Tele Munchen Fernseh GMBH and Co. Produktionsgesellschaft v. Alliance Atlantis International Distribution, LLC et al

Filing 22

SECOND ORDER TO SHOW CAUSE Why Action Should Not be Remanded for Lack of Subject Matter Jurisdiction by Judge Margaret M. Morrow. Response to Order to Show Cause due by 11/25/2013. Plaintiff may file a response to defendants pleading on or before December 2, 2013. (rne)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL

Case No.

CV 13-05834 MMM (MRWx)

Date November 15, 2013

Title Tele Munchen Fernseh GMBH & Co. Produktionsgesellschaft v. Alliance Atlantis
International Distribution, LLC et al.

Present: The Honorable

MARGARET M. MORROW

ANEL HUERTA

N/A

Deputy Clerk

Court Reporter

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

None

None

Proceedings:

Second Order to Show Cause Why Action Should Not be Remanded for
Lack of Subject Matter Jurisdiction
I. FACTUAL BACKGROUND

Tele Munchen Fernseh GMBH & Co. Produktionsgesellschaft (“Tele Munchen”), a German
limited liability company headquartered in Munich, Germany, filed this action in Los Angeles
Superior Court on March 8, 2013 against Echo Bridge Entertainment, LLC (“Echo”) and Alliance
Atlantis International Distribution (“Alliance”), a wholly owned subsidiary of Echo (collectively
“defendants”) for breach of contract, breach of the implied covenant of good faith and fair dealing,
unfair business practices and an accounting.1 Tele Munchen filed a first amended complaint (“FAC”),
alleging the same four causes of action, on July 10, 2013.2 The complaint asserts that the parties
entered into various Advance Agreements, under which defendants agreed to pay Tele Munchen
certain amounts, and pleads that defendants have failed to pay these amounts.3 On August 12, 2013,

1

Notice of Removal (“Removal”), Docket No. 1 (August 12, 2013), Exh. B (Complaint) .

2

Id., Exh. B (First Amended Complaint (“FAC”)). Exhibit B to defendants’ notice of removal
is Tele Munchen’s original complaint, defendants’ demurrer, and plaintiffs’ first amended complaint.
(See id.)
3

FAC, ¶ 19.

defendants removed the action to federal court, invoking the court’s diversity jurisdiction under 28
U.S.C. § 1332.
On October 4, 2013, the court issued an order to show cause why the case should not be
remanded to state court because it found that defendants had not met their burden of showing that the
court had diversity jurisdiction case under § 1332.4 Defendants responded to the order on October
11, 2013.5 Although defendants’ response satisfies the court that the amount in controversy
requirement is met and that defendants are citizens of Massachusetts, New York, and Illinois,
defendants have not satisfied the court concerning the citizenship of Tele Munchen. It therefore once
again directs them to show cause why the case should not be remanded.
II. DISCUSSION
A.

Legal Standard Governing Removal Jurisdiction

A suit filed in state court may be removed to federal court if the court would have had original
subject matter jurisdiction to hear the action had it been filed there. 28 U.S.C. § 1441(a) (“Except
as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which
the district courts of the United States have original jurisdiction, may be removed by the defendant
or the defendants, to the district court of the United States for the district and division embracing the
place where such action is pending”); Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987); Snow
v. Ford Motor Co., 561 F.2d 787, 789 (9th Cir. 1977). The Ninth Circuit “strictly construe[s] the
removal statute against removal jurisdiction.” Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992)
(citing Boggs v. Lewis, 863 F.2d 662, 663 (9th Cir. 1988), and Takeda v. Northwestern Nat’l. Life
Ins. Co., 765 F.2d 815, 818 (9th Cir. 1985)). Thus, all doubts as to the removability of an action
must be resolved in favor of remand. Id. at 566-67 (“Federal jurisdiction must be rejected if there
is any doubt as to the right of removal in the first instance,” citing Libhart v. Santa Monica Dairy
Co., 592 F.2d 1062, 1064 (9th Cir. 1979)).
B.

Whether this Case Was Properly Removed under 28 U.S.C. § 1332

Defendants contend that the court has diversity jurisdiction to hear the action under 28 U.S.C.
§ 1332.6 “[J]urisdiction founded on [diversity] requires that parties be in complete diversity and the
amount in controversy exceed $75,000.” Matheson v. Progressive Specialty Ins. Co., 319 F.3d 1089,
1090 (9th Cir. 2003); see 28 U.S.C. § 1332(a)(1) (“The district courts shall have original jurisdiction
of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive
of interest and costs, and is between . . . citizens of different States. . .”). Federal courts have
4

Order to Show Cause, Docket No. 14 (Oct. 4, 2013).

5

Response to the Court’s Order to Show Cause (“Response”), Docket No. 19 (Oct. 11, 2013).

