1031 Equity Exchange, LLC et al vs Superior Homes, LLC et al

Filing 19

ORDER TO SHOW CAUSE by Judge Benjamin H. Settle re 12 MOTION to Dismiss filed by Superior Homes, LLC. Show Cause Response due by 6/19/2017. (TG)

1
2
3
4
5
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

6
7
8

1031 EQUITY EXCHANGE, LLC, et
al.,

CASE NO. C17-5213 BHS
ORDER TO SHOW CAUSE

9

Plaintiffs,
v.

10
SUPERIOR HOMES, LLC, et al.,
11
Defendants.
12
13
14
15
16

This matter comes before the Court on Defendants Superior Homes, LLC
(“Superior”) and Estela Mata’s (“Defendants”) motion to dismiss (Dkt. 12). The Court
has considered the pleadings filed in support of and in opposition to the motion and the
remainder of the file and hereby requests a response as follows:

17
18
19
20
21

I.

PROCEDURAL HISTORY

On March 22, 2017, Plaintiffs 1031 Equity Exchange, LLC (“1031EE”) and Kauai
Ocean View Professional Building, LLC (“Kauai Ocean”) (collectively “Plaintiffs”) filed
a complaint against Defendants asserting diversity jurisdiction and numerous causes of
action based on violations of state law. Dkt. 1.

22

ORDER - 1

1

On May 1, 2017, Defendants filed a motion to dismiss arguing that the Court

2

should (1) abstain because of a prior action in Hawaii, (2) dismiss because neither

3

plaintiff is a real party in interest, or (3) dismiss because joinder of the real party in

4

interest would defeat jurisdiction. Dkt. 12. On May 22, 2017, Plaintiffs responded. Dkt.

5

15. On May 23, 2017, Defendants replied and argued for the first time that there is not

6

complete diversity. Dkt. 18.

7
8
9

II.

DISCUSSION

“If the court determines at any time that it lacks subject-matter jurisdiction, the
court must dismiss the action.” Fed. R. Civ. P. 12(h)(3) (emphasis added). See also Snell

10

v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 2002) (“Federal Rule of Civil Procedure

11

12(h)(3) provides that a court may raise the question of subject matter jurisdiction, sua

12

sponte, at any time during the pendency of the action . . . .”). Although Defendants

13

improperly raised the issue of diversity jurisdiction for the first time in the reply, the

14

Court must confirm it has jurisdiction before reaching the merits of the dispute. See

15

Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376, 1380

16

(9th Cir. 1988). As the parties invoking federal jurisdiction, Plaintiffs bear the burden of

17

establishing its existence. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994).

18

District courts have diversity jurisdiction when the parties are citizens of different

19

states and the amount in controversy exceeds $75,000, exclusive of interest and costs. 28

20

U.S.C. § 1332(a)(1). “Diversity jurisdiction requires complete diversity between the

21

parties—each defendant must be a citizen of a different state from each plaintiff.” In re

22

Digimarc Corp. Derivative Litig., 549 F.3d 1223, 1234 (9th Cir. 2008). “In cases where

ORDER - 2

1

entities rather than individuals are litigants, diversity jurisdiction depends on the form of

2

the entity.” Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir.

3

2006). “[A]n LLC is a citizen of every state of which its owners/members are citizens.”

4

Id. Thus, if an individual defendant is an owner or member of a plaintiff LLC, “then

5

diversity requirement of section 1332 cannot be satisfied.” Skaaning v. Sorensen, CV 09-

6

00364 DAE-KSC, 2009 WL 3763056, at *3 (D. Haw. Nov. 10, 2009)

7

In this case, there appears to be at least two problems with diversity jurisdiction.

8

First, Defendants assert that a member of 1031EE, Frank Sarabia, is a citizen of

9

California, which would result in 1031EE being a citizen of California. Johnson, 437

10

F.3d at 899. Plaintiffs allege that Superior is a California company and that Ms. Mata is a

11

citizen of California. Dkt. 1, ¶¶ 2.3–2.4. If these facts are true, then diversity of

12

citizenship between parties is destroyed and the Court lacks jurisdiction.

13

Second, Defendants assert that Ms. Mata is a member of Kauai Ocean. Dkt. 12 at

14

2. The Washington Secretary of State corporation’s registration information confirms

15

that Ms. Mata is the governing member of Kauai Ocean. https://www.sos.wa.gov/corps/

16

search_detail.aspx?ubi=604025934 (last checked June 12, 2017). If this fact is true, then

17

an LLC is suing one of its own members, which would destroy diversity. As a result, the

18

Court requests the parties’ positions on these facts and issues before addressing the merits

19

of Defendants’ motion.

20
21
22

III.

ORDER

Therefore, it is hereby ORDERED that any party may show cause why the case
should not be DISMISSED for lack of jurisdiction. Responses are due no later than June

ORDER - 3

1

19, 2017. Failure to respond will result in DISMISSAL without prejudice and without

2

further order of the Court.

3

Dated this 13th day of June, 2017.

A

4
5

BENJAMIN H. SETTLE
United States District Judge

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

ORDER - 4