United States Liability Insurance Company v. M RemodelingCorp.
1:20-cv-01287
E.D.N.YMar 16, 2020Background
- Plaintiff is a Pennsylvania insurance corporation suing four defendants, including Case Plumbing LLC, invoking diversity jurisdiction under 28 U.S.C. § 1332.
- Plaintiff's original complaint alleged Case Plumbing LLC was a New York professional limited liability company with a New York principal office.
- The Court ordered plaintiff to show cause because an LLC's citizenship is determined by the citizenship of each of its members, not by state of formation or principal place of business.
- Plaintiff responded with an amended complaint and an unsworn statement averring (in conclusory terms) that Case Plumbing is a single-member LLC owned solely by Khoon Chan, a New York resident.
- The Court found those averments conclusory and unsupported, noted the plaintiff bears the burden to prove jurisdiction by a preponderance of the evidence, and rejected unsworn/belief-based assertions.
- The Court dismissed the case for lack of subject matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper test for LLC citizenship | Case Plumbing is a New York LLC (state/principal office establishes citizenship) | Case: LLC citizenship depends on identity/citizenship of its members (not corporate test) | Citizenship of an LLC is the citizenship of each of its members (Carden/2d Cir. precedent) |
| Sufficiency of pleading members' citizenship | Alleged single-member LLC owned by Khoon Chan, a New York resident (unsworn/"believed") | Case: membership identity not admitted or proven | Plaintiffs must specifically allege identity and citizenship of every member; conclusory "believed" assertions are insufficient |
| Evidentiary standard when jurisdiction challenged sua sponte | Amended complaint + unsworn statement suffice to meet jurisdictional burden | Case: no factual proof submitted | Party asserting jurisdiction must prove it by a preponderance of the evidence; unsworn/speculative statements do not meet the burden |
| Remedy when jurisdiction not shown | Plaintiff prefers federal forum; asks to proceed | Case: subject matter jurisdiction absent | Case dismissed for lack of subject matter jurisdiction; claim belongs in state court absent proof of diversity |
Key Cases Cited
- Carden v. Arkoma Assocs., 494 U.S. 185 (1990) (LLC/partnership citizenship depends on citizenship of members/partners)
- Castillo Grand, LLC v. Sheraton Operating Corp., 719 F.3d 120 (2d Cir. 2013) (applies Carden to LLCs)
- Carter v. HealthPort Techs., LLC, 822 F.3d 47 (2d Cir. 2016) (allegation that an LLC "is a citizen" is insufficient without identifying members)
- MidCap Media Fin., L.L.C. v. Pathway Data, Inc., 929 F.3d 310 (5th Cir. 2019) (party must specifically allege citizenship of every LLC member to establish diversity)
- Broidy Capital Mgmt. LLC v. Benomar, 944 F.3d 436 (2d Cir. 2019) (party asserting subject matter jurisdiction bears burden of proof by a preponderance)
- Joseph v. Leavitt, 465 F.3d 87 (2d Cir. 2006) (court may examine subject matter jurisdiction sua sponte)
- Brown v. Keene, 33 U.S. 112 (1834) (jurisdictional averments must be positive and expressly stated)