Hai Yang Liu v. 88 Harborview Realty, LLC
5 F. Supp. 3d 443
S.D.N.Y.2014Background
- Plaintiff Hai Yang Liu sued Harborview Realty, LLC and several individuals alleging he invested $350,000 for a 5% membership interest and asserting eleven state-law claims including breach of fiduciary duty and a declaratory judgment that he is a member.
- Liu invoked federal jurisdiction based on diversity (alleging he was a South Carolina resident and defendants were New York citizens).
- Documentary evidence (an LLC membership list and IRS Form 1065 K-1s) in the record listed Liu with New York addresses and showed Harborview members in multiple states, contradicting Liu’s jurisdictional allegations.
- Harborview is an LLC; an LLC’s citizenship for diversity purposes is the citizenship of each member, so unknown or nondiverse members may defeat § 1332 jurisdiction. Doe defendants identified as Harborview members further cloud diversity.
- The Court sua sponte questioned subject-matter jurisdiction, denied Liu’s partial summary judgment motion without prejudice, and ordered supplemental briefing on Liu’s domicile, defendants’ domiciles, and whether the Court should adjudicate Liu’s declaratory-judgment claim and, if Liu is a member, the remaining state-law claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Plaintiff's domicile for diversity | Liu asserts he was domiciled in South Carolina when suit was filed. | Documentary evidence (membership list, IRS forms) shows Liu resided in New York, undermining South Carolina domicile. | Court: Liu must submit proof of South Carolina domicile; current record creates uncertainty so jurisdiction not established. |
| LLC citizenship and Doe members | Liu pleads Harborview members as New York residents (including Doe defendants), asserting complete diversity. | Membership list shows 26 members in multiple states; unnamed Doe members critical to LLC citizenship may destroy diversity. | Court: Plaintiff must identify all Harborview members and their domiciles; unnamed Doe members that are integral to diversity defeat § 1332. |
| Effect of Doe/fictitious defendants on diversity (§ 1332) | Liu relies on ability to sue in federal court despite Doe defendants. | Court notes distinction: Congress amended removal statute § 1441 to disregard fictitious defendants on removal but did not amend § 1332; permitting Doe defendants to preserve diversity would judicially rewrite statute. | Court: § 1332 requires citizenship be established at filing; Doe defendants that are material to diversity cannot be ignored; plaintiff bears burden to prove diversity. |
| Declaratory judgment that Liu is a member of Harborview | Liu asks court to declare he is a member (5%) and entitled to relief, which would support his state-law claims. | Defendants dispute Liu’s membership; if court declares Liu a member, diversity may be destroyed and remaining claims would lack jurisdiction. | Court: Hesitant to resolve declaratory claim because ruling that Liu is a member could strip federal jurisdiction over state-law claims; directed parties to brief prudential and jurisdictional issues before adjudicating. |
Key Cases Cited
- Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (federal courts are courts of limited jurisdiction; diversity jurisdiction requirements)
- McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178 (party invoking jurisdiction bears burden to plead facts establishing jurisdiction)
- Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567 (federal jurisdiction must exist at time of filing)
- Palazzo ex rel. Delmage v. Corio, 232 F.3d 38 (2d Cir. 2000) (citizenship determined by domicile; mixed question of law and fact)
- Linardos v. Fortuna, 157 F.3d 945 (2d Cir. 1998) (domicile is one’s true fixed home; residence is prima facie evidence of domicile)
- Handelsman v. Bedford Village Assocs. Ltd. P’ship, 213 F.3d 48 (2d Cir. 2000) (LLC takes citizenship of each member for diversity purposes)