Carolina Casualty Insurance Co v. Team Equipment, Inc.
2014 U.S. App. LEXIS 2138
| 9th Cir. | 2014Background
- Carolina Casualty (Iowa-incorporated, principal place in Florida) sued for a declaratory judgment in C.D. Cal. that it had no liability under an insurance policy issued to U.S. Dry Cleaning, based on a settlement limiting recovery to insurance proceeds.
- Plaintiff invoked federal diversity jurisdiction under 28 U.S.C. § 1332. Several defendants included two LLCs and multiple individuals and corporations.
- The district court dismissed the unserved complaint under Rule 12(h)(3) because Carolina (1) failed to allege LLC members’ citizenship, (2) alleged individuals’ residency rather than citizenship, and (3) pleaded jurisdictional facts “on information and belief.”
- Carolina moved for reconsideration and submitted a proposed amended complaint explaining inability to discover LLC members from public filings and again pled some jurisdictional facts on information and belief.
- The district court denied reconsideration and refused leave to amend; Carolina appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether dismissal without leave to amend was proper | Leave should be allowed to cure technical jurisdictional defects | Dismissal was permitted because complaint failed to plead jurisdiction adequately | Reversed: dismissal without leave to amend was improper because court did not find amendment futile |
| Whether pleading citizenship on "information and belief" is permissible when facts are not reasonably available | Permit jurisdictional allegations on information and belief when necessary facts are controlled by defendants | Jurisdictional facts must be pled affirmatively and on knowledge | Held: allegations on information and belief are acceptable where plaintiff cannot reasonably obtain facts (e.g., LLC members) |
| Sufficiency of alleging LLCs by corporate attributes (state of organization/principal place) instead of members’ citizenship | Alleging corporate attributes is insufficient for LLCs; but plaintiff should be allowed to cure once served | Plaintiff must allege members’ citizenship (LLC is citizen of each member’s state) | Court: LLC citizenship must be shown by members, but pleading may be relaxed pre-service if members’ citizenship is not reasonably ascertainable; plaintiff should be allowed to amend |
| Whether residency allegations suffice for individuals’ citizenship | Residency may be used when information is unavailable; pleadings on information and belief acceptable | Residency is not a substitute for citizenship; must plead citizenship | Court: residency is not equivalent to citizenship, but where plaintiff cannot reasonably obtain citizenship facts, pleading on information and belief and alleging non-citizenship of certain states is permissible pending defendants’ responses |
Key Cases Cited
- Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894 (9th Cir.) (LLC citizenship equals citizenship of each member)
- Hertz Corp. v. Friend, 559 U.S. 77 (2010) (principal place of business test for corporate citizenship)
- McQuillion v. Schwarzenegger, 369 F.3d 1091 (9th Cir.) (dismissal without leave to amend inappropriate unless amendment futile)
- Lopez v. Smith, 203 F.3d 1122 (9th Cir. en banc) (liberal leave to amend; permit curing technical defects)
- Kanter v. Warner-Lambert Co., 265 F.3d 853 (9th Cir.) (unusual circumstances may excuse affirmative citizenship allegations)
- Medical Assurance Co. v. Hellman, 610 F.3d 371 (7th Cir.) (pleading diversity on information and belief permissible at early stages)
- Lewis v. Rego Co., 757 F.2d 66 (3d Cir.) (permitting allegations of noncitizenship on information and belief in removal context)
- Am.’s Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072 (7th Cir.) (plaintiff had multiple opportunities; failure to establish citizenship can justify dismissal after chances to cure)
- Smith v. McCullough, 270 U.S. 456 (1926) (pleading federal jurisdiction must be affirmative and distinct, but defects correctable by amendment)