Wildwood Capital Assets LLC et al v. Westerfield et al

Filing 13

MEMORANDUM OPINION AND ORDER: Westerfield has not carried her burden and established that complete diversity exists between the parties and that this court therefore has subject matter jurisdiction over this action. Accordingly, the court, pursuant to 28 U.S.C. § 1447(c), sua sponte remands this action to the 298th Judicial District Court, Dallas County, Texas. (Ordered by Judge Sam A Lindsay on 1/30/2013) (ctf)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
WILDWOOD CAPITAL ASSETS, LLC;
WILDWOOD DEVELOPMENT
COMPANY, INC.; and ROSE PEARL,
LTD.,

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§
§
§
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Plaintiffs,
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v.
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DIVINA WESTERFIELD;
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TRADITIONS CAPITAL GROUP, LLC; §
EDWIN C. CLAXTON; ERIC C.
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CLAXTON; CLAXTON FAMILY
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TRUSTS; TRADITIONS GLOBAL
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INVESTMENTS; and CLAXTON GROUP, §
INC.,
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Defendants.
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Civil Action No. 3:12-CV-370-L

MEMORANDUM OPINION AND ORDER
Before the court is Plaintiffs’ Motion for Default Judgment, filed October 31, 2012.
Although the motion is pending, the court determines that Defendants have not established that
this court has subject matter jurisdiction. Accordingly, the court remands this action to the
298th Judicial District Court, Dallas County, Texas.
I.

Background
Wildwood Capital Assets, LLC (“Wildwood Capital”); Wildwood Development

Company, Inc.; and Rose Pearl, Ltd. (“Rose Pearl”) (collectively, “Plaintiffs”) filed this action
against Divina Westerfield (“Westerfield”); Traditions Capital Group LLC (“TCG”); Edwin C.
Claxton; Eric C. Claxton; Claxton Family Trusts (“CFT”); Traditions Global Investments
(“TGI”); and Claxton Group, Inc. (“CGI”) in the 298th Judicial District Court, Dallas County,

Memorandum Opinion and Order – Page 1

Texas. Plaintiffs’ Original Petition (“Petition”) asserts causes of action for breach of contract,
declaratory judgment, negligent misrepresentation, fraud, tortious interference with a contract,
tortious interference with a prospective business relationship, economic duress, civil conspiracy,
and violation of the Texas Deceptive Trade Practices Act. They seek compensatory damages,
exemplary and punitive damages, prejudgment interest, postjudgment interest, attorney’s fees,
and costs of suit.
On February 3, 2012, Westerfield removed this action to federal court, contending that
complete diversity of citizenship exists between the parties and that the amount in controversy
($11,000,000) exceeds $75,000, exclusive of interest and costs. While the amount in controversy
exceeds $75,000, complete diversity of citizenship has not been established. As there is no
federal question and the amount in controversy has been established, the court will focus its
discussion solely on the question of diversity.
II.

Jurisdictional Standard
A federal court has subject matter jurisdiction over civil cases “arising under the

Constitution, laws, or treaties of the United States,” or over civil cases in which the amount in
controversy exceeds $75,000, exclusive of interest and costs, and in which diversity of
citizenship exists between the parties. 28 U.S.C. §§ 1331, 1332. Federal courts are courts of
limited jurisdiction and must have statutory or constitutional power to adjudicate a claim. See
Home Builders Ass’n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998).
Absent jurisdiction conferred by statute or the Constitution, they lack the power to adjudicate
claims and must dismiss an action if subject matter jurisdiction is lacking. Id.; Stockman v.
Federal Election Comm’n, 138 F.3d 144, 151 (5th Cir. 1998) (citing Veldhoen v. United States
Coast Guard, 35 F.3d 222, 225 (5th Cir. 1994)). “[S]ubject-matter jurisdiction cannot be created
Memorandum Opinion and Order – Page 2

by waiver or consent.” Howery v. Allstate Ins. Co., 243 F.3d 912, 919 (5th Cir. 2001). A federal
court has an independent duty, at any level of the proceedings, to determine whether it properly
has subject matter jurisdiction over a case. Ruhgras AG v. Marathon Oil Co., 526 U.S. 574, 583
(1999) (“[S]ubject-matter delineations must be policed by the courts on their own initiative even
at the highest level.”); McDonal v. Abbott Labs., 408 F.3d 177, 182 n.5 (5th Cir. 2005) (A
“federal court may raise subject matter jurisdiction sua sponte.”).
Diversity of citizenship exists between the parties only if each plaintiff has a different
citizenship from each defendant. Getty Oil Corp. v. Insurance Co. of North America, 841 F.2d
1254, 1258 (5th Cir. 1988). Otherwise stated, 28 U.S.C. § 1332 requires complete diversity of
citizenship; that is, a district court cannot exercise jurisdiction if any plaintiff shares the same
citizenship as any defendant. See Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857 (5th Cir.
2003) (citation omitted).

