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Missouri Franchise Development Systems, LLC v. McCord

May 3, 2007

MISSOURI FRANCHISE DEVELOPMENT SYSTEMS, LLC AND BRIAN BROWN, PLAINTIFFS,
v.
JOE MCCORD AND DONALD HARKLEROAD; DEFENDANTS.



The opinion of the court was delivered by: Herndon, District Judge

MEMORANDUM AND ORDER

I. INTRODUCTION AND BACKGROUND

Pending before the Court is Plaintiffs' Motion to Remand for lack of subject matter jurisdiction. (Doc. 9.) Plaintiffs assert that the Court lacks authority to adjudicate this matter because the amount in controversy requirement mandated by 28 U.S.C. § 1332 has not been met. However, on the Court's initial screening of the Complaint (Doc. 2-1) and Defendant's Notice of Removal (Doc. 2), the Court noted an additional, potential jurisdictional problem: the parties had failed to properly plead the citizenship of the members of Missouri Franchise Development Systems, L.L.C. The Seventh Circuit deems an LLC a citizen "of every state of which any member is a citizen." Belleville Catering Co. v. Champaign Market Place, LLC, 350 F.3d 691, 692 (7th Cir. 2003)(citing Cosgrove v. Bartolotta, 150 F.3d 729 (7th Cir. 1998). Therefore, the citizenship of each member of the LLC must be pled when a party is claiming diversity as the basis for federal subject matter jurisdiction. In an Order dated April 18, 2007, the Court directed Defendants to submit a jurisdictional brief addressing the citizenship of each member of Missouri Franchise Development Systems, L.L.C., as well as each individually named plaintiff and defendant. (Doc. 22.) On May 1, 2007, Defendants submitted a jurisdictional memo, which sufficiently establishes the citizenship of each member of Missouri Franchise Development Systems, L.L.C. and every other individually named plaintiff and defendant. (Doc. 27.) Based on Defendant's jurisdictional memo, the Court is now satisfied that the parties are diverse. In addition, the Court finds that the amount in controversy is satisfied; therefore, the Court finds that subject matter jurisdiction does exist.

On November 20, 2006, Plaintiffs Missouri Franchise Development Systems, LLC, and Brian Brown ("Plaintiffs") filed suit against Defendants Joe McCord and Donald Harkleroad ("Defendants") in the Circuit Court of St. Clair County, Illinois alleging various causes of action stemming from Defendants' alleged breach of contract, specifically, the "Area Director Agreement" ("ADA"). The Complaint alleges that Defendants, as representatives of the Steak-Out food delivery service, induced Plaintiffs into becoming Area Development Directors for Steak-Out franchises. Plaintiffs further alleged that the Defendants fraudulently misrepresented the terms of the parties' agreement and the extent of Plaintiffs' exclusive regional development rights which, coupled with other factors, amounted to a material breach of the ADA.

The damages claimed in the Complaint may be roughly separated into expenses Plaintiffs incurred in reliance on the ADA and other damages resulting from Plaintiffs' upset expectancy that the ADA would be carried out. Regarding the first category of damages, costs incurred in reliance that the ADA would be fulfilled, Plaintiffs claimed in their Complaint that "[a]s a direct and proximate result of Defendant's fraudulent, false and intentional misrepresentations, Plaintiffs were induced into expending substantial sums of money and time into the business of developing Steak-Out franchises within the geographic territory purportedly granted to Plaintiffs. These sums are in excess of the jurisdictional amount." (Doc. 2, paragraph 14). The jurisdictional amount to which the Complaint refers is "an amount greater than $50,000, exclusive of costs, interest and attorney's fees," as required by Illinois law for the action to be brought in the major civil division of its circuit courts. (Doc. 2). Additionally, in Count III, the breach of contract claim, Plaintiffs allege:

In addition to the foregoing acts and omissions by Defendants, Defendants also violated the ADA in the following respects:

a. Failed to pay the Franchise fees as required in the ADA; . . .

d. Improperly transferred the O'Fallon, Illinois franchise to Maryville, Illinois in violation of the ADA; . . .

g. Failed to make payments for the Franchise fee due Plaintiffs as it relates to the Howdershell and St. Charles, Missouri Steak-Out locations . . .

(Doc. 2, paragraph 21).

In a demand letter dated February 10, 2006, Plaintiffs quantified the amount in controversy properly attributable to these claims. The letter enumerates fifteen indicia of breach and damages attributable to Defendants' alleged breach of the ADA. Among these were Plaintiffs' assertions that $12,500 worth of franchise fees was in dispute with regard to both the Howdershell and St. Charles Steak-Out locations, thus totaling $25,000. Additionally, Plaintiffs indicated that the improper transfer of the O'Fallon, Illinois location resulted in Plaintiffs' loss of income of $6,250.

Defendants removed Plaintiffs' claim to this Court on February 2, 2007, invoking the Court's diversity jurisdiction. 28 U.S.C. § 1332. (Doc. 2.) On February 23, 2007, Plaintiffs submitted their Motion to Remand. (Doc. 9.) Both parties have submitted memoranda of law supporting their positions. (Docs. 10, 13).

II. ANALYSIS

The Constitution does not require that any particular amount be in controversy between diverse parties in order to invoke the subject matter jurisdiction of the federal courts. U.S. Const., art. III, § 1. However, Congress is not prevented from establishing a jurisdictional amount requirement, since it need not grant all of the Article III judicial power to the federal courts. Kline v. Burke Constr. Co., 260 U.S. 226 (1922). Since 1996, the amount in controversy required to invoke federal court ...


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