Durbin v. Welcov Healthcare, LLC
Filing
150
ORDER: IT IS ORDERED that Defendant LHC's 112 Motion to Dismiss the Fourth Amended Complaint for lack of subject matter jurisdiction is DENIED. IT IS ORDERED Defendant Welcov's 110 Motion to Dismiss the Fourth Amended Complaint for failure to state a claim is DENIED. Signed by Judge Brian Morris on 10/9/2018. (SLR)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
GREAT FALLS DIVISION
CV-17-62-GF-BMM
JAIME [sic] DURBIN individually,
and as conservator for his mother,
JOAN DURBIN,
Plaintiff,
ORDER
vs.
Welcov Healthcare, LLC, Lewiston
Healthcare #2, LLC d/b/a The Villa
Assisted Living at Valle Vista,
Defendants,
Defendant Lewiston Health Care #2, LLC (“LHC”) has filed a motion to
dismiss the Fourth Amended Complaint filed by Plaintiff Jaime Durbin (“Durbin”)
based on a lack of subject matter jurisdiction. (Doc. 112). Defendant Welcov
Healthcare, LLC (“Welcov”) likewise has filed a motion to dismiss the Fourth
Amended Complaint for failure to state a claim. (Doc. 110). The Court conducted
a hearing on these motions on October 1, 2019.
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Background
Joan Durbin (“Ms. Durbin”) is a citizen of Montana who resided at The
Villa Assisted Living at Valle Vista (“The Villa”). (Doc. 113 at 4). Ms. Durbin
was twice injured when she fell at The Villa. The first fall took place on December
5, 2016, and again on January 22, 2017. (Doc. 65 ¶ 13).
Durbin filed a complaint against Welcov, an Arizona LLC, in this Court in
which he alleged that Welcov owned and operated The Villa. (Doc. 1). LHC
sought to intervene as a necessary and indispensable party. (Doc. 75-76). Durbin
amended his complaint and added LHC as a defendant before the Court had ruled
on LHC’s motion to intervene. (Doc. 103). The Court now has before it Durbin’s
Fourth Amended Complaint.
LHC represents that it owns and operates The Villa, employs all staff at The
Villa, and maintains the premises of The Villa. (Doc. 105 at 3). The parties agree
that LHC exists as an LLC organized under the laws of Montana with LE
Subtenant Holding LLC as the sole owning member (“LE Subtenant”). (Doc. 95).
The parties further agree that LE Subtenant, in turn, is a citizen of Minnesota.
(Doc. 95, Ex. 1-2).
Subject Matter Jurisdiction
A federal court’s diversity jurisdiction extends “to all civil actions where the
matter in controversy exceeds . . . $75,000 . . . and is between . . . [c]itizens of
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different States.” 28 U.S.C. § 1332(a)(1). Diversity jurisdiction depends on the
form of the entity in cases where an entity rather than a person is a litigant.
Congress has determined that a corporation qualifies as a citizen only of (1) the
state where its principal place of business is located, and (2) the state in which it
incorporated. 28 U.S.C. § 1332(c)(1). The Supreme Court has determined that an
unincorporated association, such as a limited partnership, possesses the
citizenships of all its members. Carden v. Arkoma Assocs., 494 U.S. 185, 195-196,
(1990).
A Limited Liability Corporation (“LLC”) possesses attributes of both a
partnership and a corporation. Johnson v. Columbia Properties Anchorage, LP,
437 F.3d 894, 899 (9th Cir. 2009). Despite possessing some traits that resemble a
corporation, every circuit that has addressed the issue treats an LLC like a
partnership “for the purposes of diversity jurisdiction.” Id.; 3123 SMB LLC v.
Horn, 880 F.3d 461, 465 (9th Cir. 2018); See Gen. Tech. Applications, Inc. v. Exro
Ltda, 388 F.3d 114, 120 (4th Cir. 2004); GMAC Commercial Credit LLC v. Dillard
Dep't Stores, Inc.,357 F.3d 827, 828–29 (8th Cir. 2004); Rolling Greens MHP, L.P.
v. Comcast SCH Holdings LLC, 374 F.3d 1020, 1022 (11th Cir.
