Scripts Wholesale, Inc. v. Mainspring Distribution LLC
1:18-cv-06612
E.D.N.YJul 13, 2021Background
- Plaintiffs Scripts Wholesale, Inc. and Lieb Pharmacy, Inc. sued Mainspring Distribution LLC and Edvin Ovasapyan (state-law claims including breach of contract, conversion, fraudulent conveyance), seeking about $4.83 million; suit filed November 19, 2018.
- Court sua sponte questioned diversity jurisdiction because Mainspring is an LLC (citizenship = citizenship of each member) and the Complaint did not allege the citizenship of all members.
- Defendants produced an affidavit stating Mainspring’s members were Ria Phillips (Pennsylvania) and Vahe Ovasapyan; Plaintiffs disputed Vahe’s domicile and obtained limited discovery.
- Evidence showed Vahe leased and later bought a home in Pennsylvania, obtained a Pennsylvania driver’s license, filed Pennsylvania tax returns, and maintained only a minimal New York apartment; the court found clear and convincing evidence Vahe was domiciled in Pennsylvania at filing.
- Plaintiffs failed to establish the citizenship (domicile) of defendant Edvin Ovasapyan at the time of filing; the Amended Complaint alleged only residence in California and submitted declarations concerned periods after filing.
- Because Edvin’s citizenship remained unproven and complete diversity was not established, the court dismissed the action with prejudice for lack of subject matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Citizenship of Mainspring (via member Vahe) | Vahe had changed domicile from New York to Pennsylvania before suit; Mainspring therefore a Pennsylvania citizen (with Phillips). | Vahe retained domicile in New York despite Pennsylvania move. | Court held Vahe was domiciled in Pennsylvania at filing; both Mainspring members were Pennsylvania citizens. |
| Citizenship of Edvin Ovasapyan | Plaintiffs offered a post-filing declaration and pointed to criminal docket entries; did not plead or prove Edvin’s citizenship on filing date. | Defense counsel asserted Edvin was not a New York citizen on the filing date but did not affirmatively prove his citizenship. | Court found Plaintiffs failed to prove Edvin’s citizenship at the time of filing; domicile remained unknown. |
| Jurisdictional disposition (sufficiency of proof; dismissal) | Plaintiffs bore the burden to prove diversity; argued evidence supported diversity as to Mainspring. | Defendants failed to affirmatively establish Edvin’s citizenship despite court orders. | Applying governing standards, the court found incomplete diversity and dismissed the action with prejudice for lack of subject matter jurisdiction. |
Key Cases Cited
- Durant, Nichols, Houston, Hodgson & Cortese-Costa P.C. v. DuPont, 565 F.3d 56 (2d Cir. 2009) (court must dismiss sua sponte if subject matter jurisdiction is lacking)
- Pennsylvania Pub. Sch. Employees’ Ret. Sys. v. Morgan Stanley & Co., Inc., 772 F.3d 111 (2d Cir. 2014) (complete diversity requirement among parties)
- Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (U.S. 2005) (diversity jurisdiction principles)
- Van Buskirk v. United Grp. of Cos., Inc., 935 F.3d 49 (2d Cir. 2019) (domicile at time complaint filed controls)
- Palazzo ex rel. Delmage v. Corio, 232 F.3d 38 (2d Cir. 2000) (definition of domicile and burden to prove change of domicile by clear and convincing evidence)
- Bayerische Landesbank, New York Branch v. Aladdin Capital Management LLC, 692 F.3d 42 (2d Cir. 2012) (LLC citizenship determined by citizenship of each member)
- Finnegan v. Long Island Power Auth., 409 F. Supp. 3d 91 (E.D.N.Y. 2019) (courts should not rely on self-serving declarations; totality of evidence governs domicile inquiry)