Health and Happiness International Holdings Limited v. Stoltze Specialty…
Health and Happiness International Holdings Limited v. Stoltze Specialty Processing, LLC
- Rochon
- 1:22-cv-10380
- U.S. District Court · Southern District of New York
- 4
In Health and Happiness v. Stoltze, Judge Rochon allowed jurisdictional discovery because the diversity-citizenship allegations were incomplete.
Health and Happiness International Holdings Limited must provide additional information about its own citizenship and the citizenship of Stoltze Specialty Processing, LLC’s members and related trust interests. The parties must participate in the limited jurisdictional discovery, and the action may be dismissed if complete diversity cannot be alleged.
What happened
In Health and Happiness International Holdings Limited v. Stoltze Specialty Processing, LLC, the plaintiff relied on diversity jurisdiction, which requires the parties’ citizenship information to show that no opposing parties share citizenship.
The plaintiff did not provide enough information about the citizenship of Stoltze Specialty Processing, LLC’s members, trusts, trustees, or beneficiaries. It also did not adequately explain how to determine the plaintiff’s own citizenship. The plaintiff asked for more jurisdictional discovery rather than having the case dismissed immediately.
Judge Jennifer L. Rochon granted the request for jurisdictional discovery. She ordered limited document requests and written questions, required the plaintiff to file the missing citizenship information by January 9, 2023, and warned that the action may be dismissed for lack of subject-matter jurisdiction if the plaintiff cannot allege a good-faith basis for complete diversity.
The detailed version
- Health and Happiness International Holdings Limited v. Stoltze Specialty… · No. 1:22-cv-10380
- Rochon
- Dec. 19, 2022
Background
Health and Happiness International Holdings Limited (H&H) filed the action based on diversity jurisdiction. The court had previously ordered H&H to supplement its allegations about the parties’ citizenship, including the citizenship of each member of any limited liability company and the ownership chain beneath those members.
H&H stated that Stoltze Specialty Processing, LLC (SSP) had members including Greg Johnson and 10 trusts. But H&H did not provide the citizenship of those members or enough information to determine the trusts’ citizenship. The opinion explains that, depending on the type of trust, citizenship may depend on the citizenship of trustees or on the citizenship of the trust’s members, including beneficiaries.
H&H also did not adequately state its own citizenship. Its complaint described H&H as a limited liability company organized and existing under the laws of Hong Kong but did not identify its members. H&H instead stated that it had shareholders and identified shareholders with at least a 5% interest in a class of voting shares. It did not provide authority for treating H&H differently from other limited liability companies when determining citizenship for diversity jurisdiction.
Request for jurisdictional discovery
H&H asked for jurisdictional discovery, meaning limited information-gathering about facts needed to determine whether the court has subject-matter jurisdiction. The court noted that district courts have discretion to allow such discovery when citizenship allegations are incomplete, but that the discretion should be used cautiously.
The court had already given H&H an opportunity to supplement its citizenship allegations. After considering H&H’s additional information, sworn affidavits, and supporting documents, the court granted H&H’s request for leave to conduct jurisdictional discovery.
Order and effect
The court ordered the parties to complete discovery limited to document requests and interrogatories sufficient to identify all SSP members and their citizenship. H&H must file a submission identifying SSP’s members and citizenship as of the date the action began. The submission must also identify the members and citizenship of any member that is itself a limited liability company, as well as the trustees, beneficiaries, and other information needed to determine the citizenship of SSP’s trusts.
H&H must also properly state its own citizenship either by identifying all of its members and their citizenship or by providing authority for treating H&H differently from a limited liability company for diversity purposes. H&H must serve and file proof of service of the specified filings and orders by December 22, 2022, and file the citizenship submission by January 9, 2023. Judge Jennifer L. Rochon stated that the action may be dismissed for lack of subject-matter jurisdiction, without further notice, if H&H cannot allege a good-faith basis for complete diversity by that deadline. The order did not decide the underlying claims.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.