Opinion
1:21-cv-03533 (AJN) (SDA)
01-12-2022
Jacqueline Schmidt, Plaintiff, v. Ollie Holdings, LLC, Defendant.
THE HONORABLE ALISON J. NATHAN, UNITED STATES DISTRICT JUDGE
REPORT AND RECOMMENDATION
STEWART D. AARON UNITED STATES MAGISTRATE JUDGE
This diversity action was referred to me for a report and recommendation on a motion for default judgment by Plaintiff Jacqueline Schmidt (“Plaintiff”) against Defendant Ollie Holdings, LLC LLC (“Defendant”). (Order of Ref., ECF No. 21.) For the reasons set forth below, I respectfully recommend that Plaintiff's motion for default judgment be denied; that the Complaint be dismissed without prejudice for failure to adequately plead subject matter jurisdiction; and that Plaintiff be granted leave to file an amended complaint within thirty (30) days of any adoption of this Report and Recommendation.
BACKGROUND
On April 21, 2021, Plaintiff filed a Complaint against Defendant alleging breach of contract. (See Compl., ECF No. 1.) After having been served with the Complaint (see 5/19/2021 Aff. of Service, ECF No. 6), Defendant failed to answer. On October 20, 2021, the Clerk of Court entered a Certificate of Default against Defendant. (Clerk's Cert., ECF No. 17.)
On December 9, 2021, Plaintiff made an application for a default judgment against Defendant. (See Mot. for Default J., ECF No. 19.) On December 22, 2021, District Judge Nathan referred the matter to me for a report and recommendation on the pending motion. (See Order of Ref.) The same day, I entered an Order finding that Plaintiff had not met her burden of showing the existence of subject matter jurisdiction and requiring her to file an affidavit or declaration setting forth the citizenship of the member or members of the Defendant LLC. (12/22/2021 Order, ECF No. 22.) Shortly thereafter, Plaintiff filed a declaration stating that the members of the LLC were Andrew Bledsoe, a citizen of New Jersey, Christopher Bledsoe, a citizen of California, and Simon Baron Development LLC, “a citizen of Delaware.” (12/22/2021 Schmidt Decl., ECF No. 23, ¶¶ 3-4.) I then entered another Order stating that Plaintiff's declaration was incomplete and order her to file, no later than January 7, 2022, an affidavit or declaration setting forth the citizenship of the member or members of Simon Baron Development LLC. (12/22/2021 Text Only Order, ECF No. 24.)
The Order also set forth the relevant legal standards, including that, because Plaintiff invoked federal jurisdiction on the basis of diversityjurisdiction, she was required to allege the citizenship of each member of the LLC. (See 12/22/2021 Order at 2.) The Court reiterates those standards in the Legal Standards section below.
On January 7, 2022, Plaintiff filed an amended declaration. (1/7/2022 Schmidt Am. Decl., ECF No. 26.) With respect to Simon Baron Development LLC, Plaintiff asserts that “[w]hen [she] was working for Defendant, [her] understanding was that the owners of Simon Baron resided in New York.” (Id. ¶ 5.) However, she then suggests that such owners may have been removed as members but she “[did] not know for certain.” (Id.) Plaintiff further stated that she believed that after she was furloughed and later terminated, the membership of the LLC changed and that, prior to her filing of this lawsuit, Defendant was acquired by another company, “StarCity.” (Id. ¶¶ 5-6; see also Compl. ¶ 11.) Plaintiff also states that StarCity is “based” in California, but she “[does] not know where it is incorporated or who its owners are.” (1/7/2022 Schmidt Am. Decl. ¶ 6.) Plaintiff then asserts that “StarCity may now be the sole members of Defendant.” (Id.)
LEGAL STANDARDS
“In the default judgment context, the only issue that usually needs to be decided is whether the plaintiff has provided adequate support for the damages or other relief he seeks. . . . However, when entry of a default judgment is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties.” Bracken v. MH Pillars Inc., 290 F.Supp.3d 258, 261-62 (S.D.N.Y. 2017) (citations and internal quotation marks omitted); see also Centra Developers Ltd. v. Jewish Press Inc., No. 16-CV-06737 (WFK) (LB), 2018 WL 1788148, at *5 (E.D.N.Y. Feb. 20, 2018), report and recommendation adopted, 2018 WL 1445574 (E.D.N.Y. Mar. 23, 2018) (citations omitted) (“Prior to entering a default judgment, the Court must ascertain that subject matter jurisdiction exists over plaintiff's claims.”).
