Kissman, et.al. v. Ohno, 3:18-cv-00018

IN THE DISTRICT COURT OF THE VIRGIN ISLANDS DIVISION OF ST. THOMAS AND ST. JOHN DENNIS KISSMAN and MARINA ) MANAGEMENT SERVICES, ) ) Plaintiffs, ) ) Case No. 3:18-cv-0018 vs. ) ) ST. THOMAS MARINA CORPORATION ) and KOSEI OHNO, ) ) Defendants, ) ) and ) ) CROWN BAY MARINA, L.P., ) ) Nominal Defendant. ) APPEARANCES: LEE J. ROHN, ESQ. RHEA LAWRENCE, ESQ. LEE J. RO F H O N R P&L AAI S N S T O I C F I F A A T N E D S COUNTER-DEFENDANTS DENNIS KISSMAN AND MARINA MANAGEMENT ST. CROI S X E, RUV.ISC.E VS I RGIN ISLANDS FOR COUNTER-DEFENDANTS NANCY KISSMAN, JANE WHERREN, AND MARINA STAFFING, INC. ADAM NICHOLAS MARINELLI, ESQ. A.J. STONE, III, ESQ. LAW OF F FI O C R E S D O E F F EBN O D L A T NNT A S G S I T P. CT HOMAS MARINA CORPORATION, KOSEI OHNO, AND CROWN BAY MARINA, L.P. ST. THO F M O A R S ,C UO.USN. VTE IR R G -P IN L AIS IN LA T N IF D F S C ROWN BAY MARINA, L.P. MEMORANDUM OPINION Robert A. Molloy, Chief Judge THIS MATTER sua sponte. came before the Court The Court considers whether diversity jurisdiction is proper in light of the parties’ positions regarding (1) claims asserted Case N2o. 32:128-cv-0018 Memorandum Opinion Page of 1 Kissman (“Kissman”) is a limited partner of CBM LP. The Court held an omnibus hearing addressing all pending motions on June 5, 2025. Defendants presented Defendant Kosei Ohno (“Ohno”) as a witness. For the reasons discussed below, the Court �inds that it lacks diversity jurisdiction and will remaIn. d thisB cAaCseK tGoR tOheU SNuDp erior Court of the Virgin Islands. See CBM LP is a Delaware limited partnership formed on February 2, 1998. ( ECF No. 1-2 at 1.) The CBM LP Partnership Agreement (“LP Agreement”) is governed by Delaware law andS esepeci�ically, the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17- 1102. ( ECF No. 1-3 at 11, LP Agreement, §9.3.) The agreement provides that thе term of the partnership “shall commence on the date of �iling the certi�icate of limited partnership . . . and shall continue until Dec 31, 2047, unless Sseoeo ner dissolved, wound up and terminated 2 in accordance with Article VII [Dissolution].” ( ECF 1-2 at 10, LP Agreement, Section 2.4.) Both Plaintiff Kissman and Defendant Ohno were limited partners of CBM LP at the time of formation. (ECF Nos. 1-3.) CBM LP’s sole General Partner is Defendant StI. dThomas MarinaA C.o rMpaornaatgioenm (e“SnTt MCoCn”)t.r (aEcCt F No. 1-1 ¶5.) Ohno is principal owner of STMC. . at ¶6. In January 1998, CBM LP entered into a contract for management services with 3 Marina Management Services, Inc. (“MMS”), “which term began” February 2, 1998. (ECF No. 1 TSehee parties disagree as to whether Kissman remains a limited partner of CBM LP. 2 Article VII “Dissolution” (ECF No. 1-3 at 6.) 3 See The LP Agreement states that the “Contract for Management Services” betwSeeeen MMS and CBM LP was “dated Case N3o. 32:128-cv-0018 Memorandum Opinion Page of 46 ¶10.) The management contract provided that MMS would manage the Crown Bay Marina in St. Thomas on behalf of CBM LP. (ECF Nos. 46 ¶4, 1-1 ¶4.) Kissman is president of MMS. (ECF NoB.. 1-C1a ¶ll4 O9p).t i on Article VIII of the LP Agreement—captioned “Transfer of Partner’s Interest, Call Option”— states: In the event that the Contract for Management Services, dated January 29, 1998 . . . between the partnership and Marina Management Services Inc. is terminated in accordance with its terms for any reason, then the General Partner shall have the right and authority, but not the obligation, to cause the partnership to purchase all of the Limited Partner interests then held by Dennis P. Kissman and/or any of his permitted transferees (collectively, “Kissman”) for the Call Price; provided, however, that such right must be exercised by the general Partner within 90 days after such termination.” LP Agreement § 8.3(a). (ECF No. 1-3 at 9.) After the marina sustained hurricane damage in 2017, the relationship between Kissman and Ohno soured. According to Defendants, the management agreement was of�icially terminated on October 27, 2017. (ECF No. 46 ¶19.) On October 18, 2017, Ohno sent Kissman an email on behalf of CBM LP informing Kissman that the management agreement between MMS and CBM LP would terminate “for cause” on October 27, 2017. (ECF No. 12- 2.) Then, on January 24, 2018, MMS was noti�ied by letter that STMC, through Ohno, had exercised the call option in the LP Agreement. (ECF No. 12-4.) According to Defendants, Kissman ceased to be a limited partner with CBM LP at that point. Case N4o. 32:128-cv-0018 Memorandum Opinion Page of Plaintiffs, on the other hand, assert that “the services of MMS had effectively been 4 terminated, at the earliest on October 6, 2017, and at the latest, October 18, 2017” — outside the 90-day period required for thе call option to be properly exercised. (ECF No. 1-1 ¶90.) Plaintiffs contend that because the call option exercised on January 24, 2018, was “outside the 90-day time perIido.d to do so,” it was ineffective and therefore Kissman remains a limited partnerC o. f CCiBtMize LnPs.hip of the Parties On February 22, 2018, Plaintiffs �iled the instant action in the Superior Court of the Virgin Islands bringing direct claims against Defendants for tortious interference with contractual relations (Count One), breach of contract (Count Two), improper exercise of the call option (Count Three), access to CBM LP’s �inancial records (Count Four), and defamation (Count Five). (ECF No. 1-1 ¶¶ 99–116.) In addition, Kissman asserted a derivative claim on behalf of CBM LP, alleging STMC’s Ida.c tio ns as general partner caused the partnership signi�icant �inancial loss (Count Six). at¶¶ 117–122. In response, on March 29, 2018, Ohno �iled Sae Ne ogteinceer oafl lRyemoval from the Superior Court to this Court for case number ST-18-cv-085. ( ECF No. 1.) Ohno asserted that this case was removable pursuant to 28 U.S.C. § 1332, “which provides federal district courts with original jurisdiction in cases where the amount in controversy exceeds the sum or valueI do.f $75,000, exclusive of interest and costs, and is between citizens of different states.” at 1. 