Sanford v. Inhalio, Inc

Background

Roger Sanford filed a motion for default judgment against Inhalio, Inc. The amended complaint and the motion asserted that the court had diversity jurisdiction under 28 U.S.C. § 1332. That statute generally gives federal district courts jurisdiction over civil actions involving more than $75,000 and citizens of different states.

The amended complaint alleged that Sanford was a resident of California and that Inhalio was incorporated in Delaware and had its principal place of business in California. The court noted that a corporation is a citizen of both its state of incorporation and the state where it has its principal place of business. The complaint, the address in the settlement agreement and promissory note, and statements in Sanford’s declaration all appeared to indicate that Inhalio’s principal place of business was in California.

Jurisdictional issue

Based on those allegations, the court said it appeared that both Sanford and Inhalio were citizens of California. If so, the requirement that the parties be citizens of different states was not satisfied. The court also rejected the apparent reliance on a contract’s forum-selection clause, explaining that parties cannot create subject-matter jurisdiction merely by agreeing that a court will have jurisdiction.

Order

The court did not rule on Sanford’s motion for default judgment or dismiss the case at this stage. Instead, it ordered Sanford to file a response by May 17, 2024, showing why the case should not be reassigned to a district judge with a recommendation that the case be dismissed for lack of subject-matter jurisdiction.