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
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?