Qi Qin v. Paul Deslongchamps ( 2022 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 21-1873
QI QIN,
Petitioner-Appellant,
v.
PAUL DESLONGCHAMPS,
Respondent-Appellee.
____________________
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 2:21-mc-00017 — Lynn Adelman, Judge.
____________________
ARGUED NOVEMBER 10, 2021 — DECIDED APRIL 14, 2022
____________________
Before MANION, ROVNER, and WOOD, Circuit Judges.
ROVNER, Circuit Judge. Qi Qin intends to sue a limited lia-
bility corporation whose members and their respective citi-
zenships are unknown to him. Without that information, he
believes he cannot, as a practical matter, bring a diversity suit
in federal court, which is his preferred forum. In an effort to
surmount that obstacle, he filed a petition pursuant to Federal
Rule of Civil Procedure 27, seeking leave to depose a known
member of the parent entity of the LLC he wishes to sue so
2 No. 21-1873
that he can ask that witness to identify the LLC’s members.
The district court denied the petition, reasoning in part that
Qin’s request is not one to perpetuate testimony that is at risk
of being lost. We agree and affirm.
I.
Qin is among 165 foreign limited partners (Qin is from
China) who in 2011 collectively invested some $82.5 million
into a limited partnership called Colorado Regional Center
Project Solaris LLLP (“CRCPS”), whose general partner is
Colorado Regional Center I LLC (“CRC-I” or the “LLC”). The
parent company of CRC-I is Waveland Ventures LLC, which
has a member (Paul Deslongchamps) and office in Milwau-
kee, Wisconsin. CRCPS was part of an approved U.S. EB-5 im-
migrant visa program through which Qin and others were
able to obtain permanent-resident visas as a result of their in-
vestment in a commercial enterprise in the United States. Qin
is now a lawful permanent resident of the U.S. and makes his
home in Florida, although his petition indicates that he re-
mains a citizen of China.
Pursuant to the limited partnership agreement of CRCPS,
the general partner, CRC-I, receives an annual management
fee of 2%, which comes to $1.6 million per year. Essentially,
Qin and the other limited partners are funding the salaries of
CRC-I and its members. CRC-I invested CRCPS’s funds in a
condominium project in Vail, Colorado through a series of
five-year loan advances. The investment was a failure, alleg-
edly due in no small part to the CRC-I’s malfeasance, with
losses to the investors totaling between $40 and $70 million.
In the meantime, while the limited partners have paid mil-
lions of dollars in management fees to CRC-I over the past 10
No. 21-1873 3
years, they allegedly have received a “pittance” in return on
their investments.
In 2019, two groups of investors filed complaints against
CRC-I in the District of Colorado; and those actions were con-
solidated under the name Wu v. Colorado Regional Center Pro-
ject Solaris, LLLP, Nos. 19-cv-2443 and 19-cv-2637. Qin is a
party to that consolidated action and along with other inves-
tors asserted a claim against CRC-I that he characterizes as
one for breach of contract. But the district court construed his
claim instead as a common law tort claim and released CRC-
I from the case. See Wu v. Colo. Reg. Ctr. Project Solaris LLLP,
2021 WL 5038826, at *4 (D. Colo. Oct. 29, 2021) (“It is clear to
the Court that the essence of the Li Plaintiffs’ case is one that
lies in tort.”). That decision, among others, is pending on ap-
peal before the Tenth Circuit (Nos. 21-1232 & 21-1253).
Believing he is free to pursue his breach of contract claim
elsewhere, Qin, on behalf of a class of other disappointed in-
vestors, wants to sue CRC-I in the Eastern District of Wiscon-
sin. 1 He has chosen that venue because Deslongchamps, a
member of CRC-I’s parent, Waveland Ventures LLC, lives in
Milwaukee, and Waveland Ventures has an office there,
which Deslongchamps manages. (There are also offices in
Texas and Colorado.) But Qin does not know the identities
and citizenships of all of the members of CRC-I and therefore
cannot plead with reasonable certainty the existence of diver-
sity of citizenship. See America’s Best Inns, Inc. v. Best Inns of
Abilene, L.P., 980 F.2d 1072, 1074 (7th Cir. 1992) (per curiam)
(citizenship of limited partnership’s general and limited
1 Deslongchamps argues that any new claim for breach of contract
would be barred by res judicata, but we need not reach that question.
