ACC Health, LLC et al v. Lost Creek Holdings, LLC et al
MEMORANDUM OPINION AND ORDER by District Judge Judith C. Herrera granting Plaintiffs leave to file motion for attorneys fees 23 no later than 09/01/17. (baw)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
ACC HEALTH, LLC, DENTRUST NEW
MEXICO, P.C., and DOCS MSO, LLC,
Civ. No. 16-546 JCH/SCY
LOST CREEK HOLDINGS, LLC,
ALL-STAR HEALTH SOLUTIONS, DIANE
TOMLINSON, ABBEY TOMLINSON,
LAUREN TOMLINSON, NATALI LUDI,
ERIN MARTIN, and MEGAN FREELS,
MEMORANDUM OPINION AND ORDER
This matter is before the Court on Plaintiff’s Motion for Order of Remand and Award of
Attorney Fees [Doc. 23]. As the case has already been remanded, the sole issue before the Court
is whether to award Plaintiffs attorney’s fees based on Defendants’ improper removal of the case
to this Court. Because the Court concludes that Defendants lacked an objectively reasonable
basis to remove the case, the motion will be granted and Plaintiffs may file their detailed motion
for attorney’s fees.
FACTUAL AND PROCEDURAL BACKGROUND
On April 15, 2016, Plaintiffs filed their Complaint [Doc. 1-1] in the Second Judicial
District Court, County of Bernalillo, New Mexico. On May 10, 2016, the Defendants received
service, and on June 9, 2016, the Defendants removed the case to this federal district court. [Doc.
1]. In their Notice of Removal, Defendants averred in conclusory fashion that this Court had
jurisdiction over the case under 28 U.S.C. § 1332 “because there is complete diversity between
the Plaintiffs and Defendants” and because the jurisdictional amount was satisfied. Doc. 1 at ¶ 5.
The Defendants’ Notice of Removal contained no allegations of the citizenship of any of the
Plaintiffs or Defendants. Similarly, the Plaintiffs’ complaint contained no allegations regarding
the citizenship of any party.
On June 10, 2016—one day after removal—the then presiding judge entered an Order to
Amend Notice of Removal [Doc. 5]. The order stated that Defendants’ notice “fail[ed] to allege
the facts of citizenship necessary to sustain diversity jurisdiction. Specifically, the Notice fails to
allege the citizenship of each and every member of Plaintiff ACC Health, LLC, Plaintiff DOCS
MSO, LLC, and Defendant Lost Creek Holdings, LLC.” Doc. 5 at 1. The presiding judge
explained that limited liability companies, such as Plaintiffs, are considered citizens of every
state of which any of its members is a citizen, and cited authority in support of that principle. Id.
at 2. The order directed the Defendants to file an amended notice of removal containing the
necessary jurisdictional allegations, if such allegations could be made in compliance with Rule
11, no later than July 1, 2016.
On June 14, 2016, Defendants filed their Amended Notice of Removal [Doc. 7].
However, this document failed to comply with the Court’s order. Specifically, Defendants appear
to have ignored the Court’s directive that they identify the state of citizenship of every member
of each LLC that is a party in the case. Instead, Defendants merely listed the states in which each
LLC had been organized or is registered to do business. Doc. 7 at ¶ 5. At this point, the presiding
judge would have been justified in remanding the case to state district court for lack of subject
matter jurisdiction. Instead, the court generously offered Defendants a second opportunity to
properly plead diversity. On June 15, the presiding judge entered a Second Order to Amend
Notice of Removal [Doc. 8]. Once again, the court spelled out for Defendants the law regarding
citizenship of limited liability companies and directed them to file a Second Amended Notice of
Removal, if they were able to do so under Rule 11, no later than July 1, 2016. Doc. 8 at 2-3.
