System Management Group v. NCU Investors, LLC

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

SYSTEM MANAGEMENT GROUP, and Case No.: 21cv0494-L(BLM) NATIONAL EDUCATION PARTNERS, INC, , ORDER DISMISSING COMPLAINT

Plaintiffs, v. NCU INVESTORS, LLC,

Defendant.

In this action alleging violation of a Securities Purchase Agreement, Plaintiff claims federal jurisdiction based on the minimal diversity requirements under, 28 U.S.C. §1332. The initial complaint was filed on March 19, 2021, and a First Amended Complaint was filed on March 24, 2021. The amended complaint does not contain sufficient allegations to establish minimal diversity of the parties. Accordingly, the amended complaint is dismissed without prejudice and with leave to amend.

Unlike state courts, "[f]ederal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree. It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations omitted). Federal courts are constitutionally required to raise issues related to federal subject matter jurisdiction and may do so sua sponte. Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006). A federal court must satisfy itself of its jurisdiction over the subject matter before proceeding to the merits of the case. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 577, 583 (1999).

Plaintiff bears the burden of demonstrating that jurisdiction is properly before the Court. See Thornhill Publ'g Co. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979). Plaintiff relies on 28 U.S.C. §1332, which provides for federal jurisdiction over class actions where the matter in controversy exceeds $5 million, and requires that “any member of a class of plaintiffs is a citizen of a State different from any defendant.” The complaint must affirmatively allege the state of citizenship of each party. Bautista v. Pan Am. World Airlines, Inc., 828 F.2d 546, 552 (9th Cir. 1987); see also Kanter v. Warner-Lambert, Co., 265 F.3d 853 (9th Cir. 2001).

Plaintiff System Management Group (“SMG”) alleges it is a domestic nonprofit corporation organized and existing under the laws of the State of California. Plaintiff National Education Partners, Inc. (“NEP”) alleges it is a corporation organized and existing under the laws of the State of Arizona, and is a wholly owned subsidiary of SMG. Plaintiff asserts that Defendant NCU Investors LLC is a limited liability company licensed in Delaware.

The citizenship of non-corporate business entities for purposes of diversity jurisdiction is determined by examining the citizenship of each of its members. Carden v. Arkoma Assoc., 494 U.S. 185, 195-96 (1990); Johnson v. Columbia Properties Anchorage. L.P., 437 F.3d 894, 899 (9th Cir. 2006). Plaintiff alleges that Defendant is a limited liability company organized and existing under the laws of the State of Delaware, but does not allege the citizenship of each of Defendant's members. The Court is therefore unable to determine Defendant's citizenship, and whether minimal diversity is present.

Because Plaintiff does not allege the facts necessary to establish minimal diversity, complaint is dismissed without prejudice and with leave to amend for lack of subject matter jurisdiction. Plaintiff may file an amended complaint on or before May 17, 2021, in which it lists the citizenship of each of Defendant NEP’s members.

IT IS SO ORDERED. \|Dated: April 14, 2021

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H . James Lorenz United States District Judge