Eagles Nest, LLC et al v. Moy Toy, LLC et al

Filing 30

MEMORANDUM OPINION OF THE COURT. Signed by District Judge Kevin H. Sharp on 9/16/2014. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(eh)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NORTHEASTERN DIVISION
EAGLES NEST, LLC; BEVERLY BAUER;
AND CORTEZ INVESTMENTS GROUP,
INC., INDIVIDUALLY AND ON BEHALF
OF ALL OTHERS SIMILARLY SITUATED
Plaintiffs,
v.
MOY TOY, LLC, and STANDING
ROCK, LLC,
Defendants.

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No. 2:14-00010

MEMORANDUM
In this action that was removed from state court pursuant to the Class Action Fairness Act,
28 U.S.C. §§ 1332(d)(2) & 1453, Plaintiffs have filed a Motion to Remand. That Motion has been
fully briefed by the parties and, for the reasons that follow, will be granted.
I.
The relevant allegations from the Complaint are as follows:
Plaintiffs, Eagle Nest LLC, a Nevada corporation, Cortez Investments Group, Inc., a Florida
corporation, and Beverly Bauer, a citizen and resident of Louisiana, own multiple lots in the
Renegade Resort community in Cumberland County, Tennessee. Defendant, Moy Toy, Inc., a
Tennessee limited liability company, is the “purported developer of Renegade Resort” (Docket No.
1-2, Complaint ¶ 9), Defendant Terra Mountain Holdings, LLC, a Georgia limited liability company,
obtained a large tract of land adjacent to Renegade Resort from Moy Toy, and Defendant Standing
Rock, LLC, also a Tennessee limited liability corporation, owns the golf course property in

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Renegade Resort.
The lots in Renegade Resort are subject to restrictions recorded in the Cumberland County
Register of Deeds. The original restrictions (“1972 Restrictions”) envisioned
the developer in Renegade Resort developing the lands as part of a common master
plan of development intending to add other lands to the development and creating
thereon a residential and commercial resort with streets, water and sewer systems,
recreation facilities of various types, and other common facilities for the use and
benefit of the owners of said properties.
(Id. ¶ 33). The 1972 Restrictions further “state[d] an intention to bind adjacent properties to the
common scheme of development and to add them and protect them over time.” (Id. ¶ 35).
The 1972 Restrictions also provided for amendment upon an affirmative vote of a majority
of the owners’ association members, and adoption by the developer. Nevertheless, amendments
were made to the restrictions in 1987 and 2005 that “were improperly recorded and improperly
executed without membership approval by vote and without valid developer approval as required”
and were improperly recorded in an “attempt to increase the power for the purported developer while
simultaneously taking vested property rights from existing property owners.” (Id. ¶ 25).
Plaintiffs, on behalf of a class that “would include approximately 551 owners and 1,351 lots
and living units less those owned by Defendants[,] . . . require clarification as to their property
rights” and “a uniform decision as to which restrictions govern Renegade Resort inasmuch as
multiple amended restrictions have been recorded under questionable circumstances” that “purport
to bind all owners in Renegade Resort.” (Id. ¶¶ 12 &15). They also request a decision as to how
the lands adjacent to Renegade Resort may be utilized. (Id. ¶ 16).
Plaintiffs challenge Moy Toy’s “claims to have developer control” by “virtue of purported
superior voting rights in the Community Club” because “[d]eveloper rights were never properly and

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completely conveyed by and through Moy Toy, LLC’s predecessors in title.” (Id. at 28).1 They also
assert that Terra Mountain Holdings “is seeking to place a conservation easement on it property
which forms part of the master planned community,” but that such “a conservation easement would
be markedly inconsistent with and different from those uses contained in and provided for in the
1972 Restrictions, the master plan of development, and multiple repeated representations of Terra
Mountain Holdings, LLC’s predecessor in title.” (Id. ¶ 30).2 As to Defendant Standing Rock,
Plaintiffs claim that it intends to “put a conservation easement” on the property where the golf
course was located that contravenes the 1972 Restrictions, which provided that a golf course would
be constructed as “common property for the use and benefit of those in Renegade Resort.” (Id. ¶
46).
Plaintiffs filed suit in the Chancery Court for Cumberland County seeking declaratory and
injunctive relief. They make no specific claim for money damages.
II.
The CAFA “provides that a federal district court has jurisdiction in a civil action where there
is diversity, 28 U.S.C. § 1332(d)(2)(A), the amount in controversy exceeds $5 million, § 1332(d),
and the proposed class includes at least one hundred members, § 1332(d)(5)(B).” Salling v. Budget
Rent-A-Car Systems, Inc., 672 F.3d 442, 443 (6th Cir. 2012). “Such a class action may be removed
to a federal district court as provided by ‘section 1446 (except that the 1–year limitation under
section 1446(b) shall not apply), without regard to whether any defendant is a citizen of the State

