Huntcole, LLC et al v. 4-Way Electric Services, LLC

Filing 31

AMENDED REPORT AND RECOMMENDATIONS re 19 REPORT AND RECOMMENDATIONS. Signed by Magistrate Judge Jane M. Virden on 12/13/17. (bfg)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
GREENVILLE DIVISION
HUNTCOLE, LLC. AND
4-WAY ELECTRIC CO., INC.

PLAINTIFFS

VS.

CIVIL ACTION NO.: 4:17-cv-65-DMB-JMV

4-WAY ELECTRIC SERVICES, LLC.

DEFENDANT

AMENDED REPORT AND RECOMMENDATION

This matter is before the court, sua sponte, recommending this case for remand for lack of
subject matter jurisdiction.1 The parties having fully briefed the issue, the
Court is prepared to offer the following:
BACKGROUND
Plaintiffs , Huntcole, LLC and 4-Way Electric Co., Inc. (“4-Way Electric”) filed this action
for declaratory judgment, eviction, and injunction on May 15, 2017, in state court against 4-Way
Electric Services, LLC (“4-Way Services”). The complaint alleges that: 4-Way Electric is a
Mississippi corporation with a principal place of business in Mississippi, Huntcole, LLC is a
Mississippi limited liability company with a principal place of business in Mississippi, and
defendant 4-WayServices is a Delaware limited liability company, registered to do business in the
State of Mississippi, with a principal place of business in Texas.

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Complaint was previously recommended for dismissal, in error. Doc #19.

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Also on May 15, 2017, defendant 4-WayServices removed the case to this court based on
diversity of citizenship and an amount in controversy exceeding $75,000 pursuant— to 28 U.S.C.
§ 1332. The notice of removal asserts that plaintiff Huntcole, LLC is in Mississippi limited liability
company with a principal place of business in Mississippi; plaintiff Four-Way Electric Company,
Inc. is a Mississippi corporation with principal place of business in Mississippi; and defendant 4WayServices, LLC. is a Delaware limited liability company with a principal place of business in
Texas.
On June 23, 2017, defendant submitted its corporate statement wherein defendant
disclosed that 4-WayServices is wholly owned by parent limited liability company VPG
Transformations Group, LLC., a Delaware limited liability company. The Court then notified
defense counsel, during the Telephonic Case Management Conference [11] held July 20, 2017,
that its removal was deficit as it did not provide an adequate basis for diversity jurisdiction— as
the disclosure of citizenship was incomplete. The court also directed defense counsel to amend
the notice of removal to adequately state a basis for diversity jurisdiction by August 2, 2017. The
court further advised counsel that failure to do so would result in the court’s recommendation of
remand for lack of jurisdiction.
Defendant filed an amended Notice of Removal [12] on August 2, 2017. Of relevance
here, 4-Way Services, LLC. alleged:
Defendant 4-Way Electric Services, LLC is, and was at the time this lawsuit was
filed, a Delaware limited liability company with its principal place of business in
Southlake, Texas, and whose sole members is VPG Transformers Group, LLC.
VPG Transformers Group, LLC is a Delaware limited liability company whose
principal place of business is Delaware and whose sole member is VPG Group
Holdings, LLC. VPG Group Holdings, LLC is a Delaware limited liability
company whose principal place of business is in Delaware. VPG Group Holdings,
LLC’s four members are: 1) VPG Group Resources, LLC, a Texas limited
liability company whose principal place of business is in Southlake, Texas; 2)
Insight Equity (VPG) Mezz Debt, LLC, a Delaware limited liability company
whose principal place of business is in Delaware; 3) Race Street Funding LLC, a
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Delaware limited liability company whose principal place of business is in
Pennsylvania; and 4) VGH Private Investors, LLC, a Delaware limited liability
company whose principal place of business is in Ohio. Attached hereto as Exhibit
“A,” which is hereby incorporated by reference, is an organizational breakdown of
the ownership interests of Defendant 4-Way Electric Services, LLC.
Amended Notice of Removal at [12]-8 (emphasis added).