4 See Plaintiffs assert two different timeframes for when constructive termina,tion of the management agreement Case N5o. 32:128-cv-0018 Memorandum Opinion Page of Because CBM LP was named as a nominal defendant in the Complaint, Ohno asserted that CBM LP’s citizenship should be disregarded “as it does not affect the Court’s subject matter jurisIddiction in this case.” (ECF No. 1 ¶7.) Ohno a lso asserted that CBM LP consented to removal. . at ¶8. According to the Notice of Remоval,citizenship for purposes of diversity jurisd iction is asserted as follows: Id 1. Plaintiff MMS is a Florida corporation with its principal place of business in St. Thomas, U.S. Virgin Islands. . at ¶3. Id. 2. Plaintiff Kissman is a citizen of St. Thomas, U.S. Virgin Islands. at ¶4. Id. 3. Defendant STMC is a Delaware corporation with its principal place of business in Washington. at ¶5. Id 4. Defendant Ohno is a citizen of Washington and a limited partner of CBM LP. . at ¶6. Without CBM LP aSse ea gpeanrteyr ainll yinterest, diversity jurisdiction is plausible among all plaintiffs and defendants. ( ECF No. 1.) On May 31, 2018, Plaintiffs attempted to amend their Complaint in an effort to change CBM LP’s status frSoeme g ae nneormalilnyal party to a real party 5 in interest and to remand the case to Superior Court. ( ECF No. 6.) The Court 6 7 denied Plaintiffs’ motion. (ECF No. 21.) In September 2019, Defendants �iled counterclaims on behalf of CBM LP, (ECF No. 46 at 15), and on September 16, 2020, Defendants amended their counterclaims to include 5 In its Memorandum Opinion �iled on March 30, 2024, the Court stated that “at this time the parties do not dispute diversity of citizenship. . . .” (ECF No. 373 at 7.) However, Plaintiffs did raise a dispute to citizenship in Plaintiffs’ Motion for Leave to File First Amended Complaint, and for Remand of the Case to the V.I. Superior Court for Lack of Subject Matter Jurisdiction, �iled May 31, 2018. (ECF No. 6.) 6 See In a succinct text Order, the Court stated that “at a later date,” it would “issue a memorandum opinion outlining the reasons for its decision”; however, no memorandum opinion was ever issued. ( ECF No. 21.) Case N6o. 32:128-cv-0018 Memorandum Opinion Page of breach of contract (Count One); breach of duty of good faith and fair dealing (Count Two); fraud (Count Three); unjust enrichment (Count Four); and intentional tort and negligence (Count Five). (ECF No. 147-1.) Defendants argue that citizenship of the parties has not changed since the date of removal and “complete diversity remains intact” pursuant to 28 U.S.C. § 1332. (ECF No. 380 at 5.) Defendants maintain that Kissman is no longer a limited partner with CBM LP and as such may not assert a derivative claim. In opposition, Plaintiffs argue that Kissman’s derivative claim is valid and that diversity jurisdiction is impossible given that CBM LP is actually a real party plaintiff—despite being listed as a nominal party. (ECF No. 381 at 4.) Plaintiffs maintain that as a limited partner of CBM LP, Kissman has standing to assert a derivative claim on CBM LP’s behalf, and as a real party Iidn interest, CBM LP’s citizenship in the diveDr.s iRtye apnoarlty asinsd u Rnedceormmimneesn ddiavteiorsnit y jurisdiction. . at 10. On April 2, 2024, the District Court entered an Order referring the issue of subject matter jurisdiction and any issues relevant and necessary to determining subject matter jurisdiction to the Magistrate Judge for a report and recommendation (“R&R”). (ECF No. 376.) The Court also ordered the parties to �ile respective memoranda for consideration as to whether the Court has diversity jurisdiction. (ECF No. 378.) In her R&R issued on July 22, 2024, the Magistrate Judge found CBM LP to be “a real party to the controversy whose presence destroys diversity,” and recommended that this case be dismissed and remanded to the Superior Court.(ECF No. 386 at 15.) Defendants then �iled an objection to the R&R, (ECF No. 390), and a motion requesting a hearing on the issue. (ECF No. 408.) On June 5, Case N7o. 32:128-cv-0018 Memorandum Opinion Page of the hearing, the Court heard �inal argument as to whether diversity jurisdiction exists between the parties. II. LEGAL STANDARD A. Rule 12(b)(1) 1. Diversity Jurisdiction “Jurisdiction based on diversity of citizenship requires that opposing parties be citizens of diverse states. Under the dictates of 28 U.S.C. § 1332(a), for diversity jurisdiction to exist, no plaintiff may be a citizenG oBfF tohree fsraomnte, sLt.aPt. ev .a Fs oarneyfr donefte Mndgamntt., Garnpd., tLhLeC amount in controversy must exceed $75,000.” Owen Equip. & Erection Co. v. Kroger , 888 F.3d 29, 34 (3d Cir. 2018)(citations omitted); each , 437 U.S. 365, 373 (1978) (“[D]ive ersaicthy jurisdiction does not exist unless defendant is a citizen of a different State from plaintiff.”). The party asserting diversiDtyo jeu vr.i sGdoilcdtsioteni nb'es aDresl ithe burden of convincing the court by aa cpcroerpdoMncdCearannnc ve. Gofe othrge ee Wvid. Nenewcem. an Irrevocable Tr. , 82 F. App'x 773, 775 (3d Cir. 2003); McNutt v. Gen. Motors Acceptance Corp. , 458 F.3d 281, 286 (3sede C iarl.s 2o0P0a6c)k (acritdi nvg. Provident Nat'l Bank , 298 U.S. 178, 189 (1936)); , 994 F.2d 1039, 1045 (3d Cir. 1993) (stating that the movant for diversity jurisdiction “bears the burden of showing “that the case is properly before