CUNA MUTUAL INSURANCE SOCIETY v. Open Lending, Inc. et al

Filing 36

ORDER that defendant Open Lending, Inc. may have until 5/26/2009 to provide verification of the diversity of citizenship between itself, defendant Houlihan, Lokey, Howard & Zukin Financial Advisors, Inc., and plaintiff CUNA Mutual Insurance Company. Signed by Chief Judge Barbara B. Crabb on 5/20/2009. (arw)

IN THE UNITED STATES DISTRICT COURT FO R THE WESTERN DISTRICT OF WISCONSIN --------------------------------------------C U N A MUTUAL INSURANCE SOCIETY, P la i n t i f f , v. 0 9 - cv -1 9 7 - b b c O P E N LENDING, INC. and H O U L IH AN , LOKEY, HOWARD & Z U K IN FINANCIAL ADVISORS, INC., D efendan ts. --------------------------------------------Th is civil action for declaratory and injunctive relief arises out of a joint venture betw een plaintiff CUNA Mutual Insurance Society and defendant Open Lending, Inc. to op erate a business known as Lenders Protection, LLC. On April 3, 2009, defendant Open L en din g, Inc. removed this case from state court, invoking this court's diversity jurisdiction un der 28 U.S.C. § 1332. Now before the court are defendant Open Lending's motion to com pel arbitration and stay proceedings in this court and plaintiff's motion for a stay of the valuation proceedings. Before ruling on the pending motions, this court has an independent obligation to in su re that subject matter jurisdiction exists. Arbaugh v. Y & H Corporation, 546 U.S. 500, ORDER

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5 0 1 (2006). The Court of Appeals for the Seventh Circuit has reiterated the need for litigan ts to meticulously review the limits of federal jurisdiction to prevent the waste of fed eral judicial resources. Belleville Catering Co. v. Champaign Market Place, L.L.C., 350 F.3d 691, 693 (7th Cir. 2003). The federal courts are "always obliged to inquire sua sponte w hen ever a doubt arises as to the existence of federal jurisdiction." Tylka v. Gerber Products C om pan y, 211 F.3d 445, 447-48 (7th Cir. 2000). Section 1332 requires complete diversity of citizenship, meaning that no plaintiff may be a citizen of the same state as any defendant. 28 U.S.C. § 1332(a)(1); McCready v. EBay, Inc., 453 F.3d 882, 891 (7th Cir. 2006); S traw bridge v. Curtiss, 7 U.S. 267 (1806). As the party that removed this case to federal court, defendant Open Lending bears the burden of showing that federal jurisdiction exists. Chase v. Shop n' Save Warehouse Fo od s, Inc., 110 F.3d 424, 427 (7th Cir. 1997) (party seeking to invoke federal diversity jurisdiction bears burden of demonstrating that complete diversity and amount in co n tro versy requirements are met). In the notice of removal, defendant Open Lending alleged that: 1) plaintiff CUNA Mutual Insurance Society is an Iowa company with its prin cipal place of business in Madison, Wisconsin; 2) defendant Open Lending, Inc. is a T e xas corporation with its principal place of business in Austin, Texas; 3) defendant H ou lihan , Lokey, Howard & Zukin Financial Advisors, Inc. is a California corporation with

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its principal place of business in California; and 4) the amount in controversy exceeds $7 5,0 00 . In establishing diversity jurisdiction, the citizenship of a business entity is determined by its organizational structure. For example, a corporation is deemed a citizen of the state in which it is incorporated and the state in which its principal place of business is located, 2 8 U.S.C. § 1332(c)(1); Hoagland ex rel. Midwest Transit, Inc. v. Sandberg, Phoenix & von G on tard, P.C., 385 F.3d 737, 741 (7th Cir. 2004). However, the citizenship of a limited liability company is the citizenship of each of its members. Thomas v. Guardsmark, LLC, 4 8 7 F.3d 531, 534 (7th Cir. 2007) (citations omitted) ("an LLC's jurisdictional statement m ust identify the citizenship of each of its members as of the date the complaint or notice of removal was filed, and, if those members have members, the citizenship of those members as well"). In this case, the complaint and notice of removal do not identify plaintiff's organizational structure. Thus, more information is needed before I can assess whether there is diversity jurisdiction in this case. Because it would be a waste of limited judicial resources to proceed further in a case w here jurisdiction may not be present, I will give defendant Open Lending seven days in w h ich to produce facts verifying the diversity of citizenship between plaintiff and defendan ts. Defendant is reminded that if plaintiff is a limited liability company whose m em bers include individual persons, the citizenship and not the residency of 3

individu al persons is what matters for diversity jurisdiction purposes. An individual is a citizen of the state in which he is domiciled, that is, where he has a "permanent home and prin cipal establishment, and to which he has the intention of returning whenever he is absen t therefrom." Charles Alan Wright, Law of Federal Courts 161 (5th ed. 1994); see also D akura s v. Edwards, 312 F.3d 256, 258 (7th Cir. 2002).

OR DER IT IS ORDERED that defendant Open Lending, Inc. may have until May 26, 2009, to provide this court with verification of the diversity of citizenship between itself, defendant H oulihan, Lokey, Howard & Zukin Financial Advisors, Inc. and plaintiff CUNA Mutual Insurance Company. Failure to comply with this deadline will result in the dismissal of the case for lack of subject matter jurisdiction. E n tered this 20t h day of May, 2009.

B Y THE COURT:

/s/ _ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ _ _ __ B AR B AR A B. CRABB D istrict Judge

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