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Capitol Indemnity Corporation v. Bes Design/Build, LLC

United States District Court, S.D. Alabama

February 20, 2019

BES DESIGN/BUILD LLC, et al., Defendants.



         This action is before the Court sua sponte on review of its subject matter jurisdiction.[1] Plaintiff Capitol Indemnity Corporation (“the Plaintiff”) has filed its first amended complaint (“FAC”) (Doc. 16) as a matter of course under Federal Rule of Civil Procedure 15(a)(1)(B). Like the initial complaint, the FAC alleges diversity of citizenship under 28 U.S.C. § 1332(a) as the sole basis for subject matter jurisdiction. See Fed. R. Civ. P. 8(a)(1) (“A pleading that states a claim for relief must contain a short and plain statement of the grounds for the court's jurisdiction…”).

When a plaintiff files suit in federal court, [the plaintiff] must allege facts that, if true, show federal subject matter jurisdiction over [the] case exists. Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994). Those allegations, when federal jurisdiction is invoked based upon diversity, must include the citizenship of each party, so that the court is satisfied that no plaintiff is a citizen of the same state as any defendant. Triggs v. John Crump Toyota, Inc., 154 F.3d 1284, 1287 (11th Cir. 1998) (“Diversity jurisdiction requires complete diversity; every plaintiff must be diverse from every defendant.”). Without such allegations, district courts are constitutionally obligated to dismiss the action altogether if the plaintiff does not cure the deficiency. Stanley v. C.I.A., 639 F.2d 1146, 1159 (5th Cir. Unit B Mar. 1981); see also DiMaio v. Democratic Nat'l Comm., 520 F.3d 1299, 1303 (11th Cir. 2008) (“Where dismissal can be based on lack of subject matter jurisdiction and failure to state a claim, the court should dismiss on only the jurisdictional grounds.” (internal quotation marks omitted)). That is, if a complaint's factual allegations do not assure the court it has subject matter jurisdiction, then the court is without power to do anything in the case. See Goodman ex rel. Goodman v. Sipos, 259 F.3d 1327, 1331, n.6 (11th Cir. 2001) (“ ‘[A district] court must dismiss a case without ever reaching the merits if it concludes that it has no jurisdiction.' ” (quoting Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993))); see also Belleri v. United States, 712 F.3d 543, 547 (11th Cir. 2013) (“We may not consider the merits of [a] complaint unless and until we are assured of our subject matter jurisdiction.”).

Travaglio v. Am. Exp. Co., 735 F.3d 1266, 1268 (11th Cir. 2013) (emphasis added) (footnote omitted). See also, e.g., Ray v. Bird & Son & Asset Realization Co., Inc., 519 F.2d 1081, 1082 (5th Cir. 1975) (“The burden of pleading diversity of citizenship is upon the party invoking federal jurisdiction . . .” (citing Mas v. Perry, 489 F.2d 1396 (5th Cir. 1974)).[2]

         Upon review of the FAC, the undersigned finds that the Plaintiff must correct the following deficiencies in its allegations supporting the citizenships of the newly joined defendants, Thomas Heil and the William Walter Bolt & Family Trust (“BAFT”):[3]

• Heil, a natural person, is alleged to be “a resident of Baldwin County…” (Doc. 16, ¶ 9).[4] First, the Plaintiff does not allege in what state the “Baldwin County” Heil resides in is located. Second, the Eleventh Circuit has repeatedly stressed that “[c]itizenship, not residence, is the key fact that must be alleged . . . to establish diversity for a natural person.” Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994) (emphasis added).[5] Accordingly, the Plaintiff must amend its complaint to allege Heil's state of citizenship (as opposed to his county of residence).[6]
• The FAC is unclear as to the nature of BAFT. “Traditionally, a trust was not considered a distinct legal entity, but a fiduciary relationship between multiple people. Such a relationship was not a thing that could be haled into court; legal proceedings involving a trust were brought by or against the trustees in their own name. And when a trustee files a lawsuit or is sued in her own name, her citizenship is all that matters for diversity purposes. For a traditional trust, therefore, there is no need to determine its membership, as would be true if the trust, as an entity, were sued.” Americold Realty Tr. v. Conagra Foods, Inc., 136 S.Ct. 1012, 1016 (2016) (citations omitted). “Many States, however, have applied the ‘trust' label to a variety of unincorporated entities that have little in common with this traditional template…So long as such an entity is unincorporated, …it possesses the citizenship of all its members…But neither this rule nor Navarro[7] limits an entity's membership to its trustees just because the entity happens to call itself a trust.” Id. Accordingly, the Plaintiff must either amend its complaint to allege all members of BAFT and their citizenships, [8] or sufficiently explain why BAFT should be considered a “traditional trust” under Alabama law (the law under which it was allegedly organized) whose membership may be disregarded for purposes of diversity jurisdiction.

         “Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.” 28 U.S.C. § 1653. “[L]eave to amend should be freely granted when necessary to cure a failure to allege jurisdiction properly.” Majd-Pour v. Georgiana Cmty. Hosp., Inc., 724 F.2d 901, 903 n.1 (11th Cir. 1984). Upon consideration, the Plaintiff is ORDERED to file and serve, no later than Wednesday, February 27, 2019, an amended complaint that corrects the above-noted deficiencies in its allegations supporting diversity jurisdiction under § 1332(a), that alleges some alternative basis for subject matter jurisdiction, or that drops the parties whose citizenships have not been sufficiently alleged. In filing the amended complaint, the Plaintiff must abide by the following directives:

• The amended complaint, which will become the operative complaint in this action, [9] “must reproduce the entire pleading as amended and may not incorporate any prior pleading by reference[, ]” see S.D. Ala. CivLR 15(a); and
• the Plaintiff must file the amended complaint as a freestanding pleading and not as an exhibit attached to a notice, motion, etc.

         Any filing made in contravention of these directives will be deemed nonresponsive to this Order and will be summarily ordered stricken. The failure to file an amended complaint as ordered may result in further appropriate action, which may include entry of an order dropping Heil and BAFT as parties to this action under Federal Rule of Civil Procedure 21 in order to preserve subject matter jurisdiction, or possible dismissal of this action for lack of subject matter jurisdiction if it is determined that a party would be prejudiced by dropping either Heil or BAFT. See Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 832 (1989) (“[I]t is well settled that Rule 21 invests district courts with authority to allow a dispensable nondiverse party to be dropped at any time, even after judgment has been rendered.”); Iraola & CIA, S.A. v. Kimberly-Clark Corp., 232 F.3d 854, 860-61 (11th Cir. 2000) (A “court can dismiss a dispensable party in order to retain jurisdiction. See Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 833, 109 S.Ct. 2218, 2223, 104 L.Ed.2d 893 (1989); Ingram v. CSX Transportation, Inc., 146 F.3d 858, 863 (11th Cir. 1998). Such power is to be used sparingly, and the court should carefully consider whether one of the parties will be prejudiced by the dismissal. See 490 U.S. at 837-38, 109 S.Ct. at 2225.”).



[1] “It is . . . axiomatic that the inferior federal courts are courts of limited jurisdiction. They are ‘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)). Accordingly, “it is well settled that a federal court is obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking.” Id. at 410. “[A] court should inquire into whether it has subject matter jurisdiction at the earliest possible stage in the proceedings.” Id. See also Arbaugh v. Y&H Corp., 546 U.S. 500, ...

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