Opinion
1-23-CV-749-DII
12-01-2023
IL VENTURES, LLC - A KETTLEBELL KING SERIES and CHAD PRICE, JAY PERKINS and NEHEMIAH HEARD, Individuals, Plaintiffs, v. FACTORY 14 UK ACQUISITION VI, LTD., FACTORY 14 UK ACQUISITION VII, LTD. and RAZOR GROUP GMBH., Defendants.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
MARK LANE, UNITED STATES MAGISTRATE JUDGE
TO THE HONORABLE UNITED STATES DISTRICT JUDGE:
Defendants' Notice of Removal (Dkt. 1), Amended Notice of Removal (Dkt. 13), and Plaintiff's Motion for Remand (Dkt. 8) are before the court. Having considered the pleadings and the relevant case law, the undersigned submits the following Report and Recommendation to the District Court.
The motion was referred by United States District Judge Robert Pitman to the undersigned for a Report and Recommendation as to the merits pursuant to 28 U.S.C. § 636(b), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. See Text Order Aug. 9, 2023.
I. Background
Plaintiffs IL Ventures, LLC - A Kettlebell King Series, Chad Price, Jay Perkins, and Nehemiah Heard filed suit in state court asserting state-law claims. Dkt. 1-1 at 2. Defendants- two United Kingdom companies and one German company-removed citing diversity and alienage jurisdiction. Dkt. 1. Plaintiffs moved to remand, arguing that Defendants have failed to establish complete diversity because they did not demonstrate Defendants' citizenship. Dkt. 8.
Defendants use “Diversity Jurisdiction” as a heading but cite Coury v. Prot, 85 F.3d 244, 248-51 (5th Cir. 1996), for the proposition that a defendant can remove if there is alienage jurisdiction.
II. Motion to Remand
A. Applicable Law
A case may be removed to federal court if the action is one over which the federal court possesses subject matter jurisdiction. 28 U.S.C. § 1441(a). Article III, § 2 of the Constitution provides that the judicial power of the United States shall extend, inter alia, to controversies “between Citizens of Different States” and to controversies “between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.” Coury v. Prot, 85 F.3d 244, 248 (5th Cir. 1996). These provisions constitute the authority for the grant of “diversity” and “alienage” jurisdiction, respectively. Id.
Although alienage jurisdiction and diversity jurisdiction are distinct concepts, they are both governed by 28 U.S.C. § 1332, which requires complete diversity between the parties. Brown v. Soilmec S.p.A., No. 3:14-CV-1547-D, 2014 WL 2750346, at *2 (N.D. Tex. June 17, 2014) (citing 14A Charles A. Wright, et al., Federal Practice and Procedure § 3661, at 5 (4th ed. 2013); Vantage Drilling Co. v. Hsin-Chi Su, 741 F.3d 535, 537 (5th Cir. 2014) (per curiam) (“[Section] 1332(a) (2) requires complete diversity.”)). Courts have uniformly held that alienage jurisdiction under 28 U.S.C. § 1332(a)(2) requires complete diversity between the parties. Id. (citing cases).
“The removing party bears the burden of showing that federal jurisdiction exists and that removal was proper.” Manguno v. Prudential Prop. & Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); accord DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006). To determine whether jurisdiction is present for removal, the court considers the claims in the state court petition as they existed at the time of removal and any ambiguities are construed against removal as “the removal statute should be strictly construed in favor of remand.” Id.
B. Analysis
Plaintiffs moved to remand arguing Defendants have failed to establish complete diversity because Defendants failed to allege the structure of their respective business organizations. Defendants argue they have properly pled diversity citizenship based on alienage jurisdiction because each Defendant is a foreign corporation that is a distinct entity from its members. The parties dispute what must be disclosed about a foreign entity to determine its citizenship, but neither side cites the Fifth Circuit standard for determining citizenship of a foreign company.
In the Fifth Circuit, courts look to whether the foreign company is a juridical person under the law that created it to determine whether it is a “citizen or subject” of a foreign state within the meaning of § 1332(a). Stiftung v. Plains Mktg., L.P., 603 F.3d 295 (5th Cir. 2010). However, an alien corporation may add an additional place of citizenship for diversity purposes if its principal place of business is within one of the states of the United States. Panalpina Welttransport GmbH v. Geosource, Inc., 764 F.2d 352, 354 (5th Cir. 1985). Case law informs the court that a UK “private limited company is a juridical person, like a corporation, as it has its own legal personality with various registration and reporting requirements.” Brink's Co. v. Chubb European Grp. Ltd., No. 3:20-CV-520-HEH, 2020 WL 6829870, at *5-6 (E.D. Va. Nov. 20, 2020) (citing The People of Puerto Rico v. Russell & Co., Sucesores S. En. C., 288 U.S. 476, 480-81 (1933); START UP LOANS CO., https://www.startuploans-.co.uk/business-advice/what-is-privatelimited-company/ (last visited Nov. 12, 2020)).
A “juridical person” is defined as an “Entity, as a firm, that is not a single natural person, as a human being, authorized by law with duties and rights, recognized as a legal authority having a distinct identity, a legal personality.” Celestine v. FCA US, LLC, No. 2:17-CV-00597-DAD-JLT, 2017 WL 3328086, at *2 (E.D. Cal. Aug. 4, 2017) (quoting Black's Law Dictionary (2d Ed.)).
The court previously ordered Defendants to file an Amended Notice of Removal to more specifically plead diversity jurisdiction. Dkt. 12. The court noted that although the Factory 14 entities are citizens of the UK, Defendants had not stated whether the Factory 14 entities have a principal place of business within the United States. Additionally, Defendants had not alleged whether Razor Group GmbH is a juridical person under German laws or where its principal place of business is located. Accordingly, the court cannot assess its citizenship. Finally, neither Plaintiffs nor Defendants had sufficiently alleged Plaintiffs' citizenships.
Defendants filed their Amended Notice of Removal addressing these issues. Dkt. 13. Having reviewed the Amended Notice of Removal, the court is satisfied that the individual Plaintiffs and the Plaintiff entity are citizens of Texas. See id. at ¶ 4. The court is further satisfied that the Factory entities are juridical persons under U.K. law and neither have a principal place of business in the United States. See id. at ¶¶ 5, 6, 8. Finally, the court is satisfied that Razor is a juridical person under the laws of Germany and does not have a principal place of business in the United States. See id. at ¶¶ 7-10.
For natural persons, “citizenship is determined by domicile, which requires residency plus an intent to make the place of residency one's permanent home.” SXSW, L.L.C. v. Fed. Ins. Co., No. 22-50933, 2023 WL 6472562, at *1 (5th Cir. Oct. 5, 2023). The citizenship of an LLC “is determined by the citizenship of all of its members.” Id. at *2.
Accordingly, the court is satisfied that the parties are diverse and the amount in controversy is met. As diversity jurisdiction is proper, the undersigned will recommend that Plaintiffs' Motion to Remand be denied.
III. Recommendations
The undersigned RECOMMENDS that the District Court DENY Plaintiff's Motion for Remand (Dkt. 8).
IV. Objections
The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battles v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Services Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996)(en banc).