Crescent Silver, LLC v. New Jersey Mining Company

Filing 23

MEMORANDUM DECISION AND ORDER RE: DEFENDANTS MOTION TO DISMISS PURSUANTTO FRCP 12(b)(1) granting 17 MOTION to Dismiss for Lack of Jurisdiction. IT IS FURTHER ORDERED that Plaintiff may file an amended complaint within 14days of the date of this Memorandum Decision and Order. Failure to do so will result in dismissal of the action. Signed by Judge Ronald E. Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
DISTRICT OF IDAHO

CRESCENT SILVER, LLC, a Delaware limited
liability company,

Case No.: 2:15-cv-00097-REB
MEMORANDUM DECISION AND
ORDER RE: DEFENDANT’S
MOTION TO DISMISS PURSUANT
TO FRCP 12(b)(1)

Plaintiff,
vs.
NEW JERSEY MINING COMPANY, an Idaho
corporation,

(Docket No. 17)

Defendant,

Now pending before the Court is Defendant’s Motion to Dismiss Pursuant to FRCP
12(b)(1) (Docket No. 17). Having carefully considered the record and otherwise being fully
advised, the undersigned enters the following Memorandum Decision and Order:
BACKGROUND
This is a contractual dispute in which Plaintiff Crescent Silver, LLC (“Crescent Silver”)
has sued New Jersey Mining Company (“NJMC”) for claims arising out of a Mill Joint Venture
Agreement between NJMC and Crescent Silver’s predecessor, United Mine Services, Inc.
Relevant here, Plaintiff alleges that this Court has jurisdiction over this action pursuant to 28
U.S.C. § 1332 – specifically, that (1) the amount in controversy, exclusive of interest and costs,
exceeds $75,000; and (2) the action is between citizens of different states.
Through its Motion to Dismiss, NJMC questions whether, in fact, this action really is
between citizens of different states. There is no dispute that NJMC is a corporation organized
under the laws of the State of Idaho with a principal place of business in Shoshone County,

MEMORANDUM DECISION AND ORDER - 1

Idaho. However, Crescent Silver is alleged to be a limited liability company organized under the
laws of the State of Delaware, that its members, HUSC Sub, LLC and HUSC II, LLC are
Delaware limited liability companies, and that “[n]one of the parent corporations and individuals
that comprise the ownership of both HUSC Sub, LLC and HUSC II, LLC reside in the State of
Idaho.” Compl., pp. 1-2 (Docket No. 1) (emphasis added). According to NJMC, this is not
enough to confer jurisdiction on this Court: Crescent Silver “has not alleged the citizenship of
the members of HUSC Sub, LLC and HUSC II, LLC, nor has it listed HUSC Sub, LLC’s or
HUSC II, LLC’s members’ members, nor the member’s members’ corresponding citizenships.”
Mem. in Supp. of MTD, p. 4 (Docket No. 17, Att. 1) (emphasis in original); see also id. at p. 5
(“[Crescent Silver] did not adequately plead diversity of citizenship because it simply stated that
none of the members of Crescent Silver, LLC reside in the State of Idaho. Crescent’s domicile
must be determined at the time the Complaint was filed and it must allege the citizenship of all
of its members in order to adequately determine the citizenship of Crescent. Here, the Plaintiff’s
pleadings do not adequately allege the citizenship of Crescent.”).1
Crescent Silver opposes NJMC’s Motion to Dismiss, responding that neither of its two
members – HUSC Sub, LLC and HUSC II, LLC – “ha[s] any members who are citizens of

1

Separately, NJMC appears to have attempted to determine the citizenship of HUSC
Sub LLC and HUSC II, LLC on its own, prior to filing the instant Motion to Dismiss. Although
it ultimately was unable to definitively confirm either’s citizenship “because the Delaware
Secretary of State will not divulge the identity of its LLC’s members and does not maintain an
up-to-date list of LLC members,” NJMC notes that (1) “[t]he Idaho Secretary of State lists Hale
Capital Partners, LP as a member of Crescent Silver, LLC on its Application for Certificate of
Authority for Foreign Limited Liability Company filed with the state and publicly available”; and
(2) Crescent Silver’s “most recent Annual Report filed with the Idaho Secretary of State . . . lists
Roger Gross as Manager located at 1220 Big Creek Rd., Kellogg, Idaho 83837.” Mem. in Supp.
of MTD, p. 4 (Docket No. 17, Att. 1). At the very least, NJMC presumably makes these
arguments to inject some amount of ambiguity into Crescent Silver’s citizenship for diversity
jurisdiction purposes.
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Idaho” and, thus, “as shown by these facts, complete diversity is present and jurisdiction is
appropriate.” Opp. to MTD, p. 2 (Docket No. 20). To this point, Crescent Silver goes on to
argue that, by alleging in its Complaint that neither its members nor their members “reside” in
Idaho, NJMC is on “fair notice” of the jurisdictional basis for its claims. Id. at pp. 2-3; see also
id. at 3 (“Defendant cannot credibly claim to be unaware of the basis for Crescent’s assertion of
jurisdiction simply because the complaint says ‘resides’ rather than ‘is a citizen of.’” And,
indeed, to the extent Crescent’s (perhaps imprecise) word choice is problematic, Crescent is
more than willing to amend to substitute ‘is a citizen of’ for ‘resides.’”).
DISCUSSION
It is undisputed that NJMC is a citizen of Idaho; therefore, for diversity jurisdiction to
exist here, Crescent Silver must not also be a citizen of Idaho. See 28 U.S.C. § 1332(a)(1). As an
LLC, Crescent Silver is considered to be “a citizen of every state of which its owners/members
are citizens.” Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006).
Crescent Silver’s members, HUSC Sub, LLC and HUSC II, LLC, are LLCs as well – ergo, like
Crescent Silver, HUSC Sub, LLC and HUSC II, LLC are similarly citizens “of every state of
which its owners/members are citizens.” Id. Except Crescent Silver neither alleges these LLCs’
citizenships, nor these LLCs’ members’ citizenship; instead, it simply asserts that “[n]one of the
parent corporations and individuals that comprise the ownership of both HUSC Sub, LLC and
HUSC II, LLC, reside in the state of Idaho.” Compl., pp. 1-2 (Docket No. 1) (emphasis added).
Is this enough? More specifically, do references to where an LLC resides (or the LLC’s
members reside, and so on) amount to citizenship for the purposes of determining diversity
jurisdiction? Crescent Silver says yes, NJMC says no.

