TSquare Apts LLC v. AMLI/BPMT Towne Square Partnership et al

Filing 97

MEMORANDUM OPINION AND ORDER granting 71 AMENDED 26 MOTION to Dismiss for Lack of Subject Matter Jurisdiction (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

United States District Court
Southern District of Texas

ENTERED
February 10, 2017

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

TSQUARE APTS LLC,

David J. Bradley, Clerk

§
§

Plaintiff,
v.

AMLI/BPMT TOWNE SQUARE
PARTNERSHIP; AMLI RESIDENTIAL
PROPERTIES, L.P.; AMLI
RESIDENTIAL PARTNERS LLC;
AMLI MANAGEMENT COMPANY; and
PENSIOENFONDS METAAL EN
TECHNIEK (PMT) f/k/a STICHTING
BEDRIJFSPENSIOENFONDS VOOR DE
METAAL EN TECHNISCHE
BEDRIJFSTAKKEN (BPMT),
Defendants.

§
§
§
§
§
§
§
§
§
§
§
§
§
§
§
§

CIVIL ACTION NO. H-16-0873

MEMORANDUM OPINION AND ORDER

Pending before the court is AMLI Defendants' Amended Motion to
Dismiss

for

Lack

of

Subject -Matter

Jurisdiction

Support ( "AMLI' s Amended Motion to Dismiss")

and

Brief

in

(Docket Entry No. 71) .

For the reasons stated below, the motion will be granted.

I.

Factual and Procedural Background

Plaintiff TSquare Apts LLC ("TSquare")
recover

alleged

damages

arising

out

of

filed this action to
its

purchase

of

a

multi-family residential apartment complex. 1

TSquare alleges that

it purchased the mid-rise apartment complex located near downtown
Houston,

Texas

("the

Complex"),

from

AMLI/BPMT

Towne

Square

Partnership ( "AMLI/BPMT") on or around September 25, 2012. 2

On or

around Memorial Day 2015, heavy rainfall resulted in damage to the
Complex. 3

TSquare

alleges

that

during

repairs

it

discovered

evidence of previously undisclosed damage and repairs that had been
hidden by AMLI/BPMT. 4
TSquare filed suit on April 1, 2016. 5
AMLI Residential Properties, L.P.
Partners,

LLC

(collectively,
alternatively,

( "AMLI
"the

LLC" )

AMLI

I

Defendants AMLI/BPMT,

("AMLI L.P."), AMLI Residential
and

AMLI

Defendants")

Management

moved

for a more definite statement. 6

conference held on June 24,

2016,

to

Company

dismiss

or,

At a scheduling

the court ordered TSquare to

1

Plaintiff TSquare Apts LLC's
First Amended Complaint
("Plaintiff's Amended Complaint"), Docket Entry No. 70, p. 1.
2

Id. at 4

3

Id.

~ 13.

~ 14.

5

See Plaintiff TSquare Apts LLC's Original Complaint, Docket
Entry No. 1.
6

See Defendants' Motion to Dismiss, and Alternatively, Motion
for More Definite Statement, and Brief in Support, Docket Entry
No. 11.
-2-

amend

its

complaint

to

identify

members

and

partners

of

the

defendant entities, along with their residences, so that the court
could determine whether it had jurisdiction. 7
after

conducting

amended
tortious

complaint,

jurisdictional
asserting

interference,

misrepresentation,

and

fraud,

discovery,

claims

for

fraudulent

conspiracy

On November 1, 2016,

to

TSquare
breach

filed

its

of

contract,

inducement,

negligent

commit

fraud.

8

The AMLI

Defendants then filed AMLI's Amended Motion to Dismiss. 9
TSquare is a limited liability company ("LLC") with members
who are citizens of Colorado . 10

AMLI/BPMT, AMLI L. P., and AMLI LLC

(collectively, "the Member Entities") are members of a complex and
multilayered

structure

of

partnerships

and

limited

liability

companies (See Organizational Chart below.) of which Prime Property
Fund, LLC ("Prime, LLC") is a part. 11

7

Hearing Minutes and Order, Docket Entry No. 21.

