United States District Court, N.D. Illinois, Eastern Division
STEELCAST LIMITED, an Indian Corporation, as a member of STEELCAST LLC, an Illinois LLC, and derivatively on behalf of STEELCAST LLC, Plaintiff,
VAUGHAN W. MAKARY, Defendant.
MEMORANDUM OPINION AND ORDER
B. Kim, United States Magistrate Judge.
dispute arises out of a joint venture between Plaintiff
Steelcast Limited and Defendant Vaughan W. Makary
(“Makary”). According to the amended complaint,
the parties formed Steelcast LLC in 2010 to sell in the
United States steel castings Plaintiff was manufacturing in
India. (R. 8, Am. Compl. ¶¶ 6-7.) Plaintiff and
Makary & Associates, Inc. were Steelcast LLC's only
members, and Makary served as Steelcast LLC's manager.
(Id. ¶ 4.) On September 14, 2017, Plaintiff
brought this action as a member of Steelcast LLC, alleging
that Makary breached his fiduciary duties to both Plaintiff
and Steelcast LLC. (Id. ¶¶ 22-26.)
March 5, 2019, Makary moved to dismiss the complaint for
failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6), (R. 46), and two months later the parties
consented to this court's jurisdiction. (R. 51);
see 28 U.S.C. § 636(c). This court does not
rule on Makary's Rule 12(b)(6) motion, but for the
following reasons, Plaintiff's complaint is dismissed
without prejudice for lack of subject-matter jurisdiction:
Federal Rules of Civil Procedure require a court to dismiss
an action if it determines “at any time that
it lacks subject-matter jurisdiction.” Fed.R.Civ.P.
12(h)(3) (emphasis added); see also Johnson v. Nat'l
Asset Advisors, LLC, __ Fed.Appx. (7th. Cir. June 19,
2019) (dismissing on appeal where plaintiffs-appellants
failed to establish subject-matter jurisdiction).
Accordingly, when subject-matter jurisdiction is in question,
courts are “obligated to consider sua sponte
issues that the parties have disclaimed or not presented,
” Gonzalez v. Thaler, 565 U.S. 134, 141
(2012), and may do so “at any point in the proceedings,
” Levin v. Attorney Registration & Disciplinary
Comm'n of Sup. Ct. of Ill., 74 F.3d 763, 766 (7th.
Cir. 1996). Thus, even though Makary has not argued that
subject-matter jurisdiction is lacking, this court now raises
the issue sua sponte. Because this ruling comes at
the pleadings stage, the court must determine whether
“well-pleaded factual allegations plausibly suggest a
claim of subject-matter jurisdiction.” Silha v.
ACT, Inc., 807 F.3d 169, 174 (7th Cir. 2015).
alleges jurisdiction based on diversity of citizenship under
28 U.S.C. § 1332. (R. 8, Am. Compl. ¶ 5.) The
subject-matter jurisdiction provided by 28 U.S.C. §
1332(a)(1) confers jurisdiction over civil actions between
citizens of different states where the amount in controversy
exceeds $75, 000. The Supreme Court has interpreted this
grant of jurisdiction to require complete diversity between
the parties. See Carden v. Arkoma Assocs.,
494 U.S. 185, 187 (1990). Complete diversity means
“that no plaintiff may be from the same state as any
defendant, ” Smart v. Local 702 Int'l Bhd. of
Elec. Workers, 562 F.3d 798, 803 (7th Cir. 2009)
(quotation and citation omitted). Section 1332(a)(2) confers
jurisdiction over actions between citizens of a state and
citizens of a foreign state where the amount in controversy
exceeds $75, 000. However, Section 1332(a)(3) “does not
permit a suit between foreigners and a mixture of citizens
and foreigners.” Allendale Mut. Ins. Co. v. Bull
Data Sys., Inc., 10 F.3d 425, 428 (7th Cir. 1993).
initial matter, Plaintiff does not establish subject-matter
jurisdiction because it does not plead the parties'
citizenship. Under Section 1332, a natural person's
citizenship is defined by the person's domicile, meaning
“the place one intends to remain.” Dakuras v.
Edwards, 312 F.3d 256, 258 (7th. Cir. 2002). Merely
pleading residence is insufficient and grounds for dismissal.
See Adams v. Catrambone, 359 F.3d 858, 866 n.3 (7th
Cir. 2004) (“When the parties allege residence but not
citizenship, the [district] court must dismiss the
suit.”) (quotation and citation omitted). For
corporations, citizenship exists both in the state of
incorporation, as well as the state where the corporation has
its principle place of business. 28 U.S.C. § 1332(c)(1);
see also Fellowes v. Changzhou Xinrui Fellowes Office
Equip. Co. Ltd., 759 F.3d 787, 788 (7th Cir. 2014). The
Supreme Court has defined principle place of business to mean
the corporation's nerve center, usually its headquarters.
