Opinion
Case No. 1:08-cv-578.
August 22, 2008
Plaintiff LGT Enterprises, LLC ("LGT"), which does business as "Letsgotickets" and "Let's Go Tickets", is a ticket broker which purchases tickets to entertainment shows and events and sells those tickets to its customers, who usually use credit cards for the purchase by mail, telephone, and the Internet. See Complaint filed June 18, 2008 ("Comp") ¶¶ 7-8. LGT has an account agreement with non-party Elavon, doing business as NOVA Information Systems ("Nova"), which gathers the credit card information of LGT's customers and either charges the cards itself or sends the information to the credit card companies to process the charges. Comp ¶ 9. A ticket broker that applies for an account with Nova is assigned a merchant identification ("ID") number; when a customer buys the ticket broker's ticket with a credit card, Nova credits the ticket broker's merchant ID number with the appropriate amount. Comp ¶ 12.
LGT hired defendants MerchantWarehouse.com, Inc. ("MerchantWarehouse") and Ticket Software doing business as TicketNetwork Direct, Inc. ("TicketNetwork") to help it prepare its application for a NOVA processing account. Comp ¶¶ 10-11. In January 2007, LGT filled out most of a Nova account application; TicketNetwork allegedly instructed LGT not to complete the lower portion of the second page of the application, which requests LGT's merchant ID numbers, saying that TicketNetwork or MerchantWarehouse would fill in those numbers. Comp ¶¶ 13-14 and Exs. 1 2. TicketNetwork forwarded LGT's application to MerchantWarehouse, which forwarded it to Nova, and the application had merchant ID numbers filled in. Comp ¶¶ 15-17.
When LGT determined that money was not being appropriately credited to its account, it investigated and found that the merchant ID numbers on its Nova application were incorrect. Instead of LGT's merchant ID numbers, the application contained defendant Judiah Luke Hoffman ("Hoffman")'s merchant ID numbers. Comp ¶ 19. The error allegedly caused Hoffman to receive nearly $110,000 in funds that LGT should have received. American Express ("Am Ex") reimbursed LGT over $28,000 of the funds that went to Hoffman instead of LGT, leaving LGT with more than $81,000 in alleged damages. Comp ¶ 20.
On June 17, 2008, LGT filed the instant complaint, asserting four state-law claims: common-law and statutory conversion by Hoffman, breach of contract by TicketNetwork, and negligence by TicketNetwork and MerchantWarehouse. On July 21, 2008, MerchantWarehouse filed a motion to dismiss the negligence claim against it due to lack of personal jurisdiction. On August 18, 2008, LGT timely filed a brief in opposition to the motion to dismiss.
TicketSoftware was served on July 8, 2008, making its answer due on July 28, 2008. See Document #4. However, by order issued July 18, 2008, this court granted TicketSoftware a jointly stipulated 30-day extension. See Document Nos. 5 and 6. TicketSoftware's answer or dispositive motion is now due on or about Wednesday, August 27, 2008.
Hoffman was served on July 22, 2008, making his answer due on August 11, 2008. See Document #11. However, by order issued August 12, 2008, Magistrate Judge Joseph G. Scoville granted Hoffman a jointly stipulated extension until and including Tuesday, September 2, 2008. See Document Nos. 12 and 13.
For the reasons that follow, the court determines that LGT has not stated its burden of establishing the complete diversity of citizenship required for federal diversity jurisdiction, so it will dismiss the complaint without prejudice, giving LGT time to amend the complaint and cure the deficiency. The court will deny without prejudice MerchantWarehouse's motion to dismiss the claim against it for lack of personal jurisdiction.
