RES-GA Creekside Manor, LLC v. Star Home Builders, Inc. et al

Filing 23

ORDER granting Defendants Star Home Builders,Inc. and Starke Hudson's 19 Motion to Set Aside Summary Judgment and Motion to Dismiss for Lack of Subject Matter Jurisdiction. Signed by Judge Richard W. Story on 12/2/2011. (vld)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
GAINESVILLE DIVISION
RES-GA CREEKSIDE MANOR,
LLC,
Plaintiff,
v.
STAR HOME BUILDERS, INC.
and STARKE HUDSON,

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CIVIL ACTION NO.
2:10-CV-207-RWS

Defendants.
ORDER
This case comes before the Court on Defendants Star Home Builders,
Inc. and Starke Hudson’s Motion to Set Aside Summary Judgment and Motion
to Dismiss for Lack of Subject Matter Jurisdiction [19] (“Defendants’ Motion”).
After reviewing the record, the Court enters the following order.
Background
On October 7, 2010, Plaintiff RES-GA Creekside Manor, LLC (“RESGA”) filed this action against Defendants seeking to recover money owed under
a promissory note and personal guaranty agreement. Compl., Dkt. [1] ¶¶ 17,
19, 21-23. Plaintiff predicated federal subject matter jurisdiction on diversity
of citizenship, alleging that Plaintiff is a Florida limited liability company with

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its principal place of business in Miami, Florida, that both Defendants are
citizens of Georgia, and that the amount in controversy exceeds $75,000.00. Id.
¶¶ 1-5. Plaintiff moved for summary judgment [15] on February 22, 2011.
Defendants did not respond to this motion. By Order dated March 25, 2011
[17], the Court granted summary judgment in favor of Plaintiff.
Defendants now move the Court to set aside the summary judgment and
dismiss the case for lack of subject matter jurisdiction. Defendants contend the
Court lacks subject matter jurisdiction because there is not complete diversity
among the parties. Specifically, Defendants advance the following argument:
first, that the citizenship of Plaintiff, a limited liability company (“LLC”), is
that of each of its members; second, that one of Plaintiff’s members is the
Federal Deposit Insurance Corporation (the “FDIC”), a federally chartered
corporation; and third, that because federally chartered corporations are not
citizens of any state, the membership of the FDIC in the Plaintiff LLC destroys
its claim to complete diversity of citizenship. Defs.’ Motion, Dkt. [19] at 3.
The Court considers these contentions below.

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Discussion
Under Federal Rule of Civil Procedure 60(b)(4), the Court may relieve a
party from a final judgment if the judgment is “void.” “A judgment is ‘void’
under Rule 60(b)(4) if it was rendered without jurisdiction of the subject matter
. . . .” Oaks v. Horizon Fin., S.A., 259 F.3d 1315, 1319 (11th Cir. 2001). A
challenge to the Court’s subject matter jurisdiction may be raised at any time.
Id. at 1317. Accordingly, if the Court is without subject matter jurisdiction over
this action, it must set aside the previously entered summary judgment and
dismiss the case. See also, Latin Am. Prop. & Cas. Ins. Co. v. Hi-Lift Marina,
Inc., 887 F.2d 1477, 1479 (11th Cir. 1989) (“[W]e are duty-bound to determine
for ourselves the basis for jurisdiction in the district court, and to dismiss for
lack of jurisdiction any case in which it is found to be wanting. . . . This rule,
springing from the nature and limits of the judicial power of the United States is
inflexible and without exception . . . .”) (internal quotation marks and citations
omitted).1