8

Plaintiff's Amended Complaint, Docket Entry No. 70, pp. 8-15.

9

See AMLI's Amended Motion to Dismiss, Docket Entry No. 71.

Plaintiff' s Amended Complaint, Docket Entry No. 70, p. 1 ~ 1;
Appendix A to Plaintiff's Amended Complaint, Docket Entry No. 70-1.
10

11

See Supplemental Declaration of Lidia Novak (Under Seal)
("Novak Declaration") , Docket Entry No. 31, pp. 1-3; see also
Organizational Chart, AMLI' s Amended Motion to Dismiss, Docket
Entry No. 71, p. 8.
-3-

Sole Member

r

PPF OPGP,
LLC

I
GP

Prime Property
Fund, LLC
~
Adviser
LP

Morgan Stanley
Real Estate
Advisor, Inc.

PPF OP,
LP
Sole Member
PPF Multifamily,
LLC
Sole Member

Sole Member

PPF AMLI
Acquisition, LLC
LP

AMLI Residential
Partners. LLC
GP

AMLI Residential
Properties, L.P.

Sole Member

AMLI REIT
Holdings, LLC
Sole Member
AMLI Towne
Square, LLC
Partner

AMLI/BPMT
Towne Square.__ ____.
Partnership

-4-

Partner

The AMLI Defendants argue that the citizenship of one or more
of the Member Entities is determined by the citizenship of Prime,
LLC,

which

is

a

citizen

of

Colorado

citizenship of two of its rnernbers. 12

because

of

the

Colorado

The AMLI Defendants argue that

the parties are therefore not completely diverse and that the court
lacks

jurisdiction over this action.

Prime,

TSquare disputes whether

LLC's citizenship ultimately determines whether the court

has subject-matter jurisdiction and argues

that,

in any event,

Prime, LLC is not a citizen of Colorado. 13
II.
A.

Analysis

Applicable Law
"Federal courts are courts of lirni ted jurisdiction."

v. Guardian Life Insurance Company of America,
1675

(1994).

matter

114 S.

Kokkonen
Ct.

1673,

A party may assert the defense of lack of subject

jurisdiction

in

a

Rule

12 (b) (1)

motion.

"'A

case

is

properly dismissed for lack of subject matter jurisdiction when the
court lacks the statutory or constitutional power to adjudicate the
case.'"

Horne Builders Association of Mississippi, Inc. v. City of

Madison,

Mississippi,

143 F.3d 1006,

1010

(5th Cir.

1998).

The

burden of establishing federal jurisdiction rests with the party

12

AMLI' s Amended
pp . 7 - 9 , , 8 - 9 .

Motion

to

Dismiss,

13

Docket

Entry

No.

71,

Plaintiff's Response to AMLI Defendants' Amended Motion to
Dismiss for Lack of Subject Matter Jurisdiction ("Plaintiff's
Response"), Docket Entry No. 83, pp. 4-5.
-5-

asserting its existence.

DaimlerChrysler Corp. v. Cuno, 126 S. Ct.

1854, 1861 n.3 (2006).
"Courts may dismiss for lack of subject matter jurisdiction on
any one of three different bases:

(1) the complaint alone;

(2) the

complaint supplemented by undisputed facts in the record; or (3) the
complaint

supplemented

by

undisputed

facts

plus

the

court's

resolution of disputed facts."

Clark v. Tarrant County, Texas, 798

F.2d 736, 741 (5th Cir. 1986).

Rule 12(b) (1) challenges to subject

matter

jurisdiction

"factual" attacks.
(5th Cir. 1981).

come

in

two

forms:

"facial"

See Paterson v. Weinberger,

attacks

and

644 F.2d 521, 523

A facial attack consists of a Rule 12(b) (1) motion

unaccompanied by supporting evidence that challenges the court's
jurisdiction based solely on the pleadings.

