United States District Court, D. Kansas
MEMORANDUM AND ORDER
D. Crabtree, United States District Judge
December 29, 2017, JVM removed this case from Johnson County,
Kansas District Court, asserting the court had diversity
subject matter jurisdiction. See Doc. 1. On January
9, 2018, JVM filed a Third-Party Complaint, asserting the
court had diversity subject matter jurisdiction over the
third-party claims. See Doc. 8. Then, on April 16,
2018, JVM amended that Third-Party Complaint by the
court's leave, still asserting diversity subject matter
jurisdiction existed. See Doc. 31. On June 19, 2018,
the court concluded that JVM had failed to allege sufficient
facts in the Notice of Removal to support diversity of
citizenship between JVM and plaintiff. Also, JVM had failed
to allege sufficient facts in the Amended Third-Party
Complaint to support diversity of citizenship between JVM and
one of the third-party defendants-Humphreys. Accordingly, the
court ordered JVM to show good cause why the court should not
remand the case to state court, dismiss the Amended
Third-Party Complaint, or both.
JVM informed the court that it cannot access citizenship
information for some of its “sub-members.” JVM
asserts it has two members. Those two members are LLCs
themselves. The members of the first LLC consist of 63
individual investors, 55 trusts, 25 individual retirement
accounts (IRAs), and two more entities (which includes one
LLC). The second member of JVM is an LLC comprised of 22
individual investors, 18 trusts, three IRAs, and seven
additional entities (which includes three LLCs and two
individual's citizenship is simply determined by the
citizenship of his domicile. Siloam Springs Hotel, LLC v.
Century Sur. Co., 781 F.3d 1233, 1238 (10th Cir. 2015).
The citizenship of the other entities involves a more complex
analysis. If the entity is a limited liability company, its
citizenship is decided by the citizenship of each one of its
members. See Id. (“Like every other circuit to
consider this question, this court concludes an LLC, as an
unincorporated association, takes the citizenship of all its
members.”); see also Birdsong v. Westglen Endoscopy
Ctr., LLC, 176 F.Supp.2d 1245, 1248 (D. Kan. 2001). The
citizenship of a limited partnership depends on the
citizenship of its partners, whether general or limited.
Carden v. Arkoma Assocs., 494 U.S. 185, 195 (1990).
And like an LLC, the citizenship of trusts and IRAs is
derived from the citizenship of each one of its members.
See Conagra Foods, Inc. v. Americold Logistics, LLC,
776 F.3d 1175, 1181 (10th Cir. 2015) (holding that “the
citizenship of a trust is derived from all the trust's
‘members'”-both trustees and beneficiaries);
see also Larchmont Holdings, LLC v. North Shore Holdings,
LLC, No. 16-CV-575-SLC, 2017 WL 213843, *4 (W.D. Wis.
Jan. 18, 2017) (“[T]he citizenship of an individual
retirement account is determined by the citizenship of its
members or owners [of the account].”).
elaborating, JVM's more recent filing, Doc. 58, explains
that it “does not have access to information on the
beneficiaries of its sub-member trusts, or the membership
base of its sub-LLCs.” Doc. 58 at 3. And to its credit,
JVM concedes, without this information, that it cannot
determine the citizenship of its members. Thus, the court
cannot determine if plaintiff and JVM are completely
diverse-as it must to exercise diversity jurisdiction over
the action. See 28 U.S.C. § 1332(a)(1); see
also Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220,
1225 (10th Cir. 2004).
court must satisfy itself that subject matter jurisdiction is
proper. Henderson ex rel. Henderson v. Shinseki, 562
U.S. 428, 434 (2011). And, it “must dismiss the cause
at any stage of the proceedings in which it becomes apparent
that jurisdiction is lacking.” Penteco Corp. Ltd.
P'ship v. Union Gas Sys., Inc., 929 F.2d 1519, 1521
(10th Cir. 1991); see also Fed. R. Civ. P. 12(h)(3)
(“If the court determines at any time that it lacks
subject-matter jurisdiction, the court must dismiss the
action.”). When the court cannot determine whether
complete diversity exists, the appropriate course is to
remand the cause to state court. See U.S. Sprint
Commc'ns Co. Ltd. P'ship of Del. v. Military
Commc'ns Ctr., Inc., No. CIV. A. 89-2144, 1989 WL
45362, at *2 (D. Kan. Apr. 3, 1989); see also Aetna U.S.
