McClellon v. Webull Financial LLC

Background

Donte McClellon, proceeding without a lawyer, sued Webull Financial LLC. He alleged that Webull caused “significant financial harm, loss and damage” by carrying out a scheme in 2021 and 2022 that devalued his brokerage account, placing and executing unauthorized trades, and withholding trade confirmations and account statements. He asserted claims under New York’s securities and consumer-protection laws and state common-law claims for fraud, breach of fiduciary duty, breach of contract, negligence, conversion, misrepresentation, identity theft, and other alleged misconduct. He sought $1.7 million in damages.

The court had previously granted McClellon permission to proceed without paying filing fees in advance. McClellon also filed two requests for free legal counsel and a motion concerning service of the lawsuit.

Subject-Matter Jurisdiction

Federal district courts generally have jurisdiction over claims arising under federal law or disputes between citizens of different states when the amount in controversy exceeds $75,000. The court held that McClellon’s complaint did not establish either basis.

First, the complaint asserted only state-law claims and did not allege a violation of federal law. Invoking federal jurisdiction by itself was not enough to create federal-question jurisdiction.

Second, the complaint did not establish diversity jurisdiction. McClellon alleged that he was a citizen of New York and that Webull had its principal place of business in and was incorporated under the laws of New York. The court explained that complete diversity requires no plaintiff and no defendant to be citizens of the same state. The court assumed, without deciding, that the amount-in-controversy requirement was met, but found that the alleged New York citizenship on both sides prevented diversity jurisdiction.

Because the court lacked subject-matter jurisdiction, it dismissed the complaint under Federal Rule of Civil Procedure 12(h)(3). The court did not reach the merits of McClellon’s allegations about the brokerage account or decide whether his state-law claims could otherwise proceed.

Leave to Replead and Other Motions

The court gave McClellon 30 days to file an amended complaint showing that the federal court has subject-matter jurisdiction. If he did not file an amended complaint within that period, the court stated that the Clerk would be directed to enter judgment.

Judge Wood denied McClellon’s two motions for free legal counsel and his motion for service without prejudice. The court also certified that any appeal would not be taken in good faith and denied permission to proceed without prepaying fees for purposes of an appeal. The matter was kept open on the docket until a civil judgment is entered.