“[T]he basis upon which jurisdiction depends must be alleged

affirmatively and distinctly and cannot be established argumentatively or by mere inference.”
Getty, 841 F.2d at 1259 (citing Illinois Cent. Gulf R.R. Co. v. Pargas, Inc., 706 F.2d 633, 636 n.2
(5th Cir. 1983)).

Failure to allege adequately the basis of diversity mandates remand or

dismissal of the action. See Stafford v. Mobil Oil Corp., 945 F.2d 803, 805 (5th Cir. 1991). A
notice of removal “must allege diversity both at the time of the filing of the suit in state court and
at the time of removal.” In re Allstate Ins. Co., 8 F.3d 219, 221 (5th Cir. 1993) (quotation marks
and citations omitted). Such failure, however, is a procedural defect and may be cured by filing
an amended notice. Id. n.4.
A natural person is considered a citizen of the state where that person is domiciled, that
is, where the person has a fixed residence with the intent to remain there indefinitely. See
Freeman v. Northwest Acceptance Corp., 754 F.2d 553, 555-56 (5th Cir. 1985). “‘Citizenship’
Memorandum Opinion and Order – Page 3

and ‘residency’ are not synonymous.” Parker v. Overman, 59 U.S. 137, 141 (1855). “For
diversity purposes, citizenship means domicile; mere residence in [a] [s]tate is not sufficient.”
Preston v. Tenet Healthsystem Mem’l Med. Ctr., Inc., 485 F.3d 793, 799 (5th Cir. 2007) (citation
and quotation marks omitted). “Domicile requires residence in [a] state and an intent to remain
in the state.” Id. at 798 (citing Mississippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30,
48 (1989)).
A partnership or unincorporated association’s citizenship is determined by the citizenship
of each of its partners. Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990). The citizenship
of a limited liability company “is determined by the citizenship of all of its members.” Harvey v.
Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008). A corporation is a “citizen of
every State . . . by which it has been incorporated and of the State . . . where it has its principal
place of business[.]” 28 U.S.C. § 1332(c)(1). The citizenship of a trust is that of its trustees.
Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 464 (1980) (citation omitted); Mullins v. Testamerica,
Inc., 564 F.3d 386, 398 (5th Cir. 2009) (footnote omitted). The citizenship of a trustee who
possesses “customary powers to hold, manage, and dispose of assets for the benefit of others” is
determined by the citizenship of the trustee, not the trust beneficiaries. Navarro Sav. Ass’n, 446
U.S. at 464 (footnote omitted). Control of the assets held in the name of the trustee must be “real
and substantial.” Id. at 465.
Any doubts as to the propriety of the removal should be construed strictly in favor of
remand. Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002). “The
burden of establishing subject matter jurisdiction in federal court rests on the party seeking to
invoke it.” St. Paul Reinsurance, 134 F.3d at 1253 (footnote omitted). Accordingly, if a case is
removed to federal court, the defendant has the burden of establishing subject matter jurisdiction;
Memorandum Opinion and Order – Page 4

if a case is initially filed in federal court, the burden rests with the plaintiff to establish that the
case “arises under” federal law, or that diversity exists and that the amount in controversy
exceeds the jurisdictional threshold.
III.

Analysis
A.

