Verb Technology Company, Inc. v. Baker and Hostetler, LLP

O [1] JS-6 [7] 8 United States District Court 9 Central District of California [10] 11 VERB TECHNOLOGY CO., INC., Case No. 2:21-cv-06500-ODW (MAAx) 12 Plaintiff, 13 v. ORDER REMANDING CASE SUA SPONTE 14 BAKER & HOSTETLER LLP, et al., [15] Defendants. [17] I. INTRODUCTION [18] On August 17, 2021, the Court ordered Defendant Baker & Hostetler LLP [19] (“Baker”) to show cause why this case should not be dismissed for lack of subject matter [20] jurisdiction. (Order to Show Cause (“OSC”), ECF No. 9.) In its Notice of Removal, [21] Baker alleged that Plaintiff Verb Technology Co., Inc., a corporation, was a citizen of [22] Nevada and Utah, and that Baker, a limited liability partnership (LLP), had no [23] citizenship in either of those states. (See Notice of Removal (“NOR”) ¶ 10, ECF No. 1 [24] (alleging the fifteen states of residence of Baker’s 460 partners).) The Court ordered [25] Baker to address the following questions: [26] (1) In the Ninth Circuit, to which partners of a LLP should this Court look in 27 analyzing diversity? [28] (2) Given the legal principle as established, what is the citizenship (not [1] merely the residence) of each and every one of Baker’s partners, and 2 accordingly, of Baker itself? [3] 4 (Minute Order 2–3.) The Court urged Baker to file declarations or other evidence in 5 support of its jurisdictional contentions. (OSC 3.) 6 On August 26, 2021, Baker filed a Response consisting of a memorandum and 7 three declarations, which Baker asserts establishes that the citizenship of its 460 partners 8 is not Nevada or Utah. (Resp., ECF No. 13.) Upon this showing, Baker asserts 9 complete diversity. 10 For the reasons that follow, Baker failed in its burden of production such that 11 substantial doubt remains about diversity jurisdiction. Accordingly, the Court 12 REMANDS this case for lack of subject matter jurisdiction. 13 II. LEGAL STANDARD 14 “Federal courts are courts of limited jurisdiction. They possess only that power 15 authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., [16] 511 U.S. 375, 377 (1994). Federal courts have original jurisdiction where an action 17 arises under federal law, or where the plaintiff’s citizenship is diverse from each 18 defendant’s citizenship and the amount in controversy exceeds $75,000. 28 U.S.C. 19 §§ 1331, 1332(a). The existence of diversity of citizenship is determined as of the time 20 the lawsuit is filed. Janzen v. Goos, 302 F.2d 421, 424 (8th Cir. 1962). 21 Federal courts have an obligation to determine the existence of subject matter 22 jurisdiction, regardless of whether the parties raise the issue. See Augustine v. United 23 States, 704 F.2d 1074, 1077 (9th Cir. 1983). The court may raise the issue of subject 24 matter jurisdiction on its own initiative at any stage in the litigation. Arbaugh v. Y&H 25 Corp., 546 U.S. 500, 506 (2006); Snell v. Cleveland, Inc., 316 F.3d 822, 826 (9th Cir. 26 2002). “If at any time before final judgment it appears that the district court lacks 27 subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447 (c); see also 28 Fed R. Civ. P. 12(h)(3). 1 “The ‘strong presumption’ against removal jurisdiction means that the defendant 2 always has the burden of establishing” subject matter jurisdiction.” Gaus v. Miles, Inc., [3] 980 F.2d 564, 567 (9th Cir. 1992). 4 III. ANALYSIS 5 Baker fails to make a sufficient showing of subject matter jurisdiction in at least 6 three senses. First, Baker fails to clarify the types of partners comprising its LLP. 7 Second, Baker’s allegations and evidence of its partners’ states of domicile is 8 insufficient. Finally, Baker’s query of its “approximately” 460 partners is insufficient 9 because a single non-diverse partner would eliminate diversity jurisdiction. 10 A. No Meaningful Response Regarding Types of Partners 11 In its OSC, the Court noted that courts must consider all members of an LLP, 12 including the various types of partners, such as limited partners, general partners, equity 13 partners, and non-equity partners. (See OSC 2.) However, Baker fails to address this 14 authority, instead asserting simply that courts look to the partners of an LLP. 15 This is insufficient and nonresponsive to the Court’s OSC. The Court ordered 16 Baker to discuss its types of partners and their citizenship, or to establish that certain 17 types of partners need not be considered in a diversity analysis in the Ninth Circuit. 18 Instead, Baker lumps all its “partners” into a general category without specifying the 19 types of partners comprising the LLP, and Baker fails to establish that the Court need 20 not consider such distinctions. (See generally Decl. of Michele Merrill (“Merrill 21 Decl.”), ECF No. 13-2; see generally Decl. of John D. Parker (“Parker Decl.”), ECF 22 No. 13-3.) This response leaves the Court without sufficient information to determine 23 Baker’s citizenship. 24 B. No Affirmative Evidence of Domicile of Partners 25 Baker’s Response is also deficient because it lacks affirmative evidence of the 26 domicile of the individuals it designates as partners, and consequently of the citizenship 27 of Baker itself. [28] 1 For unincorporated associations, including partnerships, district courts look to 2 the citizenship of the members of the partnership. Marseilles Hydro Power, LLC v. 3 Marseilles Land & Water Co., 299 F.3d 643, 652 (7th Cir. 2002) (“[T]he relevant 4 citizenship for diversity purposes is that of the members, not of the [unincorporated 5 association].”). 