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Hwang v. Gladden

United States District Court, M.D. Alabama, Eastern Division

June 20, 2018

SEONG HO HWANG, et al., Plaintiffs,
v.
BRENT GLADDEN, et al., Defendants.

          MEMORANDUM OPINION AND ORDER [1]

          SUSAN RUSS WALKER UNITED STATES MAGISTRATE JUDGE.

         This matter is before the court on the plaintiffs' motion to remand, two motions to take jurisdictional discovery, and motion to enforce an October 2017 settlement agreement. See Doc. 31; Doc. 54; Doc. 63. Also before the court are plaintiffs' motion to strike portions of defendant's response in opposition to plaintiffs' motion to enforce settlement agreement, [2] see Doc. 37, and defendants' motion for leave to file a sur-reply in response to a March 23, 2018 show cause order regarding the existence of subject matter jurisdiction at the time of removal. See Doc. 56. Defendants oppose the plaintiffs' motions. Plaintiffs have taken no position on defendants' motion for leave to file a sur-reply. The motions have been briefed and are ready for review.

         Upon consideration, all pending motions will be denied for the reasons discussed herein. Also, defendants will be ordered to file an answer to plaintiffs' complaint, and the parties will be directed to confer and file a report of parties' planning meeting in accordance with Federal Rule of Civil Procedure 26(f).

         I. Plaintiffs' Motion to Remand

         For the reasons set out in the court's March 23, 2018, order to show cause, complete diversity appears not to have been present at the time of the removal of this action. See Doc. 46. In a brief filed on April 10, 2018, plaintiffs moved to remand this cause to the Circuit Court of Lee County, Alabama, on the basis of lack of diversity. See Doc. 54.

         In the March 23 show cause order, the undersigned set out the following, inter alia:

Federal courts are courts of limited jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); see also Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994). A federal district court is “‘empowered to hear only those cases within the judicial power of the United States as defined by Article III of the Constitution, ' and which have been entrusted to them by a jurisdictional grant authorized by Congress.” Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)). Therefore, a federal court is obligated to inquire sua sponte into subject matter jurisdiction “at the earliest possible stage in the proceedings.” Id. at 410.
When, as here, the purported statutory basis for federal jurisdiction is 28 U.S.C. § 1332(a)(1) - a civil action satisfying the amount-in-controversy requirement and between “citizens of different States” - there must be “complete diversity of citizenship. That is, diversity jurisdiction does not exist unless each defendant is a citizen of a different State from each plaintiff.” Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). See also Hernandez v. Ferris, 917 F.Supp.2d 1224, 1226-27 (M.D. Fla. 2012) (“Federal courts have diversity jurisdiction over civil actions when the amount in controversy exceeds $75, 000 and the action is between citizens of different states. 28 U.S.C. § 1332(a). Diversity jurisdiction requires complete diversity; every plaintiff must be diverse from every defendant.”). The court is concerned that the parties are not completely diverse based on a recent filing by the plaintiffs, see Doc. 31; Doc. 31-15, and the court's subject matter jurisdiction must be confirmed before this case can proceed any further.
On June 27, 2016, defendants Brent Gladden and University Real Estate Group, LLC, removed this cause to this court from the Circuit Court of Lee County, Alabama, on the basis of diversity jurisdiction. See Doc. 1. In the notice of removal, the defendants represented that the parties are completely diverse because the plaintiffs are citizens of Georgia and the defendants are citizens of Alabama. See Id. at 5. In support of the notice of removal, Mr. Gladden submitted an affidavit in which he testified that he is a resident of Alabama, and that he is the sole member of University Real Estate Group, LLC. See Doc. 1-3 at 2 (“I am the President and sole member of University Real Estate Group, LLC ... an Alabama limited liability company with its principal place of business in Auburn, Alabama.”). After removal, the plaintiffs did not seek remand due to a lack of complete diversity. Also, as it must, the court assured itself of subject matter jurisdiction at the time of removal and concluded that the parties were completely diverse based on the defendants' representations in the notice of removal and Mr. Gladden's affidavit testimony. See Univ. of S. Ala., 168 F.3d at 409-10.
However, in the motion to enforce a settlement agreement filed on February 12, 2018, the plaintiffs represent that Mr. Gladden is not the sole member of University Real Estate Group, LLC. See Doc. 31 at 6-8. An exhibit to that motion is an email sent by Mr. Gladden on January 11, 2018, that states, in relevant part, “I did not originally realize that all members [of University Real Estate Group, LLC] had not executed the document to transfer all interest in [University Real Estate Group, LLC] to me, this was done in 2014. The one remaining member ... is now residing in Atlanta.” Doc. 31-15 at 1-2. That omission potentially has jurisdictional significance. “A limited liability company, unlike a corporation, is a citizen of any state of which one of its members is a citizen, not of the state where the company was formed or has it principal office.” Dasan USA, Inc. v. Weapon Enhancement Solutions LLC, 2016 WL 3996242, at *1 (N.D.Ga. 2016) (citing Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004)). “And, therefore …a limited liability company could be deemed a citizen of more than one state ….” Guthrie v. U.S. Government, 2014 WL 12742190 at *2 (S.D. Fla. 2014). Thus, the fact that a member of University Real Estate Group, LLC, resides in Atlanta, Georgia, materially contradicts the defendants' representation in the notice of removal that University Real Estate Group, LLC, is a citizen of Alabama for purposes of diversity jurisdiction.
Based on the new information of record - i.e., that a member of University Real Estate Group, LLC, resides in Atlanta - it appears that University Real Estate Group, LLC is a citizen of Alabama and Georgia. See Guthrie, supra. It is undisputed that the plaintiffs are citizens of Georgia. “[B]ecause federal courts are of limited jurisdiction ‘there is a presumption against the exercise of federal jurisdiction, such that all uncertainties as to removal jurisdiction are to be resolved in favor of remand.'” Hernandez, 917 F.Supp.2d at 1226 (quoting Russell Corp. v. Am. Home Assur. Co., 264 F.3d 1040, 1050 (11th Cir. 2001)); see also Scimone v. Carnival Corp., 720 F.3d 876, 882 (11th Cir. 2013); Upper Chattahoochee Riverkeeper Fund, Inc. v. City of Atlanta, 701 F.3d 669, 680 (11th Cir. 2012). Thus, construing all doubts against the exercise of federal jurisdiction, complete diversity does not exist among the parties on the record now before this court, and the court lacks subject matter jurisdiction.
The defendants did not alert the court that Mr. Gladden's affidavit testimony in support of the notice of removal was inaccurate based on his recent recollection that he is not the sole member of University Real Estate Group, LLC, and that one of the members of University Real Estate Group, LLC, resides in Atlanta. As to this material change of fact regarding the parties' citizenship, defendants also have not attempted to explain whether there was subject matter jurisdiction at the time of removal or whether it exists at present, given that the plaintiffs and a defendant appear to be citizens of Georgia. “The party seeking to invoke a federal forum traditionally bears the burden of persuasion on jurisdictional issues such as establishing the citizenship of the parties.” Life of the S. Ins. Co. v. Carzell, 851 F.3d 1341, 1344 (11th Cir. 2017) (citing McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936); Burns, 31 F.3d at 1094 (“The defendant can remove to federal court if he can show, by a preponderance of the evidence, facts supporting jurisdiction.”)). See also Kokkonen, 511 U.S. at 377 (“It is to be presumed that a cause lies outside [a federal court's] limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.”); Williams v. Best Buy Co., Inc., 269 F.3d 1316, 1319 (11th Cir. 2001) (the party who removes a case to federal court must demonstrate subject matter jurisdiction). Therefore, to remain in federal court, the defendants must establish that the parties are completely diverse in light of the evidence that a member of University Real Estate Group, LLC, resides in Atlanta, Georgia.

