K3 Prop, LLC v. GQ Sand, LLC

Filing 14

ORDER Regarding Jurisdiction. Plaintiff has until August 4, 2016 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. Failure to do so will result in prompt dismissal of this matter for lack of subject matter jurisdiction. Signed by District Judge James D. Peterson on 7/21/2016. (jls)

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

K3 PROP, LLC,
Plaintiff,
v.

ORDER
16-cv-142-jdp

GQ SAND, LLC,
Defendant.

Plaintiff K3 Prop, LLC procures frac sand for its customers in the petroleum industry.
K3 alleges that defendant GQ Sand, LLC agreed to fill two of K3’s frac sand purchase orders,
and so K3 transferred $930,000 to GQ, $250,000 of which was supposed to be held in
escrow pending delivery of the sand. But GQ failed to place any of the money in escrow and
failed to deliver the correct amount of sand. K3 brings a breach of contract claim and a
conversion claim against GQ.
K3 invokes this court’s diversity jurisdiction, pursuant to 28 U.S.C. § 1332. Dkt. 1,
¶ 3. But because the allegations in the complaint are insufficient to determine whether
diversity jurisdiction actually exists, the court will direct K3 to file an amended complaint
containing the necessary allegations.
“Federal courts are courts of limited jurisdiction.” Int’l Union of Operating Eng’rs, Local
150 v. Ward, 563 F.3d 276, 280 (7th Cir. 2009) (citation omitted). Unless the party
invoking federal jurisdiction establishes complete diversity of citizenship among the parties
and an amount in controversy exceeding $75,000, or raises a federal question, the court must
dismiss the case for lack of jurisdiction. Smart v. Local 702 Int’l Bhd. of Elec. Workers, 562 F.3d
798, 802 (7th Cir. 2009). 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). The party invoking federal jurisdiction bears the burden of
establishing that jurisdiction is proper. Smart, 562 F.3d at 802-03.
Here, K3 contends that diversity jurisdiction exists because: (1) the amount in
controversy exceeds $75,000; and (2) the parties are completely diverse. Dkt. 1, ¶ 3. For the
latter to be true, however, K3 cannot be a citizen of the same state as GQ. Smart, 562 F.3d at
803. K3’s allegations regarding the parties’ citizenships are insufficient to allow the court to
determine whether this is the case.
Both K3 and GQ are limited liability companies. “[T]he citizenship of an LLC is the
citizenship of each of its members[.]” Camico Mut. Ins. Co. v. Citizens Bank, 474 F.3d 989, 992
(7th Cir. 2007). But K3 does not allege the names or citizenships of any of its or GQ’s
members. Instead, K3 alleges that it is “a Texas based limited liability corporation” with its
principal office in Fort Worth, Texas, Dkt. 1, ¶ 1, and that GQ is a “Wisconsin based limited
liability corporation” with its principal office in Mazomanie, Wisconsin, id. ¶ 2. This
information is not relevant to determining the citizenship of a limited liability company.
Hukic v. Aurora Loan Servs., 588 F.3d 420, 429 (7th Cir. 2009).
Before dismissing this case for lack of subject matter jurisdiction, the court will allow
K3 to file an amended complaint that establishes subject matter jurisdiction by alleging the
names and citizenships of each of its and GQ’s members. In alleging the LLCs’ citizenships,
K3 should be aware that if any members of the LLCs are themselves a limited liability
company, partnership, or other similar entity, then it must allege the individual citizenships
of each of those members as well: “the citizenship of unincorporated associations must be

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traced through however many layers of partners or members there may be.” Meyerson v.
Harrah’s E. Chi. Casino, 299 F.3d 616, 617 (7th Cir. 2002).

ORDER
IT IS ORDERED that:
1. Plaintiff K3 Prop, LLC will have until August 4, 2016, 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.
2. Failure to timely amend will result in prompt dismissal of this matter for lack of
subject matter jurisdiction.
Entered July 21, 2016.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge

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