4 No. 21-1873
partners may not be established, after prior opportunities to
demonstrate diversity of citizenship, on allegations made “to
the best of [affiant’s] knowledge and belief”); Page v. Wright,
116 F.2d 449, 451 (7th Cir. 1940) (expressing doubt that allega-
tions of party’s citizenship for diversity purposes made only
on information and belief can suffice to establish jurisdiction).
(Qin assumes that as a lawful permanent resident of the
United States who is domiciled in Florida, he would be
treated as a citizen of Florida for diversity purposes. His as-
sumption may be mistaken, as we note below. See infra n.2.)
The LLC business form is of relatively recent vintage and
popularity. See Lincoln Benefit Life Co. v. AEI Life, LLC, 800 F.3d
99, 112 (3d Cir. 2015) (concurrence); Christine M. Kailus, Note,
Diversity Jurisdiction & Unincorporated Businesses: Collapsing
the Doctrinal Wall, 2007 UNIV. OF ILL. L. REV. 1543, 1546–48
(2007). As relevant here, one feature of the LLC is that, in the
handful of states that allow it (among them Delaware), its
members can be anonymous: an authorized third-party rep-
resentative can register the LLC without disclosing the iden-
tities of the LLC’s members. See Larry Donahue, Regular LLC
vs. Anonymous LLC, LAW 4 SMALL BUSINESS (Oct. 6, 2016),
available at https://l4sb.com/blog/regular-llc-versus-anony-
mous-llc/ (visited April 12, 2022). Even in states that do not
formally permit anonymous LLCs, it can be challenging to as-
certain the citizenship of the LLC’s members from publicly
available sources, particularly when the membership roster
includes additional LLCs or other non-corporate entities. See
Lincoln Benefit Life, 800 F.3d at 108 (“The membership of an
LLC is often not a matter of public record.”) & id. n.39 (col-
lecting cases); West v. Louisville Gas & Elec. Co., 951 F.3d 827,
830 (7th Cir. 2020) (noting that partnership in that case had
ownership structure 17 layers deep).
No. 21-1873 5
Carden v. Arkoma Assocs., 494 U.S. 185, 195–96, 110 S. Ct.
1015, 1021 (1990), deems a limited partnership to be a citizen
of every state in which any of its partners, general or limited,
is a citizen; and because an LLC is an “animal … like a limited
partnership,” Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.
1998), we have extended this treatment to the LLC, see Thomas
v. Guardsmark, LLC, 487 F.3d 531, 534 (7th Cir. 2007) (citing
Camico Mut. Ins. Co. v. Citizens Bank, 474 F.3d 989, 992 (7th Cir.
2007)); Wise v. Wachovia Sec., LLC, 450 F.3d 265, 267 (7th Cir.
2006) (collecting cases); Cosgrove, 150 F.3d at 731. So, in con-
trast to a corporation, which is a citizen of its state of incorpo-
ration and the state where it maintains its principal place of
business (two states at most), see 28 U.S.C. § 1332(c)(1); Hertz
Co. v. Friend, 559 U.S. 77, 130 S. Ct. 1181 (2010), an LLC can be
a citizen of many states. And in states where the members of
the LLC need not be publicly identified, it can be difficult if
not impossible for a prospective plaintiff to ascertain the
membership and in turn determine whether he can sue the
LLC in diversity.
E.D. Wisconsin Civil Local Rule 8 makes plain what the
dilemma is for Qin. Local Rule 8 provides:
If a pleading or notice of removal asserts juris-
diction based on diversity of citizenship, the
pleading or notice must identify the amount in
controversy and the citizenship of each party to
the litigation. If any party is a corporation, the
pleading or notice must identify both the state
of incorporation and the state in which the cor-
poration has its principal place of business. If
any party is an unincorporated association, limited
6 No. 21-1873
liability company, or partnership, the pleading or no-
tice must identify the citizenship of all members.
