AMCO Insurance Company v. Paragon LP

Filing 68

ORDER DISMISSING CASE by Judge Raymond P. Moore on 03/15/2016. (cthom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Raymond P. Moore
Civil Action No. 14-cv-03105-RM-CBS
AMCO INSURANCE COMPANY, an Iowa corporation,
Plaintiff,
v.
PARAGON LP, a Colorado limited partnership,
Defendant.
______________________________________________________________________________
ORDER
______________________________________________________________________________
This matter is before the Court on the Plaintiff’s responses (ECF Nos. 54, 66) to the
Orders to Show Cause (ECF Nos. 51, 55). Upon consideration of the responses, the Court finds
that Plaintiff has failed to show cause why this case should not be dismissed for lack of subject
matter jurisdiction.
Specifically, on January 20, 2016, the Court sua sponte issued an Order to show cause
why this case should not be dismissed due to lack of subject matter jurisdiction as Defendant
Paragon LP is a limited partnership and “an unincorporated entity’s citizenship is typically
determined by its members’ citizenship.” Grynberg v. Kinder Morgan Energy Partners, L.P.,
805 F.3d 901, 905-06 (10th Cir. 2015) (citing Carden v. Arkoma Associates, 494 U.S. 185, 19596 (1990)). On January 26, 2016, Plaintiff filed its response (ECF No. 54), recognizing that
Defendant Paragon LP is a limited partnership and attaching a list of its General, Special
Limited, and Limited Partners (collectively, “Partners”). The Partners identified consist of not

only individuals but also unincorporated entities, i.e., LLCs, LLLPs, a partnership, and an “FBO
Mark T. Donahoe, IRA, A/C #7A3 5654 UBS, Custodian.” For the individual Partners, Plaintiff
provided their residence. For the unincorporated entities, Plaintiff provided nothing to establish
their citizenship, i.e., the citizenship of the members or partners of such unincorporated entities.
On January 27, 2016, the Court noted deficiencies in Plaintiff’s response, but issued
another show cause order and provided Plaintiff “with one final opportunity to demonstrate that
the Court has subject matter jurisdiction.” (ECF No. 55, page 3.) The Court granted Plaintiff an
extension of time to respond to the order and leave to conduct discovery concerning Defendant’s
citizenship. On March 9, 2016, Plaintiff provided a response, but fails to cure all deficiencies.
Specifically, Plaintiff provided a Declaration from the General Partner of Defendant
Paragon LP (ECF No. 66-1.) That Declaration listed the General Partners, Special Limited
Partners, and Limited Partners. The Limited Partners are identified as “natural persons,”
unincorporated entities, and incorporated entities. In addition, Plaintiff provided copies of
corporate records for OCM III Holdings, Inc. and the 2014 Schedule K-1s for Defendant. (ECF
No. 66-4.) These records – along with Plaintiff’s initial response – establish subject matter
jurisdiction has not been shown.
Starting with the “natural persons,” Plaintiff’s showing is deficient in two respects. First,
although identified as “natural persons,” the K-1s show that “Steven Carder” and “John F.
McGovern” are trusts, namely, the “Steven J. Carder Living Trust” and “The John F. McGovern
Living Trust” (ECF No. 66-3, pages 3, 30). In determining the citizenship for trusts, the U.S.
Supreme Court recently stated: (1) under Navarro Savings Assn. v. Lee, 446 U.S. 458 (1980),
“when a trustee files a lawsuit in her name, her jurisdictional citizenship is the State to which she
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belongs—as is true of any natural person”; and (2) “when an artificial entity is sued in its name,
it takes the citizenship of each of its members.” Americold Realty Trust v. Conagra Foods, Inc.,
__ U.S. __, 2016 WL 854159, at *4 (2016) (emphasis in original). For unincorporated entities,
the question which follows is who such entities’ “members” are. In Americold, the plaintiff was
a real estate investment trust organized under Maryland law, and it was that law which provided
the answer to the question.
In addressing Americold’s argument that a “trust” possesses the citizenship of its
trustees, the Supreme Court stated:
Traditionally, a trust was not considered a distinct legal entity, but a “fiduciary
relationship” between multiple people. … Such a relationship was not a thing that
could be haled into court; legal proceedings involving a trust were brought by or
against the trustees in their own name. … And when a trustee files a lawsuit or is
sued in her own name, her citizenship is all that matters for diversity purposes. …
For a traditional trust, therefore, there is no need to determine its membership, as
would be true if the trust, as an entity, were sued.
Many States, however, have applied the “trust” label to a variety of
unincorporated entities that have little in common with this traditional template.
… So long as such an entity is unincorporated, we apply our “oft-repeated rule”
that it possesses the citizenship of all its members. Carden, 494 U.S., at 195, 110
S. Ct. 1015. But neither this rule nor Navarro limits an entity’s membership to its
trustees just because the entity happens to call itself a trust.
Americold, 2016 WL 854159, at *4.
Plaintiff states the citizenship of these two “natural persons” are California and Colorado,
presumably relying on the addresses in the K-1, but it is unknown if such addresses belong to the
trust, trustee, or beneficiary. And, moreover, on this record, it is unclear whose citizenship the
Court should consider to evaluate whether diversity jurisdiction exists.

