Condado 3, CFL v. Centro de Desarrollo de Servicios Especializados, Inc.

Filing 43

OPINION AND ORDER re 16 MOTION to Dismiss/Lack of Jurisdiction as to All Plaintiffs filed by Centro de Desarrollo de Servicios Especializados, Inc. Defendant's motion to dismiss for lack of jurisdiction is GRANTED, and plaintiff's claims are DISMISSED without prejudice. Judgment shall be entered accordingly. Signed by Judge Aida M. Delgado-Colon on 2/10/2020.(wm)

THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

CONDADO 3 CFL, LLC,
Plaintiff,
v.
Civil No. 18-1211 (ADC)
CENTRO DE DESARROLLO Y
SERVICIOS ESPECIALIZADOS,
Defendant.

OPINION AND ORDER
Pending before the Court is defendant Centro de Desarrollo y Servicios Especializados’
(“defendant”) motion to dismiss for lack of diversity. ECF No. 16. Plaintiff Condado 3 CFL, LLC
(“plaintiff”) filed an opposition. ECF No. 25. For the following reasons, defendant’s motion to
dismiss is GRANTED. 1
I.

Background

On February 17, 2018, plaintiff filed the instant suit against defendant seeking foreclosure
and collection of monies. ECF No. 1. Defendant filed an answer to the complaint, alleging among
Also pending before this Court are plaintiff’s motion for summary judgment (ECF No. 15) and defendant’s motion
to dismiss for lack of an indispensable party (ECF No. 17). However, insofar as the Court’s jurisdiction is a threshold
matter, the motion requesting dismissal for lack of jurisdiction is of primary concern. “After all, if the court lacks
subject matter jurisdiction, assessment of the merits becomes a matter of purely academic interest.” Deniz v. Mun.
of Guaynabo, 285 F.3d 142, 150 (1st Cir. 2002). “As a court of limited jurisdiction, this court ‘may not presume the
existence of subject matter jurisdiction, but, rather, must appraise [its] own authority to hear and determine
particular cases.’” Plaza Carolina Mall, L.P. v. Municipality of Barceloneta, 91 F. Supp. 3d 267, 277 (D.P.R. 2015) (citing
Cusumano v. Microsoft Corp.,162 F.3d 708, 712 (1st Cir. 1998)).
1

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Page 2

various defenses, lack of jurisdiction. ECF No. 4. Shortly thereafter, plaintiff filed a motion
requesting summary judgment. ECF No. 5. In response, defendant moved for jurisdictional
discovery arguing that there was a likelihood that diversity was lacking. ECF No. 6. After
reviewing the parties’ various filings regarding this matter, the Court granted the parties a 30day period to conduct jurisdictional discovery. 2 ECF No. 12.
On June 12, 2019, plaintiff filed a second motion for summary judgment. ECF No. 15. A
few days later, plaintiff filed two motions to dismiss, one for lack of jurisdiction and another for
lack of indispensable party. ECF Nos. 16, 17. Both parties filed their respective oppositions to
the pending motions. ECF Nos. 24, 25, 29, 30, 37, 40, 41.
II.

Standard of Review

Since federal courts are courts of limited jurisdiction, we must address jurisdictional
matters prior to addressing the merits of a case. Torres-Vázquez v. Commercial Union Ins. Co., 417
F. Supp. 2d 227, 233 (D.P.R. 2006) (citing Spielman v. Genzyme Corp., 251 F3d 1 (1st Cir. 2001)).
Under Rule 12(b)(1), a defendant may move to dismiss a complaint for lack of subject-matter
jurisdiction. Fed. R. Civ. P. 12(b)(1). When reviewing a complaint under Rule 12(b)(1), courts
“construe the Complaint liberally and treat all well-pleaded facts as true, according the
plaintiff[s] the benefit of all reasonable inferences.” Town of Barnstable v. O’Connor, 786 F.3d 130,
138 (1st Cir. 2015) (alteration in original) (citation and internal quotation marks omitted). A

The Court also denied without prejudice plaintiff’s first motion for summary judgment and allowed refiling within
14 days upon conclusion of jurisdictional discovery. ECF No. 12.

2

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complaint, so construed, must be dismissed under Rule 12(b)(1) if the Court lacks subject-matter
jurisdiction to adjudicate its claims. When deciding whether to dismiss a complaint for lack of
subject matter jurisdiction, however, the Court is not limited to the parties’ pleadings and may
also “consider whatever evidence has been submitted, such as . . . depositions and exhibits.”
McCulloch v. Malavé-Velez, 380 F. Supp. 2d 46, 49 (D.P.R. 2005) (citing Aversa v. United States, 99
F.3d 1200, 1210 (1st Cir. 1996)).
III.

