Fireman's Fund Insurance Company v. Oberndorf Properties et al

Filing 23

ORDER TO SHOW CAUSE by Judge Philip A. Brimmer on 6/26/17. Show Cause Response due by 7/11/2017. (dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 17-cv-01005-PAB-MJW
FIREMAN’S FUND INSURANCE COMPANY, a California corporation,
Plaintiff,
v.
OBERNDORF PROPERTIES, a Colorado general partnership,
OBERNDORF PROPERTIES LTD., a Colorado limited liability company,
STEELE STREET LIMITED II, a Colorado limited partnership,
Defendants.

ORDER TO SHOW CAUSE

The Court takes up this matter sua sponte on the complaint [Docket No. 1] filed
by plaintiff Fireman’s Fund Insurance Company (“Fireman’s Fund”). Fireman’s Fund
states that the Court has subject matter jurisdiction over this lawsuit pursuant to 28
U.S.C. § 1332. Docket No. 1 at 2, ¶ 5.
In every case and at every stage of the proceeding, a federal court must satisfy
itself as to its own jurisdiction, even if doing so requires sua sponte action. Citizens
Concerned for Separation of Church & State v. City & County of Denver , 628 F.2d
1289, 1297 (10th Cir. 1980). Absent an assurance that jurisdiction ex ists, a court may
not proceed in a case. See Cunningham v. BHP Petroleum Great Britain PLC, 427
F.3d 1238, 1245 (10th Cir. 2005). Courts are well-advised to raise the issue of
jurisdiction on their own, regardless of parties’ apparent acquiescence. First, it is the
Court’s duty to do so. Tuck v. United Servs. Auto. Ass’n, 859 F.2d 842, 844 (10th Cir.

1988). Second, regarding subject matter jurisdiction, “the consent of the parties is
irrelevant, principles of estoppel do not apply, and a party does not waive the
requirement by failing to challenge jurisdiction.” Ins. Corp. of Ireland v. Compagnie des
Bauxites de Guinee, 456 U.S. 694, 702 (1982) (internal citations omitted). Finally,
delay in addressing the issue only compounds the problem if it turns out that, despite
much time and expense having been dedicated to a case, a lack of jurisdiction causes it
to be dismissed or remanded regardless of the stage it has reached. See U.S. Fire Ins.
Co. v. Pinkard Constr. Co., No. 09-cv-00491-PAB-MJW, 2009 WL 2338116, at *3 (D.
Colo. July 28, 2009).
It is well established that “[t]he party invoking federal jurisdiction bears the
burden of establishing such jurisdiction as a threshold matter.” Radil v. Sanborn W.
Camps, Inc., 384 F.3d 1220, 1224 (10th Cir. 2004). Firem an’s Fund invokes 28 U.S.C.
§ 1332 as the basis for this Court’s diversity jurisdiction. Docket No. 1 at 2, ¶ 5.
Section 1332(a)(1) states: “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.” The facts as
presently averred, however, do not provide sufficient information regarding the
citizenship of defendants.
The complaint alleges that “Defendant Oberndorf Properties is a Colorado
general partnership. Defendant Oberndorf Properties, Ltd. is a Colorado limited liability
company. Steele Street Limited II is a Colorado limited partnership.” Docket No. 1 at 2,
¶ 3. The complaint also alleges “[o]n information and belief” that “all of the partners or

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members of [defendants] are citizens of Colorado.” Id., ¶ 4. In their answer,
defendants deny that all their partners or members are citizens of Colorado. Docket
No. 11 at 3, ¶ 4. 1
While, for diversity purposes, “a corporation shall be deemed to be a citizen of
every State and foreign state by which it has been incorporated and of the State or
foreign state where it has its principal place of business,” 28 U.S.C. § 1332(c)(1); see
Carden v. Arkoma Assocs., 494 U.S. 185, 196 (1990), 2 these considerations are
irrelevant to the determination of the citizenship of an LLC. See Siloam Springs Hotel,
L.L.C. v. Century Sur. Co., 781 F.3d 1233, 1237-38 (10th Cir. 2015) (“[I]n determ ining
the citizenship of an unincorporated association for purposes of diversity, federal courts
must include all the entities’ members.”).
Furthermore, when an entity consists of multiple tiers of ownership and control,
the entire structure must be considered for diversity purposes. In other words, when an
entity is composed of multiple layers of constituent entities, the citizenship
determination requires an exploration of the citizenship of the constituent entities as far
down as necessary to unravel fully the citizenship of the entity before the court. See
U.S. Advisor, LLC v. Berkshire Prop. Advisors, No. 09-cv-00697-PAB-CBS, 2009 WL