the court at all stages of the litigation.”). MWorittehnosuetn svu. bFjiercstt Fmeadt. tSear vj.u arnisdd Licotaionn A tshse'n court does not have the power to hear the case. , 549 F.2d 884, 891 (3d Cir. 1977). Because subject matter jurissduicat siopno niste сentral to a court's authority, a court can raise issues of subject Case N8o. 32:128-cv-0018 Memorandum Opinion Page of duty to verIidfy subject matter jurisdiction, and it must dismiss the action if it �inds jurisdiction is lacking. . “The form of the inquiry is flexible though: ‘As there is no statutory direction ‍​‌​​‌​‌​​​​‌‌‌​‌‌​​‌‌‌​‌​‌‌‌‌​​​​‌‌​‌​‌​​‌​​‌‌​‌‍ for procIedd.ure upon an issue of jurisdiction, the mode of its determination is left to the trial court.’” at 891 n.6 (citation omitted). “That Itdh.e district court is free to determine facts relevant to its jurisdiction has long been clear.” "[T]he absence of sufficient averments or of facts in the record showing such required diversity of citizenship is fatal aTnhdo mcaansn vo. Bt bde. o of vTerrulsotoekees do fb Oyh tihoe S ctaotuer Ut, neivve.n if the parties fail to call attention to the defect.’” , 195 U.S. 207, 211, (1904). “Citizens upon whose diversityN aa vlaitrirgoa nSta vg.r Aosusn’nd sv . jLuereisdiction must be real and substantial parties to thе controversy.” , 446 U.S. 458, 460 (1980) (citation altered) (citation omitted). “Thus, a federal court must disregard nominal or formIadl. parties and rest jurisdiction only upon the citizenship of real parties to the controversy.” at 461. However, it is the Court that makes the decision, “not theC iptayr otife Isn bdyia tnhaep poalirst ive. sC’ hoawsne dNeatte. rBmaninka otifo Nne owf Ywohrok are plaintiffs and who asreee dalesfoendants.” , 314 U.S. 63, 69 (1941); Wagstaffe Prac. Guide: Fed Civil Proc Before Trial § 7-IV (“One party’s characterization of parties as ‘plaintiffs’ or ‘defendants’ for diversity purpose is not a ‘fact,’ . . . and the court may realign the parties to match their actual interests in the litigation. The citizenships once properly aligned determine whether com2p. leFtea cdiiavle Crshiatyll eexnigstes .v”e).r sus Factual Challenge When evaluating а challenge to diversity jurisdiction in a Rule 12(b)(1) motion or a motion to remaGnBdF, othreef rCoonutrt “must determ isneee walhsoetBhyeerr tsh ve. Icnhtaulilte, nIngce. ,is a facial attack or a Case N9o. 32:128-cv-0018 Memorandum Opinion Page of aff'd, 397 (E.D. Pa. 2008), 600 F.3d 286 (3d Cir. 2010)(“District courts have discretion to treat Rule 12(b)(1) Gmibobtsi ov.n Bsu caks either facial or factual challenges to their subject matter jurisdiction.”); , 307 U.S. 66, 71-72 (1939) ("As there is no statutory direction for procedure upon an issue of jurisdiction, the mode of its determination is left to the trial court."). A facial challenge proceeds like a motionM ourntdenesre Rnule 12(b)(6), where the court accepts the allegations in the complaint as true. , 549 F.2d at 891. In a factual challenge, the court is "frIede. to weigh the evidence and satisfy itself as to the existence of its power to hear the case." The movant “must assert facts that affirmatively and plausibly suggest” that he has the right he claims (here, theC hruigrchht otof tjhuer iUsndiivcteirosna)l , B“hrda.t hve. rF atrhmanin gfatoctns Ttwhapt. Saurpee rmveisroerlsy consistent with such a right." , 2963 F. . ACpitpiz'xe 2n8s5h,i p2 8o8f t(h3de CPiarr. t2i0e0s 8 ) (citations omitted). McCann Citizenship is synonymous with domicile. , 458 F.3d at 286.Whiledetermined differently for individuals, corporations, and limited partnerships, most rules of citizenship are well established. “A natural person is deemed to be a citizen of the state where he is domiciled. A corporation is a citizen both of thLein sctoaltne wBehneerfeit i tL iisfe i nCcoo. rvp. AorEaIt Leidfe a, nLdL Cof the state where it has its principal place of business.” , 800 F.3d 99, 104 (3d Cir. 2015)(citations omitted). Unlike corporations, unincorporated associations such as aId l.imited partnership are not considered citizens as that tеrm is used in the diversity statute. “Instead, the citizenship of partnerships and other unincIodr.porated associations is determined by the citizenship of their partners or members.” at 105. For complete Case N10o. 3:1282-cv-0018 Memorandum Opinion Page of Id. on the opposing side. When challenged on allegatHioenrtsz o Cfo jrupr.i asdtictiona l facts, all parties must support their allegations “by competent proof.” 96-97. For cases �iledS iene s Atabteel sc ovu. Srtt aatned F raermmo Fvierde t&o Cfeadse. rCaol. court, jurisdiction is analyzed at the time of removal. , 770 F.2d 26, 29 (3d Cir. 1985) (“The defendant’s right to remove is to Pbuel ldmeatenr Cmoi.n ve. dJe anckcionrsding to the plaintiffs’ pleading at the time of the petition for removal.”); , 305 U.S. 534, 535 (1939) (“The right to remove an action from a state to a Federal court is to be determined according tо the plaintiff's pleading at the time of the petition for removal, without consideration of a 8 subsequently amended complaint.”)I.II . DISCUSSION sua Although the issue of diversity is raised sponte here, the Court never theless must determine the appropriate standard to apply. The Third Circuit has instructed: A facial attack is an argument that considers a claim on its face and asserts that it is insufficient to invoke subject matter jurisdiction of the court because, for example, there is no indication of a diversity of citizenship among the parties. A factual attack, on the other hand, is an argument that there is no subject matter jurisdiction because the facts of the case do not support the asserted GBForejfurorinstdiction. see also Save Long Beach Island v. U.S., D8e8p8' tF o.3f dC