Healthcare, Inc. v. Hoechst Aktiengesellschaft, 54
F.Supp.2d 1042, 1055 (D. Kan. 1999). The court thus remands
this case to the District Court of Johnson County, Kansas-the
court where plaintiff filed his suit.
was true about a similar case almost 20 years ago,
“[t]o say that the case must be remanded does not end
[the] discussion.” RMP Consulting Grp., Inc. v.
Datronic Rental Corp., No. 98-5062, 1999 WL 617690, at
*4 (10th Cir. Aug. 16, 1999). Instead, the relatively
uncommon posture of RMP “require[d] [the
court] to specify the nature of ‘the case' to be
remanded.” Id. The same is true here. Because
RMP illustrates how the court should approach this
relatively obscure task, the remainder of this Order
discusses RMP extensively.
case, defendant had removed the case from Oklahoma state
court based on diversity jurisdiction. When removed, the case
involved two plaintiffs and one defendant. Complete diversity
appeared to exist. After removal, defendant filed a
Third-Party Complaint against two third-party defendants.
Defendant invoked diversity jurisdiction as the basis for
subject matter jurisdiction over its Third-Party Complaint.
About a year later, the court granted defendant leave to
amend its Third-Party Complaint. Id. at *1.
jurisdictional fun began in earnest three years after the
amended Third-Party Complaint was filed. At that point, the
original plaintiffs and the two third-party defendants
asserted that a limited liability partnership-and not the
named defendant-was the real party in interest under
Fed.R.Civ.P. 17. The district court agreed, a conclusion that
required the court to revisit the diversity analysis. The
removing defendant stipulated that the limited liability
partnership was aligned with defendant's interests. It
filed a “certification of ratification” under
Rule 17(a)(3). This certificate confirmed the
partnership's authorization of the defendant's action
in the case and agreed to be bound by its outcome. And then
it stipulated that the partners of the partnership now
aligned with defendant included at least one partner who was
a citizen of plaintiffs' state of citizenship and at
least one partner who was a citizen of the same state as the
third-party defendants. The district court concluded that
complete diversity no longer existed, and so it lacked
subject matter jurisdiction. Then, the district court
dismissed the case for lack of subject matter jurisdiction.
Id. at *1-2.
removing defendant appealed, claiming that the district court
should have remanded the case instead of dismissing it.
See Id. at *3. The Tenth Circuit agreed, concluding
that 28 U.S.C. § 1447(c) mandated remand, not dismissal.
Id. (citing Int'l Primate Protection League
v. Adm'rs of Tulane Educ. Fund, 500 U.S. 72, 87
(1991)). The Circuit also held that because the district
court lacked subject matter jurisdiction, all of its orders
were a nullity. Id. (citing Brown v.
Francis, 75 F.3d 860, 866-67 (3d Cir. 1996)). The court
thus vacated all orders entered by the district
court-including those granting procedural relief such as
leave to amend. Id.
Circuit applied this aspect of its holding to the claims
asserted against the third-party defendants. It concluded it
could not discern whether the original Third-Party Complaint
was filed as a matter of right. If so, that pleading formed
part of “the case” to be remanded to state court.
But if not, it was not part of the case now destined for
return to state court. The Amended Third-Party Complaint
presented a simpler question. It was filed by leave granted
by a federal court order that now was nullified.
Consequently, the Tenth Circuit held that the Amended
Third-Party Complaint did not “form part of the case to
be remanded.” Id. at *4.
this holding to JVM's third-party claims here is
relatively simple. JVM filed its original Third-Party
Complaint as a matter of right. See Doc. 8
(Third-Party Complaint); see also Fed. R. Civ. P.
14(a)(1) (providing a Third-Party Complaint is filed as a
matter of right if filed within 14 days of defendant's
original Answer). The court thus includes those claims and
that pleading (Doc. 8) as “part of the case to be
remanded.” In contrast, the Amended Third-Party
Complaint was filed by leave of court. See Docs. 29,
30. Because the order granting that leave now is known to be
an order entered by a court lacking subject matter
jurisdiction, the amended pleading (Doc. 31) is not part of
the case remanded to state court.
IS THEREFORE ORDERED BY THE COURT THAT this case is
remanded to Johnson County, Kansas District Court for lack of
subject matter jurisdiction. The court directs the Clerk of
Court to take all necessary steps to effectuate this remand.
IS FURTHER ORDERED THAT JVM's original
Third-Party Complaint (Doc. 8) is remanded as part of the
case, but its ...