JOHNSTON et al v. DAVID DRIVE PARTNERS, LLC et al

Filing 5

MEMORANDUM OPINION filed. Signed by Judge Mary L. Cooper on 6/16/2014. (mmh)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
:
:
Plaintiffs,
:
:
v.
:
:
DAVIS DRIVE PARTNERS, LLC, et al., :
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Defendants.
:
:
SCOTT M. JOHNSTON, et al.,

CIVIL ACTION NO. 14-3685 (MLC)
MEMORANDUM OPINION

THE PLAINTIFFS — (1) Scott M. Johnston (“Johnston”) and (2) an entity listed
in the caption as Entrust Administration, Inc. FBO Scott M. Johnston, IRA 35890 (“Entity
Plaintiff”) — brought this action on June 9, 2014 to recover damages for, inter alia,
breach of contract against the following defendants: (1) David Drive Partners, LLC
(“DDLLC”); (2) CDE Hotel Properties, LLC (“CHPLLC”); (3) Grandview Partners, LLC
(“GPLLC”); (4) Landcore Commercial Real Estate, LLC (“LCLLC”); (5) CDE
Development Group, LLC “CDGLLC”); (6) Clark D. East; and (7) Blaine East. (See dkt.
entry no. 4, Am. Compl.) The plaintiffs assert subject-matter jurisdiction under 28 U.S.C.
§ 1332(a)(1) (“Section 1332(a)(1)”). (See Am. Compl. at 2.)
THE COURT intends to dismiss the Amended Complaint without prejudice. The
plaintiffs’ allegations concerning the citizenship of each party are deficient. See
Fed.R.Civ.P. 12(h)(3) (instructing district court to dismiss complaint if subject-matter
jurisdiction is lacking).

THE PLAINTIFFS fail to allege the citizenship of Johnston, Clark D. East, and
Blaine East. They merely allege that: (1) Johnston “is an individual residing [in]
California”; (2) Clark D. East “is, upon information and belief, an individual residing [in]
Florida,” and “the managing member of [CHPLLC]; and . . . a member of, the Chairman
of and the Chief Executive Officer of [CDGLLC]”; and (3) Blaine East “is, upon
information and belief, an individual residing [in] North Carolina”, and “a managing
member of [DDLLC]; and . . . a member, and the Chief Executive Officer, of [LCLLC]”.
(Am. Compl. at 3-5.) See McNair v. Synapse Grp., 672 F.3d 213, 219 n.4 (3d Cir. 2012)
(stating allegation as to mere residency is “jurisdictionally inadequate” in action brought
under Section 1332(a)(1)); see also O’Brien v. Nowicki, 490 Fed.Appx. 506, 508 n.2 (3d
Cir.) (stating “[o]f course, citizenship and residency are not synonymous”), cert. denied,
133 S.Ct. 2376 (2013).
THE PLAINTIFFS’ ALLEGATIONS as to the identity of the Entity Plaintiff are
convoluted, thereby preventing the Court from investigating the citizenship of the Entity
Plaintiff. The Court is uncertain whether the name of the Entity Plaintiff is: (1) Entrust
Administration, Inc.; (2) Entrust Administration, Inc. FBO Scott M. Johnston, IRA 35890;
(3) Entrust Group Administration, Inc.; or (4) Entrust Group Administration, Inc. FBO
Scott M. Johnston, IRA 35890. (See Am. Compl. at 1-3.)
THE PLAINTIFFS fail to allege the respective citizenship of DDLLC, CHPLLC,
GPLLC, LCLLC, and CDGLLC. The plaintiffs allege, without more, that each of those

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defendants “is, upon information and belief, a limited liability company duly organized
under the laws of [a particular state], with an office located [in a particular state]”. (Am.
Compl. at 3-4.) But limited liability companies are unincorporated associations that are
deemed to be citizens of the states in which all of their members are citizens, not the
states in which they (1) were formed, and (2) have their principal places of business.
Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 418-20 (3d Cir. 2010); cf. 28
U.S.C. § 1332(c)(1) (concerning corporations). The citizenship of each membership layer
must be traced and analyzed to determine a limited liability company’s citizenship. Id. at
420. The name and citizenship of each member must be specifically alleged. See S.
Freedman & Co. v. Raab, 180 Fed.Appx. 316, 320 (3d Cir. 2006) (stating citizenship is to
be alleged “affirmatively and distinctly”).
IT ALSO APPEARS that the plaintiffs are members of CHPLLC. (See dkt. entry
no. 4-2 at ECF pp.23-24, CHPLLC Operating Agreement at 22-23 (listing plaintiffs as
members); dkt. entry no. 4-2 at ECF p.30, Personal Guaranty at 1 (same).) This is not
jurisdictionally permissible. See Techstar Inv. P’ship v. Lawson, No. 94-6279, 1995 WL
739701, at *3 (E.D. Pa. Dec. 8, 1995) (stating there is common citizenship on both sides
of action when unincorporated entity and member of that entity are adversaries); see also
DPCC, Inc. v. Cedar Fair, L.P., 21 F.Supp.2d 488, 490 (E.D. Pa. 1998) (granting motion
to remand where unincorporated entity and member of that entity are adversaries);
Nomura Asset Capital v. Overland Co., No. 02-1604, 2003 WL 138093, at *2-3 (D. Del.

