National Fitness Holdings, Inc. v. Grand View Corporate Centre, LLC
2014 U.S. App. LEXIS 7690
| 10th Cir. | 2014Background
- District of Utah dismissed Stephenson's claims for lack of diversity jurisdiction in June 2012.
- Less than three months later, Stephenson created National Fitness Holdings, Inc., a Wyoming corporation in which he is sole director, officer, and shareholder.
- Stephenson assigned his stock in three Utah companies and his Grandview property interests to National Fitness in September 2012.
- National Fitness filed suit in Utah federal court against Grand View Corporate Centre, LLC, seeking ownership and title declarations.
- District court held the assignments impermissibly manufactured diversity under 28 U.S.C. § 1359 and dismissed the case.
- Court whether the district court clearly erred; companion Middleton v. Stephenson provided context about Stephenson's citizenship and timing of the events.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Stephenson improperly manufactured diversity under § 1359. | Stephenson argues assignments were absolute, not improper. | Defendants contend the assignments were to manufacture diversity. | No clear error; assignments improper to manufacture diversity. |
| What is the appropriate fact-intensive standard and review for § 1359 findings on appeal. | N/A (not specified as separate argument in summary). | N/A (not specified as separate argument in summary). | District court’s factual findings reviewed for clear error; ultimate § 1359 question de novo. |
| Should a presumption of impropriety apply to a sole nondiverse director/officer transferring to a diverse subsidiary. | National Fitness argues no presumption; transfers absolute. | Defendants propose presumption of impropriety; rebuts only with legitimate business purpose. | Court left the presumption issue for future cases, but affirmed on other grounds. |
Key Cases Cited
- Kramer v. Caribbean Mills, Inc., 394 U.S. 823 (1969) (preserves concern about manufacturing federal jurisdiction via assignment)
- Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736 (2014) (federal jurisdiction cannot be manufactured by collusive assignment)
- Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987 (9th Cir. 1994) (assignment timing and motive considerations for § 1359)
- Airlines Reporting Corp. v. S & N Travel, Inc., 58 F.3d 857 (2d Cir. 1995) (discusses proximity of assignment to suit in § 1359 analysis)
- Westinghouse Credit Corp. v. Shelton, 645 F.2d 869 (10th Cir. 1981) (factors for improper assignment include control, expenses, and motive)
- Amoco Rocmount Co. v. Anschutz Corp., 7 F.3d 909 (10th Cir. 1993) (§ 1359 scope prior to Hertz; manufacturing jurisdiction concerns)