CMFG Life Insurance Company v. UBS Securities, LLC

Filing 35

ORDER Regarding Jurisdiction. Amended complaint due 2/6/2014. Signed by District Judge William M. Conley on 1/23/14. (rep)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

CMFG LIFE INSURANCE COMPANY,
Plaintiff,

OPINION AND ORDER

v.

13-cv-576-wmc

USB SECURITIES, LLC,
Defendant.

In this civil action, plaintiff CMFG Life Insurance Company seeks: (1) to rescind
the purchase of a single residential mortgage-backed securities certificate sold by
defendant USB Securities, LLC; or (2) to disgorge the benefit it conferred upon
defendant through its purchase. (Compl. (dkt. #1).) CMFG alleges that this court may
exercise diversity jurisdiction to decide this securities fraud case pursuant to 28 U.S.C. §
1332(a). (Id. at ¶ 131.) Because the allegations in the complaint are insufficient to
determine if this is so, CMFG will be given an opportunity to file an amended complaint
containing the necessary factual allegations to establish diversity jurisdiction.

OPINION
“Federal courts are courts of limited jurisdiction.” Int’l Union of Operating Eng’r,
Local 150, AFL-CIO v. Ward, 563 F.3d 276, 280 (7th Cir. 2009) (citation omitted).
Unless a complaint alleges complete diversity of citizenship among the parties and an
amount in controversy exceeding $75,000, or raises a federal question, the case must be
dismissed for want of jurisdiction. Smart v. Local 702 Int’l Bhd. of Elec. Workers, 562 F.3d
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798, 802 (7th Cir. 2009).

Because jurisdiction is limited, federal courts “have an

independent obligation to determine whether subject-matter jurisdiction exists, even
when no party challenges it.” Hertz Corp. v. Friend, 559 U.S. 77, 94 (2010). Further, the
party seeking to invoke federal jurisdiction bears the burden of establishing that
jurisdiction is present. Smart, 562 F.3d at 802-03.
Here, plaintiff contends that diversity jurisdiction exists because (1) the amount in
controversy exceeds $75,000 and (2) the parties are diverse. (Compl. (dkt. #1) ¶ 3.) For
the latter to be true, however, there must be complete diversity, meaning plaintiff cannot
be a citizen of the same state as any defendant. Smart, 562 F.3d at 803. Unfortunately,
plaintiff’s allegations as to defendant USB Securities, LLC prevent this court from
determining its citizenship.
“The citizenship of an LLC is the citizenship of each of its members,” yet plaintiff
has not alleged the citizenship of defendant’s members, making it impossible to
determine whether complete diversity exists here. Camico Mut. Ins. Co. v. Citizens Bank,
474 F.3d 989, 992 (7th Cir. 2007). Instead, plaintiff alleges defendant is “a Delaware
corporation with its headquarters at 677 Washington Blvd., Stamford, CT 06901.”
(Compl. (dkt. #1) ¶130.)

As the Seventh Circuit has instructed, however, this

information is wholly irrelevant in deciding the citizenship of a limited liability company.
Hukic v. Aurora Loan Serv., 588 F.3d 420, 429 (7th Cir. 2009).
Before dismissing this action for lack of subject matter jurisdiction, CMFG will be
given leave to file within 14 days an amended complaint that establishes subject matter
jurisdiction by alleging the names and citizenship of each member of the defendant LLC.
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In alleging the LLC’s citizenship, plaintiff should be aware that if the member or
members of the LLCs are themselves a limited liability company, partnership, or other
similar entity, then the citizenship of those members and partners must also be alleged as
well. See Meryerson v. Harrah’s E. Chi. Casino, 299 F.3d 616, 617 (7th Cir. 2002) (“the
citizenship of unincorporated associations must be traced through however many layers
of partners or members there may be”).

ORDER
IT IS ORDERED that:
1) plaintiff shall have until February 6, 2014, to file and serve an amended
complaint containing good faith allegations sufficient to establish complete
diversity of citizenship for purposes of determining subject matter jurisdiction
under 28 U.S.C. § 1332; and
2) failure to amend timely shall result in prompt dismissal of this matter for lack
of subject matter jurisdiction.
Entered this 23rd day of January, 2014.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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