Fifteen Twenty-One Second Avenue Condominium Association v. Viracon LLC

• Court: District Court, W.D. Washington
• Decided: June 7, 2024
• Docket: 2:23-cv-01999
• Status: Unknown

Opinion

5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 6 AT SEATTLE

7 NO. 2:23-cv-1999 FIFTEEN TWENTY-ONE SECOND AVENUE 8 CONDOMINIUM ASSOCIATION, a ORDER DENYING PLAINTIFF’S Washington non-profit corporation, Plaintiff, v. MOTION TO REMAND 9 VIRACON, LLC, a Minnesota limited liability company, APOGEE ENTERPRISES, INC., a 10 Minnesota corporation, QUANEX IG SYSTEMS, INC., an Ohio Corporation, 11 INSULATING GLASS CERTIFICATION COUNCIL, INC., an Illinois corporation, and 12 DOES 1-20, Defendants.

13 I. INTRODUCTION 14 This matter comes before the Court on a Motion to Remand filed by Plaintiff Fifteen 15 Twenty-One Second Avenue Condominium Association (“Plaintiff” or “association”). 16 Defendants removed this lawsuit from King County Superior Court under 28 U.S.C. §§ 1332, 17 1441 and 1446, claiming complete diversity of the parties. By this motion, Plaintiff asserts that 18 the parties are not completely diverse and that this Court therefore lacks subject matter 19 jurisdiction. Having reviewed Plaintiff’s Motion to Remand and accompanying evidence filed in 20 support thereof, and the opposition briefs of Defendants (1) Viracon LLC and Apogee 21 Enterprises, Inc. and (2) Quanex IG Systems, Inc., (collectively, “Defendants”),1 the Court 22 1 Defendant Insulating Glass Certification Council, Inc., did not file an opposition to Plaintiff’s Motion to Remand, 23 although it did consent to removal. See Notice of Removal, Dkt. No. 1.

24 ORDER DENYING MOTION TO REMAND

25 2 the reasons that follow. 3 II. BACKGROUND 4 This dispute concerns the 38-story building located at 1521 Second Avenue in Seattle, 5 Washington, which is owned by Plaintiff Fifteen Twenty-One Second Avenue Condominium 6 Association. Am. Compl., ¶ 12. Plaintiff is a homeowner’s association composed of owners of the 7 residential and commercial units in that building. Id., ¶ 1. Plaintiff brings this lawsuit claiming 8 that the double-paned Insulated Glass Units (“IGUs”) making up the exterior structural wall of the 9 1521 Second Avenue building were defectively designed and constructed. According to Plaintiff, 10 the gray-colored sealant used in the IGUs breaks down when exposed to ultraviolet rays, causing 11 the seal between the panes to fail and in some cases, the glass panes to shatter. As a result,

12 according to Plaintiff, all of the approximately 7,850 IGUs at the 1521 Second Avenue building 13 must be replaced. Id., ¶ 60. 14 Seeking to recover the cost of such replacement, Plaintiff asserts multiple state-law claims 15 against various entities involved in the manufacture of the IGUs and the sealant. Plaintiff also 16 named as a defendant the Insulating Glass Certification Council, Inc., (“IGCC”), comprising 17 various manufacturers in the IGU industry. The IGUs at 1521 Second Avenue were stamped with 18 an IGCC “certification of quality” that Plaintiff claims is false and misleading. 19 The IGUs at 1521 Second Avenue are “Common Elements” under the “Covenants, 20 Conditions and Restrictions for Fifteen Twenty-One Second Avenue,” the document that 21 established the association, and therefore each condominium unit owner bears responsibility for a

22 prescribed percentage of the cost of replacing the IGUs. See Fjelstad Decl., Ex. A, Ex. B thereto. 23

