471 F.Supp.3d 688
D. Maryland2020Background
- Two related suits arise from a family dispute over two Maryland LLCs (Old Silver Hill, LLC and Wellington-Richmond Investments, LLC) in which Jacob E. Middel (Middel Jr.) and Jacob R. Middel (Middel Sr.) have competing ownership claims.
- Case 1: Middel Jr. sued Middel Sr. and the LLCs in federal court alleging breach of contract, breach of fiduciary duty, and seeking declaratory relief that he co-owns and co-manages the LLCs.
- Case 2: Middel Sr., OSH, and WRI sued Middel Jr. in Maryland state court for unauthorized taking of funds and related claims; Middel Jr. removed that action to federal court based on diversity.
- Central factual dispute: whether Middel Jr. remained a member of OSH and WRI at the times the actions were filed. LLC citizenship depends on members’ citizenship, so membership determines federal diversity jurisdiction.
- Parties have offered conflicting sworn statements and pleadings: Middel Jr. initially alleged membership but also produced letters he says show Middel Sr. removed him effective January 1, 2018; defendants initially denied membership then (by amended answers) admitted it. The LLC operating agreements are silent or absent on member removal.
- Because membership is disputed and is central to the merits (declaratory relief and liability turn on membership and removal), the court denied the motion to dismiss and the motion to remand and ordered the cases consolidated to be resolved on the merits after discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has subject-matter jurisdiction under diversity (are the LLCs citizens of VA via Middel Jr.?) | Middel Jr.: he was removed as a member effective Jan. 1, 2018, so LLCs are not citizens of VA and complete diversity exists | Middel Sr./LLCs: Middel Jr. was a member at filing (and amended answers admit membership), so LLCs share VA citizenship and diversity is lacking | Court: membership is a disputed, outcome-determinative factual issue intertwined with the merits; cannot be resolved on Rule 12(b)(1) now — proceed to merits/discovery |
| Whether the removed state action should be remanded now or retained | Middel Jr.: removal is proper because diversity exists | Middel Sr./LLCs: remand is proper because diversity is lacking | Court: denied remand without prejudice to resolution on the merits; consolidated the cases in federal court |
Key Cases Cited
- Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (2004) (time-of-filing rule governs diversity jurisdiction)
- Cent. W. Virginia Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101 (4th Cir. 2011) (an LLC’s citizenship is that of its members)
- Banca Del Sempione v. Provident Bank of Maryland, 85 F.3d 615 (4th Cir. 1996) (Section 1332 requires complete diversity between all parties)
- Adams v. Bain, 697 F.2d 1213 (4th Cir. 1982) (when jurisdictional facts are intertwined with merits, resolve by proceeding to the merits)
- Kerns v. United States, 585 F.3d 187 (4th Cir. 2009) (when jurisdictional facts are intertwined with merits, permit discovery and resolve on the merits)
- Mortensen v. First Federal Savings & Loan Ass'n, 549 F.2d 884 (3d Cir. 1977) (supporting principle that intertwined jurisdictional facts should be resolved on the merits)