Analysis

Since subject matter jurisdiction in this case is premised on diversity of citizenship under
28 U.S.C. § 1332, the Court must determine whether there is complete diversity of citizenship
between the parties. Casas Office Machines v. Mita Copystar America, Inc., 42 F.3d 668, 673 (1st Cir.
1994) (citations omitted). Without complete diversity, federal subject matter jurisdiction does
not exist. Id.; see also Connectu LLC v. Zuckerberg, 522 F.3d 82, 91 (1st Cir. 2008); Gabriel v. Preble,
396 F.3d 10, 13 (1st Cir. 2005).
The First Circuit has clearly stated that citizenship of a limited liability company or LLC
is “determined by the citizenship of all of its members.” Pramco, LLC v. San Juan Bay Marina, Inc.,
435 F.3d 51, 54 (1st Cir. 2006). On the other hand, a corporation “shall be deemed to be a citizen
of every State and foreign state by which it has been incorporated and of the State or foreign
state where it has its principal place of business.” 28 U.S.C. § 1332(c)(1). Notably, with regard to
a corporation, diversity must be satisfied both at its principal place of business and its place of

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incorporation. ACCO Brands USA LLC v. Piñeyro y Lara Comercial S.A., 27 F. Supp.3d 256, 260
(D.P.R. 2014).
Faced with a plethora of decisions regarding what is a corporation’s “principal place of
business”, the Supreme Court held that it
is best read as referring to the place where a corporation’s officers direct, control,
and coordinate the corporation’s activities. It is the place that Courts of Appeals
have called the corporation’s ‘nerve center.’ And in practice it should normally be
the place where the corporation maintains its headquarters--provided that the
headquarters is the actual center of direction, control, and coordination, i.e., the
‘nerve center,’ and not simply an office where the corporation holds its board
meetings (for example, attended by directors and officers who have traveled there
for the occasion).
Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010). As the First Circuit points out, “[a]t its heart, the
nerve center test is an inquiry to find the one location from which a corporation is ultimately
controlled.” Harrison v. Granite Bay Care, Inc., 811 F.3d 36, 41 (1st Cir. 2016). The Supreme Court
recognized that the nerve test may prove challenging “in this era of telecommuting, [when]
some corporations may divide their command and coordinating functions among officers who
work at several different locations, perhaps communicating over the Internet.” Even so, the
Court asserted that the test “points courts in a single direction, toward the center of overall
direction, control, and coordination.” Hertz Corp., 559 U.S. at 95-96.
It is well settled that once jurisdictional allegations are challenged, “the party seeking to
establish diversity jurisdiction bears the burden of persuasion, and parties must support their
jurisdictional allegations with ‘competent proof.’” Harrison, 811 F.3d at 40-41 (citing Hertz Corp.,
559 U.S. at 96-97); see also Calderón-Serra v. Wilmington Trust Co., 715 F.3d 14, 17 (1st Cir. 2013)

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Page 5

(holding that when a defendant moves to dismiss for lack of federal subject matter jurisdiction,
“the party invoking the jurisdiction of a federal court carries the burden of proving its
existence”). There is no presumption of truthfulness attached to the jurisdictional allegations.
Del Rosario-Ortega v. Star-Kist Caribe, Inc., 130 F. Supp. 2d 277, 280 (D.P.R. 2001). “Although the
Supreme Court did not go into depth about the exact quantum of proof required to meet the
burden of persuasion, it made it clear that run-of-the-mill corporate filings -- like a Form 10-K - are not enough on their own to satisfy it.” Id. This seeks to avoid jurisdictional manipulation.
Regarding this matter, the Court noted that “if the record reveals attempts at manipulation--for
example, that the alleged ‘nerve center’ is nothing more than a mail drop box, a bare office with
a computer, or the location of an annual executive retreat--the courts should instead take as the
‘nerve center’ the place of actual direction, control, and coordination, in the absence of such
manipulation.” Hertz Corp., 559 U.S. at 97.
In its motion to dismiss, defendant argues that plaintiff fails to assert diversity jurisdiction
in this case. Specifically, defendant notes that although plaintiff’s sole member, Condado 3, Inc.
was incorporated in Delaware, the assertion that its purported principal place of business is in
Minnesota “is a contrivance designed to manufacture diversity jurisdiction for a company that,
in reality, exists and operates in Puerto Rico.” ECF No. 16 at 5. Albeit defendant does not provide
any evidence to support such contention, the burden of persuasion in determining whether
diversity exists ultimately falls on plaintiff. Especially when the record is lacking competent
evidence for this Court to decide whether jurisdiction in fact exists.

