). Defendants rely on 28 U.S.C. § 1359, which prohibits jurisdiction when

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“any party, by assignment or otherwise, has been improperly or collusively made or

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joined to invoke the jurisdiction” of the district court.

Diversity of Citizenship Jurisdiction.

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Defendants present facts sufficient to raise a legitimate question as to whether

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Plaintiff has attempted to manufacture § 1332 jurisdiction. The Court cannot conclude at

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this time that it has subject matter jurisdiction to proceed with this case. The Court will

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therefore deny Plaintiff’s motion to transfer.

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IT IS ORDERED:

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1.

Plaintiff’s motion to transfer (Doc. 45) is denied.

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2.

The parties shall, on or before June 25, 2018, submit a jointly proposed

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schedule for expedited discovery on the issue of jurisdiction.
Dated this 14th day of June, 2018.

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