Boesky v. Siegel

305 F. Supp. 3d 779
District Court, E.D. Michigan·Decided March 29, 2018·No. Case No. 17–cv–12119·Published·Cited by 1 cases

Opinion

MARK A. GOLDSMITH, United States District Judge

This matter is before the Court on Defendant's motion to dismiss for lack of subject-matter jurisdiction (Dkt. 8) and Plaintiff's motion for leave to file first amended complaint (Dkt. 14). The issues were fully briefed, and hearings were held on November 7, 2017 and February 15, 2018. For the reasons that follow, the Court grants Plaintiff's motion and denies, as moot, Defendant's motion.

I. BACKGROUND

Plaintiff Marilynn Boesky is a resident of California, and the owner of a membership interest in Pearlman LLC. Compl. ¶¶ 1, 3 (Dkt. 1). Defendant Kent Siegel is a resident of Michigan, and has been the sole manager of Pearlman LLC since 2014. Id. ¶¶ 2, 4, 14-15.

According to Boesky's initial complaint, for tax year 2015, Siegel sent her a K-1-a tax form used for reporting a partner or LLC member's distributive share of items such as income or loss-which stated her interest in Pearlman LLC to be 5% of the profits, 5% of the losses, and 22.5% of the capital. Id. ¶ 17. This was consistent with the K-1s that had been sent to her annually, starting in 2006 when the LLC was formed. Id. ¶ 16. Contrary to this nearly decade-long practice, Siegel later sent an amended K-1 for tax year 2015, which described her share as 5% of the profits, 5% of the losses, and 5% of the capital. Id. Boesky claimed that she received no explanation for this change. Id. ¶ 18. However, after Boesky questioned this discrepancy, Siegel wrote to "disregard ... [t]he amended K-1. In retrospect, I have decided to retain the historic equity percentages, that have been reported since inception." 7/27/2016 email from Siegel to Roger Boesky at 1, Ex. 4 to Am. Compl. (Dkt. 14-1). For the following tax year, 2016, Siegel sent a K-1 showing Boesky retaining her historical 22.5% capital interest. Am. Comp. ¶ 18.

Boesky alleged that Siegel exercises complete and exclusive control over Pearlman LLC's books, records, bank accounts, transactions, and member distributions, and that Siegel failed, refused, and neglected *781to provide her any information that she requires to determine the financial condition of the company. Id. ¶¶ 20-21. Boesky alleged that the only financial information she has received are the K-1s. Id. ¶ 22. She claims that she requested additional information from Siegel so that she could calculate the value of her interest, but Siegel stated that he would only comply with a request for documents if made by an appraiser. Id. ¶¶ 23-34.

As a consequence, Boesky filed suit, on June 28, 2017, asserting a violation of Michigan's Limited Liability Company Act, Mich. Comp. Laws § 450.4101 et seq., and a violation of the company's operating agreement. Compl. ¶¶ 35-45. On both claims, she sought declaratory relief that she was entitled to the production of several categories of financial documents; she also claimed entitlement to an explanation for the reduction of her interest.

In lieu of filing an answer, Siegel filed a motion to dismiss for lack of subject-matter jurisdiction (Dkt. 8). He argued that the $75,000 amount in controversy in this diversity action had not been met, based on the theory that enforcement of a right to inspect documents has no determinable monetary value.

Following full briefing and a hearing on the motion to dismiss, Boesky filed a motion for leave to file an amended complaint (Dkt. 14). According to Boesky, events that took place after the initiation of her suit-the purported dissolution of Pearlman LLC-requires amending the complaint, so that Boesky can secure a declaratory ruling confirming her 22.5% interest in the capital of Pearlman LLC. See Pl. Mot. for Leave at 1-3. Siegel opposes the motion to amend on jurisdictional grounds, contending that the probate exception to diversity jurisdiction bars this Court's adjudication of her rights in Pearlman LLC; he also contends that amendment would be futile.

II. STANDARD OF DECISION

Federal Rule of Civil Procedure 15(a)(2) governs amendments to complaints by leave, and provides that the "court should freely give leave when justice so requires." The Supreme Court has explained that a plaintiff should be granted leave to amend "[i]n the absence of any apparent or declared reason-such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).

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Boesky v. Siegel, 305 F. Supp. 3d 779 (E.D. Mich. 2018).

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