McClellon v. Webull Financial LLC

Background

Donte McClellon is proceeding without a lawyer and was allowed to proceed without paying court fees. He sued Webull Financial LLC under New York law and sought money damages. He alleged that in 2021 and 2022, Webull devalued his brokerage account by placing and executing unauthorized trades and withholding trade confirmations and account statements. He asserted claims under the New York State Securities Act and the New York Consumer Protection Act, along with 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.

When McClellon filed the complaint, he was incarcerated at Otisville Correctional Facility in New York. His complaint stated that he was a New York citizen and that Webull had its principal place of business and was incorporated under New York law.

Jurisdictional Issue

A federal court can hear a case involving a federal question or a case between citizens of different states when the legal requirements for diversity jurisdiction are met. Diversity must be complete, meaning that no plaintiff and no defendant may be citizens of the same state. An individual’s citizenship for this purpose generally depends on domicile—the person’s fixed home and principal establishment, together with the intention to return there.

In a June 5, 2025 order, the court dismissed the complaint with leave to amend because it did not identify a federal question and because the allegations showed that both McClellon and Webull were citizens of New York. The court then received McClellon’s letters stating that he had been transferred to a halfway house in Seattle, Washington, and that he was domiciled in Washington and had a Washington driver’s license. The court explained that diversity is determined when a case is filed. Because McClellon was incarcerated when he filed the complaint, the court considered his pre-incarceration domicile relevant. He had not identified that domicile, and the Washington driver’s license showed only that he might intend to establish Washington as his domicile. The court therefore found that he still had not established diversity jurisdiction.

Ruling

The court directed McClellon to file an amended complaint or another response within 60 days to show that complete diversity existed when he filed the action. The court’s conclusion states that it dismissed the complaint and supplemental response for lack of subject-matter jurisdiction, with 60 days’ leave to replead. If McClellon did not file an amended complaint or other response within that period, the court stated that it would direct the Clerk of Court to enter judgment. The court also directed the Clerk to keep the matter open on the docket until a civil judgment was entered.

Judge Kimba M. Wood certified that any appeal would not be taken in good faith and denied McClellon’s fee-free status for purposes of an appeal. The opinion also states that, if complete diversity could not be established for the filing date, McClellon could move to voluntarily withdraw and refile if the requirements were met for a later complaint, or could bring the state-law claims in state court.