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AFC Franchising, LLC v. Reed

United States District Court, N.D. Alabama, Southern Division

July 24, 2017

AFC FRANCHISING, LLC, Plaintiff,
v.
EARL S. REED and URGENT CARE OF MOUNT VERNON, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          VIRGINIA EMERSON HOPKINS United States District Judge.

         I. Introduction and Procedural History.

         This is a civil action filed by Plaintiff AFC Franchising, LLC (“AFCF”) against Defendants Earl S. Reed (“Mr. Reed”) and Urgent Care of Mount Vernon, LLC (“UCMV”).

         Defendant UCMV was served on November 14, 2016. (Doc. 7). On December 12, 2016, AFCF moved for entry of default against UCMV, and the Clerk entered default against UCMV that same day. (Docs. 11, 12). This case was reassigned to the undersigned on December 13, 2016. (Doc. 14). On February 8, 2017, AFCF filed a Motion for Default Judgment as to UCMV. (Doc. 21). On March 17, 2017, AFCF filed a Motion to set a hearing to determine the damages owed by UCMV (“Motion To Determine Damages”). (Doc. 26).

         Mr. Reed was served on February 10, 2017. (Doc. 23). On March 17, 2017, AFCF moved for entry of default against Mr. Reed, and the Clerk entered default against Mr. Reed on March 20, 2017. (Docs. 25, 27).[1] AFCF has not filed a Motion for Default Judgment as to Mr. Reed.

         II. Subject Matter Jurisdiction.

         For federal courts sitting in diversity, as is the case here, subject matter jurisdiction exists if the suit is between “citizens of different States” and “the matter in controversy exceeds the sum or value of $ 75, 000, exclusive of interest and costs . . . .” 28 U.S.C. § 1332.

         AFCF's initial Complaint (doc. 1) failed to satisfy the Court's jurisdiction according to the standard enunciated by the Eleventh Circuit in Rolling Greens MHP, L.P. v. Comcast SCH Holdings LLC, 374 F.3d 1020 (11th Cir. 2004). Specifically, that case held that, in order to establish diversity, if a limited liability company is a party, the names and states of citizenship of each member of the limited liability company must be listed. Id. at 1022; see also Flintlock Const. Servs., LLC v. Well-Come Holdings, LLC, 710 F.3d 1221, 1224 (11th Cir. 2013).

         Accordingly, on May 10, 2017, the Court ordered AFCF to replead its complaint to establish the Court's subject matter jurisdiction over the action. (Doc. 29). On May 24, 2017, AFCF filed an Amended Complaint. (Doc. 31). However, the Court determined that AFCF's Amended Complaint also failed to satisfactorily establish that this suit is between “[c]itizens of different States” as of the time the lawsuit was filed. Specifically, AFCF had not met its burden of listing the names and states of every member of Defendant UCMV. Accordingly, the Court again ordered AFCF to show cause why this action should not be dismissed without prejudice for lack of subject matter jurisdiction. (Doc. 32).

         On July 18, 2017, AFCF responded to the Court's Order and moved to dismiss UCMV as a party defendant, stating that is has been unable to “discover any such additional evidence necessary to establish diversity jurisdiction.” (Doc. 33 at 1). AFCF requests that this Court dismiss UCMV as a nominal party in order to retain jurisdiction over the case.

         Courts must “disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy.” Thermoset Corp. v. Bldg Materials Corp. of Am., 849 F.3d 1313, 1317 (11th Cir. 2017) (citing Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461, 100 S.Ct. 1779, 1782, 64 L.Ed.2d 435 (1980)). As the Eleventh Circuit has recently explained,

[t]his Court has acknowledged “there is no bright-line rule” for distinguishing between real and nominal parties. Payroll Mgmt., Inc. v. Lexington Ins. Co., 566 Fed.Appx. 796, 799 (11th Cir. 2014) (per curiam) (unpublished). In Tri-Cities Newspapers, Inc. v. Tri-Cities Printing Pressmen and Assistants' Local 349, 427 F.2d 325 (5th Cir. 1970), [2] we defined “nominal or formal parties” as those that are “neither necessary nor indispensable” to the action. Id. at 327. We also said “[t]he ultimate test” for whether a defendant is nominal is “whether in the absence of the defendant, the Court can enter a final judgment consistent with equity and good conscience which would not be in any way unfair or inequitable to plaintiff.” Id. (quotation omitted and alteration adopted).

Id. (emphases added).

         As AFCF points out, Mr. Reed is individually responsible for obligations and debts under the Franchise Agreement. See, e.g., (Doc. 31-2 at 6) (demonstrating Mr. Reed is a party to the Franchise Agreement). AFCF therefore argues that (1) UCMV is not a necessary or indispensable party, and (2) AFCF would be prejudiced by the additional time and costs ...


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