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GTC INTERNATIONAL HOLDINGS, INC. v. BURNS

United States District Court, N.D. Illinois


April 29, 2004.

GTC INTERNATIONAL HOLDINGS, INC., Plaintiff,
v.
JOHN BURNS, Defendant

The opinion of the court was delivered by: JOHN W. DARRAH, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff, GTC International Holdings, Inc., filed suit against Defendant, John Burns, seeking damages for breach of his fiduciary duty of loyalty to GTC and its shareholders, as well as a declaratory judgment affirming that the Defendant breached his fiduciary duty of care to GTC and its shareholders, breached his September employment contract, that he is not owed accelerated final payment of all outstanding principal and interest under a Secured Promissory Note in consequence of the termination of his employment, and that he continues to have non-competition and confidentiality obligations to GTC.

Presently before the Court is Defendant's Motion to Dismiss Plaintiff's Complaint or, in the Alternative, to Transfer.

  A reading of the Complaint supports the following summary of the alleged operative conduct of the parties.

  Art Wholesalers, Inc. ("AWI ") and Silver Capital Corporation ("SCC") are wholly owned by GTC. SCC wholly owns Stratton Picture Company ("Stratton"). Defendant, John Burns, was, at various relevant times, simultaneously the President and Chief Operating Officer of GTC, AWI, SCC and Stratton; a member of the Boards of Directors of GTC, AWI, SCC and Stratton; and a member of the Executive Committee of GTC. On or about September 15, 2003, OTC, AWI, SCC, Stratton and Defendant executed an Employment Agreement providing for Defendant to be employed as President and Chief Operating Officer of Plaintiff GTC, AWI, SCC and Stratton; to serve as a member of the Board of Directors and Executive Committee of GTC; and to report to the Chairman of GTC. On or about December l, 2003, Defendant resigned his positions as President and Chief Operating Officer of GTC, SCC and Stratton. Defendant remained President and Chief Operating Officer of AWI; a member of the Board of Directors and Executive Committee of GTC; and a member of the Boards of Directors of AWI, SCC and Stratton.

  GTC and AWI are members of a single enterprise engaged in a common business venture. The corporations are closely held, and their general business interests are aligned. In 2003, GTC and AWI filed a combined tax return.

  Plaintiff, GTC is a corporation organized under the laws of the state of Delaware with its principal place of business in Bedford Park, Illinois. Defendant Burns resides in the state of Arizona.

  Defendant contends Plaintiff's Complaint should be dismissed or, in the alternative, transferred because: (1) this Court lacks subject matter jurisdiction because GTC has not established diversity between the parties, GTC is not the real party in interest, and GTC has failed to join an indispensable party; and (2) venue in this district is improper.

  To complete diversity jurisdiction, two basic requirements must be satisfied: (1) complete diversity of citizenship between the plainliffs and the defendants and (2) the proper amount in controversy. Neuma, Inc. v. AMP, Inc., 259 F.3d 864, 881 (7th Cir. 2001). There is no dispute that the second prong is satisfied. As to diversity of citizenship, residence and citizenship are not synonyms — it is the latter that matters for purposes of diversity jurisdiction. Meyerson v. Harrah's East Chicago Casino, 299 F.3d 616, 617 (7th Cir. 2002).

  Generally, an individual's state of citizenship, for diversity purposes, is the state of his domicile, the state he considers his permanent home. Galva Foundry Co. v. Heiden, 924 F.2d 729, 730 (7th Cir. 1991). Physical presence in a state with intent to remain there is necessary to establish domicile for purposes of diversity jurisdiction. Denlinger v. Brennan, 87 F.3d 214, 216 (7th Cir. 1996). An allegation of residency without citizenship is insufficient to establish diversity jurisdiction. Simon v. Allstate Employee Group Med. Plan, 263 F.3d 656, 658 (7th Cir. 2001). Generally, when a party bringing an action under the court's diversity jurisdiction alleges residency but not citizenship, the court must dismiss the suit. However, a plaintiff may be granted leave to amend his complaint pursuant to 28 U.S.C. § 1653. Held v. Held, 137 F.3d 998, 1000 (7th Cir. 1998).

  In this case, the Plaintiff has alleged that the Defendant resides in Arizona. While it is true that the Defendant has not denied Arizona citizenship, he also has not confirmed it. In order for diversity jurisdiction to exist, the Plaintiff must allege diverse citizenship of the parties in its Complaint. Accordingly, Plaintiff has failed to properly plead diversity.

  For the foregoing reason, Defendant's Motion to Dismiss is granted. Plaintiff's Complaint is dismissed without prejudice to refile within fourteen days of this order. Defendant's Motion to Transfer is denied as moot.

20040429

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