Id.

A factual attack

challenges the existence of subject matter jurisdiction in fact,
irrespective of the pleadings, and matters outside the pleadings -such as testimony and affidavits -- may be considered.

Id.

Because

the parties have each submitted evidence outside the pleadings, the
AMLI Defendants'

motion is a

factual attack;

and the court will

consider the evidence in the record, resolving any disputed facts.
Courts have original jurisdiction over civil actions where the
parties are diverse and the matter in controversy exceeds the sum
or value of $75,000, exclusive of interest and costs.
§

1332 (a) . 14

The Supreme Court has

14

Neither party disputes that
requirement is met in this case.
-6-

held that

the

§

1332

28

u.s.c.

requires

amount-in-controversy

"complete diversity"

since 1806.

See McLaughlin v.

Power Co., 376 F.3d 344, 353 (5th Cir. 2004)
Curtiss, 7 U.S.

(3 Cranch)

Mississippi

(citing Strawbridge v.

267, 2 L. Ed. 435

(1806)).

"Complete

diversity requires that all persons on one side of the controversy
be citizens of different states
side."

than all persons on the other

Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1079 (5th

Cir. 2008)

(internal quotation marks and citations omitted).

For artificial entities other than corporations,
jurisdiction in a

diversity

suit by or against an entity depends on the

citizenship of all its members.

Americold Realty Trust v. Conagra

Foods,

1015

Inc.,

136 S.

Ct.

1012,

( 2016)

(citations omitted) .

Where artificial entities are members of other artificial entities,
repeated application of the rule may be necessary as citizenship is
traced through organizational layers.
Holdings,

L.L.C.,

618 F. App'x 765,

768

See Alphonse v. Arch Bay
(5th Cir.

2015)

(citing

Mullins v. TestAmerica, Inc., 564 F.3d 386, 397 (5th Cir. 2009)).
The Fifth Circuit has joined the majority of circuits in holding
that these rules apply to limited liability companies as well as
partnerships.
B.

Grey Wolf, 542 F.3d at 1080.

Application

The essential question in this action is whether Prime, LLC,
and as a result,

the Member Entities,

are citizens of Colorado

because of the citizenship of two of Prime,
(i)

the City of Aurora General Employees'

LLC's shareholders:

Retirement Plan

Aurora Plan"), a Colorado public pension fundi and (ii)
-7-

("the

the Fire

and

Police

Pension

Association

of

Colorado

("the

Pension

Association"), a political subdivision of Colorado (collectively,
"the Colorado Entities")

15

the

Colorado

citizenship

diversity,

it

relationship,

of

is

the

Although the parties dispute whether

undisputed

that

whatever it may be,

Entities 16
both
to

has

entities
Prime,

any bearing on
have

LLC. 17

the
The

same
court

therefore combines its analysis of the Colorado Entities except
where otherwise stated.
In attachments to its Amended Complaint TSquare sets forth its
citizenship as well as what it alleges to be the citizenship of the
AMLI Defendants. 18

But TSquare states that it "lacks sufficient

knowledge and information to form a belief about the citizenship"
of Prime,

LLC. 19

Nevertheless,

TSquare alleges that it believes

that Prime, LLC is a single member LLC. 20

15

AMLI's Amended Motion to Dismiss, Docket Entry No. 71, p. 9.

16

The parties do not, however, appear to dispute
Colorado Entities are Colorado citizens.

that

the

17

See Plaintiff's Response, Docket Entry No. 83, p. 7 ("AMLI
Defendants claim the Pension Fund and the Pension Association are
both 'member-owners' and hold the same interest in Prime Property
Fund, LLC [Doc. 71 ~ 20]. Accordingly, the Pension Association's
sworn declaration stating it is not a member of Prime Property
Fund, LLC likewise demonstrates the Pension Fund is not a member of
Prime Property Fund, LLC.").
18

See Appendix B to Plaintiff's Amended Complaint, Docket Entry
No. 70-2, p. 2 ~~ 10-11.
19

Id.