6

Removal, ¶ 10.

jurisdiction only where there is complete diversity: plaintiff’s citizenship must be diverse from that
of each named defendant. 28 U.S.C. §§ 1332(a)(1), 1332(c)(1); see Caterpillar, Inc. v. Lewis, 519
U.S. 61, 68 n. 3 (1996); see also Cook v. AVI Casino Enters., Inc., No. 07-15088, 2008 WL
4890167, *3 (9th Cir. Nov. 14, 2008) (Unpub. Disp.) (“We have jurisdiction only if Cook, a resident
of California, has citizenship which is diverse from that of every defendant,” citing Lewis, 519 U.S.
at 68).
1.

Amount in Controversy

The court first examines whether the amount in controversy exceeds $75,000. “[W]hen a
complaint filed in state court alleges on its face an amount in controversy sufficient to meet the federal
jurisdictional threshold, [the amount in controversy] requirement is presumptively satisfied unless it
appears to a ‘legal certainty’ that the plaintiff cannot actually recover that amount.” Guglielmino v.
McKee Foods Corp., 506 F.3d 696, 699 (9th Cir. 2007). See also St. Paul Mercury Indem. Co. v.
Red Cab Co., 303 U.S. 283, 288-89 (1938) (stating that “the sum claimed by the plaintiff controls
if the claim is apparently made in good faith” and that “[i]t must appear to a legal certainty that the
claim is really for less than the jurisdictional amount to justify dismissal”). Where, by contrast, “it
is unclear or ambiguous from the face of a state-court complaint whether the requisite amount in
controversy is pled[,] . . . [courts] apply a preponderance of the evidence standard.” Guglielmino,
506 F.3d at 699. Finally, “when a state-court complaint affirmatively alleges that the amount in
controversy is less than the jurisdictional threshold, the ‘party seeking removal must prove with legal
certainty that [the] jurisdictional amount is met.’” Id. (quoting Lowdermilk v. U.S. Bank National
Association, 479 F.3d 994, 1000 (9th Cir. 2007)).
The first amended complaint cites provisions of one of the Advance Agreements between the
parties, pursuant to which defendants agreed to pay to Tele Munchen fifty percent of Canadian license
fees acknowledged to be worth $40,000 and, inter alia, German, Austrian, and Swiss license fees
acknowledged to be worth $250,000, plus interest.7 The complaint states that defendants “failed to
pay [Tele Munchen] the amount due under the Advance Agreements,”8 and that they “underreport[ed]
and underpa[id]” Tele Munchen.9 Based on these allegations, it is unclear how much of the amount
defendants owed plaintiff they failed to pay. As a consequence, it is not facially apparent from the
complaint that the amount in controversy exceeds $75,000.
Because Tele Munchen’s state court complaint is ambiguous as to the amount in controversy,
defendants must prove by a preponderance of the evidence that the jurisdictional threshold is satisfied.
“If the complaint does not specify a damages amount, the court can look at facts in the complaint and
require the parties to submit evidence relevant to the amount in controversy.” Faulkner v. Astro-Med,
7

FAC, ¶ 27.

8

Id., ¶ 30.

9

Id., ¶ 34.

Inc., No. C 99–2562 SI, 1999 WL 820198, * 2 (N.D. Cal. Oct. 4, 1999) (citing Conrad Assocs. v.
Hartford Accident & Indem. Co., 994 F. Supp. 1196, 1198 (N.D. Cal. 1998)). A defendant must
submit “summary-judgment-type evidence” to establish that the actual amount in controversy exceeds
$75,000. Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 377 (9th Cir. 1997) (citing Allen
v. R & H Oil & Gas Co., 63 F.3d 1326, 1335-36 (5th Cir. 1995)). The court determined that
defendants had not adequately shown in their notice of removal that the amount in controversy
exceeds $75,000.
In response to the court’s order to show cause, defendants cited copies of the contracts that
form the basis of Tele Munchen’s claims, which they filed in support of their motion to dismiss the
action on October 9, 2013.10 The adjusted gross receipts for the motion pictures listed in Tele
Munchen’s complaint total millions of dollars.11 Under the contracts, Tele Munchen was to be receive
48-50% of this amount.12 As a result of this evidence, the court is now satisfied that defendants have
shown the amount in controversy exceeds $75,000.
2.