oamt .3, 5 (citation altered) (citation omitted); 721 F. Supp. 3d 317, 330 (D.N.J. 2024) (“A facial attack concerns an alleged pleading deficiency whereas a factual attack concerns the actual failure of a Compare 8 15A Moore's Federal Practice - CiviCl h§a v1e0z2-L.1a6v a(g“Inf ina os tva. tMe-octoivuartti ocnas Eed iusc r. eTmraoivneindg to federal court, diversity generally must exist both when the state suit is filed and when the petition for removal is filed. However, there are exceptions to this rule.”); see also McNello v. John B. ‍​‌​​‌​‌​​​​‌‌‌​‌‌​​‌‌‌​‌​‌‌‌‌​​​​‌‌​‌​‌​​‌​​‌‌​‌‍Ke,l l7y,1 I4n cF..3d 1055, 1056–1057 (8th Cir. 2013) (case remanded for determination as to whether parties were completely Fdiievledr sve. wVohleknsw saugite wnwase rfikle AdG and when defendants filed notice of removal); , 283 F.2d Case N11o. 3:1282-cv-0018 Memorandum Opinion Page of plaintiff's Pcalapipm sv . tFoo rceo-Kmapsot rSta lfeasc tCuoa.lly with the jurisdictional prerequ isi“tes.”) (citation omitted); , 842 F.3d 805, 811 (3d Cir. 2016) ( A facial attack challenges subject matter jurisdiction without disputing the facts alleged in the notice of removal . . . . A factual attack, in contrast, disputes the factual allegations underlying the assertion of jurisdiction and involves the presentation of competing facts.”) (citation omitted). 9 The Court construes this issue as a facial attack on diversity jurisdiction. Thus, the Court must consider whether Defendants’ allegations in the Notice of Removal, attached docAum. eDnetfse, nadnadn rtesf efareiln tcoe dd epmroocnesetdriantges deisvtearbsliisthy othf ec inteizceensssahriyp joufr tishdei cptaiornti.e s. 1. Notice of removal. A notice of removal must allege the underlying facts supporting the requirements for removal jurisdiction, and because jurisdiction is attacked facially. SheеereI,n w ree c Coonmstmruoen twheea flatcht'ss iMno tthioen rteom Aopvpaol innto tCiocue nisne lt hAeg aliinghstt omr oDsitr efcatveodr atob lDe etfo. A msso’nv aonf tPshila. , 790 F.3d 457, 466 (3d GBForefront, L.P. v. Forefront Mgmt. Grp., LLC 9 Defendants rely on GBForefront , 888 F.3d 29 (3d Cir. 2018), aIsd .a basis to argue that this challenge is a factual chalGleBnFgoer.e fUropnotn review, it is unclear to the Court how this case supports Defendants’ argument. In , both a factual anIdd facial c hallenge w ere presented. SimGBilFaorr teofr othnet instant matter, the facial attack in was “that GBForefront never alleged the citizenIdship of the members of tGhBe FLoLrCe fdreofnetndant entities” in its complaint. . at 35.Separately,the factual attack in “ultimately came dIodw. n to a question of law on how to determine the citizenship of certain trusts.” . at 35 n.8. The Court in considered thе legal question of whether the truGsBtsF oart eifsrsounet weIdr.e of the traditional or business variety. at 32. The factual challenge hinged “on the proper interpretation of [case law] in determining the citizenship of the several trusts that are layered within .” at 37. “Although the District CIodu.rt had said that iGt BwFaosre afrdodnrtessing a ‘facial attack’, the Court's analysis actually addressed the Defendants' factual attack because the Court considered information outside the pleadings, as agreed to by the parties.” at 35 n.8. Unlike , the parties in the instant matter do not dispute how to determine Case N12o. 3:1282-cv-0018 Memorandum Opinion Page of Defender Ass’n ; accord Papp Cir. 2015) (“ ”), cert. denied 136 S. Ct. 980 (2016) , 842 F.3d at 811. Defendants carry the burden to show the existence of federal jurisdiction, and here Defendants fail to meet this burden from the get-go. The citizеnship of CBM LP is missing from Defendants’ Notice of Removal. Through little fault of their own, Defendants apparently failed to adequately plead diversity of citizenship in their Notice of Removal because CBM LP was originally captioned as a “Nominal Defendant.” Given that Defendants did not analyze CBM LP’s citizenship for purposes of removal, Defendants failed to demonstrate diversity by a preponderance of the evidence. Although CBM LP was originally captioned as a “Nominal Defendant” in the Complaint, the Court “must determine the propriety of the removal of a case only after it has realigned the parties according to their actual interests in the suit. The Court is not bound by the technical form of the state court proceeding but is obligated to ascertain the underlying substantive interests of the partiesG lienn mdiesdpeu tTer .a Cnod. va. rDroawng Ceh tehme. pCaor.ties according to their actual interest in the controversy.” , 384 F. Supp. 423, 427- 28 (E.D. Pa. 1974) (citations omitted) (holding to remand where a nominal party was determined by the court to be a necessary party and therefore a real party in interest; in so doing, diversity was destroyed). “Because the question as to whether a party is necessary to a proceeding is dispositive of the existence of federal jurisdictioIdn, the question of the status of a particular party must be decided by applying federal law.” . at 430. (citation omitted). Given that a cause of action is stated on CBM LP’s behalf on both sides of the case, CBM LP Case N13o. 3:1282-cv-0018 Memorandum Opinion Page of See Saxe, Bacon & Bolan, P.C. v. Martindale-Hubbell, 10 cInacn.not be considered a nominal party. , 521 F. Supp. 1046, 1048 (S.D.N.Y. 1981) (“A party tо an action is nominal or formal if no cBauumseb eorfg earc tvi.o nIn so. rC col.a oimf Nf.o rA mre.lief is or could be stated against him or on his behalf.”); , 952 F.2d 764, 767 (3d Cir. 1991) (“Nominal parties are generally those without a real interest in the litigation.”). A derivative claim is asserted on CBM LP’s behalf in Count Six of the Complaint and Defendants