~

10.

-8-

In support of their argument that Prime,

LLC has Colorado

members the AMLI Defendants first cite to the Amended and Restated
Limited Liability Company Agreement of Prime, LLC ("Fund Operating
Agreement") ,

which

states

in

Article

3,

Section

3. 03 (a)

that

"[e]ach Initial Subscribing Shareholder of Voting Shares
in exchange for

agree[s] to pay consideration to the Company
. . . Voting Shares of the Company. " 21

Second, the AMLI Defendants

cite to subscription agreements signed by the Colorado Entities,
which state,
shares

in relevant part,

in Prime,

LLC. 22

that each entity subscribed for

Third,

the AMLI

Defendants note

that

TSquare previously filed as exhibits statements purporting to show
the Colorado Entities'
Fund. " 23

ownership percentages in "Prime Property

Fourth, the AMLI Defendants attach redacted copies of IRS

Form 1099-DIV for each of the Colorado Entities showing that each
receives quarterly dividend statements from Prime, LLC. 24

Finally,

the AMLI Defendants submit signed, written consent forms showing
that each of the Colorado Entities, as "a holder of Voting Shares
of [Prime, LLC,] a Delaware limited liability company" consented to

21

AMLI's Amended Motion to Dismiss, Docket Entry No. 71, p. 14
~ 21
(citing Fund Operating Agreement, Docket Entry No. 72-1,
Art. 3, Section 3.03(a), p. 17).
Id. ~~ 22-23 (citing Docket Entry Nos. 31-1, p. 35 and 31-3,
pp. 29-30) .
22

23

Id.

~

25

(citing Docket Entry Nos.

56-3,

p.

2 and 56-4,

p. 4) .
24

Id.
(citing Pension Fund's 2015 1099-DIV and Political
Subdivision's 2015 1099-DIV, Exhibits C & D to AMLI's Amended
Motion to Dismiss, Docket Entry Nos. 72-3 and 72-4, respectively).
-9-

the election of each of the Independent Directors nominated by the
25

board.

The AMLI Defendants' evidence proves that, at a minimum, the
Colorado Entities are shareholders of Prime,

LLC.

In order to

further determine whether they are members of Prime, LLC, the court
first

looks

to

carefully

read

schedules

and

the
the

Fund
Fund

Operating Agreement.
Operating

amendments. 26

Agreement

Although

it

The
and

contains

court

has

its

attached

no

explicit

definition of "member" and few direct references to members as a
class, the Fund Operating Agreement supports the AMLI Defendants'
position that the Colorado Entities, as shareholders, are members.
First,
"the

the preamble to the Fund Operating Agreement states that
Electing

Contractholders

(as

defined

below)

and

Initial

Subscribing Shareholders (as defined below) are being issued Shares
(as

defined

[Prime,

LLC]

member of

below)
"27

[Prime,

in

and

"Share"
LLC]

are

being

is defined as

admitted

as

members

of

"an interest held by a

representing a fractional portion of the

interests of all members of

[Prime,

LLC] . " 28

A "Shareholder" is

defined as "at any time, any Person who holds Shares and is at such
time admitted to the Company as a member in accordance with the

Id. ~ 26 (citing Pension Fund's Shareholder Consent and
Political Subdivision's Consent Exhibits G & H to AMLI's Amended
Motion to Dismiss, Docket Entry Nos. 72-7 and 72-8, respectively).
25

26

Docketed as Docket Entry Nos. 72-1 and 84-3.

27

Id. at 7 (emphasis added) .

28

Id. at 12 (emphases added) .
-10-

terms of th[e]
records of

Agreement and is shown as such on the books and
LLC] . " 29

[Prime,

Shareholder"

"Non-Voting Share"

and "Non-Voting

are defined in reference to the foregoing terms. 30

Moreover, Article 11 of the Fund Operating Agreement dealing with
transferability

of

shares

"Admission of Members,"

includes

Section

11. 10

entitled

which describes the method by which "a

Person may be admitted to [Prime, LLC] as a Shareholder." 31
TSquare responds that the citizenship of Prime, LLC does not
determine the citizenship of the AMLI Defendants and that neither
of the Colorado Entities is a member of Prime, LLC.