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Jan. 8, 2003) (same). When a member of an unincorporated entity brings an action
against that unincorporated entity, “the doors of the federal courts” are “effectively
close[d]” to that action. Bankston v. Burch, 27 F.3d 164, 168-69 (5th Cir. 1994).
CHPLLC cannot be terminated from the action; it is a required party. See Fed.R.Civ.P.
19(a)(1).
THE COURT also notes that this action should have been brought in a different
venue. (See dkt. entry no. 4-1 at ECF p.5, Promissory Note at 3 (stating agreement at
issue is governed by North Carolina law); dkt. entry no. 4-1 at ECF p.8, Pledge & Escrow
Agreement at 3-5 (same); dkt. entry no. 4-1 at ECF p.14, Guaranty at 2 (same); see also
dkt. entry no. 4-2 at ECF p.21, CHPLLC Operating Agreement at 20 (stating agreement at
issue is governed by Florida law); dkt. entry no. 4-2 at ECF p.28, Pledge & Escrow
Agreement at 4 (same); dkt. entry no. 4-2 at ECF p.31, Personal Guaranty at 2 (same);
dkt. entry no. 4-3 at ECF p.6, Pledge Agreement at 3 (same).) See 28 U.S.C. § 1404(a);
Jumara v. State Farm Ins. Co., 55 F.3d 873, 875, 877 n.3, 883 (3d Cir. 1995).
THE PLAINTIFFS have failed to show that complete diversity of citizenship
exists here. See Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005) (requiring complete
diversity between each plaintiff and each defendant). Thus, the Court will dismiss the
Amended Complaint, but will do so without prejudice to the plaintiffs to exercise one of
three options within thirty days. The plaintiffs may recommence the action in New Jersey
state court, as the limitations period for the cause of action is tolled by the filing of a

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federal complaint. See Jaworowski v. Ciasulli, 490 F.3d 331, 333-36 (3d Cir. 2007);
Galligan v. Westfield Ctr. Serv., 82 N.J. 188, 191-95 (1980).
OR THE PLAINTIFFS may move in accordance with both the Federal Rules of
Civil Procedure and the Local Civil Rules to reopen the action in this federal court, with
supporting documentation:
(1) demonstrating which state Johnston was a citizen of specifically on June
9, 2014;
(2) demonstrating which state Clark D. East was a citizen of specifically on
June 9, 2014;
(3) demonstrating which state Blaine East was a citizen of specifically on
June 9, 2014;
(4) listing each member — including each non-managing and nonindividual member — within DDLLC on June 9, 2014, and analyzing the citizenship of
each member within DDLLC as it existed specifically on June 9, 2014;
(5) listing each member — including each non-managing and nonindividual member — within CHPLLC on June 9, 2014, and analyzing the citizenship of
each member within CHPLLC as it existed specifically on June 9, 2014;
(6) listing each member — including each non-managing and nonindividual member — within GPLLC on June 9, 2014, and analyzing the citizenship of
each member within GPLLC as it existed specifically on June 9, 2014;

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(7) listing each member — including each non-managing and nonindividual member — within LCLLC on June 9, 2014, and analyzing the citizenship of
each member within LCLLC as it existed specifically on June 9, 2014;
(8) listing each member — including each non-managing and nonindividual member — within CDGLLC on June 9, 2014, and analyzing the citizenship of
each member within CDGLLC as it existed specifically on June 9, 2014;
(9) properly identifying the Entity Plaintiff, and analyzing its citizenship as
it existed specifically on June 9, 2014;
(10) addressing the apparent jurisdictional bar to this action in federal court;
and
(11) demonstrating that there is jurisdiction here under Section 1332(a)(1).
OR THE PLAINTIFFS may recommence the action in a proper court in an
appropriate venue elsewhere.
IF THE PLAINTIFFS opt to move to reopen in this federal court, then they will
do so at their own peril. The Court will not further extend the thirty-day period to
proceed in another court. The plaintiffs are also advised that jurisdiction is measured
“against the state of facts that existed at the time of filing”, and thus they must explicitly
allege citizenship as it existed on June 9, 2014. Grupo Dataflux v. Atlas Global Grp., 541
U.S. 567, 571 (2004).

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THE COURT cautions the plaintiffs — if they opt to move to reopen — against
restating the allegations from the Amended Complaint. Definitive responses concerning
citizenship or domicile are required. Responses concerning residence, licensure, or place
of business will not properly invoke subject-matter jurisdiction. See McCracken v.
ConocoPhillips Co., 335 Fed.Appx. 161, 162-63 (3d Cir. 2009); Cruz v. Pennsylvania,
277 Fed.Appx. 160, 162 (3d Cir. 2008). Responses that are based upon information and
belief, assertions that are not specific (e.g., citizen of “a state other than California”), or
requests for time to discern jurisdiction will be rejected. See Vail v. Doe, 39 F.Supp.2d
477, 477 (D.N.J. 1999) (stating citizenship allegation that is based upon information and
belief “does not convince the Court that there is diversity among the parties”); see also S.
Freedman & Co., 180 Fed.Appx. at 317-20 (noting district court, in sua sponte
jurisdiction inquiry, provided party only seven days to respond).
AS THE PLAINTIFFS are represented by counsel, the Court “should not need to
underscore the importance of adequately pleading and proving diversity”. CGB
Occupational Therapy v. RHA Health Servs., 357 F.3d 375, 382 n.6 (3d Cir. 2004). The
Court will issue an appropriate order and judgment.

s/ Mary L. Cooper
MARY L. COOPER
United States District Judge
Dated: June 16, 2014

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