Polunin et al v. Fedotov

Filing 20

ORDER GRANTING DEFENDANT MIKHAIL FEDOTOV'S MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION (ECF NO. 8 ) re 19 - Signed by JUDGE HELEN GILLMOR on 3/29/2017. "Defendant's Motion to Dismiss (ECF No. 8) is < B>GRANTED. Plaintiffs' Complaint (ECF No. 1) is DISMISSED WITH PREJUDICE for lack of federal jurisdiction. The Clerk of the Court is ORDERED to CLOSE THE CASE. " (emt, )CERTIFICAT E 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

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
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DMITRY POLUNIN; EVGENY
BARZOV; TIMUR KHARCHENKO,
Plaintiffs,
vs.

MIKHAIL FEDOTOV; DOES 1-20;
DOE CORPORATIONS 1-20; DOE
PARTNERSHIPS 1-20; DOE
ENTITIES 1-20,
Defendant.

Civ. No. 16-00664 HG-KSC

ORDER GRANTING DEFENDANT MIKHAIL FEDOTOV’S MOTION TO DISMISS
FOR LACK OF SUBJECT-MATTER JURISDICTION (ECF No. 8)
Plaintiffs Dmitry Polunin, Evgeny Barzov, and Timur
Kharchenko filed a Complaint alleging state law breach of
contract claims against Defendant Mikhail Fedotov.
The Complaint alleges Plaintiffs are citizens of the
Russian Federation.
The Complaint does not contain an allegation as to
Defendant Fedotov’s citizenship.

The Complaint alleges

Defendant Fedotov is a permanent resident of the United States
of America and a resident of the State of Hawaii.
Defendant Fedotov filed a Motion to Dismiss for lack of
subject-matter jurisdiction.

Defendant asserts he is a

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citizen of the Russian Federation, just as are all three
Plaintiffs.

Defendant argues that there is no diversity

jurisdiction and that the Court lacks subject-matter
jurisdiction over the Complaint.
Defendant’s Motion to Dismiss (ECF No. 8) is GRANTED.

PROCEDURAL HISTORY

On December 20, 2016, Plaintiffs filed a Complaint.

(ECF

No. 1).
On January 27, 2017, Defendant filed DEFENDANT MIKHAIL
FEDOTOV’S MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER
JURISDICTION.

(ECF No. 8).

On February 13, 2017, Plaintiffs filed PLAINTIFFS’
MEMORANDUM IN OPPOSITION TO DEFENDANT MIKHAIL FEDOTOV’S MOTION
TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION.

(ECF No.

12).
On February 27, 2017, Defendant filed DEFENDANT MIKHAIL
FEDOTOV’S MEMORANDUM IN REPLY TO PLAINTIFFS’ MEMORANDUM IN
OPPOSITION TO DEFENDANT MIKHAIL FEDOTOV’S MOTION TO DISMISS
FOR LACK OF SUBJECT-MATTER JURISDICTION.

(ECF No. 16).

On March 28, 2017, the Court held a hearing on
Defendant’s Motion to Dismiss.

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BACKGROUND

Plaintiffs Dmitry Polunin, Evgeny Barzov, and Timur
Kharchenko state they are citizens of the Russian Federation.
(Complaint at ¶¶ 1-3, ECF No. 1).
The Complaint does not contain an allegation as to
Defendant Mikhail Fedotov’s citizenship.

The Complaint states

that Defendant Fedotov is “a permanent resident of the United
States and a current resident of the State of Hawaii.”
at ¶ 4).

(Id.

Defendant Fedotov submitted an affidavit stating

that he is a citizen of the Russian Federation.

(Affidavit of

Defendant Mikhail Fedotov at ¶ 3, attached to Def.’s Motion to
Dismiss, ECF No. 8-2).
The Complaint contains two state law claims against
Defendant Fedotov.

(Complaint at ¶¶ 33-38, ECF No. 1).

Count I

Count I is a state law claim for Breach of Contract by
Plaintiffs Polunin and Barzov against Defendant Fedotov.

(Id.

at ¶¶ 33-35).
Plaintiffs claim Defendant Fedotov is a member and sole
manager of Envy Hawaii, LLC, a limited liability company
selling automobiles in Hawaii.

(Id. at ¶¶ 9-10).

The Complaint states that in 2012, Plaintiffs Polunin and
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Barzov each purchased an interest in Envy Hawaii, LLC.
at ¶¶ 8-9, 11-12).