1

In opposition to Defendants’ Motion, Plaintiff makes much of the distinction
between “mere errors in the exercise of jurisdiction” and a “total want of jurisdiction.”
Pl.’s Opp’n, Dkt. [22] at 5-6. Plaintiff cites Oaks for the proposition “that a mere
error in the exercise of jurisdiction does not support relief under Rule 60(b)(4),” which
affords relief only where a judgment is rendered despite a “total want of jurisdiction.”
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In this case, Plaintiff predicated federal subject matter jurisdiction on
diversity of citizenship, alleging Plaintiff to be a citizen of Florida and the two
Defendants citizens of Georgia. “Federal diversity jurisdiction under 28 U.S.C.
§ 1332 requires ‘complete diversity’–the citizenship of every plaintiff must be
diverse from the citizenship of every defendant.” Legg v. Wyeth, 428 F.3d
1317, 1320 n.2 (11th Cir. 2005). On the facts as alleged in the Complaint, it
certainly appears that the requirement of complete diversity was satisfied in this
case. However, as Defendants argue, the citizenship of an LLC, such as
Plaintiff, must be determined with reference to each member of the LLC. “[A]
limited liability company is a citizen of any state of which a member of the
company is a citizen.” Rolling Greens MHP, L.P. v. Comcast SCH Holdings
LLC, 374 F.3d 1020, 1022 (11th Cir. 2004). Accordingly, to determine
Plaintiff’s citizenship in this case, and thus whether there is complete diversity
Id. (citing 259 F.3d at 1319). In other words, “an error in law is insufficient to render
a judgment void under Rule 60(b)(4).” Gulf Coast Bldg. & Supply Co. v. Int’l Bhd.
of Elec. Workers, 460 F.2d 105, 108 (5th Cir. 1972). (In Bonner v. City of Pritchard,
661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as
binding precedent all decisions of the former Fifth Circuit decided before October 1,
1981.) This rule, however, is of no help to Plaintiff. The substance of Defendants’
subject matter jurisdiction challenge is not that the Court made an error of law in the
exercise of its jurisdiction, but rather that the Court lacked subject matter jurisdiction
entirely–rendering the summary judgment void. Defendants’ claim thus falls squarely
within the ambit of Rule 60(b)(4).
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among the parties, the Court must consider the citizenship of each member of
the Plaintiff LLC.
The parties agree that Plaintiff’s ownership structure is as follows:
Plaintiff RES-GA Creekside Manor, LLC is a Florida limited
liability company, whose sole member is (A) Multibank 2009-1
RES-ADC Venture, LLC.
(A)

Multibank 2009-1 RES-ADC Venture, LLC is a
Delaware limited liability company, comprise [sic] of
two members (1) RL RES 2009-1 Investments, LLC
and (2) the FDIC.
(1)

RL RES 2009-1 Investments, LLC is a
Delaware limited liability company comprised
of only two members: (a) Rialto RL RES 20091, LLC and (b) Lennar Distressed Investments,
LLC.
(a)

Rialto RL RES 2009-1, LLC is a
Delaware limited liability company
whose sole member is (i) Rialto Capital
Holdings, LLC a Delaware limited
liability company.
(i)

Rialto Capital Holdings, LLC is a
Delaware limited liability
company whose sole member is
(A) Rialto Capital Management,
LLC.
(A)

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Rialto Capital Management,
LLC is a Delaware limited

liability company whose
sole member is Jeffrey
Krasnoff, a Florida citizen.
(b)

Lennar Distressed Investments, LLC is a
Delaware limited liability company
whose sole member is (i) Lennar
Corporation.
(i)

(2)

Lennar Corporation is a Delaware
corporation with its principal place
of business in Florida.

The FDIC is a federally chartered corporation.

Defs.’ Mot., Dkt. [19] at 4-5. This ownership structure shows that Plaintiff is
wholly owned by Multibank 2009-1 RES-ADC Venture, LLC (“Multibank
LLC”), which in turn has only two members–RL RES 2009-1 Investments,
LLC (“RL RES LLC”) and the FDIC. The structure also reveals that each
member of RL RES LLC is a citizen of either Delaware or Florida. Thus on
these facts, and putting aside the FDIC, Plaintiff would appear to be a citizen of
Delaware and Florida; as Defendants are both citizens of Georgia, there would
appear to be complete diversity among the parties. The presence of the FDIC in
this ownership structure, however, changes the analysis.