However, Defendants still did not amend their Notice of Removal to contain the
necessary jurisdictional facts as required by the court. Instead, on June 15, 2016, their counsel
wrote to Plaintiffs’ counsel stating that information regarding the citizenship of the individual
members of LLCs was not publicly available and asking Plaintiffs to provide not only that
information, but also “the ownership structure of all Plaintiffs and  their relationship to one
another.” Doc 27-3. In addition, Defendants served the Plaintiffs with interrogatories and
requests for production aimed at discovering jurisdictional facts to support the Notice of
Removal—the identities of the members of the Plaintiff LLCs and their respective states of
citizenship. See Doc. 10 and Doc. 27-4. Because the parties had not yet conducted a Rule 26(f)
“meet and confer,” in accordance with the Local Rules Plaintiffs refused to engage in discovery.
Doc. 27-5. However, on June 30, 2016, Plaintiffs’ counsel informed Defendants’ counsel by
telephone and email that a member of ACC Health, LLC—Matt Walter—was a citizen of Ohio.
Doc. 27-2. As some of the Defendants were citizens of Ohio as well, complete diversity of
citizenship was lacking.
On July 1, 2016, Defendants filed their Notice of Withdrawal of Notice of Removal
[Doc. 15], which they said was “based solely on representations by Plaintiffs that Matt Walter is
a present member of Plaintiff ACC Health LLC and is a resident of and domiciled in Ohio,
thereby destroying complete diversity between the parties . . .” Doc. 15. On July 6, 2016, the
case was transferred to the undersigned United States District Judge. Doc. 17. On July 7, 2016,
based on the Notice of Withdrawal of Notice of Removal, the Court’s chambers sent an email to
all counsel asked the parties to file a stipulated motion and order of remand. The correspondence
between the parties thereafter demonstrates their inability to agree on a form of motion and
order. Doc. 31-1. Accordingly, on July 21, Plaintiffs filed their own Motion for Order of Remand
and Award of Attorney Fees [Doc. 23], a portion of which is currently before the Court. On
August 2, 2016, the Court remanded the case to state district court via a form of order to which
the parties stipulated. Doc. 25. Thereafter, the parties continued briefing the issue of attorney’s
fees for improper removal. See Docs. 27-29, 31.
If a civil action filed in state court satisfies the requirements for original federal
jurisdiction, the defendant may invoke 28 U.S.C. § 1441(a) to remove the action to the federal
district court “embracing the place where such action is pending.” 28 U.S.C. § 1441(a). See
Huffman v. Saul Holdings Ltd. P’ship, 194 F.3d 1072, 1076 (10th Cir. 1999). Under 28 U.S.C. §
1332(a), a federal district court possesses original subject-matter jurisdiction over a case when
the parties are diverse in citizenship and the amount in controversy exceeds $75,000.00. See 28
U.S.C. § 1332(a); Johnson v. Rodrigues, 226 F.3d 1103, 1107 (10th Cir. 2000). Diversity
between the parties must be complete. See Caterpillar Inc. v. Lewis, 519 U.S. at 68, 117 S.Ct.
467; Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1225 (10th Cir. 2004).
The Tenth Circuit has held that “in determining the citizenship of an unincorporated
association for purposes of diversity, federal courts must include all the entities’ members.”
Siloam Springs Hotel, L.L.C. v. Century Surety Co., 781 F.3d 1233, 1237-38 (10th Cir. 2015)
(citing Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990) (holding that the citizenship of a
limited partnership is determined by the citizenship of each of its partners, both general and
limited). See also Conagra Foods, Inc. v. Americold Logistics, LLC, 776 F.3d 1175, 1181 (10th
Cir. 2015) (holding that when a trust is party to litigation, the citizenship of the trust is derived
from all the trust’s “members.”).
To remove a case based on diversity, the diverse defendant must demonstrate that all of
the prerequisites of diversity jurisdiction contained in 28 U.S.C. § 1332 are satisfied. “It is wellestablished that statutes conferring jurisdiction upon the federal courts, and particularly removal
statutes, are to be narrowly construed in light of our constitutional role as limited tribunals.”