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The Renegade Mountain Community Club is the property owners’ association for Renegade
Resorts. Under the 1972 Restrictions, the owner with developer rights is entitled to ten votes per lot. (Id. ¶
11).
2

After suit was filed, but before the case was removed to this Court, Plaintiffs filed a Notice of
Voluntary Dismissal as to Terra Mountain Holdings. (Docket No. 1-5).

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in which the action is brought, except that such action may be removed by any defendant without
the consent of all defendants.’” In re Mortgage Electronic Registration Sys., Inc. 680 F.3d 849, 853
(6th Cir. 2012) (quoting 28 U.S.C. § 1453(b)). “[A] defendant seeking removal must prove, by a
preponderance of the evidence, that jurisdictional requirements have been met.” Salling, 672 F.3d
at 443.
In seeking to remand this case, Plaintiffs argue Defendants have not established that removal
was proper because (1) Defendants claim the jurisdictional threshold has been met, even though
Plaintiffs seek only injunctive and declaratory relief their Complaint; (2) Defendants’ assertion of
the amount in controversy is based upon nothing but speculation and guesswork; and (3)
Defendants’ allegations as to the citizenship of the parties is deficient. Plaintiffs also argue that,
even if Defendants have sufficiently established this Court’s jurisdiction, the action should be
remanded pursuant to the discretionary exception identified in the CAFA. The Court agrees with
the last argument and will remand this case to the Chancery Court on that basis.
III.
While the “CAFA greatly expands federal jurisdiction over certain class actions,” Lemy
v. Direct Gen. Fin. Co., 559 F. App’x 796, 798 (11th Cir. 2014), it “does not grant jurisdiction in all
cases, providing judges discretionary jurisdiction in some instances, 28 U.S.C. § 1332(d)(3), and
barring jurisdiction in others, 28 U.S.C. § 1332(d)(4),” West Virginia ex rel. McGraw v. CVS
Pharmacy, Inc., 646 F.3d 169, 178 (4th Cir. 2011). As the court in McGraw explained:
To be sure, CAFA does protect important federal interests in addressing state
abuses in interstate class actions. It was enacted to prevent States from keeping
“cases of national importance out of Federal court” and making “judgments that
impose their view of the law on other States and bind the rights of the residents of
those states.” Id. § 2(a)(4). It thus assures that federal courts decide “interstate cases
of national importance.” Id. § 2(d)(2). But CAFA is also sensitive to deeply-rooted
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principles of federalism, reserving to the States primarily local matters.
646 F.3d at 178.
CAFA’s discretionary jurisdiction provision provides:
(3) A district court may, in the interests of justice and looking at the totality of the
circumstances, decline to exercise jurisdiction under paragraph (2) over a class action
in which greater than one-third but less than two-thirds of the members of all
proposed plaintiff classes in the aggregate and the primary defendants are citizens
of the State in which the action was originally filed based on consideration of–
(A) whether the claims asserted involve matters of national or
interstate interest;
(B) whether the claims asserted will be governed by laws of the State
in which the action was originally filed or by the laws of other States;
(C) whether the class action has been pleaded in a manner that seeks
to avoid Federal jurisdiction;
(D) whether the action was brought in a forum with a distinct nexus
with the class members, the alleged harm, or the defendants;
(E) whether the number of citizens of the State in which the action
was originally filed in all proposed plaintiff classes in the aggregate
is substantially larger than the number of citizens from any other
State, and the citizenship of the other members of the proposed class
is dispersed among a substantial number of States; and
(F) whether, during the 3-year period preceding the filing of that class
action, 1 or more other class actions asserting the same or similar
claims on behalf of the same or other persons have been filed.
28 U.S.C. § 1332(d)(3).
A.
Defendants argue that the Court cannot even consider the foregoing factors for two reasons:
Plaintiffs have not shown that more than one-third of the proposed class are Tennessee citizens or
that either of the remaining Defendants are citizens of this state. The Court disagrees.