Allegations Regarding Citizenship

The citizenship of the parties is set forth as follows in the Petition:
2.
Wildwood Capital Assets, LLC is a Texas limited liability
company with a principal place of business at 1130 N. Westmoreland Rd.,
DeSoto, TX 75115.
3.
Wildwood Development Company, Inc. is a Texas Corporation
with a principal place of business at 1130 N. Westmoreland Rd., DeSoto, TX
75115.
4.
Rose Pearl, Ltd. is a Texas limited partnership with a principal
place of business at 1130 N. Westmoreland Rd., DeSoto, TX 75115.
5.
Westerfield is an individual residing in Sarasota County, Florida.
She may be served at her residence located at 800 N Tamiami Trl Unit 101N,
Sarasota, FL 34236.
6.
TGI is a Florida Limited Liability Corporation, with its principal
place of business located at 5020 Clark Road, Suite 117, Sarasota, FL 34233.
TCG may be served via its agents, Westerfield, in Florida, 800 N Tamiami Trl
Unit 101N, Sarasota, FL and Traditions Capital Group, LLC, with its principal
place of business located at 5020 Clark Road, Suite 117, Sarasota, FL 34233.
7.
TCG is a Florida Limited Liability Corporation, with its principal
place of business located at 5020 Clark Road, Suite 117, Sarasota, FL 34233.
TCG may be served via its agents, Westerfield, in Florida, 800 N Tamiami Trl
Unit 101N, Sarasota, FL 34236 and Eric Claxton, in Georgia, 12 Westbury Dr.
NW, Rome, GA 30165.
8.
Edwin Claxton is a resident of Georgia and believed to be the
Chairman of TCG, CO and trustee of the Claxton Family Trusts. Eric Claxton
may be served at the offices of CG, located at 3 Central Plaza, Suite 148, Rome
GA 30161 and he may also be served at his residence, located at 12 Westbury Dr.
NW, Rome, GA 30165.

Memorandum Opinion and Order – Page 5

9.
Eric Claxton is a resident of Georgia and believed to be the Chief
Executive Officer and Managing Member of TCG and CG. Eric Claxton maybe
served at the offices of CG, located at 3 Central Plaza, Suite 148, Rome GA
30161 and at his residence located at 91 Blue Jack Rd., Statesboro, GA 30458.
10.
CFT is a Georgia Trust with its principal place of business located
at 3 Central Plaza, Suite 148, Rome GA 30161. CFT may be served at that
address, via its agent, Eric C. Claxton, at 3 Central Plaza, Suite 148, Rome GA
30161.
11.
CG is a Georgia Corporation with its principal place of business
located at 3 Central Plaza, Suite 148, Rome GA 30161. CG may be served at that
address, via its registered service agent, The Traditions Group Inc., at 3 Central
Plaza, Suite 148, Rome GA 30161.
Pls.’ Original Pet. ¶¶ 2-11. As will be shown, allegations regarding eight of the parties do not
provide sufficient information for the court to determine their states of citizenship and to
conclude that complete diversity exists between Plaintiffs and Defendants.
B.

Discussion

Wildwood Capital is a limited liability company, and allegations that its principal place
of business is in Texas do nothing to establish the citizenship of all of its members; and its
members are not listed. Rose Pearl is a limited partnership; however, the allegations do not
provide the citizenship of each of its partners, and its partners are not listed. Westerfield resides
in Florida; however, residence alone does not establish the citizenship of an individual. TGI is a
limited liability corporation; however, no allegations set forth the citizenship of all of its
members, and its members are not listed.

TCG is a limited liability corporation, and no

allegations set forth the names of its members and their respective citizenship.
With respect to Eric Claxton and Edwin Claxton, as individuals, the Petition refers to
them as residents of Georgia, which is insufficient to establish citizenship. The Petition also sets
out insufficient information as to CFT because the citizenship of its trustees is not provided.

Memorandum Opinion and Order – Page 6

As pointed out by the court, the allegations regarding the citizenship of each of the listed
parties in the two preceding paragraphs are deficient in one or more ways. Jurisdictional
allegations regarding the basis of diversity “must be alleged affirmatively and distinctly.” Getty,
841 F.2d at 1259 (citation omitted). As the allegations regarding eight of the parties are deficient
and do not clearly and affirmatively state the bases for diversity, they fail to establish jurisdiction
for diversity purposes. As jurisdiction has not been established for diversity purposes, remand is
required. See Stafford, 945 F.2d at 805.
IV.

Conclusion
For the reasons herein stated, Westerfield has not carried her burden and established that

complete diversity exists between the parties and that this court therefore has subject matter
jurisdiction over this action. Accordingly, the court, pursuant to 28 U.S.C. § 1447(c), sua sponte
remands this action to the 298th Judicial District Court, Dallas County, Texas. The clerk of the
court shall remand this action in accordance with the usual procedure. As the case is remanded,
the court declines to rule on Plaintiffs’ Motion for Default Judgment.
It is so ordered this 30th day of January, 2013.

_________________________________
Sam A. Lindsay
United States District Judge

Memorandum Opinion and Order – Page 7