Reinschmidt v. Buffalo Emergency Associates, LLP
1:13-cv-01153
W.D.N.Y.Apr 21, 2014Background
- Plaintiff Jonathan Reinschmidt, M.D. sued multiple defendants (including LLCs and partnerships) in federal court asserting fraud, conversion, negligent misrepresentation, breach of fiduciary duty, breach of contract, unjust enrichment, and equitable estoppel.
- Complaint alleged federal diversity jurisdiction under 28 U.S.C. §1332, stating plaintiff is a Tennessee citizen and none of the defendants are Tennessee residents and that the amount in controversy exceeds $75,000.
- Several named defendants are partnerships/LLCs; plaintiff repeatedly alleged he was a partner/member in many of those entities and sought derivative/partner/member relief (e.g., inspection of books and records).
- The magistrate judge sua sponte questioned subject-matter jurisdiction and issued an Order to Show Cause; plaintiff responded and sought jurisdictional discovery and permission to amend or drop non-diverse parties.
- The magistrate found the complaint failed to allege the citizenship of each partner/member (required for entities) and that plaintiff’s own repeated allegations that he was a partner/member meant his citizenship could defeat complete diversity.
- The magistrate recommended dismissal for lack of subject-matter jurisdiction and deemed pending motions to dismiss/strike and extension requests moot; discussed and rejected plaintiff’s proposals to cure jurisdictional defects under 28 U.S.C. §1653 and Fed. R. Civ. P. 21.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court has diversity jurisdiction under §1332 | Reinschmidt: court has diversity; he is Tennessee citizen; requests jurisdictional discovery and seeks to amend or drop non-diverse parties to preserve jurisdiction | Defendants: did not contest jurisdiction in filings but entities’ citizenship requires showing members’ citizenship; complaint fails to do so | Court: no proven complete diversity; complaint deficient because it omits citizenship of each partner/member; plaintiff’s repeated allegations of his own membership defeat diversity |
| Whether defective jurisdictional allegations can be cured by amendment under 28 U.S.C. §1653 | Reinschmidt: seeks to amend or disavow prior allegations to show diversity | Defendants: (implicit) §1653 only allows correcting misstatements where jurisdiction actually existed; cannot cure factual defects | Court: §1653 unavailable because plaintiff’s prior factual allegations (made under Rule 11) cannot be truthfully amended away; Newman‑Green controls |
| Whether non-diverse parties can be dropped under Rule 21 to create jurisdiction | Reinschmidt: court may drop non-diverse parties to achieve complete diversity | Defendants: (implicit) federal court lacks power to create jurisdiction; Rule 21 cannot bootstrap jurisdiction | Court: skeptical Rule 21 can be used to create jurisdiction; applying Rule 21 here would conflict with Rule 12(h)(3) and Rule 82; dropping parties is discretionary and not warranted to rescue plaintiff from his pleading choices |
| Whether to permit jurisdictional discovery before dismissal | Reinschmidt: requests discovery to establish members are not Tennessee citizens | Defendants: (did not respond to OSC) | Court: denied as unnecessary because plaintiff’s own admitted membership and allegations show lack of diversity; dismissal recommended without prejudice |
Key Cases Cited
- Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010) (federal courts must independently ensure subject-matter jurisdiction exists)
- Durant, Nichols, Houston, Hodgson & Cortese‑Costa P.C. v. DuPont, 565 F.3d 56 (2d Cir.) (2009) (complaint must adequately allege diversity jurisdiction)
- Newman‑Green, Inc. v. Alfonzo‑Larrain, 490 U.S. 826 (1989) (§1653 only corrects misstatements when jurisdiction actually exists)
- Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365 (1978) (complete diversity required between each plaintiff and each defendant)
- Whitmore v. Arkansas, 495 U.S. 149 (1990) (federal courts cannot create their own jurisdiction)
- Chao v. Russell P. Le Frois Builder, Inc., 291 F.3d 219 (2d Cir.) (2002) (Federal Rules cannot be used to bootstrap jurisdiction)
- Cave v. East Meadow Union Free Sch. Dist., 514 F.3d 240 (2d Cir.) (2008) (Rule 12(h)(3) requires dismissal if court lacks subject-matter jurisdiction)
- Lincoln Property Co. v. Roche, 546 U.S. 81 (2005) (plaintiff is master of the complaint and chooses parties to sue)
- United Republic Ins. Co. v. Chase Manhattan Bank, 315 F.3d 168 (2d Cir.) (2003) (courts should avoid wasted resources when diversity is not properly alleged)