Middleton Ex Rel. National Financial Systems Management, Inc. v. Stephenson
749 F.3d 1197
| 10th Cir. | 2014Background
- Stephenson incorporated NFSM in Utah; NFSM Employee Stock Ownership Plan owned all NFSM stock and Stephenson was a Plan trustee.
- In June 2006 Stephenson moved with family to Wyoming, becoming a Wyoming citizen, then sold NFS and Metronomics to NFSM.
- By June 2009 Stephenson and family returned to Utah; the district court later asked whether he became a Utah citizen when back in Utah.
- Plaintiffs (all Utah citizens) sued Stephenson in 2011 alleging ERISA fiduciary breaches and tax/transaction issues relating to the sales.
- Stephenson asserted state-law counterclaims and third-party claims; plaintiffs and third-party defendants challenged diversity, arguing Stephenson remained Wyoming citizen.
- The district court found Stephenson to be a Utah citizen for diversity purposes, thus destroying complete diversity and dismissing counterclaims/third-party claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the district court clearly erroneous about Stephenson’s domicile? | Middleton: Stephenson’s Wyoming ties prevailed; evidence shows intent to remain Wyoming. | Stephenson: Utah ties were weak; domicile change not proven; district court should respect prior Wyoming domicile. | No clear error; court affirmed finding of Utah domicile for diversity. |
| Who bears burden and how is domicile determined for diversity? | Middleton: the preset presumption and totality-of-circumstances framework supports Utah domicile once changed. | Stephenson: presumption of Wyoming domicile applies unless rebutted; district court should not rely on others’ narrative. | Presumption rebuttable; totality-of-circumstances analysis applied; district court’s weighing supported Utah domicile. |
Key Cases Cited
- Lincoln Prop. Co. v. Roche, 546 U.S. 81 (2005) (complete diversity requires no same-state citizenship among plaintiffs and defendants)
- Crowley v. Glaze, 710 F.2d 676 (10th Cir. 1983) (domicile is determined by residency and intent to remain)
- Miss. Band of Choctaw Indians v. Holyfield, 490 U.S. 30 (1989) (domicile requires physical presence with intent to remain)
- Mitchell v. United States, 88 U.S. (21 Wall.) 350 (1874) (domicile presumed unchanged; burden-shifting framework)
- State Farm Mut. Auto. Ins. Co. v. Dyer, 19 F.3d 514 (10th Cir. 1994) (burden of production on rebutting domicile presumption)
- Gadlin v. Sybron Int’l Corp., 222 F.3d 797 (10th Cir. 2000) (totality-of-circumstances approach to domicile)
- Aquila, Inc. v. C.W. Mining, 545 F.3d 1258 (10th Cir. 2008) (clear-error review of factual domicile findings)
- Elliot Indus. Ltd. P’ship v. BP Am. Prod. Co., 407 F.3d 1091 (10th Cir. 2005) (de novo review of questions of citizenship, with factual underpinnings)