Bellack v. The Rainmaker Group Ventures, LLC

Filing 29

ORDER GRANTING 15 Motion to Dismiss for lack of subject matter jurisdiction. Signed by Judge Thomas W. Thrash, Jr. on 9/7/17. (jkl)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
LAWRENCE J. BELLACK,
Plaintiff,
v.

CIVIL ACTION FILE
NO. 1:17-CV-1198-TWT

THE RAINMAKER GROUP
VENTURES, LLC,
Defendant.
OPINION AND ORDER

This is a breach of contract action. It is before the Court on the Defendant The
Rainmaker Group Ventures, LLC’s Motion to Dismiss [Doc. 15] for lack of subject
matter jurisdiction. For the following reasons, Rainmaker’s Motion to Dismiss is
GRANTED.
I. Background
Rainmaker is a Delaware limited liability company with approximately thirtyfive members. It provides software and consulting services to help its customers
manage revenue and increase their profitability.1 The members own shares in

1

See LLC Agreement, at 1 [Doc 1-1]; Cap Table, Exhibit A to Def.’s Mot.
to Dismiss [Doc. 16-1]; Compl. at ¶¶ 7, 8.
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Rainmaker, which are divided into three basic classes: Class A Common, Series A
Preferred, and Class B Common Shares.2 Each class brings to the owner different
rights and responsibilities. The only difference between the classes that is relevant to
the Defendant’s Motion to Dismiss, however, is that Class A and Series A Preferred
shares are voting shares, whereas Class B shares are not.3
The Plaintiff Lawrence Bellack is a Florida domiciliary and served as
Rainmaker’s Vice President of Multifamily Sales from March 2010 to December
2015.4 A little over a year into his tenure, Rainmaker granted Bellack a membership
interest comprised of 115,140 Class B Common Shares.5 Pursuant to the LLC
Agreement, Rainmaker eventually chose to repurchase those shares from Bellack at
a fair value set by Rainmaker’s Board of Managers upon Bellack’s termination of
employment.6 Due to events that occurred a few months after the stock repurchase,
Bellack called into question the Board’s valuation of the shares and filed suit in this
Court on the basis of diversity jurisdiction. The Defendant now moves to dismiss the

2

LLC Agreement § 7.1, at 29.

3

Id. at §§ 7.2-7.4, at 29-30.

4

Compl. at ¶¶ 2, 9.

5

Id. at ¶ 13.

6

See Call Notice, at 3 [Doc. 1-2].

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case pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of complete
diversity.7
II. Legal Standard
A complaint should be dismissed under Rule 12(b)(1) only where the court
lacks jurisdiction over the subject matter of the dispute.8 Attacks on subject matter
jurisdiction come in two forms: “facial attacks” and “factual attacks.”9 Facial attacks
“require[ ] the court merely to look and see if [the] plaintiff has sufficiently alleged
a basis of subject matter jurisdiction, and the allegations in his complaint are taken as
true for the purposes of the motion.”10 On a facial attack, therefore, a plaintiff is
afforded safeguards similar to those provided in opposing a Rule 12(b)(6) motion.11
“‘Factual attacks,’ on the other hand, challenge ‘the existence of subject matter
jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings,

7

The Defendant also moves to dismiss on 12(b)(6) grounds, but because
the Court finds that it does not have subject matter jurisdiction under 12(b)(1), it need
not address the Defendant’s 12(b)(6) arguments.
8

FED. R. CIV. P. 12(b)(1).

9

Garcia v. Copenhaver, Bell & Assocs., M.D.'s, 104 F.3d 1256, 1261
(11th Cir. 1997); Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir. 1990).
10

Lawrence, 919 F.2d at 1529 (quoting Menchaca v. Chrysler Credit, 613
F.2d 507, 511 (5th Cir. 1980)).
11

Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981).

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such as testimony and affidavits, are considered.’”12 The presumption of truthfulness
does not attach to the plaintiff’s allegations.13 Further, “the existence of disputed
material facts will not preclude the trial court from evaluating for itself the merits of
jurisdictional claims.”14
III. Discussion
Rainmaker argues that Bellack’s Complaint should be dismissed for lack of
subject matter jurisdiction because there is not complete diversity of the parties.
Diversity jurisdiction exists where the amount in controversy exceeds $75,000 and the
suit is between citizens of different states.15 “Diversity jurisdiction, as a general rule,
requires complete diversity--every plaintiff must be diverse from every defendant.”16
A limited liability company, unlike a corporation, is a citizen of any state of which one
of its members is a citizen, not of the state where the company was formed or has its

12

Lawrence, 919 F.2d at 1529 (quoting Menchaca, 613 F.2d at 511).

13

Id.

14

Scarfo v. Ginsberg, 175 F.3d 957, 960-61 (11th Cir. 1999).

15

28 U.S.C § 1332(a).

16

Palmer Hosp. Auth. of Randolph Cnty., 22 F.3d 1559, 1564 (11th Cir.