Exhibit A reflects:
Schedule A: Members of VPG Group Resources, LLC
•
Member 1: Insight Equity II LP – Delaware Limited Partnership, principal place
of business Southlake, Texas o
Insight Equity GP II LLC – Delaware
LLC, principal place of business
Southlake, Texas

Insight Equity (CV) II LLC– Delaware LLC, principal place of
business Southlake, Texas
•
Insight Equity Holding, LLC o Ted Beneski – a natural resident citizen of Texas
o Victor Vescovo – a natural resident citizen of Texas Member 2: Insight
Equity (TE) II LP – Delaware Limited Partnership, principal place of business
Southlake, Texas o Insight Equity GP II LLC– Delaware LLC, principal place of
business
Southlake, Texas

Insight Equity (CV) II LLC– Delaware LLC, principal place of
business Southlake, Texas
•
Insight Equity Holdings, LLC– Delaware LLC, principal
place of business Southlake, Texas o Ted Beneski – a
natural resident citizen of Texas o Victor Vescovo – a natural resident citizen of
Texas
Member 3: VPG Blocker Corp. – Delaware Corporation, principal
place of business Delaware
•
Member 4: Insight equity (AC) II LP – Delaware Limited Partnership, principal
place of business Southlake, Texas o Insight Equity (AC) GP II LLC– Delaware
LLC, principal place of business Southlake, Texas

Insight Equity Holdings, LLC– Delaware LLC, principal place of
business Southlake, Texas
•
Ted Beneski – a natural resident citizen of Texas
Victor Vescovo – a natural resident citizen of Texas Schedule
B: Members of Insight Equity (VPG) Mess Debt LLC
•
Member 1: Insight Equity Mezzanine I LP – Delaware Limited Partnership,
principal place of business Southlake, Texas o
Insight Equity Mezzanine
GP I LLC– Delaware LLC, principal place of business Southlake, Texas
 Insight Equity Mezzanine (CV) I LLC— Delaware LLC, principal
place of business Southlake, Texas
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•

Insight Equity Holdings, LLC– Delaware LLC, principal
place of business Southlake, Texas o Ted Beneski – a
natural resident citizen of Texas

o Victor Vescovo – a natural resident citizen of Texas
•
Member 2: Insight Equity Mezzanine (TE) I LP – Delaware Limited
Partnership, principal place of business Southlake, Texas o Insight Equity Mezzanine
GP I LLC– Delaware LLC, principal place of business Southlake, Texas
 Insight Equity Mezzanine (CV) I LLC– Delaware LLC, principal
place of business Southlake, Texas
•
Insight Equity Holdings, LLC– Delaware LLC, principal
place of business Southlake, Texas o Ted Beneski – a
natural resident citizen of Texas o Victor Vescovo – a
natural resident citizen of Texas
•
Member 3: Insight Equity Mezzanine (AC) I LP – Delaware Limited
Partnership, principal place of business Southlake, Texas o Insight Equity
Mezzanine (AC) GP I LLC– Delaware LLC, principal place of business
Southlake, Texas
 Insight Equity Holdings, LLC– Delaware LLC, principal place of
business Southlake, Texas
•
Ted Beneski – a natural resident citizen of Texas
•
Victor Vescovo – a natural resident citizen of Texas Schedule C: Members of
Race Street Funding, LLC
•
FS Investments Corporation - Delaware Corporation, principal place of business:
West Virginia
Schedule D: Members of VGH Private Investors, LLC
•
Member 1: Patrict Murley – a natural resident citizen of Ohio
•
Member 2: Lawrence Bradley Finkel – a natural resident citizen of Indiana
•
Member 3: Robert D. Van Vliet Revocable Trust o Trustee: Robert D. Van Vliet
– a natural resident citizen of Indiana
•
Member 4:William Joseph Hurrle – a natural resident citizen of Indiana
•
Member 5: Ronald T. Shaw – a natural resident citizen of Florida
Exhibit A at 1-2.
After review of the amended notice by the undersigned, counsel was informed that it still
failed to properly assert diversity jurisdiction. Specifically, the court noted that the removal
notice: 1) failed to properly identify the citizenship of VPG Group Resources, LLC because

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three of that limited liability corporation’s four members were identified as limited partnerships,
but only the citizenship of the general partner of those limited partnerships was disclosed, 2)
defendant failed to properly identify the citizenship of Insight Equity (VPG) Mess Debt LLC
because all three of its members were identified as limited partnerships, but only the citizenship
of the general partner of each was provided, and finally 3) that one of the five members of
VGH Private Investors, LLC was identified as a Revocable Trust, but only the citizenship of the
trustee, without further elaboration, was disclosed.1
During the [15] Telephonic Status Conference held August 4, 2017, in response to the
concerns expressed by the court, Counsel for defendant , 4-Way Services, LLC., indicated that
he felt the disclosures were adequate under applicable law to establish federal jurisdiction. The
Court resolved to reserve judgment on the revised notice of removal pending a brief in support
of the proposed notice.
LAW AND ANALYSIS
In Defendant’s [16] brief in support of amended notice of removal, defendant
acknowledged the United States Supreme Court precedent, Carden v. Arkoma Associates, 494
U.S.185, 195 (1990), holding explicitly that the citizenship of a limited partnership is
determined by the citizenship of all of its members, including that of the limited partners.
Further, the Court notes that this precedent has been long followed in this district. See,
Am. Tower, LP v. Urban Radio Broad., LLC, 2017 U.S. Dist. LEXIS 47905 as follows:
The state under the laws of which a limited partnership [or limited liability
company] is organized is irrelevant for diversity jurisdiction purposes.” Magnolia
Management Corp. v. Quest Rescue Partners - 8, L.P., 792 F. Supp. 45, 48 (S.D.
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The Court declines—as it is unnecessary given the report and recommendation made— to also
analyze the questionable suggestion of defendant that the citizenship of the trust in this case is
that of its trustee.
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Miss. 1992). The citizenship of a limited partnership or a limited liability
company is determined by the citizenship of all of its members. Carden v.
Arkoma Associates, 494 U.S. 185, 195, 110 S. Ct. 1015, 108 L. Ed. 2d
157(1990); Harvey, 542 F. 3d at 1081. The district court must consider the
citizenship of the entity’s limited as well as general partners to determine the
existence of complete diversity. Carden, 494 U.S. at 185 (Emphasis added).