“‘It is a fundamental precept that federal courts are courts of limited jurisdiction' and lack the power to disregard such limits as have been imposed by the Constitution or Congress.” Durant, Nichols, Houston, Hodgson &Cortese-Costa P.C. v. Dupont, 565 F.3d 56, 62 (2d Cir. 2009) (quoting Owen Equip. &Erection Co. v. Kroger, 437 U.S. 365, 374 (1978)). “Perhaps the most important limit is subject-matter jurisdiction, which defines ‘a court's competence to adjudicate a particular category of cases.'” Platinum-Montaur Life Scis., LLC v. Navidea Biopharmaceuticals, Inc., 943 F.3d 613, 617 (2d Cir. 2019) (quoting Wachovia Bank v. Schmidt, 546 U.S. 303, 305 (2006)). “‘[B]ecause it involves a court's power to hear a case,' subject-matter jurisdiction cannot be forfeited, waived, or conferred by consent of the parties.” Id. (quoting United States v. Cotton, 535 U.S. 625, 630 (2002)). Even if no party raises the issue, the Court must be satisfied that subject matter jurisdiction exists. See Wynn v. AC Rochester, 273 F.3d 153, 157 (2d Cir. 2001); see also Mackason v. Diamond Fin. LLC, 347 F.Supp.2d 53, 54 (S.D.N.Y. 2004) (“A district court is required to raise sua sponte the question whether diversity of citizenship is adequately pleaded[.]”).
The party invoking federal jurisdiction bears the burden of establishing that jurisdiction exists. See Conyers v. Rossides, 558 F.3d 137, 143 (2d Cir. 2009). A federal court has "original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between ... citizens of different States." 28 U.S.C. 1332(a)(1). "The Supreme Court has interpreted 'citizens of different States' to grant jurisdiction only 'if diversity of citizenship among the parties is complete, i.e., only if there is no plaintiff and no defendant who are citizens of the same State.'" Platinum-Montaur, 943 F.3d at 617 (quoting Wis. Dep't of Corr. v. Schacht, 524 U.S. 381, 388 (1998)).
A limited liability company "takes the citizenship of its members." Bayerische Landesbank, New York Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012) (citing Handelsman v. Bedford Village Assoc. Ltd. P'ship, 213 F.3d 48, 51 (2d Cir. 2000)). "A complaint premised upon diversity of citizenship must allege the citizenship of natural persons who are members of a limited liability company and the place of incorporation and principal place of business of any corporate entities who are members of the limited liability company." New Millennium Capital Partners, III, LLC v. Juniper Grp. Inc., No. 10-CV-00046 (PKC), 2010 WL 1257325, at *1 (S.D.N.Y. Mar. 26, 2010) (citing Handelsman, 213 F.3d at 51-52). Furthermore, if an LLC has "members which are LLC[s], the citizenship of the members of those LLC[s] must also be given, and must be diverse[.]" Avant Cap. Partners, LLC v. W108 Dev. LLC, 387 F.Supp.3d 320, 322 (S.D.N.Y. 2016).
DISCUSSION
Here, Plaintiff has not met her burden of showing the existence of subject matter jurisdiction, as the Complaint does not set forth the citizenship of the members of Defendant, an LLC, and therefore fails to properly allege the citizenship of Defendant itself. Moreover, despite the opportunity to cure this deficiency, Plaintiff has been unable to allege additional information regarding the members of Defendant. Plaintiff now asserts that “StarCity” may be the sole member of the Defendant LLC, but this statement is speculative and, in any event, Plaintiff does not allege the corporate entity she is referring to as “StarCity” or the citizenship of that entity or, if it is an LLC, its members. Thus, at present, I find that the Court has no basis for exercising diversity jurisdiction. Accordingly, I recommend that Plaintiff's motion for default judgment be denied and this matter dismissed for lack of subject matter jurisdiction. However, because Plaintiff may be able to establish diversity jurisdiction, I also recommend that she be granted leave to amend.
CONCLUSION
For the foregoing reasons, I respectfully recommend that Plaintiff's motion for default judgment be denied; that the Complaint be dismissed without prejudice for failure to adequately plead subject matter jurisdiction; and that Plaintiff be granted leave to file an amended complaint within thirty (30) days of any adoption of this Report and Recommendation.
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Nathan.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).