Betco Corporation, Ltd. v. Peacock et al

Filing 95

ORDER Regarding Jurisdiction. Plaintiff shall have until August 5, 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 jur isdiction under 28 U.S.C. § 1332; failure to amend timely shall result in prompt dismissal of this matter for lack of subject matter jurisdiction. Proof of Diversity Citizenship due 8/5/2014. Signed by District Judge William M. Conley on 7/22/2014. (voc)

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

BETCO CORPORATION, LTD.,
Plaintiff,

OPINION AND ORDER

v.

14-cv-193-wmc

MALCOLM D. PEACOCK, MARILYN
PEACOCK, B. HOLDINGS, INC. and
E. HOLDINGS, LLC,
Defendants.

This civil action arises out of defendants’ 2010 sale of assets to plaintiff Betco
Corporation, Ltd.

Alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332(a) to

decide this case, Betco brings claims against defendants for breach of contract, fraud,
negligent misrepresentation and breach of the duty of good faith and fair dealing. (See 2d
Am. Compl. (dkt. #34).) Betco seeks damages and to rescind the contract between the
parties. Because the allegations in the complaint are insufficient to determine if diversity
jurisdiction exists, Betco 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
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dismissed for want of jurisdiction. Smart v. Local 702 Int’l Bhd. of Elec. Workers, 562 F.3d
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. (2d Am. Compl. (dkt. #34)
¶ 6.) 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 defendants E. Holdings, LLC and Malcolm and
Marilyn Peacock prevent this court from determining their citizenship.
With respect to E. Holdings, “[t]he citizenship of an LLC is the citizenship of
each of its members,” yet plaintiff has not alleged the citizenship of defendant E.
Holdings, LLC’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 “an Illinois limited-liability company, formerly
known as Enviro-Zyme International, LLC (“EZI”), which has its principal place of
business in Illinois.” (2d Am. Compl. (dkt. #34) ¶ 5.)

However, this information is

wholly irrelevant in deciding the citizenship of a limited liability company.
Aurora Loan Serv., 588 F.3d 420, 429 (7th Cir. 2009).

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Hukic v.

Furthermore, with respect to individual defendants Malcolm and Marilyn
Peacock, plaintiff has alleged only that they are “married individuals residing in Illinois.”
(2d Am. Compl. (dkt. #34) ¶ 3.)

“But residence may or may not demonstrate

citizenship, which depends on domicile – that is to say, the state in which a person
intends to live over the long run.” Heinen v. Northrop Grumman Corp., 671 F.3d 669, 670
(7th Cir. 2012). “An allegation of ‘residence’ is therefore deficient.” Id.
Before dismissing this action for lack of subject matter jurisdiction, Betco 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
and the state(s) of domicile of Malcolm and Marilyn Peacock. In alleging the LLC’s
citizenship, plaintiff should be aware that if any member of the LLC is itself a limited
liability company, partnership, or similar entity, then the citizenship of its 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) (“[T]he 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 August 5, 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

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2) failure to amend timely shall result in prompt dismissal of this matter for lack
of subject matter jurisdiction.
Entered this 22nd day of July, 2014.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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