Varney et al v. Air & Liquid Systems Corporation et al

Filing 115

ORDER DISMISSING ACTION WITHOUT PREJUDICE FOR LACK OF SUBJECT MATTER JURISDICTION. Plaintiffs are free, if appropriate, to refile this action in a court of general jurisdiction. Signed by Judge James L. Robart. (PM)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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DONALD VARNEY, et al.,

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Plaintiffs,

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v.
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AIR & LIQUID SYSTEMS
CORPORATION, et al.,

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CASE NO. C17-1902JLR
ORDER DISMISSING ACTION
WITHOUT PREJUDICE FOR
LACK OF SUBJECT MATTER
JURISDICTION

Defendants.

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Before the court is Plaintiffs Donald Varney and Marie Varney’s (collectively,
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“Plaintiffs”) response to the court’s order to show cause regarding subject matter
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jurisdiction. (OSC Resp. (Dkt. # 106); see also OSC (Dkt. # 22).) The court issued the
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order to show cause because Plaintiffs’ complaint does not contain allegations regarding
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the identity or citizenship of the members of four Defendants, which are limited liability
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companies. (OSC at 2-3.) Those Defendants are ITT, LLC (“ITT”), McNally Industries,
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ORDER - 1

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LLC (“McNally”), Sterling Fluid Systems (USA), LLC (“Sterling”), and Warren Pumps,

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LLC (“Warren”). (Id. at 2 (citing Compl. (Dkt. # 1) ¶¶ 31, 34, 39, 45).)

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In its order to show cause, the court explained to Plaintiffs that a court assessing

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diversity jurisdiction in a proceeding involving a limited liability company must consider

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the citizenship of all members of the limited liability company. (See OSC at 2 (citing

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Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (“[A]n

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LLC is a citizen of every state of which its owners/members are citizens.”)).) The court

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also explained that if the members of a limited liability company are in turn also limited

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liability companies, Plaintiffs must allege the citizenship of those entities as well by

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identifying the citizenship of their members. (See id. at 3 n.1 (citing Johnson, 437 F.3d at

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899 (examining corporate citizenship of a limited partnership whose partners included

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LLCs by looking to the citizenship of the members/owners of those LLCs)).)

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Plaintiffs allege that the court’s subject matter jurisdiction rests on 28 U.S.C.

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§ 1332. (Compl. ¶ 52.) This provision requires compete diversity of citizenship between

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the parties. “That is, diversity jurisdiction does not exist unless each defendant is a

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citizen of a different State from each plaintiff.” Owen Equip. & Erection Co. v. Kroger,

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437 U.S. 365, 373 (1978) (italics in original). Plaintiffs allege that they are citizens of

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Arizona. (Compl. ¶ 1.) In their response to the court’s order to show cause, Plaintiffs

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state that they “have been able to determine that none of the LLC Defendants have

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members that are citizens of Arizona.” (OSC Resp. at 2.) The court has examined

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Plaintiffs’ counsel’s declaration and its accompanying evidence (see Adams Decl. (Dkt.

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# 106-1)), which Plaintiffs submitted along with their response to the order to show cause

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(see OSC Resp.), and concludes that the evidence counsel submits does not support this

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statement. Indeed, there is no evidence before the court from which it could determine

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that the limited liability company Defendants at issue are not citizens of Arizona. Thus,

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the court is unable to determine that each Defendant is a citizen of a different state from

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Plaintiffs. The court will discuss Plaintiffs’ submissions concerning each such limited

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liability company Defendant in turn.

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First, Plaintiffs’ counsel submits that counsel for Warren represented that

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Warren’s only member is IMO Industries, Inc. (“IMO”) and that IMO is a Delaware

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corporation. (Adams Decl. ¶ 3.) This information is fine as far as it goes, but it does not

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go far enough. A corporation “shall be deemed to be a citizen of any State by which it

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has been incorporated and of the State where it has its principal place of business.” 28

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U.S.C. § 1332(c)(1). Plaintiffs provide no information concerning IMO’s principal place

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of business, and so the court has insufficient information concerning the citizenship of

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Warren.

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Second, Plaintiffs assert that Arsenal HoldCo, LLC (“Arsenal”), is the sole

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member of McNally. (See OSC Resp. at 2.) Although the documentation submitted by

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Plaintiffs appears to indicate that Arsenal is a member of McNally, the court cannot

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conclude based on the evidence before it that Arsenal is McNally’s sole member. (See

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Adams Decl. ¶ 6, Ex. 2 at Cm/ECF page 17.) Furthermore, even if Arsenal is the sole

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member of McNally, the court still would not know the citizenship of McNally because it

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does not know the citizenship of Arsenal. Plaintiffs state that Arsenal is a citizen of

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Delaware, but the only evidence before the court is that Arsenal is a limited liability

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company that was organized in Delaware. (See id. ¶ 7, Ex. 3.) The state of Arsenal’s

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organization does not establish its citizenship for purposes of determining the court’s

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subject matter jurisdiction. As the court has already apprised Plaintiffs, and as they

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should have so informed themselves prior to filing suit in federal court, a limited liability

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company “is a citizen of every state of which its owners/members are citizens.” Johnson,

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437 F.3d at 899. Further, if a member of a limited liability company defendant is in turn

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another limited liability company, Plaintiffs must allege the citizenship of that entity by

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identifying the citizenship of its members as well. (See OSC at 3 n.1.) Thus, if Arsenal

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is the sole member of McNally, then Plaintiffs also need to allege the citizenship of each

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of Arsenal’s members in order to establish the citizenship of McNally, which Plaintiffs

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have not done. Thus, Plaintiffs have failed to provide any proper averment or evidence

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concerning the citizenship of McNally.

