Phillips v. Beauly LLC et al

Filing 28

MEMORANDUM AND ORDER denying 4 MOTION to Remand (Signed by Magistrate Judge Stephen Wm Smith) Parties notified.(jmarchand, 4)

United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
M ARYANNE P HILLIPS,
Plaintiff,
v.
B EAULY, LLC AND S TARWOOD W AYPOINT
TRS, LLC.,
Defendant.

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January 17, 2017
David J. Bradley, Clerk

C IVIL A CTION N O. 4:16-CV-02272

MEMORANDUM AND ORDER
Before the Court is Plaintiff Maryanne Phillips’ motion to remand this declaratory
judgment and quiet title action against Beauly, LLC and Starwood Waypoint TRS, LLC.
Dkt. 4. Phillips contends that removal is barred by 28 U.S.C. § 1332 because there is no
diversity. The parties consented to magistrate jurisdiction. Dkt. 23. After reviewing the
briefing and the law, the motion to remand is denied.
Background
Plaintiff Maryanne Phillips filed suit against Beauly, LLC and Starwood Waypoint
TRS, LLC (“Starwood”) in Texas state court. On July 29, 2016, Defendants timely
removed the case to federal court on the basis of diversity jurisdiction. Dkt. 1. Philips
filed her motion to remand August 17, 2016. Dkt. 4. Defendants responded September 15,
2016. Dkt. 14. Phillips contends that the case must be remanded because there is no
diversity of citizenship.

Analysis

A civil action brought in state court may be removed to federal court if the federal
court has original jurisdiction over the case. 28 U.S.C. § 1441(a). Original jurisdiction
extends to controversies “between Citizens of different States.” U.S. C ONST art. III, § 2,
cl. 1. Diversity jurisdiction exists only if there is complete diversity of citizenship
between the parties and the amount in controversy exceeds $75,000. See 28 U.S.C. §
1332(a); Lincoln Prop. Co. v. Rocke, 546 U.S. 81, 89 (2005) (explaining that the
citizenship of all plaintiffs must be diverse form the citizenship of all defendants). The
removing party bears the burden of showing that federal jurisdiction exists. Manguno v.
Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5 th Cir. 2002)(citations omitted).
The Fifth Circuit has held that the removal statutes are to be construed “strictly against
removal and for remand.” Eastus v. Ble Bell Creameries, L.P., 97 F.3d 100, 106 (5 th Cir.
1996) (citation omitted).
Phillips argues that because Starwood Waypoint conducts all business relating to
Texas out of offices in Houston and Dallas, there is no complete diversity since Phillips is
a Texas resident. Dkt. 4 at 5. Her argument assumes that the proper test for determining
the citizenship of a limited liability company is the “total activity test” defined in Friend
v. Hertz Corp., 297 Fed Appx. 690 (9 th Cir. 2008).
Phillips is incorrect for two reasons. First, the “total activity” test for corporation
citizenship was overturned by the Supreme Court, which, instead, adopted the “nerve
center” test for that purpose. See Hertz Corp. v. Friend, 559 U.S. 77 (2010).
More importantly, however, the test for citizenship of limited liability companies
differs from the test used for corporations. The LLC is determined by the citizenship of
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each of its members for purposes of diversity jurisdiction. See Carden v. Arkoma Assoc.,
494 U.S. 185, 195-96 (1990). Here, it is undisputed that the sole member of Beauly, LLC
and Starwood Waypoint TRS, LLC is Starwood Waypoint Borrower, LLC, a Delaware
entity with its headquarters in Oakland, California. Since no defendant is a citizen of
Texas, complete diversity remains intact.
Conclusion
For these reasons, Phillips’ motion to remand is denied.
Signed at Houston, Texas, on January 17, 2016.

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