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Defendants correctly argue that the membership of the FDIC in the
Plaintiff LLC destroys complete diversity and deprives this Court of diversity
jurisdiction. As already stated, the FDIC is a federally chartered corporation
that, by extension, was not incorporated under the laws of any state. It is well
settled that, in general, federally chartered corporations are not citizens of any
state for purposes of diversity of citizenship; the presence of a federally
chartered corporation as a party to a suit thus destroys complete diversity.2
Bankers Trust Co. v. Texas & Pacific Ry. Co., 241 U.S. 295, 309-10 (1916).
The FDIC is not a party in this case but, rather, a member of Plaintiff’s member,
Multibank LLC. Nonetheless, Plaintiff is a citizen of each state of which its
members are citizens, and thus shares the citizenship of the FDIC.3 Because the

2

There are two exceptions to this rule, neither of which is applicable in this
case. First, a federally chartered corporation may have state citizenship if a specific
statutory provision so provides. Bankers Trust, 241 U.S. at 310. Second, a federally
chartered corporation may be treated as a citizen of a particular state for purposes of
diversity jurisdiction if the corporation’s activities are largely confined to that state.
Id.; see also Loyola Fed. Savings Bank v. Fickling, 58 F.3d 603, 606 (11th Cir. 1995)
(noting exception to general rule that federally chartered corporations lack state
citizenship, under which “a corporation [may] be considered a citizen of one state for
diversity purposes if the corporation’s activities are ‘localized’ in that state . . . .”).
3

Plaintiff’s citizenship is that of its only member, Multibank LLC, which, in
turn, is a citizen of every state of which its members are citizens, including the FDIC.
Accordingly, through Multibank LLC, Plaintiff shares the citizenship of the FDIC.
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FDIC is a citizen of no state, Plaintiff is also a citizen of no state, thus
destroying Plaintiff’s claim to complete diversity among the parties.4

4

Contrary to this conclusion, Plaintiff argues that diversity jurisdiction may
exist where a federally chartered entity, such as the FDIC, is a party to the suit. Pl.’s
Opp’n, Dkt. [22] at 12-13. Plaintiff cites Fromkin v. Indymac Bank FSB, No. 10-CV8014, 2010 U.S. Dist. LEXIS 46040 (D. Ariz. Mar. 31, 2010) and argues that in that
case, “the involvement of two federally chartered defendants, including the FDIC,
neither of which are [sic] incorporated in any particular state, did not destroy diversity
jurisdiction . . . .” The court’s analysis in Fromkin, however, was limited to the
following:
“Plaintiff . . . is a resident of the state of Arizona. Removing Defendant
IMB is a Delaware limited liability company with its principal place of
business in Delaware. Defendant OneWest, FSB is a federally chartered
savings bank that is neither domiciled, nor maintains its principal place
of business, in Arizona. Defendant IndyMac Bank, FSB was a federal
savings bank which was closed by the Office of Thrift Supervision, and
on July 11, 2008, the FDIC was named as its conservator. Defendant
MERS is a Delaware corporation with its principal place of business in
Virginia. Defendant Quality Loan Services, Inc. is a California
corporation with its principal place of business in California. Thus,
complete diversity of citizenship between Plaintiff and each of the
Defendants exist.”
Id. at *4-5. The Court finds this decision to be of no persuasive value given the
court’s lack of analysis regarding the citizenship of the FDIC, or how the FDIC’s
presence as conservator affected the diversity jurisdiction analysis. The Court also
notes that both federally chartered entities in Fromkin were federally chartered banks,
which, by statute, are attributed a state citizenship for purposes of diversity
jurisdiction. See 28 U.S.C. § 1348 (providing that for purposes of diversity
jurisdiction, national banks “shall . . . be deemed citizens of the States in which they
are respectively located”); Wachovia Bank v. Schmidt, 546 U.S. 303, 306 (2006)
(defining the meaning of “located” in § 1348 and holding, “[A] national bank[], i.e.,
corporate entit[y] chartered not by any State but by the Comptroller of the Currency of
the U.S. Treasury[,] . . . is a citizen of the State in which its main office, as set forth in
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It appears to the Court that each federal district court to have considered
this issue explicitly has reached the same result and concluded that the
membership of the FDIC in an LLC (or member of the LLC) renders the LLC
“stateless,” thus destroying diversity of citizenship. Notably, in each of these
other cases, and as in this case, the plaintiff was either Multibank LLC or an
LLC wholly owned by Multibank LLC; the court in each case thus considered
the same ownership structure as that under consideration in this case. In RESNC Settlers Edge, LLC v. Settlers Edge Holding Company, the court granted
the defendant’s motion to dismiss for lack of subject matter jurisdiction on
grounds that there was not complete diversity among the parties, given the
membership of the FDIC in Multibank LLC, the sole owner of the plaintiff
LLC. No. 1:10-CV-173, 2011 WL 3897729, at *5 (W.D.N.C. Sept. 6, 2011).
The court in Settlers Edge reasoned as follows:
In the present case, there is complete diversity of citizenship
among the parties’ owners, other than FDIC. The problem here is
that the FDIC is not incorporated under the laws of any state
because it is a federally chartered corporation. . . . Unless a

