Abacus Data Systems, Inc. v. Wealthcounsel, LLC ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ABACUS DATA SYSTEMS, INC. Case No.: 20cv1067-LAB (MSB) 12 Plaintiff, ORDER OF DISMISSAL 13 v. 14 WEALTHCOUNSEL, LLC, et al. 15 Defendants. 16 17 Plaintiff Abacus Data Systems, Inc. filed this action, bringing state law claims 18 and relying on diversity as the only basis for jurisdiction. Abacus alleged that it is 19 a California corporation with its principal place of business in California, but it failed 20 to allege the citizenship of Defendant Wealthcounsel, LLC. Specifically, it failed to 21 allege the citizenship of Wealthcounsel’s owners or members. See Johnson v. 22 Columbia Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) (limited 23 liability company is a citizen of every state of which its owners or members are 24 citizens). 25 The Court, carrying out its obligation to confirm its own jurisdiction, sua 26 sponte if necessary, see Mt. Healthy City School Dist. Bd. of Ed. v. Doyle, 429 U.S. 27 274, 278 (1978), ordered Abacus to show cause why this action should not be 28 dismissed for lack of jurisdiction. As the party invoking the Court’s jurisdiction, 1 Abacus bears the burden of pleading it; until it does, jurisdiction is presumed to be 2 lacking. See Kokkkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). 3 The Supreme Court has made clear that the Court must confirm its own 4 jurisdiction before proceeding to the merits. See Steel Co. v. Citizens for a Better 5 Environment, 523 U.S. 83, 93–94 (1998). And as a practical matter, confirming 6 jurisdiction early helps prevent wasted effort and needless expense and delay. 7 Regrettably, courts’ mistaken belief that they were acting within their jurisdiction 8 has sometimes resulted in cases proceeding for years before the defect is 9 discovered and the action necessarily dismissed. See Rainero v. Archon Corp., 10 844 F.3d 832, 841 (9th Cir. 2016). 11 Specifically, the Court ordered Abacus to either file an amended complaint 12 alleging the citizenship of all of Wealthcounsel’s owners or members, or file a 13 memorandum of points and authorities showing that jurisdiction was adequately 14 pled. The Court cautioned Abacus that if it failed to show cause as ordered, this 15 action would be dismissed without prejudice for lack of jurisdiction. 16 Abacus filed an amended complaint. But instead of alleging the citizenship 17 of all of Wealthcounsel’s owners or members, as ordered, it alleges that it 18 conducted a “reasonable factual investigation” into the citizenship of 19 Wealthcounsel’s members. (First Am. Compl., ¶6.). The investigation included 20 consultation with Defendant’s counsel regarding the residence of Wealthcounsel’s 21 members, as well as internet searches and searches of other public records. This 22 investigation, it says, “has not revealed that any members are citizens of 23 California.” Therefore, Abacus alleges on information and belief that none of 24 Wealthcounsel’s members are citizens of California. 25 The Ninth Circuit has considered and rejected the adequacy of similar 26 allegations. In Kanter v. Warner-Lambert, 265 F.3d 853, 857 (9th Cir. 2001), it 27 explained that, absent unusual circumstances, a plaintiff “should be able to allege 28 affirmatively the actual citizenship of the relevant parties.” In that case, the party 1 |/invoking the court’s jurisdiction had not affirmatively alleged the citizenship of 2 ||corporate defendants; rather, “it merely alleged that they were not citizens of 3 || California.” /d. 4 At most, Abacus is able to allege that it is not aware of any facts that would 5 ||destroy diversity, and that the facts it is presently aware of are consistent with 6 || diversity jurisdiction as Abacus understands it. This is not enough to invoke the 7 ||Court’s jurisdiction. See Bell Atlantic v. Twombly, 550 U.S. 544, 545 (2007) 8 || (holding that allegations must go beyond merely being consistent with entitlement 9 || to relief). 10 Even if Abacus were granted leave to amend again, there is no reason to 11 think it could do so successfully. This is not one of the unusual cases where facts 12 |}about a defendant's citizenship are within its exclusive control, and where 13 ||jurisdiction is likely to be confirmed shortly after the defendant answers. Compare 14 || Carolina Cas. Ins. Co. v. Team Equipment, Inc., 741 F.3d 1082, 1087-88 (9th Cir. 15 ||2014). The amended complaint suggests that Wealthcounsel has many members 16 |}and may not itself know the citizenship of them all. If even one of them is a 17 || California citizen, or is non-diverse for some other reason,' diversity is lacking. 18 This action is DISMISSED WITHOUT PREJUDICE for failure to invoke the 19 || Court’s jurisdiction. 20 IT IS SO ORDERED. 21 ||Dated: July 1, 2020 22 / wit 4. ‘dg, WY 23 Honorabie Larry Alan Burns 2A Chief United States District Judge 25 || 26 Certain categories of persons destroy complete diversity in every case where 27 ||they appear. See, e.g., Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 28 Sool’). (characterizing U.S. citizen domiciled abroad as a “jurisdictional