The Supreme Court and our Circuit recently reaffirmed a district court's right and obligation to independently examine whether it has jurisdiction, without a motion or request from a party:
The objection that a federal court lacks subject-matter jurisdiction, see Fed. Rule Civ. Proc. 12(b)(1), may be raised by a party, or by a court on its own initiative, at any stage of the litigation. . . . Rule 12(h)(3) instructs: "Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction, the court shall dismiss the action."American Telecom Co., LLC v. Republic of Lebanon, 501 F.3d 534, 539 (6th Cir. 2007) (footnote omitted) (quoting Arbaugh v. Y H Corp., 546 U.S. 500, 506-07 (2006) (quoting Kontrick v. Ryan, 540 U.S. 443, 455 (2004))), cert. denied, ___ U.S. ___, 128 S.Ct. 1472 (2008). See, e.g., Wagenknecht v. US, 509 F.3d 729 (6th Cir. 2007) (Keith, Griffin, D.J. Van Tatenhove) (affirming district court's sua sponte dismissal without prejudice of certain claims for lack of subject-matter jurisdiction); Probus v. Charter Communications, LLC, 234 F. App'x 404, 405 (6th Cir. 2007) (plaintiff's failure to move to remand to state court did not preclude district court sua sponte examining whether federal jurisdiction existed) ("Because we find that the district court entertained jurisdiction of this case in the absence of complete diversity, we vacate the district court's judgment and remand the case to the district court so that it may resolve the issue of fraudulent joinder in order to determine whether there was complete diversity.").
Title 28 U.S.C. § 1331 provides that the district courts "have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." This court may exercise such federal-question jurisdiction only if the well-pleaded allegations of the complaint, not any potential defenses, arise under federal law — this is the so-called well-pleaded complaint rule. Mikulski v. Centerior Energy Corp., 501 F.3d 555, 560 (6th Cir. 2007) (en banc) (Batchelder, J., joined by Griffin, J., et al.) (citing Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003)), cert. denied, ___ U.S. ___, 128 S.Ct. 2426 (2008). LGT's four-count complaint does not assert any cause of action even arguably arising under federal law.
There are two relevant exceptions to the well-pleaded complaint rule of federal-question jurisdiction. One exception provides that federal-question jurisdiction exists "'when a federal statute wholly displaces the state-law cause of action through complete preemption.'" Mikulski, 501 F.3d at 560 (quoting Beneficial Nat'l Bank, 539 U.S. at 8). Another exception provides that federal-question jurisdiction exists "'where the vindication of a right under state law necessarily turns on construction of federal law.'" Mikulski, 501 F.3d at 560 (citing Franchise Tax Bd. v. Const. Laborers Vacation Trust, 463 U.S. 1, 9 (1983)). Neither the complete-preemption exception nor the substantial-federal-question exception to the well-pleaded complaint rule appears to apply here.
There is a third exception to the well-pleaded-complaint rule of federal-question jurisdiction, but it applies only in the removal context. Under the artful-pleading doctrine, "plaintiffs may not 'avoid removal jurisdiction by artfully casting their essentially federal law claims as state-law claims.'" Mikulski, 501 F.3d at 560 (quoting Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 397 n. 2 (1981)). LGT filed this case in this court; it was not removed here from state court.
In short, it appears that this court does not have federal-question jurisdiction. Absent federal-question jurisdiction, this court cannot proceed to the merits of the case unless it has diversity jurisdiction. As the plaintiff, LGT has the burden of establishing diversity jurisdiction. See McNutt v. GMAC of Indiana, 298 U.S. 178, 189 (1936); Certain Interested Underwriters at Lloyd's London v. Layne, 26 F.3d 39, 41 (6th Cir. 1994) (citing , inter alia, FED. R. CIV. P. 8(a) and Ohio Nat'l Life Ins. Co. v. US, 922 F.2d 320, 326 (6th Cir. 1990)).
Title 28 U.S.C. § 1332 authorizes district courts to exercise diversity jurisdiction only when there is complete diversity of citizenship. Probus v. Charter Communications, LLC, 234 F. App'x 404, 407 (6th Cir. 2007) (citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584 (1999)). Complete diversity exists only when no plaintiff and no defendant are citizens of the same state. Curry v. U.S. Bulk Transport, Inc., 462 F.3d 536, 540 (6th Cir. 2006) (citing Jerome-Duncan, Inc. v. Auto-by-Tel, LLC, 176 F.3d 904, 907 (6th Cir. 1999)).