(Id.

Plaintiffs Polunin and Barzov allege that

in 2014, they entered into an agreement with Defendant Fedotov
for him to purchase their combined interests in Envy Hawaii,
LLC.

(Id. at ¶¶ 13-17).

Plaintiffs Polunin and Barzov claim

Defendant Fedotov did not make sufficient payments to them and
failed to comply with the terms of the agreement.

(Id. at ¶¶

16-17, 22-35).

Count II

Count II is a state law claim for Breach of Contract by
Plaintiff Kharchenko against Defendant Fedotov.

(Id. at ¶¶

36-38).
Plaintiff Kharchenko alleges he entered into a loan
agreement with Defendant Fedotov for $750,000.
19).

(Id. at ¶¶ 18-

Plaintiff Kharcheko claims Defendant Fedotov failed to

make any payment on the loan.

(Id. at ¶¶ 21, 36-38).

STANDARD OF REVIEW

A plaintiff has the burden of proving that subject-matter
jurisdiction does in fact exist.

Thornhill Publ’g Co., Inc.

v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir.
1979).

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Federal Rule of Civil Procedure 12(b)(1) requires that a
case must be dismissed for lack of subject-matter jurisdiction
when the Court lacks a constitutional or statutory basis to
adjudicate the controversy.

Fed. R. Civ. P. 12(b)(1); Leeson

v. Transamerica Disability Income Plan, 671 F.3d 969, 975 (9th
Cir. 2012).
A challenge to the Court’s subject-matter jurisdiction
may be “facial or factual.”

Safe Air for Everyone v. Meyer,

373 F.3d 1035, 1039 (9th Cir. 2004).

In a facial attack, the

party challenging jurisdiction argues that the allegations
contained in a complaint are insufficient “on their face” to
invoke federal jurisdiction.

Id.

A facial challenge,

therefore, mirrors a traditional motion to dismiss analysis.
The Court must take all allegations contained in the pleading
“to be true and draw all reasonable inferences in [its]
favor.”

Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir.

2004).
In a factual attack, the party challenging jurisdiction
argues that the facts in the case, notwithstanding the
allegations in the Complaint, divest the Court of subjectmatter jurisdiction.
(9th Cir. 2000).

See White v. Lee, 227 F.3d 1214, 1242

No presumptive truthfulness attaches to the

Complaint’s allegations.

Id.

The party challenging
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jurisdiction presents “affidavits or other evidence properly
brought before the court” indicating that subject-matter
jurisdiction is lacking.

Savage v. Glendale Union High Sch.,

343 F.3d 1036, 1039 n.2 (9th Cir. 2003).

The burden then

shifts to “the party opposing the motion [to] furnish
affidavits or other evidence to satisfy its burden of
establishing subject-matter jurisdiction.”

Id.; Colwell v.

Dep’t of Health and Human Serv., 558 F.3d 1112, 1121 (9th Cir.
2009).

Failure to present suitable evidence establishing

subject-matter jurisdiction necessitates dismissal.

Moore v.

Maricopa Cnty. Sheriff’s Office, 657 F.3d 890, 895 (9th Cir.
2011).

ANALYSIS

Federal district courts are courts of limited
jurisdiction.

They have no jurisdiction without specific

constitutional or statutory authorization.

Exxon Mobil Corp.

v. Allapattah Servs., 545 U.S. 546, 552 (2005).

A party

invoking the federal court’s jurisdiction has the burden of
proving the actual existence of subject-matter jurisdiction.
Thompson v. McCombe, 99 F.3d 352, 353 (9th Cir. 1996).
Subject-matter jurisdiction is conferred on federal
courts either through federal question jurisdiction pursuant

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to 28 U.S.C. § 1331 or through diversity jurisdiction pursuant
to 28 U.S.C. § 1332.

Peralta v. Hispanic Bus., Inc., 419 F.3d

1064, 1068 (9th Cir. 2005).

I.

Federal Question Jurisdiction

A plaintiff properly invokes federal question
jurisdiction by pleading a colorable claim arising under the
Constitution or laws of the United States.

Arbaugh v. Y & H

Corp., 546 U.S. 500, 513 (2006).
Failure to establish federal question jurisdiction under
28 U.S.C. § 1331 is not the same thing as failure to state a
claim under federal law.

