Summary
The United States District Court for the Western District of Louisiana grants Plaintiffs’ motion to remand a removed action involving alleged LLC membership interests, distributions, and management. The court concludes that the removing defendants failed to establish complete diversity because the plaintiffs plausibly alleged and supported their status as members of the defendant LLC, making the LLC’s citizenship overlap with theirs.
Topics
Practice areas
Questions Presented
- Whether complete diversity of citizenship existed when Plaintiffs alleged that they were members of the defendant LLC.
- Whether the removing defendants satisfied their burden of proving that Plaintiffs were not members of the LLC for purposes of diversity jurisdiction.
- Whether the case should be remanded to state court for lack of subject-matter jurisdiction.
Holdings
- For diversity purposes, an LLC takes the citizenship of each of its members; therefore, a suit by an alleged member against the LLC ordinarily defeats complete diversity because the LLC shares the member's citizenship.
- The removing defendants did not satisfy their burden of proving that Plaintiffs were not members of Grand Cane Enterprises, LLC, and therefore did not establish complete diversity.
- In a removed case, diversity of citizenship must exist both when the action was filed in state court and when it was removed, and the court must evaluate jurisdiction using the facts existing at those times.
Key quotations
“The burden of pleading diversity of citizenship is upon the party invoking federal jurisdiction, and if jurisdiction is properly challenged, that party also bears the burden of proof.”
“In cases removed from state court, diversity of citizenship must exist both at the time of filing in state court and at the time of removal to federal court.”
Factual background
Plaintiffs alleged that they were members of Grand Cane Enterprises, LLC, each holding a 25% ownership interest, and sued the LLC's manager for inadequate distributions and mismanagement. They sought damages, removal of the manager, appointment as managers, or dissolution of the LLC. The defendants asserted that Claydine Robinson was the LLC's sole member, but the removal notice acknowledged that Plaintiffs had each contributed $11,000 and acquired a membership interest, and documentary acts of donation supported Plaintiffs' allegations that they held interests in the LLC.
Procedural history
Roger and Dixie Robinson filed suit in Louisiana state court against Grand Cane Enterprises, LLC and Claydine Robinson. The defendants removed on the basis of diversity jurisdiction, and the parties consented to disposition by the magistrate judge under 28 U.S.C. § 636(c). After initially finding a basis for diversity jurisdiction, the court reconsidered the issue upon full briefing and granted Plaintiffs' Motion to Remand.
Remand instructions
The case is remanded to the First Judicial District Court, Caddo Parish, Louisiana for lack of subject-matter jurisdiction.