First, TSquare

asserts that the dispute over the AMLI Defendants' citizenship is
based on information provided in the declaration of Lidia Novak and
argues

that

statements

the

are

declaration

not

is

inadmissible

based on her personal

because

knowledge.

Novak's
TSquare

alleges that "Novak testified she has no personal knowledge of the
organizational structure of the AMLI Defendants"
declaration
Freeman]

32

relied

completely

on

and a conversation with

documents
[defense]

and "that her

prepared
counsel. " 33

by

[Gail

TSquare

cites the following deposition testimony:
29

Id.

30

Id. at 11.

31

Id. at 59-60.

(emphasis added) .

32

Deposition of Lidia Novak ("Novak Deposition"), corporate
secretary for Prime, LLC and for the fund investment advisor,
Morgan Stanley Real Estate Adviser ("MSREA"), Exhibit A to
Plaintiff's Response, Docket Entry No. 84-1, 33:21-34:8.
33

Plaintiff's Response, Docket Entry No. 83, p. 5.
-11-

Q: How often do you work with Gail?
A: I would say in the course of a year, probably four or
five times we have an occasion to communicate by e-mail.
Q: Do you have any understanding of what her job duties
are?
A: Not specifically.
Q: Do you work in combination with her any other time
where you are relying on her work?

A: Yes, over the course of a year, as I said, probably
four or five times, yes.
Q:

In that particular context, what is that related to?

A: It might be -- I might e-mail her and send her an
organizational chart, which she maintains and I will ask
her, is that the most current version of the document?
And then she will tell me yes or she will provide
something additional.
Q:

Do you know who drafted that document for Gail?

A: I don't -- I'm assuming she did, but I don't really
know.
Q: So looking back at number 4, what you relied on for
the knowledge that the principal office was located in
Georgia and the sole member of PPF OPGP, LLC a Delaware
limited liability company was based on an organizational
chart; is that correct?
A: Based on an organizational chart,
my conversation with Braden and
whatever information was contained
was supported by documents that the

that certificate and
the knowledge that
in that certificate
fund maintains.

Novak Deposition, Exhibit A to Plaintiff's Response, Docket Entry
No. 84-1, 34:14-35:25.

Before the above exchange, however, Novak

gave the following testimony:
Q: Your primary role is, is that fair to say, basically
in the management, the investment or vice [sic] for the
particular fund, Prime Property Fund?
-12-

A: It is
right.

all

really related to

Prime

Property Fund,

How long have you been in this position?

Q:

A: I have been with Morgan Stanley since November of
2003, so doing work since then.
When did
initiated?

Q:

Prime

Property

Fund

begin;

when

was

it

A: It became an LLC on June 30th, 2004.
And you have been assigned to Prime Property Fund
since the beginning?

Q:

A: Yes.

Q: Fabulous. [Declaration paragraph] Number 4 says, "The
Fund, with its principal office located in Georgia, is
the sold [sic] member of PPF OPGP, LLC, a Delaware
limited liability company ("OPGP") ."
Where did you get that information?
A:
I relied on my knowledge of AMLI in general,
organizational charts that I have seen throughout the
course of my daily work and I also relied on the
secretary certificate that contains this information and
I consulted with our in-house counsel Braden Wilhelm.
Id. at 7:4-21; 32:19-33:8.
Contrary to TSquare's assertion, Novak's deposition testimony
shows

that

she

relied

on

her

personal

knowledge

along

with

organizational charts maintained by Freeman in her capacity as
corporate secretary.

