CostCommand, LLC v. WH Administrators, Inc.

820 F.3d 19, 422 U.S. App. D.C. 157, 2016 U.S. App. LEXIS 7010, 2016 WL 1566712
CourtCourt of Appeals for the D.C. Circuit
DecidedApril 19, 2016
Docket15-7030
StatusPublished
Cited by38 cases

This text of 820 F.3d 19 (CostCommand, LLC v. WH Administrators, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
CostCommand, LLC v. WH Administrators, Inc., 820 F.3d 19, 422 U.S. App. D.C. 157, 2016 U.S. App. LEXIS 7010, 2016 WL 1566712 (D.C. Cir. 2016).

Opinion

Opinion for the Court filed by Circuit Judge TATEL.

TATEL, Circuit Judge:

This case calls on us to perform a single task: apply the “nerve center” test that *21 the Supreme Court laid out in Hertz Corp. v. Friend, 559 U.S. 77, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010), to determine the location of a corporation’s “principal place of business,” and thus its citizenship for diversity jurisdiction purposes. For the following reasons, we agree with the district court’s application of" this test and affirm its dismissal -for lack of subject matter jurisdiction.

I.

Understanding this case’s decisive jurisdictional issue requires only a bird’s-eye view of the complicated underlying factual allegations.- Ronald Vance and Brendan Turner founded CostCommand, LLC in 2012 with the goal of providing regulatory compliance services to government .contractors. ■ CostCommand, hired PRS Software Solutions, a subsidiary of Video Equipment Rentals, two California companies we refer to collectively as the “California defendants,” to produce software j;o enable it to provide such services. After struggling to secure customers and revenue, CostCommand sought -and obtained additional funding from the California defendants. Abound this time, Turner resigned from . CostCommand. Unbeknownst to Vance, however. Turner was also developing his own company, WH Administrators, Inc. (WHA).

CostCommand sued Turner, WHA, and the California defendants in the U.S. District Court for the District of Columbia alleging that they engaged in a series of wrongful acts that essentially destroyed CostCommand’s business. As described in greater detail below, the district court concluded that it lacked diversity jurisdiction and dismissed the case.

For diversity jurisdiction to exist, no plaintiff may share state citizenship with any defendant. Caterpillar Inc. v. Lewis, 519 U.S. 61, 68, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996). For example, a New York plaintiff would be unable to bring- a diversity suit against three defendants if any one of them had New York citizenship. Citizenship is measured as of the time the plaintiff files the complaint. Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 570-71, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004). An individual has citizenship in a state for diversity purposes if he is an American citizen and is domiciled in the state. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989). Unincorporated associations, including LLCs, have the citizenship of each of their members. See Americold Realty Trust v. Conagra Foods, Inc., — U.S. -, 136 S.Ct. 1012, 1015, 194 L.Ed.2d 71 (2016). A corporation is a citizen of its place or places of incorporation, as well as its principal place of business. 28 U.S.C. § 1332(c)(1). Under Hertz, a corporation’s principal place of business is its “nerve center,” i.e., “the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities.” 559 U.S. at 80-81, 130 S.Ct. 1181.

In 'this case, no dispute exists as to the citizenship of any party except WHA. When CostCommand filed its complaint, it was a' citizen of Maryland because' it was an LLC whose sole member, Vance, was a citizen of Maryland. The California defendants were citizens of California because they were California corporations with California principal places of business. Defendant Turner was a citizen of the District of Columbia. Finally, although all parties agree that WHA was a Texas corporation, and was therefore a Texas citizen, they disagree — and this is the central issue in this case — as to whether WHA’s principal place of business lay within Texas or Maryland. If the latter, then -WHA shared Maryland citizenship with Gost- *22 Command, and no diversity jurisdiction exists.

This case’s procedural history is also relevant, though somewhat more complicated. The saga begins with CostCom-mand’s district court complaint, which alleged that “Defendant[] WH Administrators, Inc____ is a Texas corporation ... and maintains its principal place of business in Houston, Texas.” Compl. ¶7. Turner’s and WHA’s answers both admitted this allegation. In addition to the answers from Turner and WHA, the complaint generated a number of motions to dismiss, including one from the California defendants for lack of subject matter jurisdiction. These defendants argued that WHA maintained its principal place of business in Maryland because, among other things, WHA’s website listed its Bethesda office as its “corporate headquarters.” CostCom-mand’s only response was that WHA and Turner had admitted in their answers that WHA maintained its principal place of business in Texas.

Noting this dispute, the district court ordered WHA to make a supplemental filing clarifying the location of its principal place of business and providing supporting evidence. In response, Turner and WHA apologized to the court for what they termed inadvertent mistakes in preparing their answers. They explained that WHA in fact maintained its principal place of business in Maryland, and they filed supporting affidavits from Turner and Bob Ring, a founder and officer of WHA who provided the company’s initial capital. Several days later, the district court issued an order concluding that the Bethesda office was WHA’s principal place of business and granting the motion to dismiss.

The next day, CostCommand filed a motion for reconsideration and requested jurisdictional discovery. After the parties fully briefed this motion, the district court allowed jurisdictional discovery limited to a deposition of Turner .and requests' for production of documents. Thereafter, the district court received three supplemental filings — one jointly from WHA and Turner, one jointly from the California defendants, and one from CostCommand.

In its filing, CostCommand argued that various factors demonstrated -that WHA maintained its principal place of business in Texas. These included WHA’s use of its Houston address on various corporate documents, regulatory filings, and contracts with customers and vendors; Bob Ring’s location in Houston; the fact that Andy Ring, Bob Ring’s son; managed accounts payable and receivable in Texas in conjunction with a Texas accountant; and the fact that WHA paid its taxes from its Houston office and maintained its primary bank account in Houston.

By contrast, the defendants pointed to several factors that they believed demonstrated a Maryland principal place of business. Among these were that Turner, who worked out of the Bethesda office, had full operational control of WHA, including spending company money without the other directors’ approval; that the other two directors needed Turner’s approval before spending company money; that Turner “manage[d] 100 percent of the operations, the product development, the client issues,” Turner Dep.

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Bluebook (online)
820 F.3d 19, 422 U.S. App. D.C. 157, 2016 U.S. App. LEXIS 7010, 2016 WL 1566712, Counsel Stack Legal Research, https://law.counselstack.com/opinion/costcommand-llc-v-wh-administrators-inc-cadc-2016.