System Management Group v. NCU Investors, LLC

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 SYSTEM MANAGEMENT GROUP, and Case No.: 21cv0494-L(BLM) NATIONAL EDUCATION PARTNERS, 12 INC, , ORDER DISMISSING COMPLAINT 13 Plaintiffs, 14 v. 15 NCU INVESTORS, LLC, 16 Defendant. 17 18 In this action alleging violation of a Securities Purchase Agreement, Plaintiff 19 claims federal jurisdiction based on the minimal diversity requirements under, 28 U.S.C. 20 §1332. The initial complaint was filed on March 19, 2021, and a First Amended 21 Complaint was filed on March 24, 2021. The amended complaint does not contain 22 sufficient allegations to establish minimal diversity of the parties. Accordingly, the 23 amended complaint is dismissed without prejudice and with leave to amend. 24 Unlike state courts, "[f]ederal courts are courts of limited jurisdiction. They 25 possess only that power authorized by Constitution and statute, which is not to be 26 expanded by judicial decree. It is to be presumed that a cause lies outside this limited 27 jurisdiction, and the burden of establishing the contrary rests upon the party asserting 28 1 jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) 2 (citations omitted). Federal courts are constitutionally required to raise issues related to 3 federal subject matter jurisdiction and may do so sua sponte. Arbaugh v. Y&H Corp., 4 546 U.S. 500, 514 (2006). A federal court must satisfy itself of its jurisdiction over the 5 subject matter before proceeding to the merits of the case. Ruhrgas AG v. Marathon Oil 6 Co., 526 U.S. 574, 577, 583 (1999). 7 Plaintiff bears the burden of demonstrating that jurisdiction is properly before the 8 Court. See Thornhill Publ'g Co. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9th 9 Cir. 1979). Plaintiff relies on 28 U.S.C. §1332, which provides for federal jurisdiction 10 over class actions where the matter in controversy exceeds $5 million, and requires that 11 “any member of a class of plaintiffs is a citizen of a State different from any defendant.” 12 The complaint must affirmatively allege the state of citizenship of each party. Bautista v. 13 Pan Am. World Airlines, Inc., 828 F.2d 546, 552 (9th Cir.1987); see also Kanter v. 14 Warner-Lambert, Co., 265 F.3d 853 (9th Cir. 2001). 15 Plaintiff System Management Group (“SMG”) alleges it is a domestic nonprofit 16 corporation organized and existing under the laws of the State of California. Plaintiff 17 National Education Partners, Inc. (“NEP”) alleges it is a corporation organized and 18 existing under the laws of the State of Arizona, and is a wholly owned subsidiary of 19 SMG. Plaintiff asserts that Defendant NCU Investors LLC is a limited liability company 20 licensed in Delaware. 21 The citizenship of non-corporate business entities for purposes of diversity 22 jurisdiction is determined by examining the citizenship of each of its members. Carden 23 v. Arkoma Assoc., 494 U.S. 185, 195-96 (1990); Johnson v. Columbia Properties 24 Anchorage. L.P., 437 F.3d 894, 899 (9th Cir.2006). Plaintiff alleges that Defendant is a 25 limited liability company organized and existing under the laws of the State of Delaware, 26 but does not allege the citizenship of each of Defendant's members. The Court is 27 therefore unable to determine Defendant's citizenship, and whether minimal diversity is 28 present. 1 Because Plaintiff does not allege the facts necessary to establish minimal diversity, 2 complaint is dismissed without prejudice and with leave to amend for lack of subject 3 || matter jurisdiction. Plaintiff may file an amended complaint on or before May 17, 2021, 4 ||in which it lists the citizenship of each of Defendant NEP’s members. 5 IT IS SO ORDERED. 6 7 |\|Dated: April 14, 2021 Uf Pap? 9 H . James Lorenz 10 United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28