Beattie et al v. Williams Companies, Inc., The

Filing 48

MEMORANDUM AND ORDER denying 36 Motion for Leave to Amend Complaint; finding as moot 37 Motion for Hearing; finding as moot 45 Motion for Hearing; denying 10 Motion to Dismiss for Failure to State a Claim; denying 10 Motion to Dismiss for Lack of Jurisdiction; granting 28 Motion to Dismiss for Lack of Jurisdiction; finding as moot 29 Motion to Stay Discovery. Signed by District Judge Eric F. Melgren on 08/24/2017. (aa)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

DAVID W. BEATTIE et al.,
Plaintiffs,

vs.

Case No. 16-1430-EFM-GEB

THE WILLIAMS COMPANIES, INC., et al.,
Defendants.

MEMORANDUM AND ORDER
Plaintiffs David and Rhonda Beattie assert that Defendants The Williams Companies
(“TWC”) and Mid-Continent Fractionation and Storage, LLC (“MCFS”) breached a settlement
agreement. There are a multitude of motions before the Court, including two motions to dismiss,
one motion for leave to file an amended complaint, and two motions for hearings on these
motions.
MCFS asserts that this Court lacks subject matter jurisdiction because complete diversity
does not exist. Plaintiffs do not contest MCFS’s assertion that diversity jurisdiction is lacking
but instead attempt to amend their complaint to assert a federal claim. Because the Court does
not have subject matter jurisdiction, and Plaintiffs’ attempt to add a federal claim is improper,
the Court grants MCFS’s motion and denies Plaintiffs’ motion to amend. The remaining motions
are moot.

I.

Factual and Procedural Background

Plaintiffs David and Rhonda Beattie, owners of property in McPherson County,
originally filed a Complaint against TWC in December 2016. TWC is a corporation organized in
Delaware. Plaintiffs suffered hardships, health issues, loss of the use of their home, and damages
to their farm operations and personal property due to TWC’s use of brine ponds adjacent to their
property.
Plaintiffs and TWC negotiated a settlement agreement for the settlement and release of
their claims, as well as for the sale of Plaintiffs’ land. Plaintiffs state that the parties had agreed
to all the material terms through electronic messages and a written agreement from TWC.
Plaintiffs allege that TWC had agreed to purchase Plaintiffs’ land (240 acres) for $2,400,000 and
the residences and other buildings on the land for an additional $700,000 totaling $3,100,000.
TWC allegedly reneged on this agreement and Plaintiffs seek to enforce it.
After Plaintiffs filed their Complaint, TWC filed a Motion to Dismiss asserting that it did
not own the brine ponds and that it had not made any attempt to purchase land from Plaintiffs.
TWC stated that it was incorporated in Delaware and its principal place of business was in
Oklahoma. TWC also asserted that it held an interest in a subsidiary company (Williams
Partners, L.P.) which owned a subsidiary company (Williams Partners Operating, LLC) which
owned a subsidiary company (Williams Field Services Group, LLC) which owned an entity
named MCFS. TWC stated that MCFS is the entity that owns the brine ponds adjacent to
Plaintiffs’ property, and MCFS had made efforts to purchase certain parcels of the land identified
by Plaintiffs over the last few years. Accordingly, TWC alleged that MCFS would be the proper
party defendant and that this Court did not have personal jurisdiction over TWC.

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Instead of filing a response, Plaintiffs filed an Amended Complaint and added MCFS as
an additional Defendant. Plaintiffs’ allegations did not change but they stated several additional
facts.

Plaintiffs assert that all of their communications regarding the alleged settlement

agreement were through “Williams” and “Williams Companies.” They allege that they never
dealt with anyone purporting to represent MCFS in the transaction, but out of an abundance of
caution, they were adding MCFS as a defendant.
TWC again filed a Motion to Dismiss (Doc. 10) asserting that Plaintiffs had sued the
wrong party and that the Court lacked personal jurisdiction over it. On April 13, 2017, MCFS
filed its Answer to Plaintiffs’ Complaint in which it stated that it was a foreign limited liability
company organized under Delaware law and could be served on its registered agent in Topeka,
Kansas. In addition, MCFS stated that upon current information and belief, MCFS admitted that
the action involved a dispute between citizens of different states and in an amount in excess of
$75,000.
Approximately one month later, MCFS filed a Motion to Dismiss (Doc. 28) asserting that
the Court lacks subject matter jurisdiction. MCFS states that after a lengthy analysis of its entity
structure, it discovered that it has unit holders in Kansas which destroys Plaintiffs’ allegation of
diversity jurisdiction. Thus, MCFS seeks dismissal of the entire action.
Plaintiffs filed a response and a Motion for Leave to Amend Complaint (Doc. 36). They
do not contest that MCFS is considered a citizen of Kansas and diversity jurisdiction may be
lacking. Instead, they seek leave to add a federal claim under the Clean Air Act in an effort to
establish this Court’s subject matter jurisdiction. Plaintiffs have also filed two motions for
hearings on the Motions to Dismiss and Motion for Leave to File Amended Complaint (Docs.
37, 45).

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II. Legal Standard
Rule 12(b)(1) motions take one of two forms: (1) a facial attack on the sufficiency of the
complaint’s allegations as to the court’s jurisdiction; or (2) a factual attack on the facts upon
which subject matter jurisdiction is based.1 Generally, the Court “must accept the allegations in
the complaint as true.”2 But in reviewing a factual attack, the Court “may not presume the
truthfulness of the complaint’s factual allegations.”3 In a factual challenge under Rule 12(b)(1),
the court “has wide discretion to allow affidavits, other documents, and a limited evidentiary
hearing to resolve disputed jurisdictional facts.”4 Once subject matter jurisdiction is challenged,
the party claiming jurisdiction bears the burden of proof.5
III.

