American Empire Surplus Lines Insurance Company v. Art FX Murals LLC

Background

American Empire Surplus Lines Insurance Company sued Art FX Murals LLC for breach of contract and breach of the duty of good faith and fair dealing. The dispute concerned two insurance policies covering June 14, 2023, through June 14, 2024. The premiums were based partly on Art FX’s gross receipts. After an audit, American Empire alleged that Art FX owed an additional $243,369.

American Empire based federal jurisdiction on diversity of citizenship. It alleged that American Empire was organized and headquartered in Ohio and that Art FX was organized and headquartered in Oregon. Art FX is a limited liability company whose sole member is Mark Bennett. Bennett has dual U.S. and Costa Rican citizenship.

Art FX moved to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). It argued that Bennett was domiciled in Costa Rica and that a U.S. citizen domiciled abroad is not a citizen of a state for diversity-jurisdiction purposes. Art FX alternatively asked the court to transfer the case to the District of Oregon. American Empire argued that Art FX was an Oregon citizen because its primary location, books, and records were in Oregon.

Jurisdiction Analysis

The court stated that the amount-in-controversy requirement was satisfied because American Empire sought $243,369. But an LLC takes the citizenship of all its members for diversity purposes. Therefore, Art FX’s Oregon organization and principal place of business did not determine its citizenship.

The court found that American Empire, as the party asserting diversity jurisdiction, had not shown that Bennett was domiciled in Oregon. Bennett declared that he had lived in Costa Rica for approximately seven years, owned no property in Oregon or another U.S. state, intended to make Costa Rica his permanent home, did not pay taxes or vote in Oregon, and held a Costa Rican driver’s license but no U.S. driver’s license. American Empire offered no evidence rebutting those statements. The court concluded that Costa Rica was Bennett’s true, fixed, principal, and permanent home.

For a dual citizen, the court applied Second Circuit precedent requiring consideration of the person’s U.S. citizenship rather than foreign citizenship for diversity purposes. Because Bennett was a U.S. citizen domiciled abroad, the court concluded that 28 U.S.C. § 1332(a) did not provide diversity jurisdiction. The court therefore held that it lacked subject matter jurisdiction.

Disposition

Because the court found no subject matter jurisdiction, it did not consider the alternative request to transfer the case under 28 U.S.C. § 1404(a). The court granted Art FX’s motion to dismiss under Rule 12(b)(1), directed the Clerk of Court to enter judgment of dismissal for lack of subject matter jurisdiction, terminate the motion, and close the case.