United States District Court, D. Montana, Butte Division
FINDINGS & RECOMMENDATION
Jeremiah C. Lynch United States Magistrate Judge.
breach of contract action comes before the Court on
Defendants JG Worldwide, LLC, Jena Gardner, and James
Saleh's motion to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(1).
For the reasons set forth below, Defendants' motion
should be denied.
Jeff Welch and Tanya White were the shareholders of a Montana
corporation by the name of Mercury Advertising, Inc. On March
2, 2018, Mercury Advertising, its shareholders, and Defendant
JG Worldwide, LLC, entered into a Share Purchase Agreement.
Under the terms of the Purchase Agreement, Plaintiffs sold
all shares in Mercury to JG Worldwide for purchase price of
$310, 000. (Doc. 12-2). Also on March 2, 2018, JG Worldwide
executed a Secured Promissory Note for that amount, payable
to Plaintiffs in 15 monthly installments, and bearing
interest at the rate of 3.77 % per annum. (Doc. 1-1)
with the Promissory Note, Defendants Jena Gardner and James
Saleh executed a Guaranty Agreement by which they guaranteed
payment of JG Worldwide's obligation under the Promissory
Note. (Doc. 1-3). To secure payment of the purchase price, JG
Worldwide entered into a Security Agreement with Plaintiffs,
granting them a secured interest in Mercury Advertising's
stock and assets for such time as any amount of the purchase
price remained unpaid. (Doc. 12-2). JG Worldwide initially
made timely monthly payments in May, June, July, and August
2018, but was nearly two months late with its September 2018
payment and has not made any subsequent payments on the
promissory note. (Doc. 17, at 2).
commenced this diversity action in January 2019, asserting a
claim against JG Worldwide for breach of the Promissory Note,
and a claim against Gardner and Saleh for breach of the
Guaranty Agreement. (Doc. 1). In lieu of answering,
Defendants filed the pending motion to dismiss the Complaint
for lack of diversity subject matter jurisdiction under Rule
motion to dismiss under Federal Rule of Civil Procedure
12(b)(1) challenges the court's subject matter
jurisdiction over the claims asserted. “Once
challenged, the party asserting subject matter jurisdiction
has the burden of proving its existence.”
Rattlesnake Coalition v. United States Environmental
Protection Agency, 509 F.3d 1095, 1102 n. 1
(9th Cir. 2007).
defendant may pursue a Rule 12(b)(1) motion to dismiss for
lack of jurisdiction either as a facial challenge to the
allegations of a pleading, or as a substantive challenge to
the facts underlying the allegations. Savage v. Glendale
Union High School, Dist. No. 205, Maricopa County, 343
F.3d 1036, 1039 n.2 (9thCir. 2003). A facial
challenge to the jurisdictional allegations is one which
contends that the allegations “are insufficient on
their face to invoke federal jurisdiction.” Safe
Air for Everyone v. Meyer, 373 F.3d 1035, 1039
(9th Cir. 2004). In a facial challenge the court
must assume the allegations in the complaint are true and it
must “draw all reasonable inferences in
[plaintiff's] favor.” Wolfe, 392 F.3d at
contrast, in a factual attack, the challenger disputes the
truth of the allegations that, by themselves, would otherwise
invoke federal jurisdiction.” Safe Air for
Everyone, 373 F.3d at 1039. In resolving such a factual
attack, the court “may review evidence beyond the
complaint without converting the motion to dismiss into a
motion for summary judgment.” Safe Air for
Everyone, 373 F.3d at 1039. If the moving party has
“converted the motion to dismiss into a factual motion
by presenting affidavits or other evidence properly brought
before the court, the party opposing the motion must furnish
affidavits or other evidence necessary to satisfy its burden
of establishing subject matter jurisdiction.” Safe
Air for Everyone, 373 F.3d at 1039 (quoting Savage
v. Glendale Union High Sch., 343 F.3d 1036, 1039 n. 2
(9th Cir. 2003)). In looking to matters outside
the pleadings, the Court must “resolve all disputes of
fact in favor of the non-movant...similar to the summary
judgment standard.” Dreier v. United States,
106 F.3d 844, 847 (9thCir. 1996). As with a motion
for summary judgment, the party moving to dismiss for lack of
subject matter jurisdiction “should prevail only if the
material jurisdictional facts are not in dispute and the
moving party is entitled to prevail as a matter of
law.” Casumpang v. Int'l Longshoremen's
& Warehousemen's Union, 269 F.3d 1042, 1060-61
(9th Cir. 2001).
Court to have subject matter jurisdiction based on diversity,
all plaintiffs must be of different citizenship than all
defendants, and the amount in controversy must exceed $75,
000. See 28 U.S.C. § 1332. The Complaint seeks more than
$200, 000 in damages, thereby satisfying the amount in
controversy requirement for diversity jurisdiction. (Doc. 1,
at 7-8). With respect to diversity of citizenship, the
Complaint alleges that Plaintiffs are citizens of Montana,
the individual Defendants are citizens of Connecticut, and JG
Worldwide is a limited liability company organized in
Delaware with a principal place of business in New York.
(Doc. 1, at 2). Defendants do not dispute that the amount in
controversy requirement is satisfied, but argue Plaintiffs
have not met their burden of establishing diversity
jurisdiction for two reasons.
they contend the Complaint is deficient on its face because
it does not properly allege the citizenship of JG Worldwide.
“For purposes of diversity jurisdiction, the
citizenship of a limited liability company is determined by
the citizenship of its members.” 15A Moore's
Federal Practice § 102.57. See also Johnson v.
Columbia Properties Anchorage, LP, 437 F.3d 894, 899
(9th Cir. 2006). As Defendants correctly point
out, the original Complaint is deficient on its face because
while it alleges JG Worldwide's state of organization and
principal place of business, it says nothing about the
identity or citizenship of JG Worldwide's members. (Doc.
1, at 2). After Defendants filed their motion, however, the
parties entered the following stipulation: “JG
Worldwide is a single member LLC, organized in Delaware with
principal business activities in New York and Connecticut. JG
Worldwide's members are JJT Acquisitions, another
Delaware LLC, whose members are James Saleh, Jena Gardner,
and Tom Jolley, a citizen of Utah.” (Doc. 17, at ¶
2). Consistent with this stipulation, Plaintiffs filed an
Amended Complaint that properly alleges the citizenship of JG
Worldwide. (Doc. 23, at ¶ 6). Thus, to the
extent Defendants move to dismiss based on Plaintiffs'
failure to adequately allege JG Worldwide's citizenship,
the motion is moot.
Defendants raise a factual challenge to subject matter
jurisdiction by arguing that Mercury Advertising, a Montana
corporation, is a necessary and indispensable party whose
joinder will destroy complete diversity of citizenship.
Plaintiffs do not dispute that joining Mercury Advertising as
a defendant would ...