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)

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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. § § § § § § § § 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 2 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. 3

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