Hancock et al v. Kulana Partners, LLC et al

Filing 64

ORDER REGARDING SUBJECT MATTER JURISDICTION. Signed by JUDGE DERRICK K. WATSON on 2/1/2017. Re: 56 USCA Memorandum -- Upon the limited remand from the Ninth Circuit for purposes of assessing the basis of federal court jurisdiction, the Court determines that the requirements of diversity jurisdiction set forth in 28 U.S.C. § 1332(a)(1) are satisfied. The parties shall notify the appellate panel that has retained jurisdiction to hear any fut ure appeals in this matter of this Court's finding regarding subject matter jurisdiction. (ecs, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry. ad hoc: USCA Clerk

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI‘I
WILLIAM R. HANCOCK, individually CIVIL NO. 13-00198 DKW-RLP
and as Trustee of HANCOCK AND
COMPANY, INC. PROFIT SHARING
TRUST, under trust instrument April 3, ORDER REGARDING SUBJECT
1983,
MATTER JURISDICTION
Plaintiff,
vs.
KULANA PARTNERS, LLC, a Hawaii
limited liability company; FIDELITY
NATIONAL TITLE & ESCROW OF
HAWAII, INC., a Hawaii corporation,
Defendants.

ORDER REGARDING SUBJECT MATTER JURISDICTION
By memorandum dated November 7, 2016, the United States Court of
Appeals for the Ninth Circuit directed this Court to assess whether diversity exists
between the parties, whether this case is “related to” a bankruptcy proceeding
under 28 U.S.C. § 1334(b), or whether there is any other basis for federal court
jurisdiction. See Dkt. No. 56. Based on the uncontested submissions of the
parties, the Court concludes that diversity jurisdiction exists in this case pursuant to

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28 U.S.C. § 1332(a)(1). 1
DISCUSSION
I.

Diversity Jurisdiction
A federal court has diversity jurisdiction over actions between citizens of

different states where the amount in controversy exceeds $75,000. 28 U.S.C.
§ 1332. “Diversity jurisdiction requires complete diversity between the
parties—each defendant must be a citizen of a different state from each plaintiff.”
In re Digimarc Corp. Derivative Litig., 549 F.3d 1223, 1234 (9th Cir. 2008). A
limited liability company “is a citizen of every state of which its owners/members
are citizens,” not the state in which it was formed or does business. NewGen,
LLC v. Safe Cig, LLC, 840 F.3d 606, 612 (9th Cir. 2016) (quoting Johnson v.
Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006)).
In the jurisdictional allegation of his Complaint, Plaintiff William R.
Hancock alleges that Kulana Partners, LLC (“KPL”) is “a Hawaii Limited Liability
company and a citizen of the State of Hawaii.” Complaint ¶ 2. The Complaint,
however, does not allege the citizenship of each of the members of KPL. See
Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th Cir. 2001) (“[I]n a diversity
action, the plaintiff must state all parties’ citizenships such that the existence of
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Because the Court concludes that diversity jurisdiction exists, it does not reach the potential
jurisdictional alternatives identified by the Ninth Circuit.

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complete diversity can be confirmed.”). The citizenship of each of the members
of a limited liability company must be pled. Johnson, 437 F.3d at 899. When
judgment entered in this matter on January 10, 2014, neither the parties nor the
Court had identified the defect in Hancock’s jurisdictional allegations.
II.

Diversity Existed At The Time Of The Filing Of The Complaint
Following the Ninth Circuit’s limited remand, the Court solicited additional

information from the parties regarding the citizenship of KPL, among other things.
The parties agree that complete diversity exists. Moreover, Defendants do not
dispute Hancock’s allegation that the jurisdictional amount for purposes of
diversity has been satisfied. See Complaint ¶¶ 5-6.
A.

Citizenship of Hancock

Hancock, individually and as Trustee of Hancock and Company, Inc. Profit
Sharing Trust, under trust Instrument April 3, 1993, alleges that he was a citizen of
Nevada at the time of filing the Complaint. See Complaint ¶ 1. He further avers
that he intends to reside and remain domiciled in the State of Nevada. See
Hancock Decl. ¶ 8.
B.