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Next, although identified as a “natural person,” “FBO Mark T. Donahoe, IRA, A/C/
#7A3 UBS” is an Individual Retirement Account, whose citizenship was stated to be New Jersey
in the first response but is now stated to be Minneapolis in the second response. See ECF No.
54, page 2, ¶ 7; No. 54-1, page 2, ¶ 9; No. 66-1, page 3, ¶ 27; and No. 66-3, page 31.1 No reason
was given for the change in the stated citizenship of this partner. In addition, the citizenship
asserted is stated to be that of Mr. Donahoe individually, but the K-1 with the Minneapolis
address appears to be for Morgan Stanley, the Custodian of the IRA. Nor is it known, on this
record, whose citizenship the Court should consider in evaluating whether diversity exists. See
Americold, supra (discussing general diversity rule regarding an unincorporated entity).
The deficiency in Plaintiff’s showing is not limited to the natural persons. For the
unincorporated entities, the Declaration states NAV Capital Partners, LLC’s interest was
purchased in 2013 by IGW LLC; therefore, IGW LLC was a partner at the time suit was filed in
2014 and is one of the current partners. However, the Declaration states that IGW LLC has
“multiple members including” three individuals and the “Padekeky GST exempt trust.” (ECF
No. 66-1, page 4, ¶ 2, emphasis added.) First, it is not enough that only some or even most of the
citizenship of the members be disclosed. All must be shown. Next, the legal status of the
exempt trust is unknown; therefore, Plaintiff has not shown whose citizenship the Court should
consider in determining if diversity exists. See Americold, supra. Finally, the “partners” of the
exempt trust and their citizenships have been identified, but it is unknown whether the “partners”
are the trustees or the beneficiaries.

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It is also noted that Exhibit 1 (ECF No. 66-2 at page 2 ¶ 9) still identifies the IRA’s address as New Jersey.
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In summary, Plaintiff has not met its burden of demonstrating that diversity jurisdiction
exists.2 Conagra Foods, Inc. v. Americold Logistics, LLC, 776 F.3d 1175, 1182 (10th Cir. 2015),
aff’d, __ U.S. __, 2016 WL 854159 (2016). Accordingly, the Orders to Show Cause are made
ABSOLUTE and this case is DISMISSED WITHOUT PREJUDICE for lack of subject matter
jurisdiction.
DATED this 15th day of March, 2016.
BY THE COURT:

____________________________________
RAYMOND P. MOORE
United States District Judge

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Plaintiff’s second response also asserts the Court has subject matter jurisdiction pursuant to Fed. R. Civ. P. 57 and
28 U.S.C. §§ 2201-02 (ECF No. 66, ¶ 1), but “the Declaratory Judgment Act does not confer jurisdiction upon
federal courts, so the power to issue declaratory judgments must lie in some independent basis for jurisdiction.”
Devon Energy Prod. Co., L.P. v. Mosaic Potash Carlsbad, Inc., 693 F.3d 1195, 1202 (10th Cir. 2012) (internal
quotation marks and citation omitted). See also D.A. Osguthorpe Family Partnership v. ASC Utah, Inc., 576 F.
App’x 759, 764 n.6 (10th Cir. 2014) (unpublished).
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