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Hall v. Premiere Trade Software, LLC

United States District Court, N.D. Illinois, Eastern Division

March 31, 2014

GILBERT RIVERA and JAMES HALL, for and on behalf of over 100 Jane and John Does, Plaintiffs,
v.
PREMIERE TRADE SOFTWARE, LLC and JAMES DICKS, Defendants.

MEMORANDUM OPINION AND ORDER

JOHN J. THARP, Jr., District Judge.

This putative class action, removed from state court, alleges fraud, negligent misrepresentation, negligent failure to supervise, and a violation of the Illinois Consumer and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. ("ICFA") against Premiere Trade Software, LLC, and James Dicks. The defendants move to dismiss the complaint on numerous grounds and also move for Rule 11 sanctions against the plaintiffs' counsel. The Court agrees that the complaint is inadequate, but for a reason that the defendants have not advanced: the Court does not, based on the allegations of the present complaint, appear to have subject matter jurisdiction over the plaintiffs' claims. The Court therefore denies the pending motions without prejudice and grants the parties leave to file supplemental briefs addressing the Court's jurisdiction.

I. BACKGROUND

In essence, the plaintiffs complain, on behalf of a putative class, that Premiere Trade Software, LLC, a Florida limited liability company, and Dicks, its chief executive, deceived the plaintiffs by promoting financial trading software that did not make the plaintiffs money, as the defendants' sales pitch allegedly promised. Am. Compl. (Dkt. 10) ¶ 23. The plaintiffs allege that they saw Premiere Trade's television commercials, paid to attend Premiere Trade seminars in Illinois, and purchased Premiere Trade's software, along with promised technical support. Id. ¶ 1. The plaintiffs add that "they did not make profits" using the Premiere software and that instead, "even though they followed the Premiere program to the letter, Plaintiffs lost money...." Id. ¶ 23. Further, the plaintiffs allege that the technical support number offered by Premiere Trade stopped working. Id. ¶ 23.

Based on these allegations, the plaintiffs contend that Premiere Trade deceptively and fraudulently advertised and promoted its trading software and training programs. Id . ¶¶ 26, 30. The plaintiffs further contend that Premiere negligently misrepresented financial information and negligently failed to supervise its salesmen. Id . ¶¶ 33, 36.

The plaintiffs filed their initial class action complaint against "Premiere Trade" ("and certain Jane and John Does, " who can be disregarded; see 28 U.S.C. § 1441(b)) in the Circuit Court of Cook County, Illinois, in July 2012. Dkt. 1-1 ¶ 6. Although their complaint did not say so expressly, the class they purported to represent consisted of individuals who attended the defendants' seminars in Illinois and purchased the Premiere software and associated equipment. Id. ¶ 1. The plaintiffs sought damages, apparently on behalf of the entire class rather than themselves individually, "in excess of $2, 000, 000." Id. ¶ 29(a). The state court complaint identified the plaintiffs as Illinois "residents" and Premiere as a limited liability company "located" in Florida. Id . ¶¶ 7, 8.

Premiere removed the case to this Court on July 31, 2012. Dkt. 1. Its notice of removal stated that this Court has diversity jurisdiction over plaintiffs' claims under 28 U.S.C. § 1332. Id. ¶¶ 7-10. Noting that the plaintiffs were "residents" of Illinois and Wisconsin, respectively, the notice denied that "Premiere Trade" was a legal entity and that "it is assumed that Premiere Trade Software, LLC is the intended defendant." Id. n.1. The removal notice identified Premiere Trade Software, LLC ("PST")[1] as a Florida limited liability company with its principal place of business in Florida and stated that "all of its members are Florida residents." Id . ¶ 10. With respect to the amount in controversy threshold for diversity jurisdiction, the notice of removal noted only that the amount in controversy exceeds $75, 000 and that the plaintiffs were seeking in excess of $2 million in damages. Id . ¶¶ 12, 13.

The plaintiffs did not contest removal. After the case was removed, however, they filed a "First Amended Complaint" ("FAC"). Dkt. 10. The FAC names "Premiere Trade Software, LLC" and James Dicks as defendants; the plaintiffs remain the same. The FAC purports to rest on diversity jurisdiction, and alleges that "the parties are citizens of different states, " but it contains no allegations regarding the specific citizenship of the plaintiffs. Id . ¶ 2. As for the defendants, it alleges that "Premiere is a group of Florida limited liability companies all sharing the same trade name, " all of which are "operated" by defendant Dicks. Id . ¶ 12. The FAC includes a list of some 19 other companies, most with the word "Premiere" in their names that are presumably part of the group described. Id. n.1. As to the amount in controversy, the FAC alleges only that it exceeds $75, 000; it omits the statement in the original complaint that the plaintiffs seek damages in excess of $2 million and does not include any other quantification of damages. Id . ¶ 2.

