Crossing Bay Partners, LLC v. Gottfried

Background

Crossing Bay Partners, LLC brought a shareholder derivative action individually and on behalf of Equipid, Inc. against Steven Gottfried, UtilizeCore LLC, and Equipid, Inc. The complaint invoked diversity jurisdiction, which allows a federal court to hear certain civil cases involving parties from different states when the amount in dispute exceeds $75,000.

Jurisdictional problem

The court explained that diversity must exist when the case begins and must be complete, meaning no plaintiff and defendant may be citizens of the same state. A limited liability company has the citizenship of each of its members. The complaint did not identify the members of either Crossing Bay Partners or UtilizeCore, LLC, or the members’ citizenships. The court therefore concluded that the complaint did not adequately allege the facts needed to establish subject matter jurisdiction.

Order

Within 14 days of the order, Crossing Bay Partners may serve one interrogatory on UtilizeCore asking for the citizenship of all natural-person members and, if any corporation is a member, the state where that corporation was incorporated and its principal place of business. UtilizeCore must respond within 14 days. Crossing Bay Partners must amend the complaint within 30 days to provide the citizenship of all parties. The court stated that the action will be dismissed for lack of subject matter jurisdiction if the complaint is not amended as required. The order did not decide the merits of the shareholder claims.