Humphrey, Frank et al v. Love's Travel Stops & Country Stores, Inc. et al

Filing 64

ORDER Regarding Jurisdiction. Proof of Diversity Citizenship due 5/9/2014. Signed by District Judge William M. Conley on 5/6/14. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
FRANK A. HUMPHREY, and
DEAN HEALTH PLAN, INC.,
Plaintiffs,

ORDER

v.
13-cv-235-wmc
FRANCIE CO., L.P.
Defendant.

The court is in receipt of a “Stipulation to Substitute Parties and Amend Caption”
(dkt. #62), in which the parties purport to resolve a jurisdictional defect in the pleading
by substituting the current defendants with a new defendant. Unfortunately, in doing so,
the parties have also substituted one pleading defect with a new one.
Specifically, the parties’ stipulation explains that neither of the current defendants
are proper parties and then states with respect to the substitute defendant, Francie Co.,
L.P., as follows:
WHEREAS, the partners of Francie Co., L.P. are Oklahoma
citizens;
WHEREAS, the parties agree that diversity jurisdiction exists
between Francie Co., L.P. a limited partnership organized
under the laws of the State of Oklahoma, with a principal
place of business in Oklahoma, and Frank Humphrey, a
citizen of the State of Wisconsin;
The cover letter provided with the stipulation by defendant’s counsel further represents
that:
The partners who make up Francie Co., L.P. are TJL Management
Co., Inc., an Oklahoma corporation with a principal place of
business in Oklahoma, and multiple trusts with a situs in Oklahoma.
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Like other unincorporated entities, where a limited partnership is organized or
principally conducts business has no bearing on its citizenship for purposes of diversity
jurisdiction. See White Pearl Inversiones S.A. (Uruguay) v. Cemusa, Inc., 647 F.3d 684, (7th
Cir. 2011) (“Limited partnerships, limited liability companies, and similar organizations
also are disregarded for jurisdictional purposes. For an LP, LLC, or similar organization,
the citizenship of every investor counts.”) (citing Carden v. Arkoma Assocs., 494 U.S. 185
(1990)). Accordingly, Francie, Co., L.P., is assigned the citizenship of its partners.
As to one of those partners, TJL Management Co., Inc., the cover letter provides
enough information to establish that it is a citizen of Oklahoma, although this should
have been included in the parties’ stipulation or other pleading so that the corporation’s
citizenship is a matter of record. As to the other partners, the representation in counsel’s
letter that there are “multiple trusts with a situs in Oklahoma,” is equally meaningless for
jurisdictional purposes. “The citizenship of a trust is that of the trustee.” See Hicklin
Engineering, L.C. v. Bartell, 439 F.3d 346, 348 (7th Cir. 2006) (citing Navarro Savings
Ass’n v. Lee, 446 U.S. 458 (1980)). This defect must be addressed in a further stipulation
or other pleading, which identifies by name each trust that is a partner in Francie Co.,
L.P., the respective trustee of each trust, and the citizenship of each trustee, as well as the
citizenship of any other partner.
In doing so, the parties should keep in mind something they have repeatedly
refused to do to date: if the member or members of the LLCs or LPs are themselves a
limited liability company, partnership, or other similar entity, then the citizenship of
those members and partners must also be alleged. See Meyerson v. Harrah’s E. Chi. Casino,
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299 F.3d 616, 617 (7th Cir. 2002) (“[T]he citizenship of unincorporated associations
must be traced through however many layers of partners or members there may be.”).
Finally, the number of cases with basic defects in pleading citizenship for purposes
of diversity jurisdiction that this court has had to identify sua sponte seems to continue
unabated, particularly when one of the parties is an unincorporated legal entity. To have
respected local firms commit these errors repeatedly in the same case is frankly
disheartening, especially after defects had been pointed out multiple times by previous
orders of this court.
Identifying these defects is not just this court’s job; it is part of counsel’s obligation
under Rule 11 in filing pleadings. Moreover, the court would think the very real risk of
dismissal on appeal after entry of judgment on the merits would be enough incentive for
parties and their counsel to get the jurisdictional facts right the first time. See, e.g. Belleville
Catering Co. v. Champaign Market Place, L.L.C., 350 F.3d 691 (7th Cir. 2003) (vacating
judgment, remanding the case to the district court for dismissal, and instructing counsel
to prosecute action to conclusion in state court without charging their clients additional
fees where plaintiff failed to plead the citizenship of the LLC defendant).

While

monetary sanctions are justified at this stage, the court will instead require that this order
and its earlier jurisdictional orders in this case (dkt. #5, #19 and the first and last page
of #52), as well as the parties’ intervening stipulation (dkt. #62) and cover letter, be read
by all attorneys in both parties’ firms who appear in the Western District of Wisconsin
and that their respective managing partners notify the clerk of court in writing when this
has been accomplished.
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ORDER
IT IS ORDERED that:
1) by this Friday, May 9, 2014, the parties are to provide in the form of a
stipulation or other formal pleading evidence of the citizenship of each partner
of Francie Co., L.P.; and
2) by June 5, 2014, the attorney in charge of Krekeler Strother, S.C. and Axley
Brynelson, LLP, respectively shall certify in writing to the Clerk of Court that
all attorneys in their firm who appear in the Western District of Wisconsin
have read this order and the court’s earlier jurisdictional orders in this case
(dkt. #5, #19 and the first and last page of #52), as well as the parties’
intervening stipulation (dkt. #62) and cover letter (dkt. #63-1).
Entered this 6th day of May, 2014.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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