1

Defendants purport to admit diversity of citizenship, Docket No. 11 at 3, ¶ 5, but
this admission is irrelevant because “subject matter jurisdiction may not be waived or
conferred by the consent of the parties.” Aves By & Through Aves v. Shah, 997 F.2d
762, 767 (10th Cir. 1993) (citing Williams v. Life Sav. and Loan, 802 F.2d 1200, 1202
(10th Cir. 1986)).
2

A corporation’s “principal place of business” is “the place where a corporation’s
officers direct, control, and coordinate the corporation’s activities.” Hertz Corp. v.
Friend, 559 U.S. 77, 92-93 (2010).
3

2055206, at *2 (D. Colo. July 10, 2009); SREI-Miami, LLC v. Thomas, No. 08-cv-00730MSK-BNB, 2008 WL 1944322, at *1 (D. Colo. May 2, 2008); see also Hicklin Eng’g,
L.C. v. Bartell, 439 F.3d 346, 347 (7th Cir. 2006); Turner Bros. Crane & Rigging, LLC v.
Kingboard Chem. Holding Ltd., 2007 WL 2848154, at *4-5 (M.D. La. Sept. 24, 2007); cf.
Carden, 494 U.S. at 195 (“[W]e reject the contention that to determine, for diversity
purposes, the citizenship of an artificial entity, the court may consult the citizenship of
less than all of the entity’s members.”).
Fireman’s Fund has not identified defendants’ partners or members or the
citizenship of those entities. See Docket No. 1 at 2. Additionally, the complaint states
its allegations about the partners and members of defendants “[o]n information and
belief,” but fails to provide any factual basis to support the allegations. Id., ¶ 4. The
Court reads Fireman’s Fund’s averment of the citizenship of defendants to mean that
plaintiff does not have affirmative knowledge of defendants’ citizenship. Such
unsupported allegations do not confer subject matter jurisdiction over this case. See
Yates v. Portofino Real Estate Props. Co., LLC, No. 08-cv-00324-PAB-MJW, 2009 WL
2588833, at *3 (D. Colo. Aug. 17, 2009) (requiring plaintiff to “address the citizenship of
each of [defendants’] members without resorting merely to their ‘information and belief’
as to the same”); Pinkard Constr. Co., 2009 WL 2338116, at *3 (allegations made on
information and belief “mean that plaintiffs have no affirmative knowledge of a lack of
diversity”); Fifth Third Bank v. Flatrock 3, LLC, 2010 WL 2998305, at *3 (D.N.J. July 21,
2010) (concluding that an allegation that “upon information and belief, the members of
[an LLC] are citizens of New York” was insufficient because plaintiff “failed to identify or

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trace the citizenship of each individual member” of the LLC (internal quotation marks
omitted)).3 The inadequacy of plaintiff’s information and belief is demonstrated by
defendants’ denial that all of their members and partners are citizens of Colorado. See
Docket No. 11 at 3, ¶ 4. The Court is therefore unable to determine the citizenship of
defendants and whether the Court has jurisdiction. See United States ex rel. General
Rock & Sand Corp. v. Chuska Dev. Corp., 55 F.3d 1491, 1495 (10th Cir. 1995) (“The
party seeking the exercise of jurisdiction in his favor must allege in his pleading the
facts essential to show jurisdiction.”) (citations and internal quotation marks omitted).
For the foregoing reasons, it is
ORDERED that, on or before 5:00 p.m. on July 11, 2017, plaintiff Fireman’s
Fund Insurance Company shall show cause why this case should not be dismissed due
to the Court’s lack of subject matter jurisdiction.

DATED June 26, 2017.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

3

This Court has previously noted that, “[w]hile various state legislatures have
decided to permit the members of LLCs to remain anonymous to the public at large,
Congress has not created an exception to the requirements of diversity jurisdiction
which would allow the members of LLCs to remain anonymous in federal court.” U.S.
Advisor, LLC, 2009 WL 2055206, at *3 (citing Carden, 494 U.S. at 196).
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