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Cumulus Radio Corporation v. Olson

United States District Court, C.D. Illinois, Peoria Division

March 10, 2015

CUMULUS RADIO CORPORATION f/k/a CITADEL BROADCASTING CO., Plaintiff,
v.
JOSEPH OLSON and ALPHA MEDIA, LLC, Defendants.

ORDER & OPINION

JOE BILLY McDADE, Senior District Judge.

This matter is before the Court on Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction and Dissolve the Temporary Restraining Order. (Doc. 19). The parties have conducted limited discovery on the matter of jurisdiction, and the motion is now fully briefed, and ready for decision. Also pending before the Court are Defendants' Motion to Direct Payment of Bond (Doc. 30), Plaintiff's Motion to Strike Defendants' Supplemental Declarations and Exhibits in Support of Motion to Dismiss (Doc. 51), and Defendants' Motion to Withdraw Declaration of Kathleen Kirby (Doc. 53).

BACKGROUND

In its Verified Complaint, Plaintiff has alleged that there is complete diversity of citizenship between the parties and that the Court has jurisdiction pursuant to 28 U.S.C. §1332(a)(1). (Doc. 1 at ¶ 12). In support of this allegation, Plaintiff, a Nevada corporation with its principal place of business in Georgia, alleged that Defendant Alpha Media, LLC is a Delaware corporation with its principal place of business in Portland, Oregon. ( Id. at ¶¶ 9, 11). Although Defendants originally admitted the allegations in paragraphs 11 and 12 of the Verified Complaint, ( see Doc. 10 at ¶¶ 11, 12), Defendant Alpha Media now argues that it admitted subject-matter jurisdiction in error. ( See Doc. 20 at 3). Alpha Media asserts that it is a limited liability company ("LLC") with a single member: Alpha Media Holdings, LLC. ( Id. at 2). It further asserts that a woman who is domiciled in Georgia, Cynthia South, is a member of Alpha Media Holdings, LLC. ( Id. at 3). If true, this would deprive the Court of subject-matter jurisdiction. Plaintiff admits that Alpha Media is an LLC rather than a corporation, and does not dispute that Cynthia South is a citizen of Georgia. (Doc. 49 at 1-2). However, it disputes the fact that Cynthia South is a member of Alpha Media Holdings, LLC. ( See id. ). If Plaintiff is correct, the Court can conclude that it likely has subject-matter jurisdiction over this matter in spite of improperly-pled facts in Plaintiff's Verified Complaint. For the reasons explained below, the Court concludes that South is not a member of Alpha Media Holdings, LLC, despite certain indications to the contrary. For that reason, Defendants' motion to dismiss (Doc. 19) is denied.

LEGAL STANDARD

Defendants have moved to dismiss this case pursuant to Rule 12(b)(1), and argue that the Court lacks subject-matter jurisdiction to hear the case. See Fed.R.Civ.P. 12(b)(1). Objections based upon the Court's subject-matter jurisdiction cannot be waived, because the Court "has an independent obligation to satisfy itself that federal subject matter jurisdiction exists." Travelers Property Cas. v. Good, 689 F.3d 714, 718 (7th Cir. 2012) (internal quotation marks omitted). Therefore, if at any point, the Court determines that it lacks subject-matter jurisdiction, it must dismiss the action. See Fed.R.Civ.P. 12(h)(3).

This challenge to the Court's subject-matter jurisdiction is a factual challenge, in that the pleadings in the Verified Complaint are formally sufficient to establish diversity jurisdiction, but Defendants have raised a factual challenge to these allegations. See Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir. 2009). Unlike facial challenges to subject-matter jurisdiction where a court looks only to allegations contained in a complaint, factual challenges allow district courts to "look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Id. (citation omitted) (internal quotation marks omitted). This is because courts are "duty-bound" to police the limited boundaries of federal subject-matter jurisdiction, and "demand proof" of the truth of jurisdictional allegations in a complaint. See id. (citation omitted).

DISCUSSION

Plaintiff has alleged that subject-matter jurisdiction is proper pursuant to 28 U.S.C. § 1332. Under § 1332, district courts have original subject-matter jurisdiction "where the matter in controversy exceeds the sum or value of $75, 000... and is between... citizens of different States." 28 U.S.C. § 1332(a)(1). It is long and well-established that the statutory formulation "between... citizens of different States" requires "complete diversity between all plaintiffs and all defendants." Lincoln Property Co. v. Roche, 546 U.S. 81, 89 (2005). Therefore, in order for diversity jurisdiction to exist here, there must be diversity in citizenship between Plaintiff and both Defendants. See id.

In this case, there are three parties, and each requires a different type of analysis for the purposes of diversity jurisdiction. Plaintiff Cumulus is a Nevada corporation with its principal place of business in Atlanta, Georgia. Therefore, for purposes of § 1332, Plaintiff is a citizen of both Nevada and Georgia. See 28 U.S.C. § 1332(c)(1). Defendant Olson is a citizen of Illinois, and resides in Peoria, Illinois. These unchallenged allegations are sufficient to establish that Olson is domiciled in Illinois for purposes of § 1332. See Lyerla v. Amco Ins. Co., 461 F.Supp.2d 834, 836 (S.D. Ill. 2006) ("The citizenship of a natural person for diversity purposes is determined of course by the person's domicile."). Defendant Alpha Media's citizenship poses the problem here. Although Plaintiff's Verified Complaint alleged that Alpha Media is a Delaware corporation with a principal place of business in Portland Oregon - allegations sufficient to establish diversity of citizenship under § 1332(c)(1) - it is now apparent that these allegations are factually untrue. Instead, as Defendants argue and Plaintiff concedes, Alpha Media is a Limited Liability Company registered in Delaware.

Analysis of an LLC's citizenship for purposes of diversity jurisdiction is much different than analysis of a corporation's citizenship. See Hicklin Eng'g, L.C. v. Bartell, 439 F.3d 346, 347 (7th Cir. 2006). "The citizenship of a limited liability company is that of its members, and its members may include partnerships, corporations, and other entities that have multiple citizenships." Id. (citation omitted). When an LLC is made up of other entities that have multiple citizenships, "[a] federal court... needs to know each member's citizenship, and if necessary each member's members' citizenships." Id. at 348.

In this case, Defendants assert that Alpha Media LLC is an LLC with a single member: Alpha Media Holdings LLC. Plaintiff concedes that Alpha Media Holdings LLC was Alpha Media LLC's sole member at the time it filed its Verified Complaint. (Doc. 49 at 6). Therefore, Alpha Media LLC's citizenship for diversity purposes must be determined by analyzing the citizenship of Alpha Media Holdings. See Hickin Eg'g, L.C., 439 F.3d at 347-48.

The real issue here is whether Alpha Media Holdings' citizenship destroys complete diversity. Like Alpha Media, Alpha Media Holdings' citizenship is determined by the citizenship of its members. See id. Defendants assert that one of Alpha Media Holdings' members - Cynthia South - is a citizen of Georgia. ...


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