The defendants now move to dismiss the FAC on a variety of grounds, including: (1) improper venue under Fed.R.Civ.P. 12(b)(3) based on the parties' purported contractual agreement and its forum selection clause; (2) the absence of personal jurisdiction over defendant James Dicks; and (3) the plaintiffs' claims are barred by the relevant statutes of limitation. Defs.' Br. (Dkt. 15) at 2, 8; Defs.' Reply Br. (Dkt. 25) at 5. Alternatively, the defendants ask the Court to transfer the case to the federal district court for the Middle District of Florida so that the defendants may seek to compel arbitration in that jurisdiction. Defs.' Br. at 7.

The Court cannot take up these arguments, however, because the allegations of the FAC (and the original complaint and notice of removal) are insufficient to establish the Court's subject matter jurisdiction.[2] Neither party has raised any question concerning the Court's jurisdiction, but the Court is obligated to ensure its own jurisdiction is proper. See Wernsing v. Thompson, 423 F.3d 732, 743 (7th Cir. 2005) ("[N]ot only may the federal courts police subject matter jurisdiction sua sponte, they must."); Cook v. Winfrey, 141 F.3d 322, 325 (7th Cir. 1998) ("It is axiomatic that a federal court must assure itself that it possesses jurisdiction over the subject matter of an action before it can proceed to take any action respecting the merits of the action.").

II. DISCUSSION

The jurisdictional allegations of record in this case are deficient in several ways:

First, a complaint that relies on diversity jurisdiction must allege the specific citizenship of each party, in order to ensure complete diversity. See Meyerson v. Harrah's East Chicago Casino, 299 F.3d 616, 617 (7th Cir. 2002). Neither the original complaint, the notice of removal, nor the FAC, however, adequately alleges the citizenship of either of the named plaintiffs or Premiere (the FAC does, however, adequately allege that Dicks is "a citizen and resident of Florida"). Am. Compl. ¶ 13. The Court might surmise from the prior pleadings and from paragraph 18 of the FAC that Rivera is a resident of Illinois and Hall a resident of Wisconsin, but that still would not cure the problem, as it is an individual's domicile, not residence, that determines citizenship for purposes of diversity jurisdiction. See Winforge, Inc. v. Coachmen Indust., Inc., 691 F.3d 856, 867 (7th Cir. 2012) ("An allegation of residence is not sufficient to establish citizenship, which requires domicile."). Domicile is a person's legal home, "a person's true, fixed, principal, and permanent home, to which that person intends to return and remain even though currently residing elsewhere"-not necessarily where that individual lived when the complaint was filed. BLACK'S LAW DICTIONARY (9th ed. 2009); see Koch v. Koch, 450 F.3d 703, 712 n.7 (7th Cir. 2006) (quoting BLACK'S LAW DICTIONARY definition); Galva Foundry Co. v. Heiden, 924 F.2d 729, 729-30 (7th Cir. 1991) (citizenship is the "state of the individual's domicile... the state he considers his permanent home"). The Seventh Circuit has repeatedly warned litigants about the consequences of failing to adequately allege the citizenship of individuals and that it is the plaintiff's burden to do so. See, e.g., Guaranty Nat. Title Co. Inc. v. J.E.G. Assocs., 101 F.3d 57, 58-59 (7th Cir. 1996) (noting that "these lawyers knew what they had to do, and they did not do it... Anyway, it is not the court's obligation to lead counsel through a jurisdictional paint-by-numbers scheme"; remanding with instructions to dismiss for lack of jurisdiction); America's Best Inns, Inc. v. Best Inns of Abilene, LP, 980 F.2d 1072, 1074 (7th Cir. 1996) (noting that "it is the obligation of the plaintiff to establish jurisdiction, and in this obligation the plaintiff has failed" and remanding to dismiss for lack of jurisdiction).

The FAC (like the original complaint and the notice of removal) also fails to establish the citizenship of "Premiere Trading Software, LLC." For starters, unlike a corporation, the citizenship of a limited liability company is not where it is chartered and/or has its principal place of business. Rather, an LLC is a citizen of every state in which its members are citizens. Thus, to adequately allege the citizenship of an LLC, the complaint must identify the members of the LLC and their respective citizenships. See Thomas v. Guardsmark, LLC, 487 F.3d 531, 533-34 (7th Cir. 2007) (citizenship of an LLC is the citizenship of each of its members); Belleville Catering Co. v. Champaign Market Place, LLC, 350 F.3d 691, 693-94 (7th Cir. 2003) (same and remanding with instructions to dismiss where complaint did not allege citizenship of each member of LLC). Or, at a minimum, it must affirmatively allege that none of ...


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