The Management Group, LLC v. Holidaynet LLC

Background

The Management Group, LLC filed a breach-of-contract complaint on May 27, 2019, asserting that the federal court had diversity jurisdiction. The complaint named Holidaynet LLC and others as defendants. After Holidaynet failed to appear, The Management Group submitted a proposed order seeking a default judgment, which Judge Broderick signed on October 17, 2019, setting a hearing for November 7, 2019.

Holidaynet appeared at the hearing, along with its majority owner, Jo Ellen Gabel. The court asked the parties to identify the members of their limited liability companies and those members’ citizenship. The court noted that, for diversity-jurisdiction purposes, a limited liability company has the citizenship of each of its members.

The Parties’ Positions

The parties gave different accounts of the ownership and citizenship facts. They indicated that The Management Group’s owner, whom the opinion describes as a New York citizen, was also a member of Holidaynet, and that Gabel was a New Jersey citizen. The court therefore said that diversity jurisdiction might be in question and that transfer to the District of New Jersey might be appropriate.

In later letters, Holidaynet stated that the court had determined at the hearing that complete diversity was lacking. Holidaynet argued that diversity jurisdiction also would not support a transfer to New Jersey and that the court therefore lacked authority to transfer the case. The Management Group disputed Holidaynet’s account, asserting that neither it nor its sole member was a member of Holidaynet. The Management Group argued that diversity jurisdiction existed and that the court could either keep the case in the Southern District of New York or transfer it to New Jersey.

Ruling

Judge Vernon S. Broderick clarified that he had not found that diversity jurisdiction was lacking at the hearing. He also declined to make that finding in the December 3 order because the parties had provided conflicting and unsupported accounts of the jurisdictional facts. The court further noted that neither party’s letter affirmatively requested specific relief. It concluded that no action was required at that time.

The court ordered Holidaynet to answer, file a motion, or otherwise respond to the complaint by January 3, 2020. The order did not decide whether diversity jurisdiction existed, whether the case should be transferred, or whether The Management Group was entitled to a default judgment.