6 For the purpose of this analysis, the Court may properly assume Baker’s member7 partners are all attorneys, that is, natural persons. (See Parker Decl. ¶ 5); cf. Model 8 Rules of Prof’l Conduct r. 5.4(a) (Am. Bar Ass’n 1983). A “natural person’s state 9 citizenship is . . . determined by her state of domicile,” which is “where she resides with 10 the intention to remain or to which she intends to return.” Kanter v. Warner-Lambert 11 Co., 265 F.3d 853, 857 (9th Cir. 2001). Domicile “may be established by factors such 12 as: current residence; voting registration and practices; location of personal and real 13 property; location of brokerage and bank accounts; location of spouse and family; 14 membership in unions and other organizations; place of employment or business; 15 driver’s license and automobile registration; and payment of taxes.” Kyung Park v. 16 Holder, 572 F.3d 619 , 624–25 (9th Cir. 2009). 17 Baker submits three declarations in support of its Response. The first of the three 18 declarations Baker submitted with its Response merely affirms that Plaintiff Verb is still 19 a citizen of Utah and Nevada. (Decl. of Daniel F. Lula ¶¶ 4–5, ECF No. 13-1.) The 20 second, from Baker’s Director of Human Resources, indicates that, upon review of the 21 company’s records, (1) “none of [Baker’s] partners list a residence in Utah or Nevada,” 22 (2) Baker has “no information on file to indicate that any partner pays taxes in Utah or 23 Nevada,” and (3) Baker “itself does not pay taxes on behalf of a partner in either Utah 24 or Nevada.” (Merrill Decl. ¶¶ 4–6.) Baker’s General Counsel submits the third 25 declaration and states he emailed each of Baker’s approximately 460 partners to ask 26 them if any of them (1) reside in Utah or Nevada, (2) pay taxes in either state, (3) are 27 registered to vote in either state, or (4) otherwise believe themselves to be a citizen of [28] 1 either state. (Parker Decl. ¶ 5.) As of the date Baker filed its Response, Baker’s General 2 Counsel had received no responses at all to his email. (Id. ¶ 6.) 3 The foregoing showing is insufficient. “Absent unusual circumstances, a party 4 seeking to invoke diversity jurisdiction should be able to allege affirmatively the actual 5 citizenship, including the domicile, of the relevant parties.” Kanter, 265 F.3d at 857 . 6 This principle applies in equal force when a defendant is called upon to justify removal. 7 See Gaus, 980 F.2d at p. 567 (reiterating courts may insist of a party asserting 8 jurisdiction “that the jurisdictional facts be established or the case be dismissed, and for 9 that purpose the court may demand that the party alleging jurisdiction justify his 10 allegations by a preponderance of evidence”). That this task may be onerous due to the 11 defendant’s size is of no moment. 12 Baker has nowhere affirmatively alleged or declared the respective states of 13 citizenship of each of its partners. Moreover, its evidentiary showing of citizenship is 14 weak and incomplete, as it relies on the secondhand institutional knowledge of Baker, 15 not the personal knowledge of its 460-some partners, as well as the partners’ non16 response to the General Counsel’s email, which itself addressed only a limited number 17 of domicile factors. Baker’s allegations and evidence are incomplete and rely on too 18 many untenable inferences. 19 When called upon to do so, a removing party must, to meet its burden of 20 production, present affirmative allegations and evidence of the of the “actual citizenship 21 of the relevant parties.” Kanter, 265 F.3d at 857 ; Gaus, 980 F.2d at p. 567 . Baker has 22 not done so; its demonstration of the citizenship of each of its partners leaves diversity 23 jurisdiction in substantial doubt. 24 C. Doubts Regarding Number of Admitted Partners 25 Finally, and apart from the question whether Baker’s definition of “partner” is 26 the correct one, Baker fails to demonstrate it scrupulously included in its investigation 27 each and every person who would be considered a partner under Baker’s own definition. 28 When determining the citizenship of an unincorporated entity, including a LLP such as 1 || Baker, courts must look to al/ the entity’s members. Carden vy. Arkoma Assocs., 494 U.S. 185, 195-96 (1990) (‘[W]e reject the contention that to determine, for 3 || diversity purposes, the citizenship of an artificial entity, the court may consult the 4 || citizenship of less than all of the entity’s members.”). Baker’s General Counsel declares 5 || that he emailed his questions about citizenship factors to Baker’s “approximately 460 6 || partners.” (Parker Decl. 5.) That Baker’s General Counsel declares only that he 7 || emailed an “approximate” number of partners raises additional material doubts as to 8 | whether evidence of all partners is properly before the Court. Because even one non9 || diverse partner would destroy diversity, Carden, 494 U.S. at 195—96, the Court must 10 || remain firm in demanding a complete showing. 11 IV. CONCLUSION 12 “Federal jurisdiction must be rejected if there is any doubt as to the right of 13 || removal in the first instance.” Acad. of Country Music v. Cont’l Cas. Co., 991 F.3d 1059, 1061 (9th Cir. 2021). Here, after ordering Baker to demonstrate diversity of 15 || citizenship legally and factually, diversity remains unproven and in substantial doubt. 16 || Accordingly, the Court cannot conclude that diversity jurisdiction exists and must 17 || remand. 18 The Court hereby REMANDS this action to the Superior Court of California, 19 |} 111 N. Hill St., Los Angeles, CA, 90012, Case No. 21STCV18387. All dates and 20 || deadlines are VACATED. The Clerk of the Court shall close this case. 21 IT IS SO ORDERED. [22] 23 September 9, 2021 ss 24 wg OTIS D. WRIGHT, II 7 UNITED STATES DISTRICT JUDGE