the articles of association, is located.”). In any event, the Court agrees with the
decisions of other district courts, discussed below, that have explicitly addressed the
issue and held that the membership of the FDIC in an LLC renders the LLC and its
members ineligible to invoke diversity jurisdiction.
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specific statutory provision dictates otherwise, a federally charted
corporation is not a citizen of any state, meaning it is not eligible
for diversity jurisdiction. . . . The citizenship of a limited liability
company . . . is the citizenship of each of its members. If one
member of a limited liability company is “stateless,” the limited
liability company itself is stateless and jurisdiction cannot be
premised on [diversity of citizenship]. . . . Here, the ownership
interest of FDIC renders the Plaintiff LLC a “stateless” party. As
such, there is no diversity of citizenship among the parties to this
action and no jurisdiction lies pursuant to 28 U.S.C. § 1332.
Id. at *4-5 (emphasis added).
Similarly, the court in Multibank 2009-1 RES-ADC Venture, LLC v.
CRM Ventures, LLC and William Craig Turner considered this issue sua sponte
and remanded the case to state court on grounds of lack of subject matter
jurisdiction. No. 10-CV-02001-PAB-CBS, 2010 WL 3632359 (D. Colo. Sept.
10, 2010). The court’s analysis began with the proposition that the citizenship
of an LLC, for purposes of diversity jurisdiction, is determined by the
citizenship of each of its members. Id. at *1 (“[W]hen a limited liability
company 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

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entities as far down as necessary to unravel fully the citizenship of the entity
before the court.”). Because the FDIC was a member of the plaintiff, Multibank
LLC, and a citizen of no state, the CRM Ventures court held there was not
complete diversity among the parties and therefore no subject matter
jurisdiction. Id. at *2.
The court in RES-NV APC, LLC v. Astoria Pearl Creek, LLC likewise
held, “This court lacks diversity jurisdiction over this civil matter because the
[FDIC] (a) is a federal corporation that is not a citizen of any state, and (b) is a
member of the limited liability company [Multibank LLC] that is the sole
member of [the plaintiff].” No. 2:11-CV-00381-LDG(RJJ), 2011 WL 537405 at
*1-2 (D. Nev. Nov. 4, 2011). The court reasoned that because the citizenship of
a member of the plaintiff LLC was “no particular state,” the plaintiff was a
citizen of “no particular state,” thus destroying complete diversity among the
parties. Id. at *2. See also RES-NV TVL, LLC v. Towne Vistas LLC, et al.,
No. 2:10-CV-1084 JCM (PAL), 2011 WL 5117886, at *1-2 (D. Nev. Oct. 27,
2011) (dismissing for lack of subject matter jurisdiction on grounds that the
FDIC’s membership in Multibank LLC, a member of the plaintiff LLC,

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destroyed diversity of citizenship because the FDIC is not a citizen of any
state).
The Court joins the other district courts to have explicitly addressed this
issue and holds that there is no diversity jurisdiction in this case. The
membership of the “stateless” FDIC in Multibank LLC, Plaintiff’s member,
renders Plaintiff a citizen of no state. Accordingly, there is not complete
diversity among the parties, and the Court lacks subject matter jurisdiction.5
5

