Baton Rouge Ventures, LLC v. Cedar Grove Capital, LLC
3:20-cv-00628
M.D. La.Oct 19, 2020Background
- Plaintiffs Baton Rouge Ventures, LLC and Charal Baton Rouge Ventures, LLC sued Cedar Grove Capital, LLC for breach of a purchase agreement and sought declaratory relief and damages, including a disputed $300,000 escrowed deposit and attorneys’ fees.
- Plaintiffs invoked federal diversity jurisdiction, alleging the amount in controversy exceeds $75,000.
- Complaint pleaded the LLC plaintiffs as having "all members" citizens of Florida and described Cedar Grove as an LLC with members who are individual citizens of New York or alternatively "none of the members are citizens of Florida."
- The district court found these citizenship allegations inadequate because, for LLCs, federal diversity requires identifying each member and that member’s citizenship; generic or negative assertions are insufficient.
- The court sua sponte raised the issue of subject-matter jurisdiction and ordered plaintiffs to file a single comprehensive amended complaint by October 29, 2020 that affirmatively and specifically alleges the citizenship of every party (including tracing through any multi-layered entity members), or risk dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of diversity jurisdiction pleadings | Complaint alleges plaintiffs are Florida citizens and amount > $75,000 | Complaint fails to identify each LLC member; allegations are conclusory/speculative | Citizenship not adequately pleaded; court ordered comprehensive amended complaint identifying each member and citizenship |
| Whether stating LLC members are "citizens of [state]" is sufficient | Alleged "All members are citizens of Florida" or members are New York citizens | Such blanket labels do not identify each member or trace entity-membership | Insufficient; must name each member and allege each member’s citizenship in accordance with § 1332 rules |
| Permissibility of negative or alternative citizenship allegations | Pleaded alternatively that "none of the members are citizens of Florida" | Negative/speculative allegations do not affirmatively establish citizenship | Negative allegations insufficient; citizenship must be affirmatively alleged |
| Court raising subject-matter jurisdiction sua sponte | Not asserted | Not asserted | Federal courts may raise diversity jurisdiction sua sponte; court properly addressed the deficiency and directed amendment |
Key Cases Cited
- Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077 (5th Cir. 2008) (LLC citizenship determined by citizenship of all members)
- Getty Oil Co. v. Ins. Co. of North America, 841 F.2d 1254 (5th Cir. 1988) (citizenship must be distinctly and affirmatively alleged for diversity jurisdiction)
- McDonal v. Abbott Laboratories, 408 F.3d 177 (5th Cir. 2005) (federal courts may raise subject-matter jurisdiction sua sponte)
- Mullins v. TestAmerica, Inc., [citation="300 F. App'x 259"] (5th Cir. 2008) (reiterating strict pleading requirements for diversity and affirmative allegations of citizenship)