Carebourn Capital, L.P. v. Darkpulse, Inc.

Background

Carebourn Capital, L.P. filed a Minnesota state-court lawsuit against Darkpulse, Inc., alleging breach of contract and seeking a declaratory judgment and attorneys’ fees. The alleged breach involved securities-purchase agreements under which Carebourn loaned Darkpulse approximately $500,000. Carebourn alleged that Darkpulse failed to repay the loan with interest and continued selling common stock designated as collateral.

Darkpulse removed the case to federal court. Carebourn moved to remand, meaning it asked the federal court to return the case to state court because the federal court lacked subject-matter jurisdiction. Darkpulse argued that federal jurisdiction existed under both diversity jurisdiction and federal-question jurisdiction.

Diversity Jurisdiction

Diversity jurisdiction generally requires more than $75,000 in controversy and complete diversity of citizenship, meaning no plaintiff shares citizenship with any defendant. A limited partnership has the citizenship of each of its partners, and a limited liability company has the citizenship of each of its members.

Darkpulse argued that Carebourn was solely a Minnesota citizen because Chip Rice was allegedly its only partner. The court found that the evidence did not establish that Rice was currently a partner or Carebourn’s only partner. The parties’ 2018 agreement identified Carebourn Partners, LLC, as a general partner and Rice as a managing member. The record did not identify the members of Carebourn Partners, LLC or establish whether Carebourn had other members. Because Carebourn’s citizenship remained uncertain, Darkpulse did not prove that complete diversity existed.

Federal-Question Jurisdiction

Darkpulse also argued that the agreements might be unenforceable because Carebourn may have acted as an unregistered securities dealer in violation of federal law. The court applied the well-pleaded complaint rule, which generally examines the plaintiff’s complaint rather than a possible defense or counterclaim. Carebourn’s complaint asserted state-law claims, and its requested declaratory relief did not, on its face, arise under federal law.

The court explained that a possible federal securities-law defense or counterclaim could not support removal. The agreements were not automatically legally nonexistent merely because a party might have violated federal securities law; Darkpulse could potentially seek rescission through a counterclaim or affirmative defense. The court expressly stated that it was not deciding whether Carebourn was acting as an unregistered dealer.

Attorneys’ Fees and Costs

Carebourn requested attorneys’ fees and costs incurred because of the removal. The court denied that request. Although the court remanded the case, it found that Darkpulse’s argument that Rice was Carebourn’s sole member and that the parties were completely diverse was not objectively unreasonable because Carebourn’s citizenship was uncertain.

Disposition

Judge Wilhelmina M. Wright granted Carebourn’s motion to remand and ordered the case remanded to Minnesota District Court, Fourth Judicial District, Hennepin County, under 28 U.S.C. § 1447(c). The court denied Carebourn’s request for attorneys’ fees and costs.