MRC Associates, LLC v. Cook

Filing 18

MEMORANDUM OPINION. Signed by Judge Brendan Abell Hurson on 1/6/2025. (heps, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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MRC ASSOCIATES, LLC,
derivatively on behalf of
Granite Hill Funding, LLC,

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Plaintiff,

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v.

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BRUCE S. COOK,

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Defendant.
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Civil No. 24-1261-BAH

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MEMORANDUM OPINION
Plaintiff MRC Associates (hereinafter “Plaintiff” or “MRC”) derivatively on behalf of
Granite Hill Funding, LLC (“Granite Hill”) brought suit against Bruce Cook (hereinafter
“Defendant”) in the Circuit Court of Maryland for Baltimore County alleging breach of fiduciary
duty (count I) and seeking declaratory (count II) and injunctive relief (count III).

ECF 2

(complaint). Pending before the Court is Plaintiff’s motion to remand (the “Motion”). ECF 10.
Defendant filed an opposition, ECF 11, and Plaintiff filed a reply, ECF 12. All filings include
memoranda of law and exhibits. 1 The Court has reviewed all relevant filings and finds that no
hearing is necessary. See Loc. R. 105.6 (D. Md. 2023). Accordingly, for the reasons stated below,
Plaintiff’s Motion is GRANTED.
I.

BACKGROUND
This lawsuit involves brothers Bob Cook and Defendant Bruce Cook and their cascading

limited liability companies. Granite Hill is a Maryland limited liability company comprised of
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The Court references all filings by their respective ECF numbers and page numbers by the ECFgenerated page numbers at the top of the page.

two members: Plaintiff MRC and BSC Associates, LLC (“BSC”), each of which are limited
liability companies themselves. ECF 2, at 1–2 ¶¶ 1–2. Defendant Bruce Cook, a citizen of
Washington, D.C., is the sole member of BSC. Id. at 2 ¶ 2. Bob Cook, a citizen of Florida, ECF
8, at 2 ¶ 7, is the sole member of MRC, ECF 2, at 2 ¶ 1; see also ECF 1, at 1–2 ¶ 3. Plaintiff MRC
is suing derivatively on behalf of Granite Hill. ECF 2, at 2 ¶ 1. Granite Hill’s operating agreement,
which is unsigned, provides that it is “exclusively managed by the affirmative vote of” its two
managers—Bob Cook and Defendant Bruce Cook. ECF 2, at 2–3 ¶ 10; ECF 2-2, at 5 ¶ 8.
In October 2020, Granite Hill granted Westview Court Investors, LLC (“Westview”) a
$3,400,000 loan, required to be repaid with accrued interest by its October 31, 2023 maturity date.
ECF 2, at 4 ¶¶ 17–21. Westview’s members are Bob Cook, Richard Cohen, Esq., Defendant, and
Defendant’s two children. Id. ¶ 18. To secure the loan, Westview executed a deed of trust,
granting Granite Hill a security interest in a commercial property located in Frederick, Maryland.
Id. at 5 ¶ 24. If Westview defaulted on the loan, Granite Hill was authorized to execute its rights
under the deed of trust and foreclose on the property. Id. ¶ 25. Acting in his capacity as a member
of Granite Hill, Defendant refused to vote in support of any action against Westview by Granite
Hill to collect on the defaulted loan. Id. at 6 ¶ 29. Defendant’s refusal to affirmatively vote in
support of any action created a deadlock. Id. at 7 ¶ 33.
On January 2, 2024, Plaintiff filed its complaint in state court. ECF 2. The complaint
alleges that Defendant breached his fiduciary duties as a manager of Granite Hill by refusing to
affirmatively cast his vote to enable Granite Hill to collect on Westview’s defaulted loan. Id. at 8
¶ 40. After Plaintiff made unsuccessful demands on Granite Hill that it enforce its rights under the
promissory note and deed of trust, Plaintiff filed this derivative action to enforce Granite Hill’s
rights. Id. at 7 ¶ 31. On January 9, 2024, Plaintiff served the complaint and summons upon