(Emphasis supplied.) In compliance with Rule 8, Qin must
identify the citizenship of all of the members of CRC-I. But he
does not know who they are. His briefs lay out the various
efforts he has made to identify the partners through publicly
available records, tax returns, and social media (among other
sources). Based on what he knows about the members of
CRC-I and its parent, Waveland Ventures, he believes there is
complete diversity as among himself and the LLC’s member-
ship, but unless CRC-I discloses the identity of all of its mem-
bers, he cannot be sure.
In an attempt to obtain this information, Qin filed a peti-
tion in the Eastern District of Wisconsin pursuant to Rule 27,
which in relevant part provides:
A person who wants to perpetuate testimony
about any matter cognizable in a United States
court may file a verified petition in the district
court for the district where any expected ad-
verse party resides. The petition must ask for an
order authorizing the petitioner to depose the
named persons in order to perpetuate their tes-
timony.
Rule 27(a)(1). Qin identified Deslongchamps as the person he
wants to depose. And, of course, what he is seeking to learn
from Deslongchamps is the identities of all of the members of
CRC-I, so that he can establish whether diversity of citizen-
ship exists.
Judge Adelman denied the petition on two grounds. First,
Qin had not shown that his contemplated suit against CRC-I
No. 21-1873 7
would be cognizable in a United States court. In other words,
because Qin cannot yet demonstrate that there is diversity of
citizenship among the prospective parties to the action he
wants to file, he cannot show that the anticipated suit falls
within the subject matter jurisdiction of a federal court. The
most he can state at this juncture is that, based on what he
knows thus far, it is “likely” that there will be diversity juris-
diction, and Judge Adelman found that insufficient. Judge
Adelman indulged Qin’s assumption that he would be
treated as a citizen of Florida for diversity purposes; but the
judge noted the possibility that CRC-I, via one or more of its
members, might, like Qin, be a citizen of Florida. 2 Also, apart
from the unknown citizenships of CRC-I’s members, Qin had
not shown that his damages exceeded $75,000. Second, he had
not shown that a deposition to elicit Deslongchamps’ testi-
mony is necessary to prevent that testimony from being lost.
2 Qin’s assumption that he qualifies as a citizen of Florida for diversity
purposes may be mistaken. When in 2011 Congress removed section
1332(a)’s “deeming clause,” which treated a lawful permanent resident of
the U.S. as a citizen of his state of domicile, see Pub. L. No. 100-702, § 203(a),
102 Stat. 4642, 4646 (1988) (“an alien admitted to the United States for per-
manent residence shall be deemed a citizen of the State in which such alien
is domiciled”), it replaced that clause with language that two of our sister
circuits have construed to treat a lawful permanent resident as an alien for
diversity purposes, see Pub. L. No. 112-63, § 101, 125 Stat. 758, 758 (2011).
See Tagger v. Strauss Grp. Ltd., 951 F.3d 124, 126–27 (2d Cir. 2020) (per cu-
riam); accord Cavalieri v. Avior Airlines C.A., 25 F.4th 843, 848–49 (11th Cir.
2022) (per curiam). Treating Qin as an alien might in turn have conse-
quences vis-à-vis his effort to invoke the diversity jurisdiction of a federal
court. See Baylay v. Etihad Airways P.J.S.C., 881 F.3d 1032, 1041 (7th Cir.
2018); Salton, Inc. v. Philips Domestic Appliances & Pers. Care B.V., 391 F.3d
871, 875 (7th Cir. 2004); Allendale Mut. Ins. Co. v. Bull Data Sys., Inc., 10 F.3d
425, 428 (7th Cir. 1993).
8 No. 21-1873
The stated purpose of Rule 27, to perpetuate testimony, im-
plies that there is a risk of such testimony being lost (due to
an individual’s impending death, for example). Qin was not
invoking Rule 27 for that purpose, but rather to obtain juris-
dictional discovery in the face of CRC-I’s unwillingness to dis-
close the identity of its members. R. 10 at 6–8. Judge Adelman
did not believe he had the authority “to either apply Rule
27(a) outside its domain or invent another procedure to pro-
vide Qin with the information he seeks.” R. 10 at 8. And the
judge was not persuaded that Qin’s inability to obtain such
information might result in an injustice. He noted that Qin
could bring his breach of contract claim in state court. R. 10 at
8–9.
