Huobi Co., Ltd v. Marto HG Digital Asset Group Fund I GP, LLC

Background

The defendants filed a motion asking the court to compel arbitration and stay the action or, alternatively, dismiss it under Federal Rule of Civil Procedure 12(b)(6). Before addressing that motion, the court raised a question about subject-matter jurisdiction—the court’s authority to hear the case.

Huobi alleged that diversity jurisdiction supported its state-law claims. Huobi alleged that it was registered under the laws of the Republic of Korea and had its principal place of business in Seoul, South Korea. It also alleged that Taotao He was a citizen of New York and that the amount in controversy was at least $2 million.

Jurisdictional issue

The court explained that, because Huobi was a citizen of a foreign state, diversity jurisdiction under 28 U.S.C. § 1332(a)(2) required all defendants to be citizens of a U.S. state. The court found Huobi’s allegations insufficient as to several entity defendants.

For the limited liability companies identified in the opinion as MHG LLC and MHG GP, Huobi did not identify the owners or members of MHG LLC or allege each owner’s or member’s citizenship. The court therefore found that Huobi had not adequately alleged the citizenship of MHG LLC or MHG GP. The court also found the allegations concerning MHG LP insufficient because Huobi did not identify its limited partners or allege their citizenship, and because the allegations did not adequately establish the citizenship of its general partner, MHG GP.

Order

The court ordered Huobi to show cause—that is, to explain in writing—by September 3, 2021, why the action should not be dismissed without prejudice for lack of subject-matter jurisdiction. The court did not itself dismiss the action in this order.

The court also extended the deadline for Huobi’s opposition to the defendants’ motion and continued the September 24, 2021 hearing. The court stated that the replacement briefing and hearing dates would be set, if necessary, after the jurisdictional issue was resolved. Judge Maxine M. Chesney signed the order.