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Rixoma Inc. v. Trendtek LLC

United States District Court, N.D. Texas, Dallas Division

December 12, 2017

RIXOMA, INC., Plaintiff,
v.
TRENDTEK, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge.

         On September 29, 2017, Plaintiff Rixoma, Incorporated (“Plaintiff”) filed this action against Defendant Trendtek, LLC (“Defendant”), seeking a declaration from the court, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, that a letter of intent entered into by the parties pertaining to a license agreement “is not a binding contract or agreement between the two companies but rather an unenforceable and illusory ‘agreement to agree.'” Complaint for Declaratory Judgment 1 (Doc. 1). Plaintiff alleges that “[t]his court has subject matter jurisdiction over the claims presented pursuant to 28 U.S.C. § 1332, as the amount in controversy exceeds the statutory minimum, and there is complete diversity of citizenship as between Plaintiff, an Oklahoma citizen, and Defendant, a Texas citizen.” See Id. ¶ 4. For the reasons that follow, the court concludes that Plaintiff's jurisdictional allegations are deficient, as the court is unable to determine whether its exercise of subject matter jurisdiction is appropriate on the face of the pleadings. In addition to pleading deficiencies with respect to diversity of citizenship and the amount in controversy requirements, the court puts Plaintiff on notice that it has serious doubts that this declaratory judgment action is ripe for adjudication.

         I. Subject Matter Jurisdiction

         A federal court has subject matter jurisdiction over civil cases “arising under the Constitution, laws, or treaties of the United States, ” or over civil cases in which the amount in controversy exceeds $75, 000, exclusive of interest and costs, and in which diversity of citizenship exists between the parties. 28 U.S.C. §§ 1331, 1332. Federal courts are courts of limited jurisdiction and must have statutory or constitutional power to adjudicate a claim. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994) (citations omitted); Home Builders Ass'n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998). Absent jurisdiction conferred by statute or the Constitution, they lack the power to adjudicate claims and must dismiss an action if subject matter jurisdiction is lacking. Id.; Stockman v. Federal Election Comm'n, 138 F.3d 144, 151 (5th Cir. 1998) (citing Veldhoen v. United States Coast Guard, 35 F.3d 222, 225 (5th Cir. 1994)).[1] A federal court must presume that an action lies outside its limited jurisdiction, and the burden of establishing that the court has subject matter jurisdiction to entertain an action rests with the party asserting jurisdiction. Kokkonen, 511 U.S. at 377 (citations omitted). “[S]ubject-matter jurisdiction cannot be created by waiver or consent.” Howery v. Allstate Ins. Co., 243 F.3d 912, 919 (5th Cir. 2001).

         A federal court has an independent duty, at any level of the proceedings, to determine whether it properly has subject matter jurisdiction over a case. Ruhgras AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999) (“[S]ubject-matter delineations must be policed by the courts on their own initiative even at the highest level.”); McDonal v. Abbott Labs., 408 F.3d 177, 182 n.5 (5th Cir. 2005) (A “federal court may raise subject matter jurisdiction sua sponte.”) (citation omitted).

         A. 28 U.S.C. § 1332

         Diversity of citizenship exists between the parties only if each plaintiff has a different citizenship from each defendant. Getty Oil Corp. v. Insurance Co. of North America, 841 F.2d 1254, 1258 (5th Cir. 1988). Otherwise stated, 28 U.S.C. § 1332 requires complete diversity of citizenship; that is, a district court cannot exercise jurisdiction if any plaintiff shares the same citizenship as any defendant. See Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857 (5th Cir. 2003) (citation omitted). “[T]he basis upon which jurisdiction depends must be alleged affirmatively and distinctly and cannot be established argumentatively or by mere inference.” Getty, 841 F.2d at 1259 (citing Illinois Cent. Gulf R.R. Co. v. Pargas, Inc., 706 F.2d 633, 636 n.2 (5th Cir. 1983)). Failure to allege adequately the basis of diversity mandates remand or dismissal of the action. See Stafford v. Mobil Oil Corp., 945 F.2d 803, 805 (5th Cir. 1991). A notice of removal “must allege diversity both at the time of the filing of the suit in state court and at the time of removal.” In re Allstate Ins. Co., 8 F.3d 219, 221 (5th Cir. 1993) (quotation marks and citations omitted). Such failure, however, is a procedural defect and may be cured by filing an amended notice. Id. n.4.

         A partnership or unincorporated association's citizenship is determined by the citizenship of each of its partners. Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990). The citizenship of a limited liability company “is determined by the citizenship of all of its members.” Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008) (citations omitted).

         A corporation is a “citizen of every State . . . by which it has been incorporated and of the State . . . where it has its principal place of business[.]” 28 U.S.C. § 1332(c)(1). In defining or explaining the meaning of the term “principal place of business, ” the Supreme Court stated:

We conclude that “principal place of business” is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's “nerve center.” And in practice it should normally be the place where the corporation maintains its headquarters-provided that the headquarters is the actual center of direction, control, and coordination, [that is], the “nerve center, ” and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).

Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010).

         “When a plaintiff invokes federal-court jurisdiction, the plaintiff's amount-in-controversy allegation is accepted if made in good faith.” Dart Cherokee Basin Operating Co., LLC v. Owens, ___ U.S. ___, 135 S.Ct. 547, 553 (2014) (collecting cases).

         B. The Doctrine of Ripeness

         Article III of the Constitution confines the federal courts to adjudicating actual “cases” and “controversies.” U.S. Const. art. III, § 2. In an attempt to give meaning to Article III's “case or controversy requirement, ” the courts have developed a series of principles termed “justiciability doctrines.” United Transp. Union v. Foster, 205 F.3d 851, 857 (5th Cir. 2000). One such doctrine is ripeness. “Ripeness doctrine ‘is drawn both from Article III limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction.'” Opulent Life Church v. City of Holly Springs,697 F.3d 279, 286 (5th Cir. 2012) (quoting Reno v. Catholic Soc. Servs., Inc., 509 U.S. 43, 58 n. 18 (1993)); Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp.,559 U.S. 662, 670 n. 2 (2010) (“Ripeness reflects constitutional considerations that implicate Article III limitations on judicial power, as well as prudential reasons for refusing to exercise jurisdiction.” (internal quotation marks omitted)). Ripeness is “peculiarly a question of timing whose basic rationale is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements.” Opulent Life Church, 697 F.3d at 286 (internal punctuation and citations omitted). The ripeness doctrine separates those matters that are premature because the injury is speculative and may never occur from those that are appropriate for judicial review. See Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967), overruled on other grounds, Califano v. Sanders,430 U.S. 99 (1977). “Declaratory judgments cannot be used to seek an opinion advising what the law would be on a hypothetical set of facts.” Vantage Trailers, Inc. v. Beall Corp., 567 F.3d 745, 748 (5th Cir. 2009) (citation omitted). A case is ripe for adjudication if all remaining questions are legal and further factual development is unnecessary. New Orleans Pub. Serv., Inc. v. Council of the City of New Orleans,833 F.2d 583, 587 (5th ...


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