1031 Equity Exchange, LLC v. Superior Homes, LLC, 3:17-cv-05213

Plaintiffs 1031 Equity Exchange, LLC and Kauai Ocean View Professional Building, LLC filed a diversity-based state-law suit in federal court on March 22, 2017.
Defendants Superior Homes, LLC and Estela Mata moved to dismiss arguing abstention, lack of real-party-in-interest, and that joinder would defeat jurisdiction; their reply raised lack of complete diversity.
The Court issued an order to show cause about apparent lack of diversity; Defendants agreed diversity was lacking.
The Court initially dismissed the complaint for lack of jurisdiction but issued that order before Plaintiffs had a fair opportunity to respond to the show-cause deadline.
The Court vacated its prior dismissal order for that clerical/oversight error and then found Plaintiffs failed to establish complete diversity: evidence indicated (1) Frank Sarabia is a member/owner of 1031EE (a California citizen), and (2) Kauai Ocean’s membership structure showed Superior as a member — creating non-diversity with defendants.
The Court dismissed the complaint without prejudice for lack of subject-matter jurisdiction.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Court's initial dismissal should remain	Plaintiffs implied the dismissal was premature because the Court set the show-cause response deadline for June 19 and they had not yet had fair opportunity to respond	Court issued dismissal before Plaintiffs could respond; Rule 60(a) permits correction of clerical/oversight mistakes	Court vacated its prior dismissal order for oversight and premature entry
Whether the court has diversity jurisdiction	Plaintiffs invoked diversity jurisdiction in the complaint and did not rebut defendants’ later assertions	Defendants asserted lack of complete diversity: Frank Sarabia (a member/owner of 1031EE) is a California citizen; Kauai Ocean’s operating agreement reflects Superior as a member, creating same-state citizenship overlap	Court held Plaintiffs failed to establish complete diversity and dismissed the complaint without prejudice for lack of subject-matter jurisdiction

Snell v. Cleveland, Inc., 316 F.3d 822 (9th Cir. 2002) (courts may raise subject-matter jurisdiction sua sponte at any time)
Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858 F.2d 1376 (9th Cir. 1988) (court must confirm jurisdiction before addressing merits)
Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375 (U.S. 1994) (party invoking federal jurisdiction bears burden of establishing it)
Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894 (9th Cir. 2006) (LLC citizenship is the citizenship of all its members)
In re Digimarc Corp. Derivative Litig., 549 F.3d 1223 (9th Cir. 2008) (diversity requires complete diversity among all plaintiffs and defendants)