assert a Counterclaim on CBM LP’s behalf, as well. Given that action is stated on CBM LP’s behalf, CBM LP is a real party in interSeeset Nanodm iutrsa c iAtiszseent sChaippi tmalu vst. Obvee crolannsdid Ceore.d to determine whether complete diversity exists. , No. 02-1604 GMS, 2003 U.S. Dist. LEXIS 28574, at *9 (D. Del. Jan. 8, 2003) (�inding that, “[d]ue to the derivative nature of the plaintiff’s claims, . . . the Partnership is more than a nominal party,” and the court is thus required to consider its citizenship to determine diversityC)a. rAdse na lvi.m Airtkeodm liaa bAislsitoyc ipaatretsnership, the citizenship of each of CBM LP’s members is relevant. , 494 U.S. 185, 108 (1990) (“For diversity jurisdiction purposes, a limited partnership is considered a citizen of each state in which its partners are citizens.”). Both Kissman and Ohno are alleged as members of CBM LP in both the Complaint and at the time of removal. In addition, Defendant STMC is the general partner of CBM LP and therefore both have the same citizenship. (ECF No. 404 at 18.) By asserting a derivative claim (Count Six) on behalf of CBM LP against Defendant STMC, (and defendant Ohnios) ,t hdeiv searmsitey aiss destroyed . As Plaintiffs assert, “[w]hatever domicIidle. Defendant [STMC] has [CMB LP].There cannot be diversity jurisdiction.” Case N14o. 3:1282-cv-0018 Memorandum Opinion Page 2of. C itizenship of CBM LP is inconclusive. Looking into the record, the Court finds insufficient evidence that would demonstrate the citizenship ofH eCrBtMz C oLrPp. . vA.l Fl rpieanrdties must support their allegations of citizenship by competent proof. , 559 U.S. 77, 96-97 (2010). Even as of thе June 5, 2025 hearing DefendantsS weeerLei nucnoalnb leB teon eafcict oLuinfet for each of CBM LP’s limited partners—some of which are trusts. , 800 F.3d at 105 n.16 (“[T]he citizenship ‍​‌​​‌​‌​​​​‌‌‌​‌‌​​‌‌‌​‌​‌‌‌‌​​​​‌‌​‌​‌​​‌​​‌‌​‌‍ of unincorporated associations must be tracedC athrlrsobuegrhg Rheosw. Ceovrepr. vm. Caanmy blaryiae rSsa vo.f & p Laoratnne Arsss o’nr, members there may be.”) (citation omitted); 554 F.2d 1254, 1259 (3d Cir. 1977) ("When the rule of complete diversity is read in conjunction with the principle that the citizenship of a partnership depends upon that of its members, it becomes clear that diversity jurisdiction may not obtain unless all of the members of the pl aintiff partnership are of distinct citizenship from all of the defendants.") (citation altered). FoGr BdFivoererfsriotyn tp, urposes, the citizenship of a trust is based on the citizenship of the trustees. 888 F.3d at 39. At the omnibus hearing, Ohno expressed uncertainty when testifying as to the identities of the CBM LP members representing the trusts. He stаted names of law �irms or attorneys but could not specify identities of speci�ic trustees when questioned. He also asserteSede r GesBiFdoernecfyr oinnt N, ew York for certain trustees, but residency is not 11 the same as citizenship. 888 F.3d at35 (“[R]esidency alone is insufficient to plead diversity of citizenship.”)(citation omitted). As of the date of this order, Defendants . SeeGBForefront, 11 It is possible to remedy this particular issue 888 F.3d at 41 (remanding to District Court Case N15o. 3:1282-cv-0018 Memorandum Opinion Page of all have yet to demonstrate with comp etent proof the citizenship for members of CBM LP for purBpo. sTesh oe fd deirvievrastiitvye j ucrlaisidmic. tion. Turning to the Complaint, Plaintiff Kissman alleges a derivative claim on behalf of CBM LP in Count Six. Defendants contend that Count Six is not properly a derivative claim under Delaware law because Kissman allеgedly was removed as a partner of CB M LP before he �iled the Complaint and therefore lac“k s standing to assert a derivative claim. A derivative action is de�ined as asuit by a beneficiary of a fiduciary to enforce a right belonging to the fiduciary; esp., a suit asserted by a shareholder on the corporation's behalf against a third party (usu. a corporate officer) because of the corporation's failure to take some action against the third party.” DERIVATIVE ACTION, Black's Law Dictionary (12th ed. 2024). In the context of a limited partnership, a partner may assert a derivative action on behalf of the partnership. “Derivative actions are one of the principal means of challenging improper, illegal, or unreasonable conduct by . . . management. Among the more commоn offenses charged in derivative actions are excessive salaries, issuance of stock without adequate consideration, diversion of corporate opportunity, misapplication of funds, improvident loans, and secret profits.” DERIVATTIrVuEst A BCeTnIOefNic,i aBrlay ckSt'sa nLdaiwng D iicnt ioShnaarryeh (o1l2dtehr eDde.r i2va0t2iv4e) A(cctiitoinngs to Judith Schemel Suelzle, , 39 Stan. L. Rev. 267, 267–68 (1986)). Given that CBM LP is organized pursuant to Delaware law and the LP Agreement was created under the Delaware Uniform Limited Partnership Act, Delaware law is the source of any cause of action the plaintiffs have for breach of contract or breach of �iduciary duty. (ECF Case N16o. 3:1282-cv-0018 Memorandum Opinion Page of No. 390 at 5.) Therefore, Defendants assert, “the analysis ofI dw.hether Count Six is a proper derivative claim must start with a preview of Delaware law.” “In a derivative suit, a shareholder [or limited partner] sues on behalf of the corporation [or partnership] for harm done to the corporation [or partnership]. By contrast, a plaintiff bringing a direct aNctoiomnu rma uAssts ebte C ainpjiutarel,d directly or independently of the corporation [or partnership.]” see 2a0ls0o3K Uen.Sw. oDritshty. LvE. XHIaSr g2r8o5v7e4, at *7 (citations and internal quotation marks omitted); , 855 F. Supp. 101, 106 (E.D. Pa. 1994) (explaining