See Hertz Corp. v. Friend, 559 U.S. 77, 92-93
amended complaint, Plaintiff identifies itself as an Indian
corporation and lists an address in India where the
corporation is located. (R. 8, Am. Compl. ¶ 1.)
Plaintiff may well be a citizen of India, but location is not
synonymous with citizenship. Without any well-pleaded facts
regarding Plaintiff's place of incorporation and
principle place of business, citizenship is not established.
Plaintiff further alleges Makary is a resident of Illinois,
(Id. ¶ 3), but says nothing about where Makary
is domiciled. The confusion is heightened because Plaintiff
requests equitable liens on Makary's properties not only
in Illinois, but also in Florida. (Id. ¶ 36.)
By only pleading Plaintiff's location and Makary's
residence, but not their citizenship, Plaintiff's amended
complaint fails to establish diversity jurisdiction under
Plaintiff were to clarify the citizenship of the parties,
there is a second jurisdictional defect relating to Steelcast
LLC. Plaintiff filed its complaint “as a member
of” and “on behalf of Steelcast LLC.”
Plaintiff alleges that it has authority to bring this
derivative action under Illinois law. (R. 8, Am. Compl.
¶ 19 (citing 805 ILCS 180/40-5).) When a derivative
claim grounded in state law is brought in federal court under
diversity jurisdiction, the court must consider the
citizenship of the limited liability company on behalf of
whom the action is brought. See Gen. Tech. Applications,
Inc. v. EXRO LTDA, 388 F.3d 114, 120 (4th Cir. 2004);
Hanson v. Riggs, No. 14 CV 6051, 2015 WL 1281189, at
*4 (N.D. Ill. March 17, 2015). Unlike corporations, the
citizenship of a limited liability company is defined by
“the citizenship of each of its members.”
Camico Mut. Ins. Co. v. Citizens Bank, 474 F.3d 989,
992 (7th Cir. 2007). Thus, the court must determine whether
complete diversity exists between Plaintiff and Steelcast LLC
on one side of the diversity jurisdiction equation and Makary
on the other.
LLC's only two members are Plaintiff and Makary &
Associates, Inc. (R. 8, Am. Compl. ¶ 4.) Plaintiff does
not plead its own or Makary & Associates, Inc.'s
state of incorporation or principal place of business.
Instead, Plaintiff merely asserts that it is an Indian
corporation and Makary & Associates, Inc. is an Illinois
corporation. As discussed above, threadbare statements of a
corporation's location do not establish citizenship. But
assuming that Plaintiff is correct, Steelcast LLC would be a
citizen of both India and Illinois. This would violate the
complete diversity requirement of Section 1332 because
Steelcast LLC and Makary may both be citizens of Illinois.
Thus, based on the allegations in the amended complaint,
complete diversity is broken with respect to any claims
Plaintiff brings derivatively on behalf of Steelcast LLC.
the alignment of Steelcast LLC does not cure the
jurisdictional defect. While Plaintiff places Steelcast LLC
on the plaintiff's side of its complaint, in derivative
actions, “[g]enerally, the represented entity . . . is
aligned as a defendant.” See EXRO, 388 F.3d at
120. Even if Plaintiff named Steelcast LLC as a defendant,
however, jurisdiction still would be lacking because
Plaintiff and Steelcast LLC may both be citizens of India. In
a scenario in which Steelcast LLC were realigned as a
defendant, the case would present an Indian plaintiff suing
Indian and Illinois citizens. That would violate Section
1332(a)(3), which bars suits between foreigners and a mix of
citizens and foreigners. See Allendale, 10 F.3d at
428. Put another way, because this suit appears to involve an
Indian plaintiff, an Illinois defendant, and a limited
liability company that is a citizen of both India and
Illinois, regardless of Steelcast LLC's alignment,
complete diversity does not appear to be possible. In any
event, the current pleadings do not establish that
subject-matter jurisdiction exists in this court.
appear that some of Plaintiffs claims may be individual and
not derivative. Counts I, IV, and VI derive from Plaintiffs
allegations that Makary, in his role as manager of Steelcast
LLC, failed to remit money held by the LLC and owed to
Plaintiff. (R. 8, Am. Compl. ¶ 13.) If Plaintiff chooses
to amend its complaint, it may demonstrate that it has
standing to bring its claims individually and try to show
that Steelcast LLC is not an indispensable party.
Nonetheless, on the current pleadings, Plaintiff does not
even establish the citizenship of Plaintiff and Makary, much
less plead whether Steelcast LLC is an indispensable party.
foregoing reasons, Plaintiffs amended complaint is dismissed
without prejudice for ...