Am. Tower, L.P. v. Urban Radio Broad., LLC, 2017 U.S. Dist. LEXIS 47905, *2 (N.D. Miss.
Mar. 30, 2017).

In Gross v. Gann, 2014 U.S. District Lexis 135455, Your Honor found the same, “For
purposes of federal diversity jurisdiction, [a limited] partnership is considered a citizen of every
state in which a general or a limited partner is a citizen. Bankston v. Birch, 27 F.3d 64, 165
(5Cir. 1994).” Gross v. Gann, 2014 U.S. Dist. LEXIS 135455, *6, 2014 WL 4691553 (N.D.
Miss. Aug. 20, 2014) (Emphasis added). This is a direct statement of the law as to artificial
entities and has no limitations or exceptions for active and passive partners.
Despite this well-established law, the defendant urges the court to adopt, instead, Justice
O’Connor’s dissent in Carden which would permit disregarding the citizenship of the limited
partners when determining citizenship of the limited partnership for diversity purposes. To
buttress this argument, defendant suggests that the Fifth Circuit in Corfield v. Dallas Glen Hills
LP, 355 F.3d 853, 863 (5th Cir.2003), provides authority for this court to dismiss the holding in
Carden and its progeny and disregard the citizenship of the limited partners of the limited
partnerships at issue in this case.
The undersigned respectfully declines the defendant’s invitation as, among other things,
it would violate the most basic of our legal principles – United States Supreme Court precedent,
where applicable, controls, and since the question of whether a limited partnership must

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establish diversity jurisdiction by disclosing the citizenship of all of its members is well
established, it will be followed in the instant case.
Furthermore, Corfield – on which defendant relies— does not supply authority to the
contrary. Corfield concerned a limited partnership as well as a complex insurance market
involving “names”, underwriters, syndicates, and others. Far from supporting defendant 4-Way
Services argument here, the Corfield court, in determining the citizenship of the limited
partnership at issue, reiterated the rule that a limited partnership’s citizenship for diversity
purposes is determined by that of all of its members including the citizenship of its limited
partners.
Even further, while the court went on to grapple with the proper method to determine the
citizenship of what it referenced as a “conundrum”— which questionably even qualified as an
artificial entity, involving associations of syndicates, “names,” underwriters, and insurance
markets, it said nothing to undermine the Carden rule— that when it comes to limited
partnerships, their citizenship is determined by that of each member, including the limited
partners.
In the undersigned’s view, the suggestion that this Court should disregard the long
recognized vehicle of the limited partnership, such as those at issue in this case, and instead treat
these limited partnerships as if they were of questionable stature as artificial entities— and even
then of some unspecified variety analogous to an insurance syndicate— is not even colorable.
CONCLUSION
Accordingly, because it is uncontested that defendant has failed to disclose the
citizenship of all of the limited partners of each limited partnership in the citizenship chain in

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this case, it has failed to properly establish diversity jurisdiction, and this case should be
remanded for lack of the same.
PROCEDURE FOR FILING OBJECTIONS
The parties are referred to L.U.Civ. R. 72(a)(3) for the applicable procedure in the event
any party desires to file objections to the findings and recommendations herein contained. The
parties are warned that any such objections are required to be in writing and must be filed within
fourteen (14) days of this date. Failure to timely file written objections to the proposed findings,
conclusions and recommendations contained in this report will bar an aggrieved party, except
upon grounds of plain error, from attacking on appeal unobjected-to proposed factual findings
and legal conclusions accepted by the district court. Douglass v. United Services Automobile
Association, 79 F.3d 1415 (5th Cir. 1996).
Respectfully submitted this Wednesday, December 13, 2017.

/s/ Jane M. Virden
UNITED STATES MAGISTRATE JUDGE

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