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Defendant via substitute service. ECF 10, at 2; ECF 1-4. On February 23, 2024, Defendant filed
a motion to dismiss in the state court arguing that Plaintiff did not properly effectuate service upon
him. ECF 10, at 2; ECF 1-5. The state court ultimately denied Defendant’s motion to dismiss.
ECF 10, at 3; ECF 1-7. Thereafter, Defendant moved for reconsideration of his motion to dismiss
and filed an answer to the complaint. ECF 10, at 3; ECF 1-9 (motion to reconsider); ECF 1-8
(answer dated March 29, 2024). The state court denied his motion for reconsideration on April
26. ECF 10, at 3; ECF 1-13. On April 30, 2024, Defendant removed the action to this Court,
based on diversity jurisdiction, thirty-two days after he filed his answer in the state court. ECF 1
(notice of removal); ECF 1-20 (civil cover sheet noting diversity as the basis for jurisdiction). The
notice of removal asserts that removal was timely because Defendant was never properly served.
ECF 1, at 2 ¶ 9. After removal, Plaintiff then filed the instant motion to remand, ECF 10, which
is fully ripe and ready for disposition.
II.

LEGAL STANDARD
Federal courts are courts of limited jurisdiction and “may not exercise jurisdiction absent

a statutory basis.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). The
Court must have subject matter jurisdiction either based on diversity of citizenship or a federal
question. 28 U.S.C. §§ 1331, 1332(a)(1). Diversity jurisdiction requires complete diversity of
citizenship and an amount in controversy over $75,000. 28 U.S.C. § 1332(a)(1). Federal law
grants defendants “[t]he right to remove a case from state to federal court” if a United States district
court would have original jurisdiction over the case. See Mulcahey v. Columbia Organic Chems.
Co., 29 F.3d 148, 151 (4th Cir. 1994). A federal district court has original diversity jurisdiction
“only if diversity of citizenship among the parties is complete, i.e., only if there is no plaintiff and
no defendant who are citizens of the same State.” Wisconsin Dep’t of Corr. v. Schacht, 524 U.S.
381, 388 (1998). “The presence of [a] nondiverse party automatically destroys original [diversity]
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jurisdiction . . . .” Id. at 389. “For purposes of diversity jurisdiction, the citizenship of a limited
liability company . . . is determined by the citizenship of all of its members . . . .” Cent. W. Virginia
Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011) (citing Gen. Tech.
Applications, Inc. v. Exro Ltda, 388 F.3d 114, 121 (4th Cir. 2004)).
Federal courts are reluctant “to interfere with matters properly before a state court.”
Zambito v. Ocular Benefits, LLC, Civ. No. DKC 23-1875, 2023 WL 8545230, at *2 (D. Md. 2023).
Therefore, in reviewing a motion to remand, “[federal] courts strictly construe the removal statute
and resolve all doubts in favor of remanding the case to state court.” Richardson v. Philip Morris
Inc., 950 F. Supp. 700, 701–02 (D. Md. 1997); Creekmore v. Food Lion, Inc., 797 F. Supp. 505,
507 (E.D. Va. 1992). “[I]f the plaintiff challenges removal in a motion to remand, then the burden
is on the defendant to ‘demonstrat[e] that removal jurisdiction is proper.’” Strawn v. AT&T
Mobility, LLC, 530 F.3d 293, 296 (4th Cir. 2008) (emphasis omitted).
III.

