Yolked, Inc. v. CFG Merchant Solutions, LLC

Background

CFG Merchant Solutions, LLC removed this case from Santa Clara County Superior Court to the U.S. District Court for the Northern District of California. A party that removes a case must establish federal subject matter jurisdiction, meaning the federal court's legal authority to hear the case.

Jurisdiction issue

The court explained that federal courts are courts of limited jurisdiction and must presume that jurisdiction is absent until the party invoking it establishes otherwise. It also explained that an LLC is a citizen of every state in which its owners or members are citizens. The LLC's state of formation or the state where it does business does not determine its citizenship for this purpose.

Because the citizenship of CFG's owners or members was relevant to whether the parties were citizens of different states, the court ordered CFG to show cause—in other words, to explain in writing—why the case should not be returned to Santa Clara County Superior Court for failure to establish federal subject matter jurisdiction.

Order

CFG had to provide its written explanation by June 26, 2023. Plaintiffs could file an optional reply by June 29, 2023.

The court stated that it would not rule on CFG's pending motion to dismiss until the subject matter jurisdiction issue was determined. It therefore vacated the June 28 hearing on that motion and said it would reset the hearing if needed. The opinion does not decide whether federal jurisdiction exists, whether the case will be returned to state court, or whether the motion to dismiss will be granted or denied.