2004); Handelsman v. Bedford Village Assocs. Ltd. P'ship, 213 F.3d 48, 51 (2d
Cir. 2000); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998). The Ninth
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Circuit joined all other circuits in treating an LLC as a citizen of every state of
which its owners and members are citizens. Johnson, 437 F.3d at 899.
Discussion
LHC argues that an LLC organized under Montana law must be treated as a
corporation for purposes of diversity jurisdiction under 28 U.S.C. § 1332. (Doc.
105 at 15). LHC points to the unique nature of the Montana Limited Liability
Company Act (“the Act”) as justification for this Court to ignore the controlling
Ninth Circuit precedent in Johnson. The Act requires an LLC organized under
Montana law to file its organizational documents and records with the Montana
Secretary of State. MCA § 35-8-108(2). The Act further directs that Montana law
will regulate a Montana LLC’s organization and affairs. (Doc. 105 at 16-17).
Corporations in Montana must file similar reports and remain subject to similar
organizational regulations. (Doc. 105 at 16).
LHC argues that similar filing mechanisms and regulations that govern a
Montana LLC and a Montana corporation illustrate the uniquely corporate
characteristics in a Montana LLC. Accordingly, LHC argues that this Court must
treat an LLC organized under Montana law like a corporation for purposes of
diversity jurisdiction under § 1332. This rational would require the Court to
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conclude that an LLC stands as a separate entity distinct from its members for
purposes of § 1332. (Doc. 105 at 17). LHC failed to explain how the Act differs
in any material way from the laws of other states that allow for the formation of an
LLC.
LHC nevertheless asks this Court to look past the Ninth Circuit decision in
Johnson. LHC claims repeatedly that the Ninth Circuit premised Johnson on the
“common law presumption that unincorporated associations are not legal entities
independent of their members.” (Doc. 105 at 18-19) (citing Johnson, 437 F.3d at
899)). LHC points to the decision of the Montana Supreme Court in Beach v.
State, 348 P.3d 629 (2015), to support the undisputed proposition that a law passed
by the Montana legislature replaces the common law that previously controlled the
issue. No action of the Montana legislature to create any kind of unique corporate
form overcomes the authority of Congress, however, to establish the parameters of
diversity jurisdiction under § 1332. This Court lacks the ability to ignore
applicable law within the Ninth Circuit that supports the very rule that LHC seeks
to hurdle.
The Ninth Circuit recently remanded a case to the district court in Stalwart
Capital, LLC v. iCap Pac. Nw. Opportunity & Income Fund, LLC, 715 F. App'x
794, 794 (9th Cir. 2018), where a New Jersey LLC sued two Washington LLCs
based on diversity of jurisdiction. The Ninth Circuit refused on appeal to analyze
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the merits of the case until the district court determined that diversity jurisdiction
properly had been grounded. Id. The Ninth Circuit instructed the district court on
remand to apply the principles in Johnson to ascertain the citizenship of each of the
LLC’s owning members in order to evaluate diversity jurisdiction properly. Id. at
795.
The Ninth Circuit in Keehan Tennessee Investments, LLC v. Guardian
Capital Advisors, Inc., 692 F. App'x 445, 446 (9th Cir. 2017), determined that the
district court lacked diversity jurisdiction under § 1332. Plaintiff originally had
filed its case in state court. Id. at 445. Defendant removed the action to the federal
district court on the basis of diversity jurisdiction under § 1332. Id. The Ninth
Circuit concluded, based on the principles of Johnson, that the defendant had failed
to “allege facts regarding the citizenships of the members of Plaintiff LLCs” that
would support diversity jurisdiction under § 1332. Id. at 446 (citing Johnson, 437
F.3d at 899). The Ninth Circuit reversed the district court’s decision with direction
to vacate the judgement due to the defendant’s failure to allege that the plaintiff
LLC’s members were citizens of other states. Id.