Nothing in Novak's Deposition,

which the

court has read in its entirety, suggests that Novak lacked personal
knowledge of the facts in her declaration,
she

may

have

consul ted

corporate
-13-

despite the fact that

documents

or

counsel

before

signing the declaration under penalty of perjury. 34

Moreover, the

court need not rely solely on Novak's Declaration because TSquare
attached a similar description of the AMLI Defendants' corporate
structure to its Amended Complaint without qualification. 35
TSquare further asserts that "[Prime, LLC] is not a party to
this case or even a member or partner in any AMLI Defendant." 36
That fact is irrelevant.

The court must apply its citizenship

analysis through as many organizational layers as necessary to
accurately

determine

the

citizenship

of

the

evidence before the court proves that Prime,

defendants.

The

LLC is the limited

partner of PPF OP, LP, which is the sole member of PPF Multifamily,
LLC, which is in turn the sole member of PPF AMLI Acquisition LLC,
the sole member of defendant AMLI LLC and a limited partner of
defendant AMLI L.P.
TSquare next argues that the Pension Association is not a
member

of

Prime,

declaration of J.

LLC.

First,

Scott Simon,

Pension Association.

TSquare

cites

to

the

sworn

Chief Investment Officer of the

Simon declares:

The Association does not hold or possess
stock
certificates or membership instruments in [Prime, LLC].

34

Considering the complexity of the alleged organizational
structure, Novak's need to refresh her recollection regarding its
details from a source she personally knows to be reliable is
understandable.
35

See supra notes 10-11 and accompanying text.

36

Plaintiff's Response, Docket Entry No. 83, p. 4.
-14-

The Association is not a shareholding member or managing
member of
[Prime, LLC]. The Association does not
participate in the management of [Prime, LLC] . The
Association does not receive and has never received an
annual K-1 tax form specific to the Association from or
in connection with [Prime, LLC] .
Declaration from Fire and Police Pension Association of Colorado
("Simon Declaration"), Exhibit B to Plaintiff's Response, Docket
Entry No. 84-2, p. 1.

TSquare argues that Simon's Declaration and

the fact that (i) no investor has a direct ownership in the fund's
assets

and

(ii)

"the Manager of

Prime

Property Fund,

LLC has

exclusive power and authority over the investments of the company"
indicate that Prime, LLC's shareholders are "merely" investors in
"an investment fund held by Prime Property Fund, LLC." 38
At

best,

testimony.

the

Simon

Declaration

sets

up

dueling

investor

Simon declares that the Pension Association is "not a

shareholding

member"

of

Prime,

LLC. 39

But

Tom

Connell,

administrator of the Aurora Plan, refused to sign an identically
worded

declaration 40

deposition. 41

and

testified

to

the

contrary

at

his

Connell testified that he understood that the Aurora

Plan owns shares in an actual limited liability company as opposed

38

Id. at 5-6.

39

Simon Declaration, Exhibit B to Plaintiff's Response, Docket
Entry No. 84-2.
40

AMLI's Amended Motion to Dismiss, Docket Entry No. 71, p. 17
28 (citing Deposition of Tom Connell ("Connell Deposition"),
Exhibit B to AMLI' s Amended Motion to Dismiss, Docket Entry
No. 72-2, 73:6-74:11).
~

41

Connell Deposition, Exhibit B to AMLI's Amended Motion to
Dismiss, Docket Entry No. 72-2, 55:4-56-5.
-15-

to a mere investment vehicle. 42
deposition 43

prove

little,

The conflicting declaration and

however,

because

neither

investor

purported to have sufficient expertise -- legal or otherwise -- to
resolve the parties'

dispute over the membership status of the

Colorado Entities.
TSquare's arguments regarding the management and ownership of
Prime, LLC's assets are not persuasive.

The signed consent form

from each of the Colorado Entities consenting to the election of
the

Independent Directors

undermines

TSquare' s

assertions

shareholders have no role in the management of Prime,
assuming

arguendo

that

creatures of state law,

44

TSquare

is

correct,

because

LLC.
LLCs

that
But
are

and because Prime, LLC was formed under

Delaware law, the court looks to the law of that state to determine
whether members of LLCs are required to directly own assets or
participate in management.