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With regard to the first point, Defendants argue that Plaintiffs, in their moving papers, seek
to “satisf[y] the citizenship requirement set forth in § 1332(d)(3) with nothing more than an
approximated guess that the requisite percentage of the Plaintiff class are Tennessee citizens.”
Instead, Plaintiffs merely state that “approximately forty-six percent (46%) of the member of the
class are believed to be citizens of Tennessee.” (Docket No. 20 at 17).
Although the statute is unclear as to who carries the burden, its seems that the party asking
a court to decline to exercise jurisdiction under CAFA should carry the burden of persuasion. There
is authority for that proposition. See Myrick v. WellPoint, Inc., 2014 WL 4073065, at *2 (7th Cir.
Aug. 14, 2014) (stating that statute is “not clear,” but placing the burden of production on party
seeking remand); Wurtz v. Rawlings Co., LLC, 2014 WL 3746801, at *3 (2nd Cir. July 31, 2014)
(“The Second Circuit has declined to reach the issue of who bears the burden with regard to CAFA
exceptions”); Vodenichar v. Halcon Energy Properties, Inc., 733 F.3d 497, 503 (3rd Cir. 2013) (“The
party seeking to invoke an exception bears the burden of proving by a preponderance of the evidence
that the exception applies”). Regardless, the citizenship of the members of a proposed class cannot
be based on “guesswork”; “there must ordinarily be at least some facts in evidence” regarding
citizenship. Mondragon v. Capital One Auto Finance, 736 F.3d 880, 884 (9th Cir. 2013).
In conjunction with their reply, Plaintiffs supplemented the record with the Affidavit of John
Moore, President and Assistance to the Secretary of the Renegade Mountain Community Club. In
his Affidavit, Mr. Moore asserts that he retrieved an “Assessment Roll Database” printout from the
Tax Assessor’s office for the “location code G01” and compared that 169-page printout with the
master database for Renegade Resort. (Docket No. 29-2, Moore Aff. ¶¶ 5-6). His comparison of
the record showed that “of the 546 owners of record (536 without dual residency status), owning lots

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and/or living units within the Renegade Resort, 263 (48.17%) owners show an official Tennessee
address of record.” (Id. ¶ 8).
Residency, perforce, does not equate to citizenship, Walker v. Iverson, 509 F. App’x 394,
395 n.1 (6th Cir. 2012), but various cases “undeniably incorporate language amenable to an argument
that the court may determine citizenship based solely on evidence of residency[,]” Preston v. Tenet
Healthsystem Mem. Med. Ctr., Inc., 485 F.3d 793, 800 (5th Cir. 2007) (collecting numerous cases,
including the Sixth Circuit decision in Fort Knox Transit v. Humphrey, 151 F.2d 602, 602 (6th Cir.
1945)). In the CAFA arena, utilizing residency to establish citizens for purposes of the Act’s
exception has met with mixed results:
Some courts . . . have found that mailing addresses used for sending payments
or bills are insufficient to prove the class citizenship element under a CAFA
exception. See, e.g., In re Sprint Nextel Corp., 593 F.3d at 674 (class definition of
cell phone users with Kansas number and billing address was insufficient by itself
to satisfy plaintiffs' burden of proof [and] expressing unwillingness to rely on
“[s]ensible guesswork,” although court was “inclined to think that at least two-thirds
of those who have Kansas cell phone numbers and use Kansas mailing addresses are
probably Kansas citizens”); Reece, 2013 WL 1342379, at *4 n. 7 (noting that, even
if plaintiffs had presented proper evidence that putative class members' royalty
payments were sent to Oklahoma addresses, this would have been “less than
conclusive on the citizenship issue”); HMB Interests, LLC v. Chesapeake Louisiana
LP, No. 12–2344–cv, 2010 WL 3604008, at *3 (W.D.La. Sept.18, 2013) (“The fact
that a majority of the lessors list a Louisiana mailing address is not sufficient for the
Plaintiffs to meet their burden of proof as to the citizenship requirement.”). In
contrast, other courts have found that mailing addresses are sufficient to raise a
presumption of continuing domicile and citizenship. See, e.g., Preston II, 485 F.3d
at 821–22 (where the defined class was a finite group of persons who were
hospitalized by the defendant following Hurricane Katrina, mailing addresses in
hospital records allowed district court to make a “credible estimate that at least
one-third of the class were citizens of Louisiana” when the complaint was filed);
Commisso, 2012 WL 3070217, at * 5 (holding that class citizenship element was
satisfied based on class definition that limited plaintiffs to individuals who worked
in New York office and defendants' evidence that 67.4% of the putative class
members had a New York address) (“This data is more than sufficient to create a
presumption that more than one third of the putative class members are New York
citizens, and Commisso has not attempted to rebut this presumption.”); Bey, 904
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F.Supp.2d at 1105 (relying on defendants' evidence that 90% of putative class
members, which were employees at an Oregon corporation, had an Oregon address
and had therefore presented prima facie evidence of citizenship in Oregon).
Jeter v. Wild West Gas, LLC, 2014 WL 3890308, at *10 (N.D. Okla. Aug. 7, 2014).
Because “the burden of proof placed upon a plaintiff should not be exceptionally difficult
to bear,” for a plaintiff seeking to establish a CAFA exception, Mondragon, 736 F.3d at 884, the
Court finds Plaintiffs’ evidence sufficient. This case involves a defined class of Tennessee property
owners, and an indicia of domicile is property ownership. See e.g. Kyung Park v. Holder, 572 F.3d
619, 624 (9th Cir. 2009); Caffey v. Home Depot, 2014 WL 1681705, at *2 (M.D. Tenn. April 28,
2014). This is not to suggest that each of the 263 owners that comprise almost half of the class are
necessarily Tennessee residents, but it is reasonable to conclude that more than 1/3 of the lot owners
are Tennessee citizens when both the county assessor’s and homeowners’ associations rolls show
that their address of record is in Tennessee. See Williams v. Homeland Ins. Co., 657 F.3d 287, 291
(5th Cir. 2011) (citation omitted) (“The district court may make ‘a reasonable assumption’ of
CAFA’s citizenship requirements from evidence that indicates the ‘probable citizenship of the
proposed class’”); Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 572 (5th Cir. 2011)(“The
evidentiary standard for establishing citizenship and domicile at this preliminary stage [in a CAFA
case] must be practical and reasonable.”).
Turning to the second point, Defendants argue that Plaintiffs have not, and cannot, show that
either of the primary Defendants is a citizen of Tennessee. This is because both Moy Toy and
Standing Rock are limited liability companies comprised of Florida members.
“The general rule is that all unincorporated entities—of which a limited liability company
is one—have the citizenship of each partner or member.” Delay v. Rosenthal Collins Grp., LLC,

