Opinion
2:24-cv-05790-MCS-BFM
07-30-2024
Sundby v. Landau
PRESENT: THE HONORABLE MARK C. SCARSI, UNITED STATES DISTRICT JUDGE
CIVIL MINUTES - GENERAL
Proceedings: (In Chambers) Further Order to Show Cause
Plaintiffs Dale Sundby and Edith Sundby filed a complaint in this Court invoking diversity jurisdiction but providing insufficient allegations to confirm the parties have diverse citizenship. (See Compl., ECF No. 1.) The Court ordered Plaintiffs to show cause why this case should not be dismissed for lack of subject matter jurisdiction. (OSC, ECF No. 11.) Apparently in response to the order to show cause. Plaintiffs filed an amended complaint as a matter of course. (FAC, ECF No. 12); see Fed.R.Civ.P. 15(a)(1). Plaintiffs did not file a redline version of their amended pleading as required by Initial Standing Order § 13. As best as the Court can tell, the amended complaint differs from the original in that Plaintiffs dropped as parties the defendants whose citizenship the Court found inadequately pleaded and Plaintiffs asserted a new federal claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). (Compare FAC, with Compl.)
The amendment does not resolve the Court's concerns. The newly pleaded RICO claim has no effect on jurisdiction. “Subject matter jurisdiction must exist as of the time the action is commenced.” Morongo Band of Mission Indians v. Cal. St. Bd. of Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988). Although “incorrect statements about jurisdiction that actually exists” may be amended under 28 U.S.C. § 1653, a complaint may not be amended “to produce jurisdiction where none actually existed before.” Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 831 (1989). “If jurisdiction is lacking at the outset, the district court has no power to do anything with the case except dismiss.” Orff v. United States, 358 F.3d 1137, 114950 (9th Cir. 2004) (internal quotation marks omitted), aff'd, 545 U.S. 596 (2005). Plaintiffs' pleading of a new federal claim under RICO, therefore, does not suffice to confer federal-question jurisdiction over the action as originally filed-that is, a complaint without any federal claims. Cf. Strudley v. Santa Cruz Cnty. Bank, No. 5:15-cv-05106-EJD, 2017 U.S. Dist. LEXIS 161313, at *6-7 (N.D. Cal. Sept. 29, 2017) (rejecting under Morongo plaintiffs' new pleading of federal securities claims that were “distinct and independent from the state-law claims alleged in the original complaint”).
Plaintiffs' putative dismissal of potentially nondiverse parties Equity Trust Company, Benning Management Group 401(K) Profit Sharing Plan, Fasack Investments LLP, and Meylan Davitt Jain Arevian & Kim LLP, on the other hand, opens a new can of worms. As discussed, Plaintiffs cannot cure defective jurisdictional facts by amendment under 28 U.S.C. § 1653. See Newman-Green, 490 U.S. at 831-32. Accordingly, assuming the dropped parties are nondiverse, the amendment is ineffective to address the jurisdictional problem. That said, the Court has discretion to allow dismissal of dispensable nondiverse parties from an action to perfect diversity jurisdiction under Federal Rule of Civil Procedure 21. La. Mun. Police Emps.' Ret. Sys. v. Wynn, 829 F.3d 1048, 1057 (9th Cir. 2016); see Fed.R.Civ.P. 21 (giving courts discretion to drop a party “on just terms”); Newman-Green, 490 U.S. at 837 (approving Rule 21 dismissals of nondiverse parties, reasoning that a plaintiff “should not be compelled to jump through . . . judicial hoops merely for the sake of hypertechnical jurisdictional purity”). Such discretion should not be exercised if the parties to be dismissed are indispensable to the litigation under Federal Rule of Civil Procedure 19. See Scottsdale Ins. Co. v. Flora Bioscience, Inc., __ F.Supp.3d __, No. 23-cv-03952-PCP, 2024 U.S. Dist. LEXIS 69566, at *6-7 (N.D. Cal. Apr. 16, 2024) (citing Horn v. Lockhart, 84 U.S. 570 (1873)). The Rule 19 inquiry, in turn, requires courts to consider whether the parties' joinder would defeat subject-matter jurisdiction, among other issues. Fed.R.Civ.P. 19(a)(1), (b). Accordingly, to determine whether to allow the dismissal of Equity Trust Company, Benning Management Group 401(K) Profit Sharing Plan, Fasack Investments LLP, and Meylan Davitt Jain Arevian & Kim LLP, the Court still must consider their citizenship.
The Court orders Plaintiffs to show cause why the Court should authorize dismissal of the parties they dropped from the amended complaint. Plaintiffs shall file a written response within 14 days asserting facts toward those parties' citizenship, addressing whether the parties are necessary or indispensable under Rule 19, and providing any other arguments why the Court should allow their dismissal under Rule 21. Alternatively, Plaintiffs may dismiss this case without prejudice and open a new case in a state court of competent jurisdiction or in a federal court that can exercise jurisdiction over an original complaint that states a basis for federal subject-matter jurisdiction. Failure to file a timely and satisfactory response will result in dismissal without further notice.
IT IS SO ORDERED.