LBR Holdings, LLC v. Poulos, et al
Filing
38
MEMORANDUM OPINION AND ORDER granting defendants Gregory G. Poulos, Jason G. Poulos, Pamela F. Poulos, Shaun D. Rogers, Kevin H. Rogers, Derek B. Rogers and T. G. Rogers, III's 30 MOTION to Dismiss for Lack of Subject Matter Jurisdiction. Signed by Senior Judge David A. Faber on 1/23/2014. (cc: counsel of record) (arb)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
AT BLUEFIELD
LBR HOLDINGS, LLC,
Plaintiff,
v.
CIVIL ACTION NO. 1:13—01081
GREGORY G. POULOS, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the court is a motion to dismiss for lack of
subject matter jurisdiction filed by defendants Gregory G.
Poulos, Jason G. Poulos, Pamela F. Poulos, Shaun D. Rogers, Kevin
H. Rogers, Derek B. Rogers, and T.G. Rogers, III.
(Doc. No. 30).
Defendant Geomet Operating Company, Inc. agrees with defendants
that this court does not have jurisdiction because diversity is
lacking.
For the reasons expressed more fully below, the motion
to dismiss is GRANTED.
I.
Background
Relying on diversity of citizenship, LBR filed this suit
against the defendants listed above, as well as EQT Production
Company, seeking declaratory and other relief regarding the
ownership of the coalbed methane under certain property located
in McDowell County, West Virginia.
Plaintiff LBR Holdings is a
Virginia limited liability company with its principal office in
Lexington, Kentucky.
trusts.
The two members of LBR are Kentucky
The trustee for both trusts is a citizen of Kentucky
while the beneficiaries of the trusts are citizens of Kentucky,
Tennessee, and North Carolina.
Resolution of the motion to
dismiss hinges on the whether the citizenship of a trust is
determined by the citizenship of the trust’s beneficiaries.
If
it is, as defendants argue in their motion, diversity is lacking
because LBR would be a citizen of Kentucky, Tennessee, and North
Carolina for purposes of diversity jurisdiction and defendants
Derek Rogers and T.J. Rogers are also North Carolina citizens.
LBR contends that the citizenship of the trust is based upon the
citizenship of the trustee and, therefore, there is complete
diversity.
II.
Standard of Review
Federal district courts may exercise diversity jurisdiction
over civil actions in which the matter in controversy exceeds the
sum or value of $75,000.00 and is between citizens of different
states.
See 28 U.S.C. § 1332(a)(1).
The phrase “between
citizens of different states” has been interpreted as requiring
“complete diversity,” i.e., the citizenship of each plaintiff
must be diverse from the citizenship of each defendant.
Caterpillar Inc., v. Lewis, 519 U.S. 61, 68 (1996)(citing
Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L. Ed. 435
(1806)).
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III.
Analysis
The parties agree that neither the Supreme Court nor our
appeals court has decided the precise issue presented herein: how
to determine the citizenship of a trust.
The parties further
agree that the courts to have considered the question are
divided.
Having reviewed the split of authority on the issue,
the court finds particularly persuasive the opinion of the United
States Court of Appeals for the Third Circuit in Emerald
Investors Trust v. Gaunt Parsippany Partners, 492 F.3d 192 (3d
Cir. 2007).
In that case, the Third Circuit discussed four alternatives
for determining the citizenship of a trust:
(a) look to the citizenship of the trustee only; (b)
look to the citizenship of the beneficiary only; (c)
look to the citizenship of either the trustee or the
beneficiary depending on who is in control of the trust
in the particular case; or (d) look to the citizenship
of both the trustee and the beneficiary.
Id. at 201.
In considering the possibilities, the Emerald
Investors court rejected the option proposed by the plaintiff in
this case - - that the court should only look to the citizenship
of the trustee.
See id. at 201-02.
The Third Circuit noted that
the likely source of confusion on the issue was the Supreme
Court’s holding in Navarro Savings Association v. Lee, 446 U.S.
458 (1980), which “could be understood as suggesting that a court
should look to the citizenship of the trustee in determining the
citizenship of a trust without regard to the citizenship of the
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beneficiary.”
Id. at 201.
However, as the Emerald Investors
court noted, a later decision by the Court made clear that
“Navarro had nothing to do with the citizenship of the ‘trust.’”
Id. at 202 (quoting Carden v. Arkoma Associates, 494 U.S. 185,
192-93 (1990)).
Therefore, to the extent that various courts
have concluded that the citizenship of a trust is that of the
trustee, their reliance on Navarro is misplaced.
The Emerald Investors court ultimately determined that, in
determining the citizenship of a trust, the best alternative was
to look at both the citizenship of the trustee and the
beneficiary.
See id. at 203.
In so doing, the court noted that
such an approach would not contradict either Navarro or Carden;
“obviates the possibility of an illogical outcome under a trustee
or beneficiary-only approach in a case in which the trustee
controls the trust and the beneficiary is merely passive, or vice
versa”; and provides a bright-line rule for determining if the
court has subject matter jurisdiction.
Id. at 203-04.
Recently, in a case involving the same parties that are
named herein, a court in the Western District of Virginia
considered the method for determining the citizenship of a trust.
See Poulos v. Geomet Operating Company, Inc., Case No.
1:12CV00094 (W.D. Va. June 6, 2013).
Relying on the Emerald
Investors decision, Judge Jones concluded that the test adopted
by that court was “well-reasoned” and “the most desirable of the
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four options.”
Id. at p. 6.
The court held that LBR had the
citizenship of both its trustee and its beneficiaries and,
therefore, complete diversity was lacking.
See id.
For the reasons expressed by Judge Jones in his opinion in
Poulos and the United States Court of Appeals for the Third
Circuit in Emerald Investors Trust, the court concludes that LBR
has the citizenship of both its trustee and its beneficiaries.
See also Constantin Land Trust v. Epic Diving and Marine
Services, LLC, Civil Action No. 12-259, 2013 WL 1292275, *6 (E.D.
La. Mar. 28, 2013) (listing opinions holding “that the
citizenship of a trust is that of all of its `members,’ defined
as its trustees and beneficiaries”); Yueh-Lan Wang ex rel. Wong
v. New Mighty U.S. Trust, 841 F. Supp.2d 198, 203 (D.D.C. 2012)
(finding that “Supreme Court precedent and the well-considered
decisions of other circuits support the conclusion that the
citizenship of a trust’s beneficiaries must be taken into account
in determining the citizenship of a trust”).
In this case, that
means that LBR is a citizen of Kentucky, Tennessee, and North
Carolina.
Because defendants Derek Rogers and T.J. Rogers are
citizens of North Carolina, complete diversity is lacking and
this court does not have jurisdiction.
IV.
Conclusion
Based on the foregoing, defendants’ motion to dismiss for
lack of subject matter jurisdiction is GRANTED.
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The Clerk is directed to send a copy of this Memorandum
Opinion and Order to all counsel of record.
It is SO ORDERED this 23rd day of January, 2014.
ENTER:
David A. Faber
Senior United States District Judge
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