LGT's complaint asserts that "[t]his court has subject matter jurisdiction under 28 U.S.C. § 1132 in that the dispute arises among citizens of different states and the amount in controversy exceeds $75,000" Comp. ¶ 22, but the complaint fails to allege specific facts that might substantiate this assertion. LGT's complaint alleges only that it is a Michigan corporation with a registered office in Michigan, that defendant TicketNetwork is a Connecticut corporation with a registered office in Connecticut, that defendant MerchantWarehouse is a Massachusetts corporation with a registered office in Massachusetts, and that defendant Hoffman "resides" in Nevada, see Comp. ¶¶ 2-6.
As to the corporate plaintiff and the two corporate defendants, the location of a corporation's registered office(s) does not necessarily determine its citizenship for purposes of diversity jurisdiction. The general rule is that for the purpose of determining diversity jurisdiction and removability, a corporation is deemed to be a citizen both of any state where it is incorporated and the state where it maintains its principal place of business. Wolf v. Bankers Life Cas. Co., 519 F. Supp.2d 674, 676 n. 1 (W.D. Mich. 2007) (Maloney, J.) (citing 28 U.S.C. § 1332(c)(1)).
Even if LGT timely files an amended complaint that specifies the principal place of business of all corporate parties, this order will not prevent the defendants from contending that a party's principal place of business is in a state other than that alleged by LGT.
The complaint alleges that the plaintiff is a Michigan corporation, Comp. ¶ 2, but it does not specify where it maintains its principal place of business. Likewise, the complaint alleges that TicketNetwork and MerchantWarehouse are Connecticut and Massachusetts corporations, respectively, Comp. ¶ 3 5, but it does not specify where it believes each maintains its principal places of business. Cf. American Nat'l Fire Ins. Co. v. Mirasco, Inc., 2000 WL 1368009, *2 (S.D.N.Y. Sept. 20, 2000) (requiring corporate plaintiffs to amend complaint to sufficiently allege facts establishing their own citizenship) (citing Advani Enters., Inc. v. Underwriters at Lloyds, 140 F.3d 157, 160 (2d Cir. 1998) (allegation that corporation has "an office" in New York was insufficient to establish that New York was its principal place of business)).
Thus, it is not enough for the plaintiff to allege the corporate parties' states of incorporation and the locations of their registered offices. See Poly-Flex Const., Inc. v. Neyer, Tiseo Hindo, Ltd., 2008 WL 793759, *3 (W.D. Mich. Mar. 24, 2008) (Maloney, J.) ("It is not enough for Poly-Flex to allege that it has 'an address of . . . Grand Prairie, Texas' or that NTH has 'a registered address of . . . Detroit, Michigan'. . . . 'A document listing a corporate defendant's business address is wholly insufficient to establish either its place of incorporation or its principal place of business. . . .'") (record citation omitted) (quoting Barlow v. K.L. Harring Transp., 2006 WL 3104705, *1 (E.D. Mich. Oct. 31, 2006) (citing Johnson v. Pharmacia Upjohn Co., 1999 WL 1005653, *4 (W.D. Mich. Oct. 12, 1999) (Quist, J.)).
Accord Smith v. Intex Recreation Corp., 755 F. Supp. 712 (M.D. La. 1991) (allegation that defendant corporation was a California corporation having business at a particular address in California was not sufficient to establish citizenship for purpose of diversity, so plaintiff was required to amend the complaint), aff'd w/o op., 1994 WL 24927 (5th Cir. Jan. 7, 1994);
Cf. American Motorists Ins. Co. v. American Employers Ins. Co., 600 F.2d 15, 16 (6th Cir. 1979) (for diversity purposes, it was not enough for the complaint to assert that the defendant corporation was "licensed to do business and doing business in Louisiana"), cited by Teal Energy USA, Inc. v. GT, Inc., 369 F.3d 873, 880 n. 30 (6th Cir. 2004).