Bollard v. Cal. Province of the Soc.

of Jesus, 196 F.3d 940, 951 (9th Cir. 1999); see Arbaugh, 546
U.S. at 516.

Any non-frivolous assertion of a federal claim

suffices to establish federal question jurisdiction, even if
that claim is later dismissed on the merits.

Bollard, 196

F.3d at 951.
Plaintiffs have not pled a colorable claim arising under
the Constitution or the laws of the United States.
Plaintiffs do not invoke the Court’s jurisdiction based
on federal question jurisdiction.

Plaintiffs claim there is

subject-matter jurisdiction based on diversity jurisdiction.
(Complaint at ¶ 7, ECF No. 1).

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II.

Diversity Jurisdiction

Diversity jurisdiction exists when there is complete
diversity of citizenship between the parties, and the amount
in controversy exceeds $75,000.

28 U.S.C. § 1332(a);

Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996).
The diversity statute, as amended in 2011, states, as
follows:
(a)

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–
(1)

citizens of different States;

(2)

citizens of a State and citizens or subjects of
a foreign state, except that the district courts
shall not have original jurisdiction under this
subsection of an action between citizens of a
State and citizens or subjects of a foreign
state who are lawfully admitted for permanent
residence in the United States and are domiciled
in the same State;

(3)

citizens of different States and in which
citizens or subjects of a foreign state are
additional parties; and

(4)

a foreign state, defined in section 1603(a) of
this title, as plaintiff and citizens of a State
or of different States.

28 U.S.C. § 1332(a) (2011).

A.

The District Court Lacks Diversity Subject-Matter
Jurisdiction In Suits Between Aliens

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The United States Supreme Court has long held that “the
courts of the United States have no jurisdiction of cases
between aliens.”

Montalet v. Murray, 8 U.S. 46, 47 (1807);

Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 824 n.2 (1969).
Diversity jurisdiction does not encompass foreign
plaintiffs suing foreign defendants.

Faysound Ltd. v. United

Coconut Chemicals, Inc., 878 F.2d 290, 294 (9th Cir. 1989).
Plaintiffs contend there is diversity jurisdiction in
this case.

Plaintiffs claim there is complete diversity

between the Parties because the Plaintiffs are all citizens of
the Russian Federation and Defendant Fedotov is an alien
lawfully admitted for permanent residence to the United States
and residing in the State of Hawaii.
ECF No. 12).

(Pla.’s Opp. at pp. 3-4,

Plaintiffs contend that as a legal permanent

resident, Defendant should be treated as a citizen of the
State of Hawaii.

(Id. at p. 3).

Plaintiffs are incorrect.

Defendant presents a factual

attack to subject-matter jurisdiction and has submitted an
affidavit indicating that subject-matter jurisdiction is
lacking.

Savage v. Glendale Union High Sch., 343 F.3d 1036,

1039 n.2 (9th Cir. 2003).

Defendant Fedotov submitted an

affidavit stating that he is a citizen of the Russian
Federation.

(Affidavit of Mikhail Fedotov at ¶ 3, attached to

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Def.’s Motion to Dismiss, ECF No. 8-2).

In a suit between

aliens Defendant Fedotov is not treated as a citizen of Hawaii
for purposes of diversity jurisdiction.

See W. Schwarzer, A.

Tashima, J. Wagstaffe, Federal Civil Procedure Before Trial §§
2:1492, 2:1514 (2016); 14A Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 3661 (4th ed. 2013).
There is no diversity jurisdiction in this case because
it involves a suit exclusively between aliens who are citizens
of the Russian Federation.
Section 1332(a) does not confer jurisdiction over suits
solely between aliens.

Faysound Ltd., 878 F.2d at 294; Nike,

Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20
F.3d 987, 990-91 (9th Cir. 1994) (“diversity jurisdiction does
not encompass a foreign plaintiff suing foreign defendants”);
see Guan v. Bi, 2014 WL 953757, *6 (N.D. Cal. Mar. 6,
2014); Shovlin v. Careless, 2013 WL 3354544, *7 (N.D. Cal.
June 26, 2013); Global Discoveries, Ltd., 2013 WL 4377766, at
*2.

B.

The Decision By The Nevada District Court In Aiken
v. Snee Is Not Applicable

Plaintiffs rely on a Findings and Recommendation issued
by a Magistrate Judge that was adopted by the District Court
for the District of Nevada in Aiken v. Snee, 2015 WL 2097543,
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at *5-6 (D. Nev. May 5, 2015).
persuasive.