25 2 behalf of the unit owners to recover their shares of that cost. RCW 64.38.020(4). Plaintiff also 3 alleges it is the successor in interest to the building project developer and assignee of the rights 4 belonging to the project’s developer/declarant, general contractor, and glazing subcontractor, and 5 is also bringing this lawsuit on its own behalf to enforce these rights. Am. Compl., ¶ 2. 6 Plaintiff is incorporated in Washington, with its principal place of business in this state. 7 Viracon is a Minnesota limited liability company, whose sole member is Defendant Apogee, a 8 Minnesota corporation headquartered in Minnesota. Notice of Removal, Dkt. No. 1, ¶ 3. All other 9 Defendants are corporations, and none is incorporated in Washington, or has a principal place of 10 business in Washington. 11 III. DISCUSSION

12 A. Standard on a Motion to Remand 13 A defendant may remove a state court action to federal court on the basis of diversity of 14 citizenship. 28 U.S.C. § 1441(b); see also 28 U.S.C. § 1332. Diversity jurisdiction exists only 15 where there is: (1) complete diversity between the citizenship of the plaintiffs on the one hand, 16 and the defendants on the other; and (2) an amount in controversy greater than $75,000. 28 U.S.C. 17 § 1332(a). Where either element is lacking, federal courts lack subject matter jurisdiction and 18 must remand the action to state court. 28 U.S.C. § 1447(c). The “strong presumption” against 19 removal jurisdiction means that the defendant always has the burden of establishing that removal 20 is proper. Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). 21 B. Whether Plaintiff’s and/or IGCC’s Members Should Be Considered in Determining Plaintiff’s Citizenship for Diversity Purposes 22 Plaintiff seeks remand of this action, claiming this Court lacks subject matter jurisdiction 23

25 2 is a corporation and a citizen of Washington, the citizenship of its members—that is, the 3 individual owners of units within the 1521 Second Avenue condominium building—should be 4 considered for purposes of determining diversity jurisdiction. Further, according to Plaintiff, 5 several of its member-owners are citizens of some of the same states that Defendants are citizens 6 of, including Texas and New York. Similarly, Plaintiff argues, several members of Defendant 7 IGCC are citizens of Washington, and their citizenship should be accounted for in the jurisdiction 8 inquiry as well. Under either theory (or both), Plaintiff argues, complete diversity is lacking and 9 this matter must be remanded. 10 The citizenship of a corporation is determined by the state(s) of its incorporation and its 11 principal place of business. 28 U.S.C. § 1332(c)(1) (for purposes of diversity jurisdiction, “a

12 corporation shall be deemed to be a citizen of any State by which it has been incorporated and of 13 the State where it has its principal place of business.”). The Ninth Circuit has confirmed that 14 where a corporation is a party, courts should look to that corporation’s citizenship in the 15 jurisdiction inquiry, even in cases in which that corporation has a “non-stock, non-profit, equal 16 voting, membership structure.” Kuntz v. Lamar Corp., 385 F.3d 1177, 1182-83 (9th Cir. 2004) 17 (rejecting the argument in a lawsuit against incorporated nonprofit electric cooperative that 18 diversity jurisdiction must be determined by the citizenship of cooperative’s members, rather than 19 by that of the corporate entity pursuant to § 1332(c)(1), and affirming the bright-line rule that “for 20 purposes of diversity jurisdiction, a corporation is a corporation is a corporation”). 21 It is also true, however, that “a federal court must disregard nominal or formal parties and

22 rest jurisdiction only upon the citizenship of real parties to the controversy.” Id., citing Navarro 23

25 2 corporate entity sues (or is sued) in its representative capacity, it is merely a nominal party 3 serving as a vehicle for enforcing the rights of, for example, its members. Under such 4 circumstances, Plaintiff urges, it is the citizenship of those members, rather than of the 5 corporation, that controls for diversity purposes. 6 The Court concludes that this proposition does not apply to the facts of this case. The 7 cases on which Plaintiff relies hold only that the citizenship of the members of an incorporated 8 association may be relevant if—but only if—the corporation is acting solely on its members’ 9 behalf. See, e.g., Zee Med. Distrib. Ass'n, Inc. v. Zee Med., Inc., 23 F. Supp. 2d 1151, 1156 (N.D. 10 Cal. 1998) (“ZMDA”) (where corporate plaintiff “asserts no corporate interest of its own” and “is 11 not a party to any of these contracts,” and “sues solely in a representative capacity it is not the

