DKSJ, LLC v. Cohen

Background

DKSJ, LLC brought this action against Joseph S. Cohen, asserting a breach-of-contract claim. DKSJ alleged that the parties’ contract contained a forum-selection clause designating the U.S. District Court for the Southern District of New York as the exclusive forum for disputes arising from or based on the agreement.

DKSJ had previously brought its claims in New York Supreme Court because it believed the federal court lacked subject-matter jurisdiction. The state court dismissed that case without prejudice and stated that this court should decide its own jurisdiction before DKSJ brought the case there. DKSJ therefore filed this action seeking, in substance, a ruling on federal jurisdiction. Cohen told the court that he had no knowledge of facts contrary to DKSJ’s assertion that federal jurisdiction was lacking and did not object to dismissal.

Jurisdiction

The court held that it had no subject-matter jurisdiction. It lacked federal-question jurisdiction because DKSJ’s breach-of-contract claim did not arise under federal law.

The court also held that diversity jurisdiction was unavailable. DKSJ is a limited liability company whose citizenship is determined by the citizenship of its members. DKSJ’s sole member was a trust, whose citizenship is determined by the citizenship of its trustees. Because the complaint alleged that two of the trust’s three trustees were New York citizens, the court treated DKSJ as a New York citizen for this analysis. Cohen was also alleged to be a New York citizen, so complete diversity was absent.

The court further explained that the parties’ consent and the forum-selection clause could not establish subject-matter jurisdiction. Subject-matter jurisdiction cannot be created by agreement between the parties.

Disposition

The court dismissed the action for lack of subject-matter jurisdiction. It directed the Clerk of Court to terminate all pending motions and close the case. The opinion did not decide the underlying breach-of-contract claim.