Citizenship of Fidelity

Defendant Fidelity National Title & Escrow of Hawaii, Inc. (“Fidelity”)
admits in its Answer that it is a citizen of Hawaii. Dkt. No. 14 (6/19/13 Answer

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¶ 1). Further, Fidelity does not dispute Hancock’s showing that it has not
registered to do business in Nevada for purposes of its corporate citizenship. See,
e.g., Hogan Decl. Ex. F.
C.

Citizenship of KPL

None of the members of KPL were citizens of Nevada at the time the action
was commenced. The four members of KPL and their respective citizenships are:
C. Dustin Crane (Georgia); Milan S. Crane (Utah); Curtis R. Crane (Arizona); and
F. Michael Crane (Utah). See C. Dustin Crane Decl. ¶ 4; Milan S. Crane Decl.
¶ 4; Curtis R. Crane Decl. ¶ 4; and F. Michael Crane Decl. ¶ 4. See also Hogan
Exs. B and C.
D.

Complete Diversity Exists Based Upon The Record Evidence

Based upon the foregoing, complete diversity exists between Hancock, on
one hand, and Defendants Fidelity and the individual members of KPL, on the
other. Although the Complaint did not allege the citizenship of the members of
KPL, the previously defective jurisdictional allegations are not fatal. The Court is
satisfied that the uncontroverted evidence submitted for purposes of the limited
remand cures the jurisdictional deficiency, and amendment of the pleadings is
neither economical nor required. As the Ninth Circuit recently explained:
Defective jurisdictional allegations are not fatal, however. A
judgment is only void where there is a “total want of
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jurisdiction” as opposed to an “error in the exercise of
jurisdiction.” Watts v. Pinckney, 752 F.2d 406, 409 (9th Cir.
1985) (internal quotation marks omitted). Courts may permit
parties to amend defective allegations of jurisdiction at any
stage in the proceedings. The operative statute, 28 U.S.C.
§ 1653, provides that “[d]efective allegations of jurisdiction
may be amended, upon terms, in the trial or appellate courts.”
We agree that “[s]ection 1653’s liberal amendment rule permits
a party who has not proved, or even alleged, that diversity
exists to amend his pleadings even as late as on appeal.” D.C.
ex rel. Am. Combustion, Inc. v. Transamerica Ins. Co., 797 F.2d
1041, 1044 (D.C. Cir. 1986). The intent of the provision is to
avoid the needless expenditure of judicial resources where a
court can instead “permit the action to be maintained if it is at
all possible to determine from the record that jurisdiction does
in fact exist.” Aurecchione v. Schoolman Transp. Sys., Inc.,
426 F.3d 635, 639 (2d Cir. 2005) (internal quotation marks
omitted).
NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 612-13 (9th Cir. 2016). See also
Sun Printing & Publ’g Ass’n v. Edwards, 194 U.S. 377, 382 (1904) (“The whole
record . . . may be looked to, for the purpose of curing a defective averment of
citizenship, where jurisdiction in a Federal court is asserted to depend upon
diversity of citizenship[.]”); Travaglio v. Am. Exp. Co., 735 F.3d 1266, 1269 (11th
Cir. 2013) (“[W]e need not vacate a decision on the merits if the evidence
submitted during the course of the proceedings cures any jurisdictional pleading
deficiency by convincing us of the parties’ citizenship.”).
CONCLUSION
Upon the limited remand from the Ninth Circuit for purposes of assessing
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the basis of federal court jurisdiction, the Court determines that the requirements of
diversity jurisdiction set forth in 28 U.S.C. § 1332(a)(1) are satisfied.
The parties shall notify the appellate panel that has retained jurisdiction to
hear any future appeals in this matter of this Court’s finding regarding subject
matter jurisdiction.
IT IS SO ORDERED.
DATED: February 1, 2017 at Honolulu, Hawai‘i.

Hancock v. Kulana Partners, LLC et al.; CV 13-00198 DKW-RLP; ORDER REGARDING
SUBJECT MATTER JURISDICTION

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