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Third, Plaintiffs have not established the citizenship of Sterling. Again, because

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Sterling is a limited liability company, its citizenship is determined by the citizenship of

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its members or owners. See Johnson, 437 F.3d at 899. Although Plaintiffs provide

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information concerning the “principals” of Sterling, they provide no information

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concerning Sterling’s members. 1 (See OSC Resp. at 2.) Further, the information

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Further, the notion that the terms “principal” and “member” of a limited liability
company are “most likely synonymous”—as Plaintiffs suggest—borders on the specious. (See
OSC Resp. at 2.) Delaware’s Limited Liability Company Act (“LLC Act”) “defines a member
as ‘a person who is admitted to a limited liability company as a member as provided in [6 Del.
C.] § 18-301,’” which in turn pertains to the admission of members. Hampton v. Turner, No.
CV 8963-VCN, 2015 WL 1947067, at *5 (Del. Ch. Apr. 29, 2015); see also OPERATING
AGREEMENT, Black’s Law Dictionary (10th ed. 2014) (“A limited-liability company’s
governing document that sets out the financial and managerial rights of the company’s
members.”). A “principal” is “[s]omeone who authorizes another to act on his or her behalf as

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Plaintiffs provide concerning Sterling’s state of organization and principle place of

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business is irrelevant. (See id.) As noted above, this type of information applies when

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establishing the citizenship of a corporation for purposes of diversity jurisdiction, see 28

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U.S.C. § 1332(c)(1), not a limited liability company, see Derosier v. Glob. Hawk Ins. Co.

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(RRG), No. 4:16-CV-06069-KAW, 2017 WL 1133411, at *3 (N.D. Cal. Mar. 27, 2017)

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(“[A]n LLC is not defined by its principal place of business, and thus the location of its

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nerve center is not at issue for purposes for establishing diversity jurisdiction.” (internal

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citation and quotation marks omitted)). Thus, Plaintiffs fail to establish the citizenship of

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Sterling.

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Finally, Plaintiffs fail to establish the citizenship of ITT. As noted above, the fact

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that ITT is a limited liability company organized in Indiana is irrelevant. (See OSC Resp.

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at 2.) Further, as discussed above, the citizenship of ITT’s principals is also irrelevant.

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(See supra n.1.) Plaintiffs provide no information concerning the citizenship of ITT’s

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members. (See OSC Resp. at 2; Adams Decl. ¶¶ 2, 5, Ex. 1.) Thus, Plaintiffs have failed

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to provide any of the information requested by the court with respect to any of the limited

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liability company Defendants.

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Based on the foregoing review of the information Plaintiffs provide in response to

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the court’s order to show cause, there is no evidence to substantiate Plaintiffs’ assertion

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that “none of the LLC Defendants have members that are citizens of Arizona.” (See OSC

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an agent.” PRINCIPAL, Black’s Law Dictionary (10th ed. 2014). Thus, although a member of a
limited liability company may serve as its principal, one may also serve as a principal of a
limited liability company without being its member. The terms are not synonymous.

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Resp. at 2.) Thus, the court cannot determine if there is complete diversity of citizenship

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between the parties as required to support federal subject matter jurisdiction under 28

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U.S.C. § 1332(a)(1).

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This court is a court of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of

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Am., 511 U.S. 375, 377 (1994). It possesses only that power authorized by the

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Constitution and statute. Id. It cannot gloss over the existence of subject matter

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jurisdiction. Indeed, the Supreme Court instructs that “[i]t is to be presumed that a cause

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lies outside [the court’s] limited jurisdiction,” and “the burden of establishing the

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contrary rests upon the party asserting jurisdiction.” Id. The court provided Plaintiffs

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with an opportunity to demonstrate the court’s subject matter jurisdiction (see OSC), but

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Plaintiffs failed to do so. If a federal court determines that it lacks subject matter

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jurisdiction at any time during a dispute, the court must dismiss the action. See Fed. R.

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Civ. P. 12(h)(3); Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010) (“Courts have an

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independent obligation to determine whether subject-matter jurisdiction exists, even

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when no party challenges it.”); Rosales v. United States, 824 F.2d 799, 803 n.4 (9th Cir.

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1987). Accordingly, the court DISMISSES this action WITHOUT PREJUDICE for lack

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of subject matter jurisdiction. Plaintiffs are free, if appropriate, to refile this action in a

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court of general jurisdiction.

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Dated this 1st day of February, 2018.

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A

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JAMES L. ROBART
United States District Judge

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ORDER - 7