The Ninth Circuit likewise analyzed an LLC’s citizenship for purposes of
diversity jurisdiction under § 1332 in 3123 SMB LLC v. Horn, 880 F.3d 461, 465
(9th Cir. 2018). The LLC at issue had been organized and registered under the
laws of Missouri with a single owning member. Id. at 464. The Ninth Circuit
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cited Johnson and concluded that the sole owning member’s citizenship would
dictate the LLC’s citizenship for purposes of diversity jurisdiction. Id. at 465
(citing Johnson, 437 F.3d at 899).
LHC correctly notes that the Supreme Court never has ruled directly on an
LLC’s citizenship for purposes of establishing diversity jurisdiction under § 1332.
This fact simply highlights the “Supreme Court’s consistent refusal to extend the
corporate citizenship rule to non-corporate entities, including those that share some
of the characteristics of corporations.” Johnson, 437 F.3d at 899. The Supreme
Court’s decision in Carden v. Arkoma, 494 U.S. 185, 195-196 (1990), remains the
controlling authority regarding the citizenship of non-corporate entities for
purposes of § 1332.
Carden treated a limited partnership as having the citizenship of all its
members. Id. The Supreme Court carefully distinguished the process of
determining citizenships of corporations from determining citizenships of noncorporate entities. Id. at 188-89. The Supreme Court upheld the rule that a noncorporate entity, though possessing some ‘“characteristics of a corporation’ and
deemed a ‘citizen’ by the law creating it—may not be deemed a ‘citizen’ under the
jurisdictional rule established for corporations.” Id. at 189 (citing Great Southern
Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456-57 (1900)).
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The Supreme Court in Americold Realty Trust v. Congra Foods, Inc., 136
S.Ct. 1012, 1015 (2016), likewise refused to extend the corporate citizenship rule
to artificial entities other than corporations. The Supreme Court affirmed the
Tenth Circuit’s application of the non-corporate citizenship rule to determine the
plaintiff’s citizenship for purposes of diversity jurisdiction. Id. The Supreme
Court reasoned that Congress “never expanded [the corporate] grant of citizenship
to include artificial entities other than corporations.” Id. The Supreme Court
concluded that courts must adhere to the “oft-repeated rule that diversity
jurisdiction” for unincorporated entities “depends on the citizenship of all its
members.” Id. (quoting Chapman v. Barney, 129 U.S. 677, 682 (1889) (internal
quotations omitted)).
LHC argues that Montana’s Act somehow automatically designates an LLC
organized and registered in Montana as a citizen of Montana for purposes of §
1332. The Act fails to affect how a federal court must treat a Montana LLC for
purposes of analyzing diversity jurisdiction under § 1332. Carden, 494 U.S. at
189. As recognized by the Supreme Court in Americold Realty Trust, it remains
the province of Congress, not a state legislature, to decide whether to extend the
“grant of corporate citizenship to include artificial entities other than corporations”
for purposes of § 1332. Americold Realty Trust, 136 S.Ct. at 1015. Congress has
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yet to include an LLC as a corporate form for purposes of diversity jurisdiction
under § 1332.
The Court must treat an LLC like a partnership for purposes of evaluating
diversity jurisdiction. Johnson, 437 F.3d at 899. A partnership possesses the
citizenships of all of its members for purposes of § 1332. Carden, 494 U.S. at 195196. LHC, as an LLC, likewise possesses the citizenship of all of its members for
purposes of § 1332. LHC’s citizenship, for purposes of determining diversity
jurisdiction under § 1332, will be determined by the citizenship of its sole member
LE Subtenant. Johnson, 437 F.3d at 899. LE Subtenant is a citizen of Minnesota.
Accordingly, LHC is a citizen of Minnesota for purposes of § 1332. As a result,
complete diversity exists between the parties and LHC’s motion to dismiss based
on lack of diversity jurisdiction must be denied. The controlling Ninth Circuit
authority in Johnson and the Supreme Court’s decisions in Carden and Americold
Realty Trust eliminate the need to evaluate LHC’s constitutional claims.