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585 F.3d 1003, 1005 (6th Cir. 2009) (citing, Carden v. Arkoma Assocs., 494 U.S. 185, 187–92
(1990). However, “CAFA itself evinces an intent that suits by unincorporated associations be
treated like suits by corporations in that the citizenship of the association for diversity purposes is
determined by the entity’s principal place of business and not by the citizenship of its members.”
Erie Ins. Exchange v. Erie Indem. Co., 722 F.3d 154, 161 (3rd Cir. 2013). Specifically, the Act
provides:
(10) For purposes of this subsection and section 1435, an unicorporated association
shall be deemed to be a citizen of the State where it has its principal place of
business and the State under whose laws it is organized.
28 U.S.C. § 1332(d)(10). Thus, “[f]or qualifying class actions . . CAFA abrogates the traditional
rule that an unincorporated association shares the citizenship of each of its members for diversity
purposes[.]” Davis v. HSBC Bank Nevada, N.A., 557 F.3d 1026, 1032 n.13 (9th Cir. 2009); see also
Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008) (in Section 1332(d)(10)
“Congress has created a statutory exception to” the general rule of citizenship for unincorporated
associations).
Defendants concede that both Moy Toy and Standing Rock are Tennessee limited liability
companies. For purposes of CAFA, they are Tennessee citizens. See, Ferrell v. Express Check
Advance of SC LLC, 591 F.3d 698, 700 (4th Cir. 2010) (holding that a Tennessee limited liability
company “is an ‘unincorporated association’ as that term is used in 28 U.S.C. § 1332(d)(10)” and
a citizen of Tennessee).
B.
In determining whether it is “in the interest of justice” to decline jurisdiction, the Court is
to look at the “totality of the circumstance” and consider the six factors listed in Section 1332(d).