Pritchett v. Office Depot, Inc., 404 F.3d 1232, 1235 (10th Cir. 2005) (citing Shamrock Oil & Gas
Corp. v. Sheets, 313 U.S. 100, 108-09 (1941)). “All doubts are to be resolved against removal.”
Fajen v. Found. Reserve Ins. Co., 683 F.2d 331, 333 (10th Cir. 1982). “The burden of
establishing subject-matter jurisdiction is on the party asserting jurisdiction.” Montoya v. Chao,
296 F.3d 952, 955 (10th Cir. 2002).
Under 28 U.S.C. § 1447(c), “[a]n order remanding may require payment of costs and any
actual expenses, including attorney fees, incurred as a result of the removal.” In deciding
whether to award costs, “the key factor is the propriety of defendant’s removal.” Excell, Inc. v.
Sterling Boiler & Mech., Inc., 106 F.3d 318, 322 (10th Cir. 1997). The court need not find that
the defendant removed the state court action in bad faith; the court may award attorneys’ fees if
it finds that the defendant lacked “objectively reasonable grounds to believe removal was
proper.” Martin v. Franklin Capital Corp., 393 F.3d 1143, 1145 (10th Cir. 2004). The court has
wide discretion in this matter. Id.
The Court concludes that there is no evidence in the record to show that Defendants
possessed objectively reasonable grounds to believe that at the time of removal there was
complete diversity among the parties such that removal was proper. Defendants have provided
the Court with no evidence to show that prior to removal, they identified the members of every
LLC and made an effort to determine the citizenship of each such, as is required when
determining whether LLCs are diverse.1 That Defendants lacked objectively reasonable grounds
to remove is confirmed by their actions after removal. Their original Notice of Removal
contained no allegations regarding the citizenship of the members of the LLC parties, and when
the Court directed Defendants to amend their notice to add that information (to the extent they
were able within the bounds of Rule 11), they did not do so. Instead, they made further
conclusory allegations that did not meet the requirements of the Court’s order. Only after the
Court ordered Defendants to amend their notice of removal a second time did Defendants seem
to notice that citizenship of the individual members of the LLC was relevant. At that time,
Defendants could have acknowledged that they lacked any reasonable basis to assert the
complete diversity of the parties, and they could have moved to remand. Instead, Defendants
demanded information regarding LLC membership and citizenship from the Plaintiffs. This is
improper. As the removing parties, Defendants carried the burden to ensure that this Court had
subject matter jurisdiction before filing a notice of removal. That did not happen here. And,
when Plaintiffs and the Court alerted Defendants to the issue, they did not acknowledge the
problem but rather protracted the dispute.
In their response [Doc. 27], Defendants contend that an Affidavit of Defendant Diane
Tomlinson demonstrates that Defendants had a reasonable belief that there was complete
diversity among the members of the various LLCs that are parties in this case. According to that
response brief [Doc. 27 at 2], Ms. Tomlinson’s affidavit makes various statements about Matt
Walters and Lawrence Caplan, including their ownership interests in various entities. The brief
also states that Ms. Tomlinson’s affidavit discusses corporate acquisitions, payrolls, and
structures. However, a review of that affidavit [Doc. 27-1] reveals that it contains none of this
information. Indeed, it contains no information relevant to the question of whether Defendants
had a reasonable basis to remove this case prior to June 9, 2016.
Accordingly, an attorney’s fee award is warranted in this case. Plaintiffs must file their
motion for attorney’s fees, including supporting affidavits and billing documentation, no later
than September 1, 2017.
IT IS THEREFORE ORDERED that Plaintiff’s Motion for Order of Remand and
Award of Attorney Fees [Doc. 23] is GRANTED, and Plaintiffs may file their motion for fees no
later than September 1, 2017.
UNITED STATES DISTRICT JUDGE
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