Dorilton Capital Management LLC v. Stilus LLC
- Rochon
- 1:23-cv-03789
- U.S. District Court · Southern District of New York
- 3
In Dorilton Capital v. Stilus, Judge Rochon found diversity allegations inadequate, denied jurisdictional discovery without prejudice, and allowed another submission.
Dorilton Capital Management LLC, Williams IP Holdings LLC, Stilus LLC, and Claudia Schwarz; the plaintiffs were required to provide additional jurisdictional allegations or face dismissal of the action.
What happened
In Dorilton Capital Management LLC v. Stilus LLC, the court found that the plaintiffs had not adequately shown that the parties were citizens of different places as required for federal diversity jurisdiction. The plaintiffs identified themselves as citizens of Bermuda and the Marshall Islands, while alleging that Claudia Schwarz was a German citizen and that Stilus LLC shared her citizenship.
The court explained that these allegations showed the plaintiffs and defendants were all citizens of foreign states, which did not support diversity jurisdiction under the law. The plaintiffs argued that Schwarz should be treated as a Florida citizen because she owned a Florida residence and vehicle, but the court rejected that basis on the allegations presented.
Judge Jennifer L. Rochon gave the plaintiffs one additional opportunity, until May 23, 2023, to provide a good-faith basis for diversity jurisdiction. Judge Rochon denied the request for jurisdictional discovery without prejudice, meaning the plaintiffs could renew it if they later alleged facts supporting jurisdiction; the court stated that the action would be dismissed without further notice if they could not do so.
The detailed version
- Dorilton Capital Management LLC v. Stilus LLC · No. 1:23-cv-03789
- Rochon
- May 15, 2023
Background
The plaintiffs are Dorilton Capital Management LLC and Williams IP Holdings LLC. The defendants are Stilus LLC and Claudia Schwarz. In an earlier order, the Court found that the complaint did not adequately allege diversity of citizenship, which is a basis for federal subject-matter jurisdiction when the parties meet specific citizenship requirements. The Court directed the plaintiffs to file a supplemental submission explaining the good-faith basis for jurisdiction.
The plaintiffs’ supplemental submission alleged that the plaintiffs were citizens of Bermuda and the Marshall Islands. It alleged that Schwarz was a German citizen with residences in Florida, Bermuda, and Germany. The plaintiffs argued that Schwarz should be treated as a Florida citizen because she allegedly owned a residence and vehicle there. They also alleged that Schwarz was Stilus’s only member, so Stilus had the same citizenship as Schwarz.
Jurisdictional Analysis
The Court concluded that these allegations did not establish diversity jurisdiction. Under 28 U.S.C. § 1332(a)(2), the relevant citizenship rules distinguish between citizens of a U.S. state and citizens or subjects of a foreign state, subject to an exception involving certain permanent residents domiciled in the same state as the opposing party. The Court explained that a person may remain a citizen of a foreign state for diversity purposes even if that person is a permanent resident and domiciliary of a U.S. state. Based on the allegations, the plaintiffs were citizens of foreign states and the defendants were also citizens of a foreign state.
Disposition
The Court allowed the plaintiffs one additional opportunity, by May 23, 2023, to allege a good-faith basis for diversity jurisdiction. The plaintiffs were required to identify the citizenship of every party, specify the provision of 28 U.S.C. § 1332 on which they relied, and cite supporting case law. The Court stated that the action would be dismissed without further notice if the plaintiffs could not allege a good-faith basis for complete diversity of citizenship.
The plaintiffs alternatively requested permission to conduct jurisdictional discovery, meaning discovery directed at facts relevant to whether the court has jurisdiction. The Court denied that request without prejudice to renewal if the plaintiffs later alleged facts showing a possible basis for diversity jurisdiction.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.