ANALYSIS
Plaintiff argues that this action should be remanded to state court because this Court lacks

subject matter jurisdiction as there is not complete diversity between the parties. See ECF 10, at
5–6. Plaintiff further argues that remand is proper because Defendant did not timely remove the
case to this Court. Id. at 6–8. Underlying this argument is that for this Court to find removal
timely, it would have to reconsider the state court’s order finding service properly effectuated. See
id. at 7. Finally, Plaintiff argues that removal was untimely based on the date he filed his answer
in state court. Id. at 8. In opposition, Defendant argues that there is complete diversity between
the parties—MRC and Defendant—and that Granite Hill is not a party to action, so its citizenship
is not to be considered. ECF 11, at 6. Defendant spends the bulk of his opposition arguing that
removal was timely because he was never properly served in state court. Id. at 6–13. Because the

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Court finds that it does not have subject matter jurisdiction, it will remand the action to state court
and will not address the timeliness of removal or whether service was proper.
The Court first addresses the citizenship of each entity. Granite Hill is a citizen of all the
states of which its members are citizens. Plaintiff MRC, whose sole member is a citizen of Florida,
is a citizen of Florida. BSC, whose sole member is a citizen of Washington, D.C., is a citizen of
Washington, D.C. Therefore, because Granite Hill is comprised of MRC and BSC, for diversity
purposes, it is a citizen of both Florida and Washington, D.C. This is not in dispute. See ECF 11,
at 1–2 (“Plaintiff is a citizen of Florida and Defendant is a citizen of Washington, D.C. Thus, there
is complete diversity between the parties, and diversity jurisdiction is proper.”). Rather, Defendant
argues exclusively that Granite Hill’s citizenship should not be considered because it is not a party
to this suit. Id. at 6. The Court is not so persuaded.
A derivative action is a suit initiated by a member or shareholder against a third party on
behalf of a business entity to enforce a corporate cause of action. See Price v. Gurney, 324 U.S.
100, 105 (1945); Ross v. Bernhard, 396 U.S. 531, 538 (1970). As such, the business entity on
whose behalf the suit is brought is a necessary party to the suit. See Price, 324 U.S. at 105. The
Fourth Circuit evaluates diversity jurisdiction in a derivative suit based on the citizenship of the
represented business entity in addition to the respective citizenships of the plaintiff and the
defendant. See Gen. Tech. Applications, Inc. v. Exro Ltda., 388 F.3d 114, 121 (4th Cir. 2004);
Smith v. Sperling, 354 U.S. 91 (1957).
Defendant asserts that “[w]hile plaintiffs in derivative actions often name the corporate
entity as either a nominal defendant or a nominal plaintiff, Plaintiff did not do so here.” ECF 11,
at 6. In doing so, he directs the Court to no authority in support of his point, and the Court is not
otherwise persuaded that the case caption is dispositive on the issue. See Gen. Tech. Applications,

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Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir. 2004) (evaluating diversity jurisdiction with the
represented entity aligned both as a plaintiff and as a defendant); Ross v. Bernhard, 396 U.S. 531,
538 (1970) (“Although named a defendant, [the corporation] is the real party in interest, the
stockholder being at best the nominal plaintiff.”).
Further, Fed. R. Civ. P. 10(a) provides that the title of the complaint must name all the
parties. In the instant case, the complaint names the plaintiffs as “MRC Associates, LLC,
derivatively on behalf of Granite Hill Funding, LLC.” ECF 2, at 1 (emphasis added). Under each
count, the complaint specifies “Granite Hill v. Defendant.” See ECF 2, at 8 (count I), at 9 (count
II), at 11 (count III). And while the overlap between the various LLCs may confuse the matter
somewhat on the merits, the complaint invariably seeks to vindicate the rights of Granite Hill.
Based on the foregoing, the Court must consider Granite Hill’s citizenship when
determining whether it possesses diversity jurisdiction. Because Granite Hill is a citizen of the
same state as each of the Plaintiff and Defendant, there is not complete diversity. The Court
therefore lacks subject matter jurisdiction. As such, it need not (and indeed cannot) address the
remaining arguments. The matter will be remanded to the Circuit Court for Baltimore County.
IV.

CONCLUSION
For the foregoing reasons, Plaintiff’s motion to remand is GRANTED. A separate

implementing Order will issue.

Dated: January 6, 2025

/s/
Brendan A. Hurson
United States District Judge

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