Under our Circuit's total-activities test, "'[t]he question of a corporation's principal place of business is essentially one of fact, to be determined on a case-by-case basis, taking into account the character of the corporation, its purposes, the kind of business in which it is engaged, and the situs of its operations.'" Century Business Servs., Inc. v. Bryant, 69 F. App'x 306, 313 (6th Cir. 2003)) (quoting Gafford v. GE Co., 997 F.2d 150, 161 (6th Cir. 1993)); see, e.g., Collins v. Louisville Ladder, Inc., 2007 WL 1973551 (E.D. Ky. July 3, 2007) (applying "total activities" test).
Under this "total activities" test, a corporation's principal place of business is not necessarily the state where it has its main administrative or executive offices or other nominal "headquarters." See Riggs v. Island Creek Coal Co., 542 F.2d 339, 342 (6th Cir. 1976) (a corporation's headquarters "does not invariably govern the location of its principal place of business"); see, e.g., Teal Energy, 369 F.3d at 876-78 (district court did not clearly err in finding that plaintiff corporation's principal place of business was Texas, where almost all its oil and gas development revenue was being earned at the time the complaint was filed, rather than Canada, the site of its headquarters).
Thus, LGT "must specifically allege the states in which it believes each party maintains its principal place of business, and provide underlying facts to support that allegation, both of which the current complaint fails to do." Poly-Flex Const., Inc. v. Neyer, Tiseo Hindo, Ltd., 2008 WL 793759, *3 (W.D. Mich. Mar. 24, 2008) (Maloney, J.); cf. Sinclair v. Bankers Trust Co. of Calif, N.A., 2005 WL 3434827, *2 n. 1 (W.D. Mich. Dec. 13, 2005) (Quist, J.) ("Sinclair alleges that . . . she is a citizen of Michigan and that Bankers' Trust is a California corporation. She does not allege that Bankers' Trust's principal place of business is not in Michigan. If Bankers' Trust's principal place of business were in Michigan, then diversity of citizenship would not exist."). On the present record, the court cannot rule out the possibility that LGT is a citizen of the same state as TicketNetwork and/or MerchantWarehouse, and the court cannot simply assume that it is not.
As to defendant Hoffman, "[f]or purposes of diversity jurisdiction, residency does not necessarily prove citizenship." Wolf v. Bankers Life Cas. Co., 519 F. Supp.2d 674, 676 n. 1 (W.D. Mich. 2007) (Maloney, J.) (citing Deasy v. Louisville Jefferson Cty. Metro. Sewer Dist., 47 F. App'x 726, 728 (6th Cir. 2002)). See also Moscardelli v. Michigan Laborers HealthCare Fund, 2008 WL 762237, *2 (W.D. Mich. Mar. 19, 2008) (Maloney, J.) (citing Sun Printing Pub. Ass'n v. Edwards, 194 U.S. 377, 382 (1904) (an averment that defendant was a resident of Delaware "would not necessarily have imported that [he] was a citizen of Delaware")).
See also Herrick v. Liberty League Int'l, ___ F. Supp.2d ___, 2008 WL 2230702, *7 n. 6 (S.D. Ohio May 28, 2008) ("[R]esidency does not equal citizenship.") (citations omitted);
see, e.g., Kuntz v. City of Dayton, No. 95-3938, 99 F.3d 1139, 1996 WL 607148 (6th Cir. 1996) (per curiam) (Jones, Ryan, Moore, JJ.) (noting, "The district court dismissed the suit for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1), reasoning that Kuntz had failed to allege diversity as he did not allege citizenship in a state other than Ohio, but merely residency in the state of New York.") (emphasis added).
For a natural person, state citizenship is not a matter of residency but of domicile. Nat'l City Bank v. Aronson, 474 F. Supp.2d 925, 931 (S.D. Ohio 2007) (citing, inter alia, Gilbert v. David, 235 U.S. 561 (1915)); see, e.g., Wolf, 519 F. Supp.2d at 676 n. 1 (quoting Deasy, 47 F. App'x at 728 ("'To establish the citizenship required for diversity jurisdiction, Deasy must show more than mere Tennessee residence. He must show that Tennessee is his domicile. To acquire a domicile within a particular state, a person must be physically present in the state and must have either the intention to make his home there indefinitely or the absence of an intention to make his home elsewhere.'") (citations omitted)). LGT has not alleged facts sufficient for this court to find that the State of Nevada — or some other state other than Michigan — is Hoffman's domicile.