1994).
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principal office.17 “To sufficiently allege the citizenships of these unincorporated
business entities, a party must list the citizenships of all the members of the limited
liability company....”18 “The burden to show the jurisdictional fact of diversity of
citizenship [is] on the ... plaintiff.”19
Bellack has failed to do so in this case, both facially and factually. The
Complaint states that Rainmaker is a Delaware LLC with its principal place of
business in Georgia, and claims that on that basis there is diversity.20 But as stated
above, the citizenship of an LLC is determined differently than that of a corporation;
the citizenship of the LLC’s members is what determines the citizenship of the LLC.
Since Bellack did not list out the members of the LLC and their respective citizenship,
the Complaint fails to adequately allege subject matter jurisdiction.
Normally the Court would simply direct the Plaintiff to replead; however, the
Complaint also fails as a factual matter. The documents provided by the Defendant
along with its motion show that three of Rainmaker’s members are citizens of Florida,
17

See Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374
F.3d 1020, 1022 (11th Cir. 2004).
18

Id.

19

King v. Cessna Aircraft Co., 505 F.3d 1160, 1171 (11th Cir. 2007)
(alteration and omission in original) (quoting Slaughter v. Toye Bros. Yellow Cab
Co., 359 F.2d 954, 956 (5th Cir. 1966)).
20

Compl. ¶¶ 3-5.

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the same state of citizenship as the Plaintiff’s.21 These include two individuals,
Michael Cowles and Stephanie Brown, as well as Longboat Strategic Advisors, LLC
(collectively, the “Florida Shareholders”).22 The two individual members have Florida
addresses and driver’s licenses, and Longboat is a Florida LLC whose majority owner,
Kevin Costello, is also a Florida resident with a Florida driver’s license.23 The
Plaintiff, meanwhile, has presented no evidence to the contrary despite having had an
opportunity to do so in response to this motion.24 As it is, the Court finds the evidence
submitted by the Defendant to be sufficient to establish that the Florida Shareholders
have physical presence in Florida and intend to remain there. This defeats diversity
jurisdiction.

21

Cap Table, Exhibit A to Def.’s Mot. to Dismiss [Doc. 16-1]. The
addresses and driver’s licenses for the individual members provided in Rainmaker’s
Cap Table are located in Florida.
22

See id.; Driver’s Licenses, Exhibit B to Def.’s Mot. to Dismiss [Doc. 16-

2].
23

See Cap Table, Exhibit A to Def.’s Mot. to Dismiss [Doc. 16-1]; Florida
Secretary of State Records, Exhibit C to Def.’s Mot. to Dismiss [Doc. 15-2].
24

Instead of providing contrary evidence, the Plaintiff argues that the
Defendant’s submissions are unverified. However, the burden of proof for establishing
diversity rests with the Plaintiff, not with the Defendant. See King, 505 F.3d at 1171.
Additionally, the Plaintiff complains that he has not gotten satisfactory responses from
the Defendant regarding the citizenship of Class A Common and Series A Preferred
Shareholders. But as the Court finds that Class B Common Shareholders are members
of Rainmaker, this complaint is moot.
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Rather than contesting their domicile, Bellack instead argues that the Florida
Shareholders are not actually members of Rainmaker because they do not have voting
rights as Class B Common Shareholders. As Bellack rightfully points out, ownership
or financial interest in an LLC does not necessarily connote membership.25 But
Bellack makes the logical mistake of believing that because ownership is not
sufficient, that means that voting rights are necessary. In fact, the Delaware Code
explicitly says that “[a] limited liability company agreement may provide that any
member or class or group of members shall have no voting rights.”26
The true test for LLC membership is not whether they have voting rights or a
financial interest, but is rather whatever the LLC Agreement says it is.27 In this case,
the LLC Agreement states that a “Shareholder” means:
any record owner of Shares. Each record owner of Shares who has
executed a signature page to this LLC Agreement is entitled to possess
and exercise all the rights and privileges of a member of a limited
liability company organized under the Delaware Act, subject to the terms

25

See Del. Code tit. 6, § 18-702(b)(1) (“An assignment of a limited liability
company interest does not entitle the assignee to become or to exercise any rights or
powers of a member;”).
26

Del. Code tit. 6, § 18-302(a) (emphasis added).

27

See id. at § 18-301 (setting default rules for admitting members of an
LLC, but deferring to the LLC agreement).
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of this LLC Agreement, including without limitation, the right to vote and
otherwise participate in the management and affairs of the Company.28
In other words, in order to be a member of Rainmaker, one must (1) own shares and
(2) have signed the LLC Agreement. That is it; there are no other requirements.29 All
three Florida Shareholders own shares, and at least two have signed the LLC
Agreement, making at least Longboat and Cowles members of Rainmaker.30 And
because at least two of Rainmaker’s members are Florida domiciliaries, Rainmaker
is also a Florida domiciliary. As Florida is also the domicile of the Plaintiff, there is
not complete diversity, and this Court does not have subject matter jurisdiction.
IV. Conclusion
For the reasons stated above, the Defendant’s Motion to Dismiss is GRANTED.

28

LLC Agreement, at 10.

29

The Plaintiff tries to focus attention on the last clause of that definition
(“including without limitation, the right to vote and otherwise participate in the
management and affairs of the Company”) but misses the important phrase right
before it stating that the rights and privileges of members were “subject to the terms
of this LLC Agreement.”
30

See Share Certificates, Exhibit D to Def.’s Mot. to Dismiss [Doc. 16-3];
Additional Shareholder Signature Pages, LLC Agreement, at 82, 96 [Doc 1-1].
Stephanie Brown’s signature page, to the extent it exists, is not included in the record.
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SO ORDERED, this 7 day of September, 2017.

/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge

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