Summary
The United States District Court for the District of South Carolina grants Palmetto Bluff Investments, LLC’s motion to voluntarily dismiss its insurance coverage action without prejudice under Federal Rule of Civil Procedure 41(a)(2). The court concludes that complete diversity is lacking because the plaintiff and one defendant are both citizens of Georgia, and it declines to order jurisdictional discovery. The court also determines that attorneys’ fees and costs may be imposed as a condition of dismissal and begins evaluating the amount of that award.
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Practice areas
Questions Presented
- Whether the court had subject-matter jurisdiction under 28 U.S.C. § 1332 when PBI's LLC membership structure traced to a Georgia citizen and Westchester was a Georgia corporation.
- Whether jurisdictional discovery was warranted to test PBI's declaration concerning its citizenship.
- Whether attorneys' fees and costs should be imposed as a condition of voluntary dismissal under Federal Rule of Civil Procedure 41(a)(2), and, if so, in what amount.
Holdings
- The court lacked subject-matter jurisdiction because PBI and Westchester were both citizens of Georgia, defeating complete diversity under 28 U.S.C. § 1332(a).
- Jurisdictional discovery was not warranted because defendants supplied no concrete basis to question the credibility of PBI's declaration tracing its citizenship.
- The court could condition voluntary dismissal without prejudice on PBI's payment of defendants' attorneys' fees and costs that were attributable to nontransferable work.
- PBI was required to pay $22,954.50 in attorneys' fees and $1,291.21 in costs, for a total of $24,245.71, as a condition of dismissal without prejudice.
Key quotations
“For the foregoing reasons, the court GRANTS PBI’s motion to voluntarily dismiss this action and ORDERS PBI to pay $24,245.71 of Defendants’ costs and fees as a condition to dismissal without prejudice.” (Conclusion § IV)
Factual background
PBI, a South Carolina LLC, owns and operates the Palmetto Bluff residential and recreational preserve through subsidiaries. After homeowners challenged proposed limits on short-term renters' access to amenities, PBI sought coverage under directors-and-officers and professional-liability policies issued by Westchester and ACE. PBI later learned that its layered LLC and partnership ownership structure included Paxton Griffin, a Georgia citizen, making PBI a Georgia citizen; Westchester was also a Georgia corporation.
Procedural history
PBI filed this federal declaratory-judgment action asserting diversity jurisdiction and seeking insurance coverage for an underlying state-court action. After discovery was largely completed and defendants filed summary-judgment motions, PBI moved for voluntary dismissal based on newly discovered information showing that its LLC membership traced to a Georgia citizen. The court denied jurisdictional discovery, found complete diversity lacking, granted dismissal without prejudice subject to payment of $24,245.71 in fees and costs, and deemed the pending motions moot.