Failure to State a Claim
Welcov contends that Durbin’s Fourth Amended Complaint must be
dismissed for failure to state a claim against Welcov. The Court must take as true
all allegations of material fact in the Fourth Amended Complaint on a motion to
dismiss for failure to state a claim. SmileCare Dental Group v. Delta Dental Plan
of California, Inc., 88 F. 3d 780, 782-83 (9th Cir. 1996). The Court also must
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construe these allegations in the light most favorable to the plaintiff. Id. The
Fourth Amended Complaint should not be dismissed for failure to state a claim
unless it appears beyond doubt that Durbin can prove no set of facts in support of
his claim that would entitle him to relief. Barnett v. Centoni, 31 F.3d 813, 816 (9th
Cir.1994). The Court may dismiss the Fourth Amended Complaint as a matter of
law for lack of a cognizable legal theory, or the pleading of insufficient facts under
an otherwise cognizable legal claim. Fed. R. Civ. P. 12(b)(6).
The Fourth Amended Complaint alleges that Joan Durbin fell twice while
she was a resident at The Villa. (Doc. 103, ¶¶ 12-13). The Fourth Amended
Complaint further alleges that LHC and Welcov jointly operate, possess, and
control the conditions of the premises of The Villa. (Doc. 103, ¶¶ 6-7). Taken as
true, these facts demonstrate LHC and Welcov own and control the premises where
Durbin experienced her injuries.
The Fourth Amended Complaint further alleges that LHC and Welcov knew
that Ms. Durbin was a smoker while she was residing at The Villa. (Doc. 103, ¶
15). The Villa required Ms. Durbin to smoke outside in Montana winter
conditions. (Doc. 103, ¶ 15). The Fourth Amended Complaint alleges that Ms.
Durbin’s falls occurred while she was smoking in an area immediately outside The
Villa. (Doc. 103, ¶ 14-15). The Fourth Amended Complaint further alleges that
this outdoor area was icy, snowy, and slippery. (Doc. 103, ¶ 14). The Fourth
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Amended Complaint alleges that Ms. Durbin fell on the property LHC and Welcov
control. (Doc. 103, ¶¶ 12-13). The Fourth Amended Complaint alleges that both
falls, and the snowy, icy, and slippery conditions of the designated smoking area,
were known to the operators of The Villa. (Doc. 103, ¶¶ 12-13, 21).
These allegations, taken as true, clearly establish a cognizable legal claim of
negligence resulting in injury under Montana law. See Busta v. Columbus Hosp.
Corp., 916 P.2d 122, 136-141 (1996) (setting forth the elements of negligence).
The Fourth Amended Complaint alleges that Welcov and LHC owned and
operated The Villa. The Fourth Amended Complaint alleges Welcov and LHC, as
owners of The Villa, owed a duty to its residents to maintain a safe living area.
(Doc. 103, ¶¶ 6-7). The Fourth Amended Complaint alleges that Welcov and
LHC, as owners of The Villa, breached this duty when they failed to maintain a
safe environment. (Doc. 103, ¶¶ 12-21). The Fourth Amended Complaint further
alleges that this breach resulted in Ms. Durbin’s injuries and damages associated
with the injuries. (Doc. 103, ¶¶ 13-22).
Taking all allegations provided in Durbin’s Fourth Amended Complaint as
true, the Court determines that Durbin sufficiently alleges a cognizable legal theory
based on the facts pled. See Busta, 916 P.2d 122. Durbin’s Fourth Amended
Complaint survives Welcov’s motion to dismiss for failure to state a claim.
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Welcov remains free to bring a motion for summary judgement on the same issue
once the parties have further developed the record. Fed. R. Civ. P. 56.
ORDER
Accordingly, IT IS ORDERED that defendant LHC’s motion to dismiss the
Fourth Amended Complaint for lack of subject matter jurisdiction (Doc. 112) is
DENIED. IT IS ORDERED defendant Welcov’s motion to dismiss the Fourth
Amended Complaint for failure to state a claim (Doc. 110) is DENIED.
DATED this 9th day of October, 2018.
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