The court has reviewed the Delaware

Limited Liability Company Act, Del. Code tit. 6, §§ 18-101 et seq.,
and can find no support for the argument that members must directly

42Id.

43

The court notes, however, that only Connell's statements were
subject to cross-examination.
44

J.
William Callison and Maureen A. Sullivan, Limited
Liability Companies: A State-by-State Guide to Law & Practice§ 1:1
Nature of limited liability company ( 2 016) (Westlaw) ( "LLCs are
formed pursuant to various state limited liability company acts,
which generally set forth a series of default rules that govern LLC
operation and governance unless the members' operating agreement
specifies particular rules.").

-16-

own an LLC's assets or exercise control over the company.
contrary,

To the

Delaware law provides for multiple classes of members

with varying rights. 45
Finally, TSquare argues that "Prime Property Fund, LLC" refers
to both an actual LLC and an "investment vehicle" of the same name
created by the LLC. 46

TSquare offers three arguments for why the

Pension Fund holds shares in this alleged investment fund rather
than the LLC itself.

First, TSquare alleges that the Pension Fund

"generally does not own shares in the companies that hold[]
manage[] the investment funds. " 47
explanation that Prime,

and

Second, TSquare asserts without

LLC's election to be treated as a

real

estate investment trust ( "REIT") for federal tax purposes indicates
that the Pension Fund is "merely an investor in a fund managed and
held by [Prime, LLC] and not a member of [Prime, LLC] ." 48

Finally,

TSquare argues that the Pension Fund does not appear to be a member
or owner of Prime, LLC because it does not have share certificates.
TSquare's arguments are not convincing.

First,

the typical

structure of the Pension Fund's other investments has no bearing on
how Prime,

LLC is

reasoning,

and

the

structured.
court

Second,

can

think

of

TSquare has offered no
none,

to

support

45

Id. at

46

Plaintiff's Response, Docket Entry No. 83, p. 6.

47

Id. at 7.

§

18-302 (a).

4Bid.

-17-

the

assertion that Prime, LLC's REIT election for federal tax purposes
is evidence of the existence of a distinct investment vehicle.
Third, as evidenced by the Fund Operating Agreement 49 and affirmed
by deposition testimony, 50 Prime, LLC is uncertificated, and thus
no shareholder possesses share certificates.

Finally,

because

neither the Fund Operating Agreement nor its attachments make any
mention of a distinct investment vehicle like the one hypothesized
by TSquare,

the court can find no evidence to support TSquare's

allegations.
The court finds that the Colorado Entities were shareholders
of Prime, LLC, an LLC organized under Delaware law when this suit
was filed.

The court further finds that the Colorado Entities, as

shareholders, are also members of Prime, LLC.
concludes that Prime, LLC and, as a result,
are citizens of Colorado.
Colorado,

The court therefore
the Member Entities,

Because TSquare is also a citizen of

the parties are not completely diverse,

and the court

must dismiss this action for want of subject-matter jurisdiction. 51

49

Fund Operating Agreement, Docket Entry No. 84-3, p. 16 § 3.02
("All Shares issued hereunder shall be uncertificated unless
otherwise determined by the Manager in its discretion.").
50

Novak Deposition, Exhibit A to Plaintiff's Response, Docket
Entry No. 84-1, 17:4-7.
51

At least one of the Member Entities is a necessary party.
Dismissal of the non-diverse parties pursuant to Federal Rule of
Civil Procedure 21 would therefore not be appropriate.
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J

I
t
III.

Conclusions and Order

For the reasons explained above,

the court concludes that

TSquare has failed to meet its burden to establish that the AMLI
Defendants

are

completely

diverse.

Accordingly,

the

AMLI

Defendants' Amended Motion to Dismiss for Lack of Subject-Matter
Jurisdiction (Docket Entry No. 71) is GRANTED.
SIGNED at Houston, Texas, on this lOth day of February, 2017.

UNITED STATES DISTRICT JUDGE

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