12 ‘real party to the controversy’ for the purposes of diversity.”); see also S.N.D.A. v. Sonitrol Corp., 13 No. C-08-2168 JL, 2008 WL 11408627 (N.D. Cal. June 4, 2008) (noting that “Zee Medical held 14 that in its diversity analysis the court must look to the members' citizenship when (as is the case 15 here) an incorporated association is suing purely on their members' behalf” and “solely on behalf 16 of its members”; where corporate association “has no stake in the outcome of the litigation, other 17 than the interests of its members . . . it is its members’ citizenship, not [the corporation’s,] which 18 must establish diversity jurisdiction”) (emphases added); Airlines Reporting Corp. v. S and N 19 Travel. Inc., 58 F.3d 857, 862 (2d Cir.1995) (plaintiff that was a collection agent for a consortium 20 of air carriers was acting “merely as an agent representing the interests of others” and “did not 21 seek to protect any corporate interests of its own,” and therefore the air carriers were the “‘real

22 and substantial parties’ to this controversy,” and “their citizenship for diversity purposes” 23

25 2 vindicate its own rights, it cannot be said that it has “no stake in the outcome of the litigation.” 3 See Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 194 (2d Cir. 2003) (“OSGI”) (where 4 plaintiff OGSI was suing on behalf of others, but also “suffered a pecuniary loss and is entitled to 5 a portion of the damages award, . . . OGSI is not ‘a mere conduit’ but possesses a valid stake in 6 the litigation sufficient to be considered a ‘real and substantial’ party for diversity purposes.”). 7 Under such circumstances, the corporation is a real party to the controversy, and there is simply 8 no justification for piercing the corporate veil for jurisdictional purposes. See ZMDA, 23 F. Supp. 9 2d at 1155 (“[I]f this case involved the contractual rights of ZMDA itself, as a corporation, then 10 the diversity inquiry would stop with the citizenship of the named parties.”). 11 Here, there is no claim that Plaintiff is suing solely on behalf of its members. To the

12 contrary, Plaintiff has clearly articulated that it suffered the injuries claimed. See, e.g., Am. 13 Compl., ¶ 27 (“The ongoing quality representation of the false certification stamp is deceptive and 14 misleading, occurs in trade or commerce, impacts the public interest, and causes injury to Fifteen 15 Twenty-One Second Avenue Condominium Association’s property such that injunctive relief, 16 damages, civil penalties, and attorney’s fees are required.”) (emphasis added). Although the unit 17 owners voted to approve the bringing of this lawsuit, there is no evidence that anyone other than 18 Plaintiff is the master of this litigation. Fjelstad Decl., ¶ 5; see OSGI, 337 F.3d at 195 (where 19 agreement between plaintiff and other parties with an interest in the litigation gave plaintiff “the 20 express power to act on their behalf” and authority to “take such action as it may deem to be 21 necessary or appropriate,” plaintiff “was clearly intended to be the ‘master of the litigation’” and

22 other parties’ citizenship “is of no consequence to subject matter jurisdiction.”). 23

25 2 gives Plaintiff authority to sue on its membership’s behalf. RCW 64.38.020(4). In its original 3 Complaint, Plaintiff claimed that it is the successor-in-interest to, and the assignee of, the rights 4 being sued upon.2 Compl., ¶ 2. There is no allegation that Defendants sold IGUs to the members, 5 were directly engaged in a contractual or other relationship with them, or attempted to defraud the 6 members themselves; the allegedly false representations were made to Plaintiff and/or its 7 assignors. See Am. Compl., ¶ 29 (“In selling its falsely certified JS780 Gray IGUs, Viracon, LLC 8 made fraudulent, consumer protection affirmative representations to Fifteen Twenty-One Second 9 Avenue Condominium Association.”). 10 Plaintiff has also failed to make an argument for why the limited exception to the rule, 11 articulated in Kuntz, that a corporation’s citizenship controls should be expanded to include the