II.
We review the denial of Qin’s Rule 27 petition for abuse of
discretion. See In re Deiulemar Compagnia di Navigazione S.p.A.
v. M/V Allegra, 198 F.3d 473, 479 (4th Cir. 1999); In re Bay Cnty.
Middlegrounds Landfill Site, 171 F.3d 1044, 1045–46 (6th Cir.
1999); Penn Mut. Life Ins. Co. v. U.S., 68 F.3d 1371, 1374 (D.C.
Cir. 1995). The district court did not abuse its discretion in this
case. Rule 27 allows for a particular and narrow form of in-
quiry to take place before a suit is filed. However sympathetic
one might be with Qin’s plight, his desire to take what
amounts to pre-suit jurisdictional discovery falls outside the
limited scope of the rule.
Pursuant to Rule 27, when there is a need to perpetuate
the testimony of an individual relevant to a matter that is cog-
nizable in federal court, the party seeking that testimony may
file a verified petition in the judicial district where the indi-
vidual resides asking the court to authorize his or her deposi-
tion. Rule 27(a)(1)–(2). The petitioner must show that he
No. 21-1873 9
expects to be a party to an action in a United States court but
cannot presently bring the action or cause it to be brought.
Rule 27(a)(1)(A). If the court is satisfied that perpetuating the
sought-after testimony may prevent the failure or delay of jus-
tice, the court must issue an order allowing the deposition.
Rule 27(a)(3).
Deslongchamps argues, and the district court agreed, that
Qin’s petition fails in the first instance because it does not
show that Qin’s prospective lawsuit is one cognizable in
district court. See M/V Allegra, 198 F.3d at 484 (quoting Dresser
Indus., Inc. v. United States, 596 F.2d 1231, 1238 (5th Cir. 1979)).
This of course depends in part on whether there is diversity
of citizenship between Qin and the members of the LLC. See
28 U.S.C. § 1332(a). 3 At this juncture Qin cannot establish
diversity because he does not know who the members of the
LLC are and whether any of them has the same citizenship as
he does for diversity purposes. From his perspective, that is
the very reason why it is necessary and appropriate for him
to invoke Rule 27: without the opportunity to depose
Deslongchamps, he cannot plead himself into federal court.
Qin’s rationale presumes that Rule 27 is, or can be, a vehi-
cle for obtaining pre-suit discovery in order to ascertain or
confirm the existence of a fact necessary to bringing suit—in
this case, diversity of citizenship. But this rationale attributes
a breadth and purpose to the rule that it does not possess.
3 Qin’s petition also did not allege that the amount at issue in his pu-
tative suit exceeds the jurisdictional threshold of $75,000. We shall assume
for present purposes, given the significant amounts of money invested in
CRCPS by Qin and the other limited partners, that this omission could
have been corrected.
10 No. 21-1873
Rule 27 provides only for the perpetuation of testimony
that is at risk of becoming unavailable. Rule 27(a)(3); see Ariz.
v. Cal., 292 U.S. 341, 347–48, 54 S. Ct. 735, 737–38 (1934) (bill of
complaint to perpetuate testimony); VirtualAgility Inc. v.
Salesforce.com, Inc., 759 F.3d 1307, 1319 (Fed. Cir. 2014); Penn.
Mut. Life Ins. Co., 68 F.3d at 1375. This includes the testimony
of a witness who is aged or seriously ill, might flee, or who
may become unavailable by reason of relocation or other ge-
ographic constraints before a suit can be filed. See, e.g., Calde-
ron v. U.S. Dist. Ct. for N.D. Cal., 144 F.3d 618, 622 (9th Cir.
1998) (noting likelihood that witness might make himself un-
available in view of, inter alia, his observed panic when he en-
countered person he would likely inculpate in his testimony
and his refusal to sign declaration); Penn. Mut. Life Ins., 68 F.3d
at 1375 n.3 (witness’s plan to leave country for prolonged pe-
riod); Ash v. Cort, 512 F.2d 909, 913 (3d Cir. 1975) (advanced
age of witness); In re Sims, 389 F.2d 148, 150 (5th Cir. 1967)
(witness’s imminent departure for Peru).
