The
Proponent of the Existence of Diversity Jurisdiction
Bears the Burden of
Demonstrating Same
In a recent decision from
Colorado, the court has reiterated that it is the burden of the party claiming
the existence of diversity jurisdiction to demonstrate that it actually
exists. In this case, the court rejected
the notion that it could proceed on the basis of incomplete information. Mendoza
v. Hospitality Staffing Solutions, LLC, Civ. Act. No. 13:-cv-1286-WJM-MJW
(D. Col. June 10, 2013).
In this instance, the
Defendants removed the case to federal court based upon alleged diversity
jurisdiction. Initially, the Defendants
suggested that the citizenship of an LLC should be determined on the same basis
as that of the corporation, namely its jurisdiction of organization and its
principal place of business. Although
the 10th Circuit has not yet issued a ruling on that point, the
trial court determined to follow the rulings of every other court that has
considered the matter (they being the 1st, 2nd, 4th,
6th, 7th 8th and 9th Circuits) as
well as other Colorado courts, it citing Hale
v. MasterSaw International Pty, Ltd., 93 F. Supp.2d 1108, 1112 (D. Col.
2000) for the accepted rule, namely that citizenship is dependent upon all the
members of the LLC.
In response to an order to show
cause, an affidavit had been submitted on behalf of Hospitality Staffing
Solutions, LLC reciting two of its members, both of which are themselves
partnerships. The decision goes on to
recite:
Mr. Woodward then states that the
partners comprising Frontenac IX Private Equity Capital are unknown, and their
identities are protected by a confidential agreement.
In
response thereto, the court wrote:
Defendants’ Response fails to
provide the information necessary to definitively determine the citizenship of
HSS. The Response is therefore
deficient, and does not satisfy the Court’s Order to Show Cause.
* * *
The Court notes that Defendants were
specifically warned that this action would be dismissed if they did not
properly respond to the Court’s Order to Show Cause. Despite this warning, Defendants failed to
provide the information requested. On
the current record, the Court finds that Defendants have not met their burden
of showing that this Court has jurisdiction over this action. Therefore, Defendants have failed to overcome
the presumption against removal in this case, and remand of this case is
appropriate. (citations omitted).
Consistent with a number of
other decisions, the inability to trace the ownership of an LLC back to either
natural persons or corporations will be fatal to a claim of diversity
jurisdiction.
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