Complete Diversity

Both Tele Munchen and defendants are limited liability companies. The Ninth Circuit treats
limited liability companies like partnerships for purposes of diversity jurisdiction. See Johnson v.
Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (applying the standard used by
sister circuits that treats LLCs like partnerships). Thus, “an LLC is a citizen of every state of which
its owners/members are citizens.” Id.; see also Marseilles Hydro Power, LLC v. Marseilles Land and
Water Co, 299 F.3d 643, 652 (7th Cir. 2002) (explaining that “the relevant citizenship [of an LLC]
for diversity purposes is that of the members, not of the company”); Handelsman v. Bedford Village
Assocs., Ltd Partnership, 213 F.3d 48, 51-52 (2d Cir. 2000) (recognizing that “a limited liability
company has the citizenship of its membership”).
As respects defendants, the complaint alleges that both Alliance and Echo are Delaware limited
liability companies with offices in California and that Echo acquired a 100% ownership interest in
Alliance.13 The complaint also alleges that Alliance is the successor in interest to Atlantis Releasing
B.V. (“Atlantis”), a Dutch limited liability company that was the original party to the Advance

10

Declaration of Tom Hammond in Support of Defendants’ Response to Order to Show Cause
(“Hammond Decl.”), Docket No. 19-1 (Oct. 11, 2013), ¶ 4; Declaration of Tom Hammond in
Support of Defendants’ Motion to Dismiss (“Hammond MTD Decl.”), Docket No. 15-2 (Oct. 9,
2013), Exhs. A-F (Advance Agreements).
11

Id., ¶ 3.

12

Id., ¶ 3; Hammond MTD Decl., Exhs A-F (Advance Agreements).

13

FAC, ¶¶ 2, 4-5

Agreements.14 The notice of removal cites the complaint and restates its allegations concerning the
citizenship of Alliance and Echo.15 Because neither the complaint nor the notice of removal provided
information about the citizenship of the owners and members of Echo, the party that has apparently
acquired 100% ownership of both Atlantis and Alliance, the court was unable to determine
defendants’ citizenship. In support of their response to the court’s order to show cause, defendants
submitted the declaration of Tom Hammond, Alliance’s Chief Financial Officer, who states that “[t]o
the best of [his] knowledge, the ownership of [Echo] is held by citizens of Massachusetts, New York,
and Illinois.16 This response satisfies the court concerning the citizenship of defendants.
Tele Munchen’s complaint and defendants’ notice of removal both allege that Tele Munchen
is a limited liability company formed under the laws of the Republic of Germany, with its principal
place of business in Munich, Germany.17 As a limited liability company, Tele Munchen’s principal
place of business is irrelevant for purposes of diversity jurisdiction. Rather, Tele Munchen is a
citizen of the state, or foreign country, of which its owners or members are citizens. See Machason
v. Diamond Financial LLC, 347 F.Supp.2d 53, 55 (S.D.N.Y. 2004) (finding that a foreign LLC’s
citizenship for diversity purposes is that of its members); Hunley v. Glencore Ltd., Inc., No.
3:10–cv–455, 2012 WL 1071271, *9-10 (E.D. Tenn. Mar. 29, 2012) (directing plaintiff to amend
the complaint to state the membership of a foreign LLC defendant so the court could determine its
citizenship for jurisdictional purposes). As the court noted in its order to show cause, neither the
complaint nor the notice of removal alleges the citizenship of Tele Munchen’s owners or members.
The court therefore could not determine Tele Munchen’s citizenship.
Defendants’ response to the court’s order to show cause states that defendants “are unaware
[of] the citizenship of Tele Munchen’s members,” but that, “to the best of Defendants[’] knowledge[,]
members of Tele Munchen reside in the Republic of Germany.”18 These statements do not suffice
to demonstrate that Tele Munchen’s members are German citizens. Defendants have not adduced no
summary-judgment type evidence, such as a sworn declaration identifying the members of Tele
Munchen and their citizenship, which confirms that Tele Munchen’s members are German citizens.
Nor can the court say, based on the statements in defendants’ response, that defendants have
affirmatively alleged that Tele Munchen’s members are German citizens. For that reason, the court
once again orders defendants to show cause why the case should not be remanded for lack of subject
matter jurisdiction. See Conrad Assoc. v. Hartford Accident & Indemnity Co., 994 F.Supp.1996,
1198 (N.D. Cal. 1998) (“Because the ‘removal statutes are strictly construed against removal,’. . .
14

Id., ¶ 3.

15

Removal, ¶ 10.

16

Hammond Decl., ¶ 6.

17

Id., ¶ 1; Removal, ¶ 10.

18

Response at 4-5.

doubts about removal must be resolved in favor of remand.”).
III. CONCLUSION
For the reasons stated, the court concludes defendants have not shown that the complete
diversity requirement of § 1332 is met. The court therefore orders defendants to show cause on or
before November 25, 2013, why this action should not be remanded to Los Angeles Superior Court
for lack of subject matter jurisdiction. Should defendants fail to respond by this date, the court will
remand the action forthwith. Plaintiff may file a response to defendants’ pleading on or before
December 2, 2013. This will be defendants’ last chance to demonstrate that the court has subject
matter jurisdiction. Should defendants fail to satisfy the court that jurisdiction exists, the court will
remand the case to state court.

CV-90 (12/02)

CIVIL MINUTES - GENERAL

Initials of Deputy Clerk AH