That is not the scenario presented here. There is no allega-
tion suggesting that Deslongchamps may become unavailable
to Qin. What Qin is seeking is the opportunity to conduct ju-
risdictional discovery. Courts sometimes authorize such dis-
covery after suit is filed when doubt emerges regarding
whether, as alleged, the parties are in fact diverse. E.g., Dancel
v. Groupon, Inc., 940 F.3d 381, 386 (7th Cir. 2019); Zurich Am.
Ins. Co. v. Tangiers Int’l LLC, 2018 WL 3770085, at *2 (N.D. Ill.
Aug. 9, 2018). But in this case Qin is invoking Rule 27 to de-
termine, before any suit is filed, whether the parties to his pro-
posed suit are diverse such that he can file it in federal court.
In sum, Qin’s petition is not one to perpetuate testimony ma-
terial to a prospective suit that he and the court have reason
No. 21-1873 11
to believe is cognizable in federal court but rather one to iden-
tify whether a particular action is cognizable in federal court.
This is not a purpose recognized by Rule 27, and we do
not have the authority to expand the rule beyond its stated
scope. Federal courts are courts of limited jurisdiction. Kokko-
nen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S. Ct.
1673, 1675 (1994). “They possess only that power authorized
by Constitution and statute, which is not to be expanded by
judicial decree.” Ibid.; see also Giancana v. Johnson, 335 F.2d 366,
367–68 (7th Cir. 1964). Rule 27 allows for a limited form of
discovery for a particular purpose when there is reason to be-
lieve the court will have jurisdiction over the suit to which the
discovery is relevant. Qin’s proposed reading would broaden
the rule to authorize discovery in instances when there may
in fact be no basis for federal jurisdiction. See Ash, 512 F.2d at
912 (“We reiterate that Rule 27 is not a substitute for discov-
ery. It is available in specific circumstances to preserve testi-
mony which could otherwise be lost.”); accord M/V Allegra,
198 F.3d at 485 (“Rule 27 is not a substitute for broad discov-
ery, nor is it designed as a means of ascertaining facts for
drafting a complaint.”) (citations omitted); see also United
States v. Cuya, 964 F.3d 969, 973 & n.4 (11th Cir. 2020) (“in civil
cases generally, a party is not entitled to discovery before an
action is brought—indeed, he may not seek discovery until
after he has not only filed a complaint, but a well-pleaded
one”) (collecting cases).
Qin faces an obvious obstacle to pursuing relief in federal
court, and the dilemma posed by the non-corporate associa-
tion whose members (and their citizenship) the plaintiff can-
not ascertain despite reasonable investigatory efforts has been
noted and discussed elsewhere. See Lincoln Benefit Life Co., 800
12 No. 21-1873
F.3d at 102, 107–08; Carolina Cas. Ins. Co. v. Team Equip., Inc.,
741 F.3d 1082, 1087–88 (9th Cir. 2014); cf. Med. Assur. Co. v.
Hellman, 610 F.3d 371, 376 (7th Cir. 2010); In re Ingenuity 13
LLC, 2012 WL 968080, at *4–*6 (E.D. Cal. Mar. 21, 2012) (mag-
istrate judge), reconsideration denied, 2012 WL 1414076 (E.D.
Cal. Apr. 20, 2012) (district judge). But in asking us to explore
how he might surmount that obstacle, Qin is asking for us to
issue an advisory opinion. That is beyond our power. See Jones
v. Griffith, 870 F.2d 1363, 1366 (7th Cir. 1989) (“Federal courts
are not authorized to render advice to persons contemplating
litigation or acts that may lead to litigation.”) (collecting
cases). The sole issue before us is whether Qin’s invocation of
Rule 27 was proper, and we have concluded that it was not.
III.
As Qin’s petition does not establish that he is seeking to
perpetuate testimony that may otherwise become unavailable
to him, and that is relevant to a matter cognizable in federal
court, we AFFIRM the denial of Qin’s Rule 27 petition.