The Aiken decision is not

The 2015 decision in Aiken applied an out-of-date

version of the federal diversity statute.
Between 1988 and 2012, the diversity statute included the
following language:
For the purposes of this section ... an alien
admitted to the United States for permanent
residence shall be deemed a citizen of the State in
which such alien is domiciled.
See 1988 Amendment to 28 U.S.C. § 1332(a), Pub. L. No.
100-702, § 203(b), 102 Stat. 4642, 4646 (1988).
Courts generally referred to this clause as the “deeming”
clause.

Yokeno v. Sekiguchi, 754 F.3d 649, 652-53 (9th Cir.

2014).
The deeming clause was removed from the diversity statute
by Congress pursuant to the 2011 Amendment to 28 U.S.C. §
1332.

Federal Courts Jurisdiction and Venue Clarification Act

of 2011, Pub. L. No. 112-63, § 101, 125 Stat. 758 (2011)
(“2011 Amendment”); H.R. Rep. No. 112-10 (2011), 2011 WL
484052, at *7.
The 2011 Amendment went into effect on January 6, 2012.
28 U.S.C. § 1332; Pub. L. No. 112-63, § 105 (stating that the
amendment shall take effect 30-days after December 7, 2011).
The 2015 decision in Aiken was based on the deeming clause
language even though the language had been deleted from the
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diversity statute in 2011.
Plaintiffs’ reliance on the holding in Aiken is
misplaced.
The deeming clause does not apply to this case.

Guan, 2014 WL

953757, *6.

C.

The Decision By The Ninth Circuit Court of Appeals
In Yokeno v. Sekiguchi Is Not Applicable

Plaintiffs’ reliance on the Yokeno case is also misplaced
because the deeming clause was deleted from the diversity
statute before the claims arose in this case.

Yokeno v.

Sekiguchi, 754 F.3d 649, 652 (9th Cir. 2014).
In Yokeno, the plaintiff was a Japanese citizen who was
an alien lawfully admitted for permanent residence who was
living in Guam.

Id. at 651.

Defendants were aliens.

Both the Plaintiff and the

Id. at 653.

The appeals court examined the deeming clause and found
that although the plain reading of the clause seemed to
indicate that Yokeno should be deemed a citizen of Guam, it
held that conferring jurisdiction in a suit between aliens
would be constitutionally impermissible.

Id. at 654.

The

Ninth Circuit Court of Appeals ruled that despite the language
in the deeming clause, the district court lacked jurisdiction
over the suit.

Id.
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The Constitution does not grant Article III Courts
diversity jurisdiction in suits between aliens.
Defendant Mikhail Fedotov’s Motion to Dismiss For Lack of
Subject-Matter Jurisdiction (ECF No. 8) is GRANTED.
Plaintiffs are unable to cure the deficiencies in
diversity jurisdiction by amendment.

Amendment is not

permitted as granting leave to amend would be futile.

Forman

v. Davis, 371 U.S. 178, 182 (1962); Pierre v. So. Cal.
Permanent Medical Group, 2016 WL 6917280, *2 (C.D. Cal. Jan.
13, 2016) (denying leave to amend because diversity
jurisdiction did not exist and any amendment to the complaint
regarding diversity jurisdiction would be futile).
Plaintiffs’ Complaint (ECF No. 1) is DISMISSED WITH
PREJUDICE for lack of federal jurisdiction.
CONCLUSION

Defendant’s Motion to Dismiss (ECF No. 8) is GRANTED.
Plaintiffs’ Complaint (ECF No. 1) is DISMISSED WITH
PREJUDICE for lack of federal jurisdiction.
//
//
//

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The Clerk of the Court is ORDERED to CLOSE THE CASE.
IT IS SO ORDERED.
DATED:

Honolulu, Hawaii, March 29, 2017.

_________________________________
__
Helen Gillmor
United States District Judge

Dmitry Polunin; Evgeny Barzov; Timur Kharchenko v. Mikhail
Fedotov; Does 1-20; Doe Corporations 1-20; Doe Partnerships 120; Doe Entities 1-20; Civ. No. 16-00664 HG-KSC; ORDER
GRANTING DEFENDANT MIKHAIL FEDOTOV’S MOTION TO DISMISS FOR
LACK OF SUBJECT-MATTER JURISDICTION (ECF No. 8)
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