Doc. 46 at 1-5.

         In response to the show cause order, the plaintiffs argued that other non-diverse members of University Real Estate Group, LLC, had not transferred their interests in the LLC to Mr. Gladden in 2014 because the members failed to comply with the unanimity requirement of the LLC's operating agreement. See Doc. 36. After the defendants responded to the show cause order, however, defendants filed evidence showing that the non-diverse members of University Real Estate Group, LLC unequivocally waived the unanimity requirement of the operating agreement as of April 2, 2018 - the last date a member of the LLC acknowledged the transfer of interest to Gladden and waived the unanimity requirement. See Doc. 50 at 4; Doc. 50-8. See also Doc. 54 at 15 (Plaintiffs assert that “[i]t was not until early 2018 that the parties reflected unanimity to transfer their membership interests.”). Plaintiffs argue that the 2018 waiver is not an unequivocal reflection that the members of the LLC intended to waive the unanimity requirement. See Doc. 54 at 15. The court cannot agree.

         “Regarding the waiver of rights under a contract generally … ‘[a] waiver will not be implied from slight circumstances, but must be evidenced by an unequivocal and decisive act, clearly proved.'” Ex parte Textron, Inc., 67 So.3d 61, 66 (Ala. 2011) (quoting Isom v. Johnson, 205 Ala. 157, 159-60, 87 So. 543, 545 (Ala. 1920)). The April 2, 2018 acknowledgement constitutes clear evidence of “an unequivocal and decisive act” by the members of University Real Estate Group, LLC, to waive the unanimity requirement and to affirm that all interest in the LLC has been transferred to Gladden. The evidence of record establishes that Gladden is the sole member of University Real Estate Group, LLC. Gladden is a citizen of Alabama, and, because he is the sole member of the ...


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