Enemigo LTD. v. Trinity Beverage Group, LLC

Background

Enemigo Ltd., described in the opinion as a United Kingdom-based tequila company and a citizen of the United Kingdom, sued Michael Bell, Hill Flynn, Trinity Beverage Group, LLC, Jureta Capital Partners LLC, Verity Wines, LLC, Oracles Capital, Inc., Oracles Imports, LLC doing business as Oracles Craft Brands, Kathryn Selby, and Selby New York, Inc. Enemigo asserted claims for fraud, breach of contract, unjust enrichment, declaratory judgment, conversion, civil conspiracy, and alter-ego liability.

The dispute arose from supply agreements under which defendants were to import and distribute Enemigo’s tequila, as well as investments Enemigo made in defendant entities. Enemigo invested $500,000 in Jureta through a convertible note and entered an exclusive supply agreement with Verity. After Verity allegedly defaulted on its debts, Bell formed Trinity, which acquired Verity and its assets in a foreclosure sale. Enemigo then entered another supply agreement with Trinity and invested additional money through a convertible note. The Trinity Agreement allegedly guaranteed purchases of at least $1,175,000 of Enemigo’s product during the first year. Trinity instead allegedly purchased $229,224 worth of tequila. Enemigo further alleged that Flynn sent a purportedly signed agreement with Southern Glazer’s Wine and Spirits, LLC, but Bell later stated that the agreement had never been executed and that Flynn likely forged the signature.

Motion and jurisdictional issues

The defendants moved under Federal Rule of Civil Procedure 12(b)(1), which permits dismissal when a federal court lacks subject-matter jurisdiction. They argued that Enemigo had not adequately pleaded the citizenship of the limited liability company defendants and that complete diversity was absent because Enemigo allegedly became a member of Jureta and, through Jureta, a member of Verity. Diversity jurisdiction requires all plaintiffs to have citizenship different from all defendants, and a limited liability company has the citizenship of each of its members.

Enemigo argued that Jureta should be dropped from the case under Rule 21 because it was a dispensable party. Enemigo also argued that Trinity’s acquisition of Verity’s assets ended any ownership interest Enemigo might have held in Verity before the lawsuit was filed. Finally, Enemigo argued that affidavits and other evidence established the citizenship of the relevant entities and showed that complete diversity existed.

Court’s analysis

The court concluded that Jureta was not indispensable under Rule 19(b). It noted that Jureta had been dissolved since at least June 2023, had been inactive and non-operational since at least June 2021 according to Flynn’s testimony, and had not appeared in the case. The court found little likelihood of prejudice to Jureta or the other defendants if the case proceeded without Jureta. It also noted that the amended complaint did not attribute any action only to Jureta and that Enemigo had offered to remove allegations against Jureta.

The court further found that proceeding without Jureta would not undermine the adequacy of a judgment. Requiring the parties to begin again in state court after extensive federal-court litigation and discovery would, in the court’s view, burden the parties and waste judicial resources. The court also stated that there did not appear to be one state in which all defendants could be sued, so Enemigo might not have an adequate alternative remedy if the federal action were dismissed. The opinion determined that Jureta could be dismissed as a dispensable party to preserve diversity jurisdiction, but the order did not separately state that Jureta was dismissed.

On Verity’s citizenship, the court accepted Enemigo’s allegation that Verity had merged with or transferred its assets to Trinity through a 2021 foreclosure sale. Because Jureta’s ownership interest in Verity ended before Enemigo filed the original complaint on November 18, 2022, the court concluded that Jureta was not a member of Verity at the relevant time. Enemigo therefore could not have been a member of Verity through its alleged membership in Jureta, and Verity’s presence did not destroy subject-matter jurisdiction.

Regarding the pleadings, the court acknowledged that Enemigo’s complaint may not have adequately alleged the citizenship of the members of the LLC defendants. But it explained that defective jurisdictional allegations do not necessarily require dismissal when the underlying diversity jurisdiction existed from the beginning. Affidavits established, without dispute on the record, that Oracles Craft was a citizen of Florida and that Trinity was a citizen of Delaware, New York, Florida, California, and Connecticut. The court found the record sufficient to establish complete diversity between Enemigo and those defendants. It directed Enemigo to amend its complaint regarding Jureta and Verity.

Disposition

Judge Naomi Reice Buchwald denied the defendants’ motion to dismiss for lack of subject-matter jurisdiction. She directed Enemigo to file an amended complaint consistent with the Memorandum and Order within ten days and directed the Clerk of Court to close the pending motion.