Analysis

There are two motions to dismiss before the Court. Defendant MCFS seeks dismissal of
the case on the basis that the Court lacks subject matter jurisdiction. MCFS asserts that it is a
Kansas citizen because as an unincorporated association, it takes on the citizenship of its
members. MCFS states that its member (three times removed), Williams Partners L.P. (“WPZ”),
is a publicly traded master limited partnership and has unitholders that are Kansas residents.

1

Holt v. United States, 46 F.3d 1000, 1002-03 (10th Cir. 1995).

2

Id. at 1002.

3

Id. at 1003.

4

Id.

5

United States ex rel. Hafter, D.O. v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1160 (10th Cir.

1999).

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Thus, MCFS contends that it and Plaintiffs are both citizens of Kansas and the Court therefore
lacks subject matter jurisdiction because complete diversity is lacking.6
Whether the Court has subject matter jurisdiction is dispositive to the entire case, so the
Court will address this motion first. In response to MCFS’s Motion to Dismiss for lack of
subject matter jurisdiction, Plaintiffs filed a response and a Motion for Leave to File an Amended
Complaint. Plaintiffs do not address the diversity issue and appear to concede that the parties are
not diverse. Instead, Plaintiffs seek leave to amend their complaint and add a federal claim in an
effort “to do away with the necessity of showing diversity jurisdiction.” Thus, the issue is
whether the Court can allow Plaintiffs leave to amend their complaint to add a federal claim in
an effort to establish subject matter jurisdiction when jurisdiction is currently lacking. The Court
concludes that it cannot.
Pursuant to 28 U.S.C. § 1653, “[d]efective allegations of jurisdiction may be amended,
upon terms, in the trial or appellate courts.” Although Plaintiffs do not cite to this statute, it
appears that they are attempting to amend their Complaint to establish jurisdiction. Plaintiffs,
however, are not attempting to remedy an insufficient or defective diversity allegation, but
instead are attempting to assert a federal claim never previously alleged.
Section 1653 permits amendment of incorrect statements about jurisdiction that
actually exists, and not defects in the jurisdictional facts themselves. In other
words, [s]ection 1653 does not allow the Court to amend a pleading so as to
produce jurisdiction where none actually existed before. Section 1653 is designed

6

Defendant TWC seeks dismissal on the basis that the Court lacks personal jurisdiction over it. TWC
states that it is a Delaware corporation with its principal place of business in Oklahoma and that it has no employees,
offices, or business operations in Kansas. TWC owns an interest in several subsidiary companies, including MCFS,
and MCFS is allegedly the company that owns the brine ponds at issue in this lawsuit. Thus, TWC asserts that it is
not the proper Defendant and that the Court lacks personal jurisdiction over it.

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to broadly permit amendment of jurisdictional allegations defective in form, not
substance, so as to avoid dismissal on technical grounds.7
The Court has discretion in applying § 1653.8
Prior to Plaintiffs’ request for leave to amend, there were no federal cause of action
allegations, and jurisdiction was not premised on a federal question. Instead, Plaintiffs alleged
that the Court had subject matter jurisdiction due to the diversity of the parties pursuant to 28
U.S.C. § 1332. Plaintiffs’ concession that the parties are not completely diverse precludes this
Court from having subject matter jurisdiction on the basis of diversity.9 Thus, because the Court
does not have subject matter jurisdiction, and Plaintiffs attempt to allege an entirely new basis
for subject matter jurisdiction is improper, the Court grants MCFS’s Motion to Dismiss and
denies Plaintiffs’ Motion for Leave to Amend Complaint.10
IT IS THEREFORE ORDERED that Defendant MCFS’s Motion to Dismiss (Doc. 28)
is GRANTED.
IT IS FURTHER ORDERED that Plaintiffs’ Motion for Leave to Amend Complaint
(Doc. 36) is DENIED.

7

Geismann v. Aestheticare, LLC, 622 F. Supp. 2d 1091, 1095 (D. Kan. 2008) (internal quotation marks and
citations omitted) (discussing § 1653 in the context of whether a defendant could amend a notice of removal from
state court in an effort to establish the district court’s subject matter jurisdiction on the basis of diversity and the
amount in controversy).
8

Id.

9

To the extent that Plaintiffs may argue that they did not concede this point, they made no attempt to
address the jurisdictional diversity issue or any effort to establish jurisdiction on the basis of diversity. As noted
above, once subject matter jurisdiction is challenged, the burden is on the party claiming jurisdiction to demonstrate
it.
10

Plaintiffs erroneously state that the current action will continue against TWC should the Court grant
MCFS’s Motion to Dismiss. This contention is incorrect as the entire case will be dismissed because the Court lacks
subject matter jurisdiction because all parties are not diverse.

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IT IS FURTHER ORDERED that Defendant TWC’s Motion to Dismiss (Doc. 10),
Plaintiffs’ Motion to Stay Discovery (Doc. 29), Plaintiffs’ Motions for Hearing (Docs. 37, 45)
are DENIED AS MOOT.
IT IS SO ORDERED.
Dated this 24th day of August, 2017.

ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE

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