Opinion
CASE NO. 1:16-CV-0162 AWI JLT
04-21-2016
MT. POSO COGENERATION CO., LLC, Plaintiff v. ASSOCIATED ELECTRIC & GAS INSURANCE SERVICES LIMITED a Bermuda Corporation, and AEGIS INSURANCE SERVICES, INC., a New Jersey Corporation Defendants AND RELATED COUNTERCLAIMS
ORDER TO SHOW CAUSE WHY CASE SHOULD NOT BE REMANDED FOR LACK OF SUBJECT MATTER JURISDICTION
On February 3, 2016, Defendants removed this insurance dispute from the Kern County Superior Court. See Doc. No. 1. The basis for the removal was diversity jurisdiction. See id. The Notice of Removal states that the Plaintiff seeks $41.5 million in damages, that Plaintiff is a corporation who is incorporated under the laws of Delaware with a principal place of business in California, and that the defendant corporations are incorporated in either Bermuda or New Jersey with principal places of business in New Jersey. See id. Critically, however, the Complaint alleges that Plaintiff is a limited liability company. See Complaint ¶ 4.
A district court has "a duty to establish subject matter jurisdiction over the removed action sua sponte, whether the parties raised the issue or not." United Investors Life Ins. Co. v. Waddell & Reed, Inc., 360 F.3d 960, 967 (9th Cir. 2004). The removal statute (28 U.S.C. § 1441) is strictly construed against removal jurisdiction. Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010); Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). It is presumed that a case lies outside the limited jurisdiction of the federal courts, and the burden of establishing the contrary rests upon the party asserting jurisdiction. Geographic Expeditions, 599 F.3d at 1106-07; Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009). For diversity jurisdiction, the amount in controversy must exceed $75,000.00, and there must be "complete diversity," which means "each of the plaintiffs must be a citizen of a different state than each of the defendants." See 28 U.S.C. § 1332(a); Hunter, 582 F.3d at 1043; Allstate Ins. Co. v. Hughes, 358 F.3d 1089, 1095 (9th Cir. 2003). "The strong presumption against removal jurisdiction" means that "the court resolves all ambiguity in favor of remand to state court." Hunter, 582 F.3d at 1042; Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). "If at any time prior to judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c); Gibson v. Chrysler Corp., 261 F.3d 927, 932 (9th Cir. 2001). Remand under 28 U.S.C. § 1447(c) "is mandatory, not discretionary." Bruns v. NCUA, 122 F.3d 1251, 1257 (9th Cir. 1997).
Here, there is no doubt that the amount in controversy exceeds $75,000.00. See Complaint at ¶ 44. The problem is that it is unclear whether complete diversity exists. Defendants' notice of removal alleges that Plaintiff is a corporation and then proceeds to identify the state of incorporation and the principal place of business. If Plaintiff was in fact a corporation, this would sufficiently demonstrate Plaintiff's citizenship, see Hertz Corp. v. Friend, 559 U.S. 77, 80-81 (2010), and complete diversity for purposes of the notice of removal. Nevertheless, Plaintiff is not a corporation. As its name expressly shows, Plaintiff is an LLC. See Complaint ¶ 4; Doc. No. 12. It is well established in the Ninth Circuit that, "like a partnership, an LLC is a citizen of every state of which its owners/members are citizens." Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006); see Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir. 2010). Defendants' allegations regarding Plaintiff's place of business and incorporation do not establish in any way Plaintiff's citizenship. See id.
Plaintiff's Rule 7.1 disclosure shows Plaintiff's "partial" citizenship. The disclosure indicates that Plaintiff has two members, both of whom are LLC's - DTE Mt. Posco, LLC ("DTE") and Macpherson Green Power Co., LLC ("Macpherson Green"). See Doc. No. 12. DTE is "ultimately owned" by a corporation that is incorporated in Michigan. See id. However, there is no information about the Michigan corporation's principal place of business, see Hertz, 559 U.S. at 80-81, and it is unclear whether the Michigan corporation is DTE's only member. Thus, DTE's "full" citizenship is unknown. As for Macpherson Green, that entity is "ultimately owned" by a "California corporation" and a California limited partnership. See Doc. No. 12. However, assuming that the "California corporation" is incorporated in California, it is still unknown where that corporation's principal place of business is. Thus, like DTE, the California corporation's "full" citizenship is unknown. See Hertz, 599 U.S. at 80-81. As for the California limited partnership, the citizenship of a limited partnership is the same as each of its partners. Johnson, 437 F.3d at 899; Kuntz v. Lamar Corp., 385 F.3d 1177, 1182 (9th Cir. 2004). There is no information about who the partners in the limited partnership are, or what the partners' citizenship may be. Thus, the citizenship of the California limited partnership is entirely unknown. See id.
As indicated above, it is Defendants' burden to establish subject matter jurisdiction, and they have not done so. Based on the filings made in the case to this point, the Court will not immediately remand the matter. Instead, through an order to show cause, Defendants will be given an opportunity to demonstrate that complete diversity of citizenship exists. If they cannot do so, this case will be remanded.
ORDER
Accordingly, IT IS HEREBY ORDERED that, within fourteen (14) days of service of this order, Defendants are to show cause in writing why this case should not be remanded for lack of subject matter jurisdiction. IT IS SO ORDERED. Dated: April 21, 2016
/s/_________
SENIOR DISTRICT JUDGE