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 Defendant's
fiduciary duty to Plaintiff and its shareholders. Plaintiff also
seeks a declaratory judgment affirming, among other things, that:
(1) Defendant 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 (2)
under certain conditions, a failure to make any payment due under
the Secured Promissory Note would not constitute a default.
Presently before the Court is Defendant's Motion to Dismiss
Plaintiff's Amended Complaint or, in the Alternative, to
Transfer. The basis for subject matter jurisdiction in
Plaintiff's Complaint is diversity jurisdiction. Defendant
contends that the real party in interest, New Art Co., has not
been added to this action by Plaintiff; Defendant also contends
that New Art Co. is an indispensable party to this action. Under
either analysis, if New Art Co. was added as a party, complete
diversity would not exist, and the matter would be subject to
dismissal for lack of subject matter jurisdiction because New Art
Co. and Defendant are both citizens of Arizona. For the following
reasons, Defendant's Motion to Dismiss is granted. LEGAL STANDARD
For subject matter jurisdiction to exist in a matter alleging
diversity of citizenship, two requirements must be met. First,
the amount in controversy between the parties must exceed
$75,000.00. 28 U.S.C. § 1332(a). Second, complete diversity of
citizenship must exist between the plaintiffs and the defendants.
28 U.S.C. § 1332(a). A corporation is deemed to be a citizen of
any state where it is incorporated and any state where it has its
principal place of business. 28 U.S.C. § 1332(c)(1).
Generally, if subject matter jurisdiction is not apparent from
the face of a complaint, the allegations from the complaint are
taken as true. United Phosphorus, Ltd. v. Angus Chem. Co.,
322 F.3d 942, 946 (7th Cir. 2003) (United Phosphorus). However, "if
the complaint is formally sufficient but the contention is that
there is in fact no subject matter jurisdiction, the movant may
use affidavits and other material to support the motion." United
Phosphorus, 322 F.3d at 946. "The burden of proof is on the
party asserting jurisdiction." United Phosphorus,
322 F.3d at 946. Evidence may be weighed to determine whether subject matter
jurisdiction has been established. United Phosphorus,
322 F.3d at 946.
Plaintiff is a Delaware corporation with its principal place of
business in Illinois. Defendant is a citizen of Arizona. New Art
Co. is Plaintiff's wholly-owned subsidiary and is incorporated in
and, therefore, is a citizen of Arizona. BACKGROUND
In January 2003, Defendant sold all the assets of his business
to New Art Co. Defendant then signed an employment agreement and
a non-competition agreement with New Art Co.*fn1 These
agreements were later superceded by other agreements among
Plaintiff, New Art Co., other wholly-owned subsidiaries of
Plaintiff, and Defendant.
Defendant and New Art Co. also executed a Secured Promissory
Note which provides that, in the event of certain defaults by New
Art Co., the principal and outstanding interest under the Secured
Promissory Note will become immediately due and payable. It
further provides that under certain conditions, a failure to make
any payment due under the Note does not constitute a default.
Defendant and New Art Co. were the only parties to the Secured
Promissory Note. The Secured Promissory Note is to be governed
according to Arizona law.
Pursuant to these agreements, Defendant became President and
Chief Operating Officer of Plaintiff and its subsidiaries.
Thereafter, Defendant resigned from many of these positions but
remained as President and Chief Operating Officer of New Art Co.
Plaintiff terminated Defendant's employment with New Art Co. for
cause, in part because of Defendant's alleged failure to perform
The Real Party in Interest
Defendant contends that Plaintiff is not the real party in
interest to most of the claims in the Amended Complaint.
Specifically, Defendant argues that New Art Co., and not
Plaintiff, is a party to the Secured Promissory Note; therefore, only New Art Co.
can seek a declaration concerning its obligations under the
Secured Promissory Note.
In response, Plaintiff claims that it is in privity to the
Secured Promissory Note and can seek a determination of its
rights under the Note. Plaintiff also asserts that it can assert
the claims under the Secured Promissory Note because the parent
corporation, Plaintiff, is the real party interest for the claims
of its wholly-owned subsidiary, New Art Co. Plaintiff further
asserts that any claims that could be asserted by New Art Co. are
merely incidental to Plaintiff's claims relating to Defendant's
Federal Rule of Civil Procedure 17(a) states that "[e]very
action shall be prosecuted in the name of the real party in
interest." To determine whether a party is a "real party in
interest" in a diversity proceeding, a court "must look to the
applicable state substantive law." Am. Nat'l ...