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This action’s fact pattern resembles the one considered recently by a sister court in Evans
& Vertin, LLC v. Canyon Holdings, LLC, 2011 WL 52421 (D. Mont. 2011). There, the
defendant, Canyon Holdings, LLC (“Canyon”) likewise filed a motion to dismiss for lack of
subject matter jurisdiction, challenging the plaintiff, Evans & Vertin, LLC’s (“E & V”)
allegations that the parties were from different states. See id. at *1. In relevant part, E & V’s
complaint alleged:
Plaintiff E & V is a Montana Limited Liability Company with its principal place of
business in Missoula, Montana. E & V’s members are residents of Minnesota and
Montana . . . . Defendant Canyon is a Delaware Limited Liability Company.
Canyon has previously taken the position before this Court that its member is a
resident of the State of Washington.
Id. Canyon faulted the complaint for not identifying the members of E & V and not providing
the necessary facts to determine each member’s citizenship. In response, E & V provided a
declaration detailing the citizenship of the various entities, trusts, or individuals with ownership
interest in E & V, also offering to file an amended complaint if necessary. See id. The district
court found E & V’s allegations to be inadequate, reasoning:
While the complaint alleges the members of the limited liability company as residents
of Minnesota and Montana, that is not enough for the Court to determine each
member’s citizenship. This infirmity is highlighted by E & V filing a declaration to
address the deficiency. The motion to dismiss shall be granted, but it is not clear that
this defect cannot be corrected. As such, the Court will grant E & V leave to amend
the defective pleading.
Id. (emphasis added) (citing Lew v. Moss, 797 F.2d 747, 749-50 (9th Cir. 1986) (noting residence
is only a factor to consider when determining citizenship for diversity purposes)) (other internal
citations omitted).
Evans & Vertin’s reasoning is instructive and applies equally to this case. In particular,
despite the allegation that neither Crescent Silver, HUSC Sub, LLC, HUSC II, LLC, nor the

MEMORANDUM DECISION AND ORDER - 4

individuals comprising the ownership/membership of the latter LLCs reside in Idaho, it is
impossible to know whether complete diversity exists. Moreover, this information is no doubt
available to Crescent Silver as the parent corporate entity – as further evidenced, by Crescent
Silver having already “offered to provide precisely that information to counsel for Defendant in
order to allay any of Defendant’s concerns.” Opp. to MTD, p. 2, n.1 (Docket No. 20).2
Accordingly, NJMC’s Motion is granted. Because it is not clear that any amendment
would be futile, Crescent Silver is also granted leave to amend its defective pleading to address
the citizenship of all pertinent/involved entities. If Crescent Silver so files an amended
complaint and, after reviewing it, NJMC finds grounds to mount another substantive subject
matter jurisdiction challenge, NJMC may do so at that time.
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2

On this discrete point, Evans and Vertin provides an additional comment:

Before responding [to Canyon’s motion to dismiss], E & V contacted the other side.
It requested Canyon withdraw the motion in light of the fact that E & V could file an
amended complaint to address the raised issues. That would have been a wise move
that reaches the same result – E & V filing an amended complaint – without wasting
the parties’ and the Court’s time.
Evans and Vertin, 2011 WL 52421 at *1, n.1. The undersigned takes no position here on who
(Crescent Silver or NJMC) was in the best position to resolve the underlying issue as efficiently
as possible.
MEMORANDUM DECISION AND ORDER - 5

ORDER
Based on the foregoing, IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss
Pursuant to FRCP 12(b)(1) (Docket No. 17) is GRANTED.
IT IS FURTHER ORDERED that Plaintiff may file an amended complaint within 14
days of the date of this Memorandum Decision and Order. Failure to do so will result in
dismissal of the action.

DATED: November 10, 2015

Honorable Ronald E. Bush
U. S. Magistrate Judge

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