On the present record, then, the court cannot rule out the possibility that LGT and one of the defendants are citizens of the same state, and "the court cannot simply assume that they are not." Ellis v. Kaye-Kibbey, 2008 WL 2696891, *2 (W.D. Mich. July 1, 2008) (Maloney, C.J.) (citing Tsesmelys v. Dublin Truck Leasing Corp., 78 F.R.D. 181, 182 (E.D. Tenn. 1976) ("[A]llegations of the citizenships of the parties . . . is of the essence of jurisdiction and, being so essential, their absence can neither be overlooked nor supplied by inference.") (citations omitted)).
Therefore, LGT has not carried its burden of establishing the existence of federal jurisdiction, and the case is properly dismissed until and unless it corrects that defect. See Cooper v. Cianfrocca, 2001 WL 640808, *1 (S.D.N.Y. 2001) ("The complaint is dismissed sua sponte for failure to allege facts sufficient to establish subject matter jurisdiction. 28 U.S.C. § 1332 requires that the parties be of diverse citizenship, not residence. Plaintiffs may file an amended complaint sufficiently alleging jurisdiction . . . on or before. . . ."); accord Royal Ins. Co. of Am. v. Caleb V. Smith Sons, Inc., 929 F. Supp. 606, 608 (D. Conn. 1996) ("Allegations of complete diversity must be apparent from the pleadings.") (citing FED. R. CIV. P. 8(a)(1) and John Birch Society v. NBC, 377 F.2d 194, 197-99 (2d Cir. 1967)).
See also Levering Garrigues Co. v. Morrin, 61 F.2d 115, 121 (2d Cir. 1932) (where plaintiff adequately alleged citizenship of individual defendants but not citizenship of defendant labor unions, the Court of Appeals reversed the grant of an injunction and remanded to the district court "with directions to dismiss the complaint without prejudice, for lack of jurisdiction, unless the plaintiffs shall amend to correct the jurisdictional defect."), aff'd o.g., 289 U.S. 103 (1933);
Carnegie, Phipps Co. v. Hulbert, 53 F. 10, 11 (8th Cir. 1892) (where complaint failed to allege citizenship of members of unincorporated-partnership, Court of Appeals reversed judgment in favor of defendants "for want of jurisdiction" and remanded case to district court "with directions to that court to dismiss it unless the plaintiff shall amend its complaint to show jurisdiction").
ORDER
This action is DISMISSED without prejudice for lack of subject-matter jurisdiction.
Plaintiff MAY FILE an amended complaint that alleges facts sufficient to support federal jurisdiction, if at all, no later than Friday, October 3, 2008.
This does NOT constitute leave to amend the complaint in any other respect; such leave must be sought in the usual fashion.
Defendant MerchantWarehouse.com's motion to dismiss for lack of personal jurisdiction [Dkt #8] is DENIED without prejudice as moot. See Edwards Assocs., Inc. v. Atlas-Telecom Servs. USA, Inc., 2007 WL 30256, *8 (N.D. Tex. 2007) ("[P]laintiff shall amend its petition to properly allege . . . the state(s) of citizenship of the corporate parties, and the basis for subject-matter jurisdiction. * * * All pending Rule 12 motions to dismiss are denied as moot. The defendants shall have leave, however, to reassert their motions. . . .").
Accord Wexco, Inc. v. IMC, Inc., 820 F. Supp. 194, 205 (M.D. Pa. 1993) ("Plaintiffs shall amend their complaint to assert jurisdiction under diversity of citizenship. * * * Once the amended complaint has been filed, Defendants are free to submit any appropriate motions under the schedules outlined in the Federal and Middle District Rules.") (emphasis added).
This is a final and appealable order.