that the determination hinges on "whether the Pporilmaka rvy. iKnojubaryy aaslhleiged in the complaint is to the partnership or to the individual plaintiffs"); , No. 05-330-SLR, 2008 U.S. Dist. LEXIS 92254, at *24 (D. Del. Nov. 13, 2008) (“Whether a claim is direct or derivative turns solely on who suffered the alleged harm and who would receive the benefit of any recovery or other remedy.”) (citation omitted). Under Delaware law, the plaintiff in a derivative action must be a partner or an assignee of a partnership interest at the time of bringing the action and: (1) At the time of the transaction of which the plaintiff complains; or (2) The plaintiff’s status as a partner or an assignee of a partnership interest had devolved upon the plaintiff by operation of law or pursuant to the terms of the partnership agreement from a person who was a partner or an assignee of a partnership interest at the time of the transaction. 6 Del. C. § 17-1002. Upon this premise, for Count Six to be interpreted as a proper derivative claim, Kissman must have been a limited partner at the time of �Sielieng and removal— “a condition precedent found wanting here” according to Defendants. 6 Del. C. § 17-1002. (ECF No. 390 at 11.) However, Defendants carry the heavy burden of persuasion by a preponderance Case N17o. 3:1282-cv-0018 Memorandum Opinion Page of Complaint alleges that the call option removing Kissman as a limited partner was not properly exercised and therefore Kissman remained a limited partner and maintained the right to assert a derivative claim on behalf of CBM LP. Defendants contend the facts of the case are at issue based on application of Delaware law. There is no question that the partnership agreement was organized under Delaware law. However, the rules for determining citizenship do not change depending on whether or not Delaware law applies. The rules de�ining jurisdictional citizenship of a party—whether individual, a Limited Partnership, or Corporation—are de�initive. Even if jurisdiction was challenged upon a factual basis as Defendants attempted to assert at the omnibus hearing, “no presumptive truthfulness attaches” to Defendants’ allegations, and “the existence of disputed material factMs owritlel nnsoent preclude the court from evaluating for itself the merits of jurisdictional claims.” , 549 F.2d at 891. “It is fundamental that federal courts must have subject matter jurisdiction before reaching the merits of a case, and as its name indicates, jurisdiction baseGdB oFno rdeifvroenrstity of citizenship requires that opposing parties be citizens of diverse states.” , 888 F.3d at 34. Any argument concerning a lack of standing cannot first go to the merits of the claim. If it does, the movant has not met its burden for diversity jurisdiction. Kissman’s standing to assert a derivative claim is tied to the factual disputes arising from Count Three of the Complaint, which questions the merits of the call optiоn that allegedly withdrew Kissman’s membership in CBM LP. The parties dispute exactly when the management agreement was terminated, which is determinative of whether the call option was properly exercised. In the Complaint, Plaintiffs allege that constructive notice of Case N18o. 3:1282-cv-0018 Memorandum Opinion Page of 12 termination was given before the date of termination asserted by Defendants. This boils down to both factual and legal matters, and it is a merits question because Count Three of Plaintiffs’ complaint challenges the legality of the exercise of the call option. The Court �inds that Defendants do not suf�iciently demonstrate that Kissman’s partnership rights with CBM LP had ceased by the time the Complaint was �iled or when the case was removed. It is undisputed that Kissman was a limited partner at the formation of CBM LP. He was also a mеmber at the time Plaintiffs allege that the Management Agreement was constructively terminated. In addition, Kissman was a member at the time of the 13 disputed call option. Defendants’ assertions concerning the call option are disputed by Plaintiffs, and none of the cases that Defendants proffer present a similar scenario. To the extent that a challenge “bleedsP ianptpo, the merits of the case, the District Court ought not address it in terms of jurisdiction." 842 F.3d at 811 n.4. The Third Circuit has held that "a district courDt mavuiss tv t. aWkee lclas rFea nrogto to reach the merits of a case when deciding a Rule 12(b)(1) motion." , 824 F.3d 333, 348 (3d Cir. 2016) (citation omitted.) Even in a factual attack on jurisdiction, a district court may not decide genuinely disputed facts where ‘the question of jurisdiction is dependent on the resolution of factual 12 Although the exact dates Plaintiffs assert for constructive termination vary, they all fall within a timeframe outside the 90-day call option window: “By instructing MMS to cease contacting vendors and others and to stop efforts to repair the marina, the contract of MMS was effectively terminated on October 6, 2018.” (ECF No. 1-1 Compl. at ¶66.); “The ‍​‌​​‌​‌​​​​‌‌‌​‌‌​​‌‌‌​‌​‌‌‌‌​​​​‌‌​‌​‌​​‌​​‌‌​‌‍General Partner terminated the agreement with MMS on October 8, 2017, and at the latest on October 18, 2017. (ECF No. 1-1 at ¶ 19.) “0n October 16, 2018, Ohno, on behalf of the General Partner, removed MMS access to the bank accounts so that bills could not be paid. When Kissman asked Ohno if he had done this, he would not respond.” (EFC No. 1-1¶67.) 