August Resource Funding, LLC v. Procorp, LLC
3:18-cv-01011
W.D. Wis.Jul 15, 2019Background
- Plaintiff August Resource Funding, LLC sued Procorp, LLC and Timothy Erik Schultz in Rock County, Wisconsin circuit court asserting breach of contract and replevin.
- Defendants removed the case to federal court relying solely on diversity jurisdiction under 28 U.S.C. § 1332.
- August Resource is a Wisconsin corporation with its principal place of business in Wisconsin.
- Defendants’ removal pleading alleged Procorp is an LLC with principal place in Taylor, Michigan and that Schultz is a resident of Taylor, Michigan, but gave no details about Procorp’s membership structure or Schultz’s domicile.
- The district court concluded the removal notice failed to establish complete diversity because an LLC’s citizenship depends on each member’s citizenship and an individual’s citizenship is determined by domicile, not mere residency.
- The court gave defendants until July 29, 2019 to supplement the record to show the facts necessary to establish diversity jurisdiction or the case will be remanded to state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has diversity jurisdiction | August Resource argued (by implication) there is not diversity because it is a Wisconsin citizen | Defendants argued diversity jurisdiction exists because Procorp is an LLC with principal place in Michigan and Schultz resides in Michigan | Court held removal failed to establish diversity because defendants did not allege the citizenship of each LLC member nor Schultz's domicile |
| Sufficiency of allegations about LLC citizenship | N/A | Procorp characterized as an LLC "owned" by Schultz and identified its principal place of business | Court held that alleging LLC principal place and ownership is insufficient; must allege each member’s citizenship |
| Sufficiency of allegations about individual citizenship | N/A | Defendants alleged Schultz is a resident of Taylor, Michigan | Court held residency allegations are inadequate; must plead domicile for individuals |
| Remedy for deficient removal notice | Plaintiff sought remand (implicit) | Defendants implicitly sought to keep case in federal court via removal | Court ordered defendants to supplement jurisdictional facts by a deadline or the case will be remanded |
Key Cases Cited
- Int’l Union of Operating Eng’rs, Local 150 v. Ward, 563 F.3d 276 (7th Cir.) (federal courts are courts of limited jurisdiction)
- Smart v. Local 702 Int’l Bhd. of Elec. Workers, 562 F.3d 798 (7th Cir.) (party invoking federal jurisdiction bears the burden to establish it)
- Hertz Corp. v. Friend, 559 U.S. 77 (U.S. 2010) (federal courts must independently determine subject-matter jurisdiction)
- Thomas v. Guardsmark, LLC, 487 F.3d 531 (7th Cir.) (LLC citizenship determined by citizenship of each member)
- Meyerson v. Harrah’s E. Chi. Casino, 299 F.3d 616 (7th Cir.) (if members are entities, their citizenship must be alleged too)
- Myrick v. WellPoint, Inc., 764 F.3d 662 (7th Cir.) (individual’s citizenship determined by domicile)
- Winforge, Inc. v. Coachmen Indus., Inc., 691 F.3d 856 (7th Cir.) (residency is not equivalent to citizenship for diversity purposes)