12 facts of this case. Plaintiff, if it prevails, may reimburse its members for their proportionate share 13 of the cost of replacing the IGUs. This fact does not explain why the Court should consider the 14 members’ citizenship, any more than the Court should ever consider the citizenship of 15 shareholders who stand to benefit from a successful lawsuit brought by the corporation whose 16

17 2 The Amended Complaint, filed after removal, amended the allegation to state that Plaintiff’s members (in addition to the Plaintiff) are assignees of rights belonging to the project developer, contractor, and subcontractors. Am. 18 Compl. ¶ 2 (“Fifteen Twenty-One Second Avenue Condominium Association and each individual unit owner are also successors in interest to the developer/declarant of the Fifteen Twenty-One Second Avenue project and assignee 19 of the project’s developer/declarant’s, general contractor’s, and glazing subcontractor’s rights against the defendants named herein.”). This particular allegation was not contained in the original complaint upon which removal was based, and Defendants suggest the assignment to the members (if indeed there was one) was a sham or a collusive 20 attempt to destroy this Court’s subject matter jurisdiction. See Viracon’s Opp., at 13-14. Plaintiff fails to respond to this accusation, to explain the mechanism by which its members became assignees of the original developer’s and 21 contractors’ rights, or otherwise to make any effort to substantiate this bald assertion. Because the Court need not consider facts that were not extant at the time of removal, it rejects Plaintiff’s claim that its members were assigned the original parties rights against Defendants here. See Williams v. Costco Wholesale Corp., 471 F.3d 975, 976 (9th 22 Cir. 2006) (“Courts have long held that post-removal amendments to the pleadings cannot affect whether a case is removable, because the propriety of removal is determined solely on the basis of the pleadings filed in state court.”) 23 (citations omitted).

25 2 F.2d 937, 939 (7th Cir.1990) (“If the defendants had . . . broken a contract they had with the 3 association, the wrong would be to the association even though the loss resulting from it would be 4 borne ultimately by the real estate agents who are its members.”). In the absence of persuasive 5 justification, the Court declines to do “what precedents have repeatedly cautioned against; that is, 6 to complicate the inquiry at the threshold jurisdictional stage with fact intensive inquiries that 7 would inevitably require additional court and party resources, before a case even gets started.” 8 Parler, LLC v. Amazon Web Servs., Inc., No. 2:21-CV-270, 2021 WL 4476918, at *7 (W.D. 9 Wash. Sept. 30, 2021); see Hertz Corp. v. Friend, 559 U.S. 77, 130 (2010) (“Complex 10 jurisdictional tests complicate a case, eating up time and money as the parties litigate, not the 11 merits of their claims, but which court is the right court to decide those claims.”).

12 Finally, for the foregoing reasons, the Court also declines to consider the citizenship of 13 IGCC’s members for purposes of determining subject matter jurisdiction. IGCC is an 14 incorporated entity, and thus its citizenship, i.e., state of incorporation (Illinois) and principal 15 place of business (New York), controls. 28 U.S.C. § 1332(c)(1). There is no evidence that IGCC 16 is being sued as a mere nominal party. Based upon allegations in the Complaint (and the 17 Amended Complaint), Plaintiff’s claims are against the council, not its members, who of course 18 have not been named in this lawsuit. See, e.g., Am. Compl., ¶ 23 (“IGCC failed and continues to 19 fail to ensure the validity of its own IGCC stamp on Viracon, LLC’s IGUs.”). While IGCC and its 20 members may be engaged in various relationships (e.g. as licensor/licensees), and a judgment 21 against IGCC may have an impact on the membership, such circumstances are indistinguishable

22 from the relationship of corporations and their shareholders generally. The IGCC, and not its 23

25 1 ||members, is the real party to the controversy, and its citizenship, and not its members’, controls 2 || the jurisdiction question before the Court. Complete diversity exists in this case. 3 IV. CONCLUSION 4 For the foregoing reasons, Plaintiff's Motion for Remand is DENIED. 5 DATED this 7th day of June, 2024. 6 , Asner eu, Barbara Jacobs Rothstein 8 US. District Court Judge 9 10 1] 12 13 14 15 16 17 18 19 20 21 22 23 4 || ORDER DENYING MOTION TO REMAND 25 || -9