13 SeeUrdan v. WR Capital Partners There is nothing in the record that indicates Kissman intentionally relinquished this “property right” that gives rise to his ability to sue derivatively. , Ltd. Liab. Co., No. 2018-0343-JTL, 2019 Del. Ch. LEXIS 313, at *23 (Del. Ch. Aug. 19, 2019)(“The right to sue derivatively is a property right Case N19o. 3:1282-cv-0018 Memоrandum Opinion Page of Dalfio v. Orlansky-Wax Ltd. Liab. Co. issues going to the merits.’” , , No. 21-56339, 2022 U.S. App. LEXIS 21470, at *3 (9th Cir. Aug. 3, 2022) (citation and internal quotation marks 14 omitted). "Whether a party has standing to bring claims and whether a party's claims are barred bOyff iacnia el qCuoimtamb.l eo fd Uenfesnecsue raerde C trwedoi tsoerpsa vr.a Rte.F .q Luaefsfetirotny s&, tCoo .be addressed on their own terms." , 267 F.3d 340, 346 (3d Cir. 2001). Defendants contend that the Court’s interpretation of Count Six of the Complaint— "derivative or not—is a separate analysis entirely than its eventual adjudication of its merits.” (ECF No. 390 at 11.) However, whether Kissman remains a limited partner is a question of state law that also goes to the merits of Count Six of the complaint. If argument to determine jurisdiction must first go to the merits of the claim, the movant has not met its burden for diversity jurisdiction. And if the Court is required to analyze the merits against the party asserting removal, all doubts must favor remand. There is a presumption against removal jurisdiction in a suit originally �iled in state court, and the Third CircuitB hoayse rc va.u Stnioanpe-dO nt hTaoto lcso Cuortrsp .should resolve all doubts against removal in favor ofs eree malasnod A.bels v. State Farm Fire and Ca,s 9u1a3lt yF C.2od 108, 111 (3d Cir. 1990) (citation omitted); ., 770 F.2d 26, 29 (3d Cir. 1985) (“Because lack of jurisdiction would make any decree in a case void, and the continuation of the litigation in federal court futile, the removal statuAtdeo srnhoo uEldn tberes .s tIrnicc.t lvy. construed and all doubts should be resolved in favor of remand.”); 14 Dalfio v. Orlansky-Wax, Ltd. Liab. Co. Here, jurisdiction is challenged facially a s the allegations contained in the notice of removal are “insufficient Case N20o. 3:1282-cv-0018 Memorandum Opinion FPaegdee ra toefd D ep’t Stores, 629 F. Supp. 1565, 1573 (D.R.I. 1986) ("Any substantial doubts as to the proрriety of removal must be resolved against the proponent of a federal forum.") (citation omitted). In other words, in a challenged removaIld c.ase, the district court may retain jurisdiction “only where its authority to do so is clear. . ..” (citation omitted). Here, it is not certain to the Court that Kissman was removed as a limited partner of CMB LP, and the Court �inds that Defendants have not demonstrated otherwise by a preponderance of evidence. Furthermore, the Court is not persuaded that it must entertain Kissman’s standing as a 15 “condition precedent” to its d ecision pertaining to jurisdiction. 15 As a separate basis for barring Plaintiffs’ derivative claim under Delaware law, Defendants assert that Plaintiffs’ Complaint fails to plead facts with particularity as to whether Kissman ever made an actual demand to STMC for taking alternative actions, stepping down, or rectifying the alleged harms, in accordance with 6 Del. C. § 17-1003. (ECF No. 390 at 12.) Pursuant to 6 Del. C. § 17-1003, “[i]n a derivative action, the complaint shall set forth with particularity the effIonr rt,e i fC aongyn, iozfa tnhte T pelcahin. Stioffl st.o C soercpu. rDee irniivtaiattivioen L oitfi gth.,e action by a general partner or the reasons for not making the effort.” If a plaintiff should fail to make a demand, it must show that making such a demand would be futile. 101 F.4th 250, 257 (3d Cir. 2024). In drawing all reasonable inferences from the pleadings in the instant matter, the Court �inds that if a demand had been made it would likely have been fuAtikleh iclo GnuspidtaeriDnegr itvhaatti vOehlyn ov. wWaislk iinn stohne process of cancelling Kissman’s membership and essentially kicking him out of CBM LP. Delaware law governs the substantive requirements of Plaintiff's claim of demand futility. , , 594 F. Supp. 3d 606, 610 (D. Del. 2022). “Corporate standards apply to limited partnerships in the demand excused analysis, and demand futility issues in the partnership context are the same as in the corporate context. Thus, where a limited partner sues a general partner derivatively because the general partner failed to do something, the test for demand excusal is whether or not the particularized factual allegations of the derivativeW ceonmskpel avin. tB clureea tBee lal rCeraesaomnearbieles doubt that, as of the time the complaint is filed, the general partner could have properly exercised its independent and disinterested business judgment in responding to a demand.” , Inc., No. 2017-0699-JRS, 2018 Del. Ch. LEXIS 221, at *1 (Del. Ch. July 6, 2018). “Under Delaware law, pre-suit demand requirement for a shareholder derivative action is futile if a majority of the directors who comprise the board either: (1) recеived a material personal benefit from the alleged misconduct that is the subject of the litigation demand; (2) faces a substantial likelihood of liability on any of the claims that would be the subject of the litigation demand; or (3) lacks independence from someone who received a material persIonn rael bCeongnefizita fnrto Tme cthh.e alleged misconduct that would be the subject of the litigation demand or who would face a substantial likelihood of liability on any of the claims that are the subject of the litigation demand.” at 257. Plaintiffs here suf�iciently argued that pleading requirements were properly met aSnede that “[i]t would be futile to request the General Partner of Crown Bay Marina Limited Partnership to bring the action against itself.” (ECF No. 404 at 16.) The Complaint itself averred the futility of making any demand. ( No.1-1 ¶120.) To the extent that Ohno faced a substantial likelihood of liability on the