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To support its proposition that diversity exists in this case, plaintiff submits an unsworn
declaration by John M. Himmelberg, resident of New York and Corporate Secretary of Midwest
Servicing, Inc., a servicer for Condado 3 CFL, LLC; the limited liability company agreement for
Condado 3 CFL, LLC, and Condado 3, Inc.; a document evidencing Condado 3, Inc.’s corporate
registration status in the state of Delaware; and the results of a search in Puerto Rico’s
Department of State Corporation Registry for “condado 3 cfl, llc”. See ECF No. 25-2, 25-3. The
evidence submitted at ECF No. 25 shows that plaintiff is a limited liability company with its
principal place of business in Edina, Minnesota. ECF No. 25-2. Condado 3, Inc. is plaintiff’s sole
member. Id. Condado 3, Inc. is also a Delaware corporation, registered on November 4, 2015,
with its “principal place of business” in Minnesota. Id. Plaintiff proffers that it is not incorporated
or registered to do business in Puerto Rico, that it does not own or lease properties in Puerto
Rico, and does not have employees, executives, directors or officers in Puerto Rico. ECF No. 25,
25-2, 25-4.
Additionally, plaintiff alleges that its nerve center is located where its sole member,
Condado 3, Inc., conducts its business, and that the center of direction, control and coordination
of its sole member is in Minnesota, where the “main decision maker” resides. ECF No. 25 at 3.
However, there is no “competent proof” regarding these allegations. As discussed above, even
considering that nowadays technology allows business to operate remotely, a party asserting
diversity jurisdiction must submit competent proof of its place of business and where decisions
are made.

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Page 7

As to what constitutes “competent proof”, this Court held that standard corporate filings
are insufficient on their own to be considered competent proof of a plaintiff’s principal place of
business. Condado 2 CLF, LLC v. R.R. Enters., S.E., No. 17-1994, 2018 U.S. Dist. LEXIS 76156, *6
(D.P.R. May 4, 2018). A “blanket statement” by a company representative that its “corporate
officers are located in Minnesota and that the decision-making and directional activity for the
corporation occurs there is similarly insufficient.” Id. Likewise, a sheer statement asserting that
the plaintiff’s members are not of the same citizenship as defendant fails to meet plaintiff’s
burden to show complete diversity. See D.B. Zwirn Spec. Opportunities Fund, L.P. v. Mehrotra, 661
F.3d 124, 125-26 (1st Cir. 2011).
The First Circuit held that “when a corporation is called upon to establish its own
citizenship -- particularly, as in this case, a corporate plaintiff which has chosen to initiate the
litigation under the federal courts’ diversity jurisdiction -- the imposition is hardly
overwhelming because information concerning ‘the relevant factors regarding its principal
place of business normally is available to it through its own corporate records.‘” Media
Duplication Services, Ltd. v. HDG Software, Inc., 928 F.2d 1228, 1237 (1st Cir. 1991) (citing Wright
& Cooper, Federal Practice & Procedure § 3625, at 641 (1984). In a similar vein, this Court noted
“[w]herever Plaintiff’s principal place of business exists, Plaintiff should be able to present
evidence showing details about the location of managers and corporate personnel in charge of
daily operations, directors’ meetings, bank accounts, where major policy decisions are made, as
well as the operations themselves.” Condado 2 CLF, LLC, 2018 U.S. Dist. LEXIS 76156, *6.

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Here, there is no allegation much less any evidence showing where Condado 3, Inc.’s
principal place of business really is, namely, where the direction and control of the operations
and the decision making takes place. Plaintiff’s assertions on this point are simply insufficient
to show what this Court needs to ascertain it has jurisdiction over the instant claims. The
unsworn statement, which is signed by a New York resident employed by plaintiff’s servicer not a company representative or officer, or the “main decision maker” -, fails to provide the
necessary proof, and plaintiff offers no additional evidence despite being granted the
opportunity to conduct discovery on this issue. Moreover, the only mention of Condado 3, Inc.
in the unsworn statement submitted by plaintiff provides as follows: “Condado 3, inc. is a
Delaware corporation with a principal place of business in Minnesota. Condado is in good
standing under the laws of the state of Delaware.” ECF No. 25-2. This is clearly a blanket
statement insufficient to show its place of business as required for purposes of establishing
diversity jurisdiction.
Case law is clear that the mere mention of where the place of business is purportedly
located without more is insufficient to establish plaintiff’s citizenship, thus plaintiff has not met
the burden of persuasion required to establish diversity. Consequently, defendant’s motion to
dismiss for lack of jurisdiction is GRANTED.

Civil No. 18-1211 (ADC)
IV.

Page 9

Conclusion

For the above stated reasons, defendant’s motion to dismiss for lack of jurisdiction is
GRANTED, and plaintiff’s claims are DISMISSED without prejudice. Judgment shall be
entered accordingly.
SO ORDERED.
At San Juan, Puerto Rico, on this 10th day of February, 2020.
S/AIDA M. DELGADO-COLÓN
United States District Judge