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Durbin v. Welcov Healthcare, LLC

United States District Court, D. Montana, Great Falls Division

October 9, 2018

JAIME [sic] DURBIN individually, and as conservator for his mother, JOAN DURBIN, Plaintiff,
v.
Welcov Healthcare, LLC, Lewiston Healthcare #2, LLC d/b/a The Villa Assisted Living at Valle Vista, Defendants,

          ORDER

          BRIAN MORRIS, UNITED STATES DISTRICT COURT JUDGE.

         Defendant Lewiston Health Care #2, LLC (“LHC”) has filed a motion to dismiss the Fourth Amended Complaint filed by Plaintiff Jaime Durbin (“Durbin”) based on a lack of subject matter jurisdiction. (Doc. 112). Defendant Welcov Healthcare, LLC (“Welcov”) likewise has filed a motion to dismiss the Fourth Amended Complaint for failure to state a claim. (Doc. 110). The Court conducted a hearing on these motions on October 1, 2019.

         Background

         Joan Durbin (“Ms. Durbin”) is a citizen of Montana who resided at The Villa Assisted Living at Valle Vista (“The Villa”). (Doc. 113 at 4). Ms. Durbin was twice injured when she fell at The Villa. The first fall took place on December 5, 2016, and again on January 22, 2017. (Doc. 65 ¶ 13).

         Durbin filed a complaint against Welcov, an Arizona LLC, in this Court in which he alleged that Welcov owned and operated The Villa. (Doc. 1). LHC sought to intervene as a necessary and indispensable party. (Doc. 75-76). Durbin amended his complaint and added LHC as a defendant before the Court had ruled on LHC's motion to intervene. (Doc. 103). The Court now has before it Durbin's Fourth Amended Complaint.

         LHC represents that it owns and operates The Villa, employs all staff at The Villa, and maintains the premises of The Villa. (Doc. 105 at 3). The parties agree that LHC exists as an LLC organized under the laws of Montana with LE Subtenant Holding LLC as the sole owning member (“LE Subtenant”). (Doc. 95). The parties further agree that LE Subtenant, in turn, is a citizen of Minnesota. (Doc. 95, Ex. 1-2).

         Subject Matter Jurisdiction

         A federal court's diversity jurisdiction extends “to all civil actions where the matter in controversy exceeds . . . $75, 000 . . . and is between . . . [c]itizens of different States.” 28 U.S.C. § 1332(a)(1). Diversity jurisdiction depends on the form of the entity in cases where an entity rather than a person is a litigant. Congress has determined that a corporation qualifies as a citizen only of (1) the state where its principal place of business is located, and (2) the state in which it incorporated. 28 U.S.C. § 1332(c)(1). The Supreme Court has determined that an unincorporated association, such as a limited partnership, possesses the citizenships of all its members. Carden v. Arkoma Assocs., 494 U.S. 185, 195-196, (1990).

         A Limited Liability Corporation (“LLC”) possesses attributes of both a partnership and a corporation. Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2009). Despite possessing some traits that resemble a corporation, every circuit that has addressed the issue treats an LLC like a partnership “for the purposes of diversity jurisdiction.” Id.; 3123 SMB LLC v. Horn, 880 F.3d 461, 465 (9th Cir. 2018); See Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir. 2004); GMAC Commercial Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 828-29 (8th Cir. 2004); Rolling Greens MHP, L.P. v. Comcast SCH Holdings LLC, 374 F.3d 1020, 1022 (11th Cir. 2004); Handelsman v. Bedford Village Assocs. Ltd. P'ship, 213 F.3d 48, 51 (2d Cir. 2000); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998). The Ninth Circuit joined all other circuits in treating an LLC as a citizen of every state of which its owners and members are citizens. Johnson, 437 F.3d at 899.

         Discussion

         LHC argues that an LLC organized under Montana law must be treated as a corporation for purposes of diversity jurisdiction under 28 U.S.C. § 1332. (Doc. 105 at 15). LHC points to the unique nature of the Montana Limited Liability Company Act (“the Act”) as justification for this Court to ignore the controlling Ninth Circuit precedent in Johnson. The Act requires an LLC organized under Montana law to file its organizational documents and records with the Montana Secretary of State. MCA § 35-8-108(2). The Act further directs that Montana law will regulate a Montana LLC's organization and affairs. (Doc. 105 at 16-17). Corporations in Montana must file similar reports and remain subject to similar organizational regulations. (Doc. 105 at 16).

         LHC argues that similar filing mechanisms and regulations that govern a Montana LLC and a Montana corporation illustrate the uniquely corporate characteristics in a Montana LLC. Accordingly, LHC argues that this Court must treat an LLC organized under Montana law like a corporation for purposes of diversity jurisdiction under § 1332. This rational would require the Court to conclude that an LLC stands as a separate entity distinct from its members for purposes of § 1332. (Doc. 105 at 17). LHC failed to explain how the Act differs in any material way from the laws of other states that allow for the formation of an LLC.

         LHC nevertheless asks this Court to look past the Ninth Circuit decision in Johnson. LHC claims repeatedly that the Ninth Circuit premised Johnson on the “common law presumption that unincorporated associations are not legal entities independent of their members.” (Doc. 105 at 18-19) (citing Johnson, 437 F.3d at 899)). LHC points to the decision of the Montana Supreme Court in Beach v. State, 348 P.3d 629 (2015), to support the undisputed proposition that a law passed by the Montana legislature replaces the common law that previously controlled the issue. No. action of the Montana legislature to create any kind of unique corporate form overcomes the authority of Congress, however, to establish the parameters of diversity jurisdiction under § 1332. This Court lacks the ability to ignore applicable law within the Ninth Circuit that supports the very rule that LHC seeks to hurdle.

         The Ninth Circuit recently remanded a case to the district court in Stalwart Capital, LLC v. iCap Pac. Nw. Opportunity & Income Fund, LLC, 715 Fed.Appx. 794, 794 (9th Cir. 2018), where a New Jersey LLC sued two Washington LLCs based on diversity of jurisdiction. The Ninth Circuit refused on appeal to analyze the merits of the case until the district court determined that diversity jurisdiction properly had been grounded. Id. The Ninth Circuit instructed the district court on remand to apply the principles in John ...


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