claims that would be the subject of any demand made in a derivative action in the instant matter, the demand rule asserted does not survive for purposes of determining diversity jurisdiction. Plaintiffs further argue that Defendants’ argument should be “waived for failing to raise it before the Magistrate Judge.” (ECF No. 404 at 17.) Given the Case N21o. 3:1282-cv-0018 Memorandum Opinion Page of Even after removal to federal court, Defendants still carry the “heavy burdeSnt eoefl pVearllseuya Asiuotnh,.” vb. yU nai opnre Spwointdche raanndc eS iogfn tahl eD eivv.idence that jurisdiction does in fact exist. See, e.g.Hillman v. Hillma,n 809 F.2d 1006, 1010, 1012 n.6 (3d Cir. 1987) (citation omitted). , 903 A.2d 798 (Del. Ch. 2006) (finding that the formal general partner plaintiff of ‍​‌​​‌​‌​​​​‌‌‌​‌‌​​‌‌‌​‌​‌‌‌‌​​​​‌‌​‌​‌​​‌​​‌‌​‌‍a limited partnership lacked standing as a limited partner under 6 Del. C. § 17-1001 and 6 Del. C. § 17-1 002 because the terms of the limited partnership agreement clearly deprived him of anyoptions to become a limited partner after having been removed as general partner). Here, Defendants provide no basis for their stance 16 other than Delaware law and allegations. Based on the record, the Court finds Kissman’s derivative claim may stand. 16 Defendants do not deny that CBM LP “clearly has an interest in this case” and concede that Kissman has the right to bring an action against the general partner for willful misconduct under CBM LHPB’s Gpeanr.t nCeorrsph. ivp. aMgarnecehmeestnetr; Phaorwtneveresr, Defendants assert interpretation oHf tBhe claim as derivative in nature “is neither required nor appropriate under Delaware law.” (ECF No. 3H9B0. at 8.) For support, Defendants cite to , 95 F.3d 1185, 1190 (3d Cir. 1996). is unpersuasive. Unlike the instant matter, all of the partners within the small, limited partnership in wеre before the district court, and therefore the Court found the Partnership was not required as a party. It held that the Partnership was properly represented, and concluded that, “given proper protective provisions in the judgment, proceeding in the absence of the Partnership will cause noI dp. rej udice; that the Partnership is effectively represented by the partners and conHsBequently suffers no prejudice from its exclusion; and that whether or not the plaintiffs' claims are ‘derivative’ is immaterial.” at1 1M88c.C Ilnu nthe e vi.n sSthaanmt mahatter, CBM LP’s members are not allM bceCfolurnee the court as in . McClune Defendants alMsoc Ccliutnee to , 593 MFc.2CdL u4n8e2 (3d Cir. 1979). is equally unpersuasive. The decision in was based on requirements of Fed. R. Civ. P. 24(a), of which the limited partnership (“LP”) in did not meet. The Court in found that, in addition to lacking the requisite сriteria necessary to intervene as a party plaintiff, the LP’s interests were already adequately represented by existing parties in the suit and “the disposition ofI dth. e case would not i mMcpKeadye v[.t Hheey LisPo]n from asserting the same claims in a separate lawsuit becausMe ctChlue ncelaims they asserted belonged solely to the defendant LP and did not belong to the individual limited partners. at 484-86. See also , 614 F.2d 899, 907 (3d Cir. 1980) (noting “that the decision in merely upheld a dheansi adli sbcyr ethtieo ndistrict court of a motion for intervention of right and permissive intervention and did not hold that permissive intervention could not have been permitted by the district court as a matter of law. . .. A court to treat the pleading of an intervenor as a separate action in order that it might adjudicate the claims raised by the intervenor. . .. This discretionary procedure is properly utilized in a McacsCel uinn ewhich it appears that the intervenor has a separate and independent basis for jurisdiction and in which failure to adjudicate the claim will result Case N22o. 3:1282-cv-0018 Memorandum Opinion Page of IV. CONCLUSION For the reasons stated above, the Court �inds that it lacks diversity jurisdiction in this matter. Accordingly, the Court will remand this case to the Superior Court of the Virgin Islands. An appropriate Order follows. Dated: Robert A. Molloy ROBERT A. MOLLOY Septem ber 29 , 2025 /Csh/ief Judge Kenworthy v. Hargrove Defendants also cite to , 855 F. Supp. 101 (E.D. Pa. 1994), where the court found iKte wnawso rretahsyonable to restrict limited Kpeanrwtnoerrtsh fyrom bringing direct claims on behalf of the partnership when the general partners were already participating in the same litigation for the same alleged breaches. The Court �inds , tоIod,. is unpe. rsuasive. In , the Partnership was a private bank that had been seized by the state. The claims alleged injury to the limited partnership Private Bank, rather than toI dt.h e limited partners individually. at 106 The lawsuit arose out of the seizure of the Private Bank, which was the action taken directly against the interests of the Private Bank and not the individual limited partners. at 107. None of the harm for which the limited partner plaintiffs sought redress in their Complaint—with the exception of damages alleged in a fraudulent misrepreIsde. ntation count—existed independently of the limited partnership or were inflicted directly upon the limited partners. As such, the limited partners had “standing to sue only derivatively on behalf of the Private Bank.” In the instant matter, Kissman’s derivative claim on CBM LP’s behalf is properly asserted as the alleged injury was inflicted upon the partnership and not upon Kissman directly.

Case Details

Case Name: Kissman, et.al. v. Ohno

Court Name: District Court, Virgin Islands

Date Published: Sep 29, 2025

Citation: 3:18-cv-00018

Docket Number: 3:18-cv-00018

Court Abbreviation: D.V.I.