Although not alleged in the Complaint, Plaintiff argues in opposition to
Defendants’ Motion that in addition to diversity jurisdiction, the Court has federal
question jurisdiction under 12 U.S.C. § 1819(b)(2)(A). Pl’s Opp’n, Dkt. [22] at 7-10.
Defendants also reference the possibility of federal question jurisdiction under § 1819,
but–citing an outdated version of the statute–conclude it does not exist. Defs.’ Mot.,
Dkt. [19] at 5. While Defendants are correct that there is no federal question
jurisdiction in this case, their reasoning in support of this conclusion is flawed.
Defendants cite § 1819 as providing “that all civil suits ‘to which the [FDIC] shall be
a party shall be deemed to arise under the laws of the United States . . . except that any
such suit to which the [FDIC] is a party in its capacity as a receiver of a State bank . .
. shall not be deemed to arise under the laws of the United States.’” Id. (emphasis in
original) (citing 12 U.S.C. § 1819 (Fourth)). Defendants reason that because the
FDIC is acting as a receiver of a State bank in this case, there is no federal question
jurisdiction. Id. As a threshold matter, Plaintiff is correct that the version of the
statute cited by Defendants has been superceded. Pl.’s Opp’n, Dkt. [22] at 7. The
statute now provides:
(2)(A) (Federal Court Jurisdiction In General) Except as provided in
subparagraph (D), all suits of a civil nature at common law or in equity
to which the [FDIC], in any capacity, is a party shall be deemed to arise
under the laws of the United States.

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(D) (State Actions) Except as provided in subparagraph (E), any action .
. . to which the [FDIC], in [its] capacity as receiver of a State insured
depository institution by the exclusive appointment by State authorities,
is a party other than as a plaintiff . . . shall not be deemed to arise under
the laws of the United States.
(E) (Rule of Construction) Subparagraph (D) shall not be construed as
limiting the right of the [FDIC] to invoke the jurisdiction of any United
States district court in any action described in such paragraph if the
institution of which the [FDIC] has been appointed receiver could have
invoked the jurisdiction of such court.
12 U.S.C. § 1819 (emphasis added). While Plaintiff is correct that Defendants rely on
an outdated version of § 1819, this oversight is immaterial because under either
version of the statute, there is no federal question jurisdiction in this case because the
FDIC is not a party. Under either version the statute, federal question jurisdiction is
only presumed in cases where the FDIC is a party. “A ‘party’ is one by or against
whom a lawsuit is brought.” Settlers Edge, 2011 WL 3897729 at *3 (citing Hukic v.
Aurora Loan Servs., 588 F.3d 420, 429 (7th Cir. 2009)). While it does not make the
argument explicitly, Plaintiff seems to believe that the FDIC’s ownership interest in
Multibank LLC, Plaintiff’s sole owner, compels the Court to treat the FDIC as a party
for purposes of federal question jurisdiction. Pl.’s Opp’n, Dkt. [22] at 8-10. This
contention is without merit. The FDIC is not a party in this case, and its membership
in Plaintiff’s parent LLC does not make it one. Accordingly, there is no basis for
federal question jurisdiction under § 1819. See also Astoria Pearl Creek, 2011 WL
5374050 at *3:
RES-NV APC, not the FDIC, brought the instance action. RES-NV
APC offers no support for its bald proposition that, if the FDIC’s
ownership interest is substantial, ‘then clearly the FDIC would be a
party pursuant to 12 U.S.C. § 1819.’ RES-NV has not argued or
suggested that the FDIC is a defendant, a third-party defendant, or is
otherwise a party in any capacity to this action. As the FDIC is not and
never has been a party, in any capacity, to this civil action, this civil
action is not deemed to arise under the laws of the United States
pursuant to § 1819(b)(2)(A).
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Conclusion
In light of the foregoing, Defendants Star Home Builders, Inc. and Starke
Hudson’s Motion to Set Aside Summary Judgment and Motion to Dismiss for
Lack of Subject Matter Jurisdiction [19] are hereby GRANTED.
SO ORDERED, this 2nd day of December, 2011.

_______________________________
RICHARD W. STORY
UNITED STATES DISTRICT JUDGE

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