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Four of those factors clearly support declining jurisdiction in this case.
CAFA was intended to “restore the intent of the framers of the United States Constitution
by providing for Federal court consideration of interstate case of national importance under diversity
jurisdiction.” Pub. L. 109-2 § 2, 118 Stat. 4 (2005). In response to Plaintiffs’ Motion to Remand,
Defendants argue that this is a case of national or interstate concern because it “involves issues of
contract law and property law that could impact countless developments and the effect of countless
recorded documents.” (Docket No. 20 at 18). This argument is not further developed, and the Court
does not understand how this case will impact countless developments and documents. See, Preston,
485 F.3d at 822 (in CAFA case involving New Orleans hospital’s actions during Hurricane Katrina,
“broad statement” about evacuation of medical facilities during disasters being a national concern
“could swallow the rule” because “many events isolated to one area at any particular time may
reoccur in another geographic location in the future”).
Whether the case is heard by this Court or the Chancery Court, the decision will be limited
to, and potentially affect the rights of, the owners of property and developer(s) of Renegade Resort.
It involves the interpretation of restrictions relating to property in a portion of a single county, in a
single state, and will be governed by the laws of the state of Tennessee. The first two factors,
Sections 1332(d)(3)(A) and (B) favor remand. See Foley v. Cordillera Golf Club LLC, 2012 WL
114856, at * 6 (D. Colo. April 5, 2012) (declining to exercise discretionary jurisdiction under CAFA
where claim involved membership rights in golf course and a restaurant in county in Colorado and
matter involved contract claims that would likely be governed by Colorado law).
The third and fourth factors also favor remand. While “CAFA was clearly designed to
prevent plaintiffs from artificially structuring their suits to avoid federal jurisdiction,” Freeman v.

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Blue Ridge Paper Products, Inc. 551 F.3d 405, 407 (6th Cir. 2008), there is no indication that the
Complaint was pled in such a was so as to avoid this Court’s jurisdiction. The case involves real
property right that are traditionally within the purview of state courts. United States v. Real Property
& All Furnishings Known As Bridwell’s Grocery , 195 F.3d 819, 821 (6th Cir. 1999). It was filed
in the most logical forum for that dispute – the Chancery Court for the county in which the property
is located – and in a court that has a “distinct nexus with the class member, the alleged harm, [and]
the defendants[.]” 28 U.S.C. 1332(d)(3)(D).
With regard to the fifth factor, Plaintiffs assert that “the number of members of the Plaintiff
class that are citizens of Tennessee is substantially larger than the number of class members from
any other state.” (Docket No. 18 at 10). Defendants do not challenge that assertion. While it seems
logical that Tennessee lot owners would substantially outnumber the owners from any other state
(particularly since nearly half of the putative class has a Tennessee address), the Court does not
consider this a factor in its decision to decline jurisdiction.
With regard to the sixth and final factor, there was a previously-filed putative class action
that raised at least some claims similar to the ones presented in this litigation. However, this does
not strongly favor retaining jurisdiction because the class action status in that case was denied by
the Chancery Court. See, Buck v. Metro-Goldwyn-Mayer Studios Inc., 2014 WL 3510151, at *5
(C. D. Cal. July 24, 2014) (“Th[e] final factor’s purpose is efficiency and fairness,” with the intent
being to insure that class action litigation “be handled efficiently on a coordinated basis pursuant
to ... 28 U.S.C. § 1407”).
In short, “CAFA’s primary objective” is to “ensur[e] Federal court consideration of interstate
cases of national importance.” Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345, 1350 (2013). The

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totality of the circumstances indicate that this simply is not such a case.
C.
As a part of their Motion to Remand, Plaintiffs request attorney’s fees and costs under the
removal statute.
So far as relevant, that statute provides:

“[a]n order remanding the case may require

payment of just costs and any actual expenses, including attorney fees, incurred as a result of the
removal.” 28 U.S.C. § 1447(c). Even though a district court has “considerable discretion to award
or deny costs and attorney fees” under the statute, “the Supreme Court has instructed that fee awards
are inappropriate unless ‘the removing party lacked an objectively reasonable basis for seeking
removal.’” Powers v. Cottrell, Inc., 728 F.3d 509, 515 (6th Cir. 2013) (quoting Martin v. Franklin
Capital Corp., 546 U.S. 132, 141 (2005)).
Defendants’ removal of this case was not objectively unreasonable, and Plaintiffs do not
argue otherwise. Their request for attorney’s fees and costs will be denied.
VI.
On the basis for the foregoing, Plaintiffs’ Motion to Remand will be granted and this case
will be remanded to Chancery Court. Plaintiffs’ request for attorney’s fees will be denied.
An appropriate Order will be entered.
____________________________________
KEVIN H. SHARP
UNITED STATES DISTRICT JUDGE

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