Gilpin v. CU Capital Market Solutions, LLC

• Court: District Court, D. Nevada
• Decided: September 10, 2021
• Docket: 3:20-cv-00589
• Status: Unknown

Opinion

2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 JEREMY GILPIN, et al., Case No. 3:20-cv-00589-MMD-WGC

7 Plaintiffs, ORDER

8 v.

9 CU CAPITAL MARKET SOLUTIONS, LLC, et al., 10 Defendants. 11 12 I. SUMMARY 13 Plaintiffs Jeremy Gilpin and Hardaway Capitol Group, LLC (“Hardaway”) filed a 14 first amended complaint against Defendants CU Capital Market Solutions, LLC (“CU- 15 CMS”) and Capital Markets Management Group (“CMMG”) arising from events following 16 the conclusion of two bio refinery projects in Nevada. (ECF No. 14 (“FAC”).) Before the 17 Court is Defendants’ motion to dismiss pursuant to Rule 12(b)(1) of the Federal Rules of 18 Civil Procedure. (ECF No. 23 (“Motion”).)1 Because the Court finds that it does not have 19 diversity jurisdiction over this action—and as further explained below—Defendants’ 20 Motion is granted. 21 II. BACKGROUND 22 The following facts are taken from Plaintiffs’ FAC (ECF No. 14), unless noted 23 otherwise. Jeremy Gilpin is a resident of Nevada and a senior executive of Greater 24 Nevada Commercial Lending, LLC. (Id. at 2.) Gilpin is also the manager of Hardaway, 25 which is a limited liability company incorporated and has a principal place of business in 26 Nevada. (Id.) On the other hand, CU-CMS and CMMG are both Georgia limited liability 27

28 1The Court has additionally reviewed the parties’ corresponding response and 2 Kansas but also maintains an office in Georgia. (Id. at 2.) CMMG has a principal place 3 of business in Georgia. (Id. at 3.) 4 Plaintiffs invoke this Court’s diversity jurisdiction under 28 U.S.C. § 1332. (Id.) 5 Plaintiffs allege that for several years, numerous parties—including Defendants—have 6 been litigating in multiple forums “to stake their claims for fees stemming from two large 7 financing transaction” that Gilpin arranged regarding renewable energy projects in 8 Nevada. (Id. at 4.) Plaintiffs seek a declaratory judgement against Defendants, and 9 further alleges Defendants engaged in intentional interference with contractual relations 10 and intentional interference with prospective economic activity. (Id. at 18-22.) This 11 resulted in damages to Plaintiffs in excess of $75,000. (Id. at 18-22.) 12 Further relevant to this order, the parties do not dispute that CU-CMS includes 13 three credit unions: Jefferson Financial Credit Union (“Jefferson Financial”), Freedom 14 Northwest Credit Union (“Freedom Northwest”) and SunState Federal Credit Union 15 (“SunState”). (ECF Nos. 23 at 9, 24 at 8.) These three credit unions are federally 16 chartered unions. (ECF No. 23 at 9.) 17 Plaintiffs state in their opposition that Jefferson Financial is “headquartered in 18 Metairie, Louisiana, with more than a dozen locations in south Louisiana” and that 19 “eligibility for membership in Jefferson Financial is limited only to certain counties and 20 parishes in Louisiana and Alabama.” (ECF No. 24 at 8.) Defendants attached a 21 declaration to their reply from the Chief Executive Officer of Jefferson Financial 22 declaring that Jefferson Financial conducts business and makes loans in Louisiana and 23 Alabama, and that “15% of the revenues of Jefferson Financial is received from 24 business conducted outside of the state of Louisiana.” (ECF No. 28-1 at 2-3.) 25 As to the remaining two credit unions, Plaintiffs assert in response to the Motion 26 that Freedom Northwest is located and operates in Idaho. (ECF No. 24 at 9.) SunState 27 operates and restricts its membership to Florida, where it is located. (Id.) 28 /// 2 Rule 12(b)(1) of the Federal Rules of Civil Procedure (“FRCP”) allows defendants 3 to seek dismissal of a claim or action for a lack of subject matter jurisdiction. Although 4 the defendant is the moving party in a motion to dismiss brought under Rule 12(b)(1), 5 the plaintiff is the party invoking the court’s jurisdiction. As a result, the plaintiff bears the 6 burden of proving that the case is properly in federal court. See McCauley v. Ford Motor 7 Co., 264 F.3d 952, 957 (9th Cir. 2001) (citing McNutt v. Gen. Motors Acceptance Corp., 8 298 U.S. 178, 189 (1936)). Plaintiff’s burden is subject to a preponderance of the 9 evidence standard. See Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). 10 Federal courts are courts of limited jurisdiction. See Owen Equip. & Erection Co. 11 v. Kroger, 437 U.S. 365, 374 (1978). A federal court is presumed to lack jurisdiction in a 12 particular case unless the contrary affirmatively appears. See Stock W., Inc. v. 13 Confederated Tribes of Colville Rsrv., 873 F.2d 1221, 1225 (9th Cir. 1989) (citation 14 omitted). “Because subject matter jurisdiction goes to the power of the court to hear a 15 case, it is a threshold issue and may be raised at any time and by any party.” Mallard 16 Auto. Grp., Ltd. v. United States, 343 F. Supp. 2d 949, 952 (D. Nev. 2004) (citing FRCP 17 12(b)(1)). 18 Moreover, district courts have original jurisdiction over civil actions where the 19 matter is between citizens of different states and the amount exceeds $75,000. 28 20 U.S.C. § 1332(a)(1). Diversity jurisdiction exists when there is “complete diversity of 21 citizenship, i.e., every plaintiff be a citizen of a different state from every defendant.” 22 Carpenter v. PNC Bank, N.A., 368 F. Supp. 3d 1339, 1344 (D. Haw. 2019) (citing 23 GranCare, LLC v. Thrower, 889 F.3d 543, 548 (9th Cir. 2018)). Although corporations 24 are citizens of any state in which they are incorporated or have their principal place of 25 business, “an LLC is a citizen of every state of which its owners/members are citizens.” 26 Johnson v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). 27 /// 28 /// 2 Defendants argue this action should be dismissed because: (1) complete 3 diversity does not exist between the parties; (2) the amount in controversy does not 4 exceed $75,000; and the Colorado River2 abstention doctrine applies to this action. 5 (ECF No. 23 at 8-14.) Because the issue of complete diversity proves to be dispositive, 6 the Court will address the parties’ two arguments below with respect to this issue and 7 declines to resolve Defendants’ remaining arguments. 8 1) Federally-Chartered Corporations 9 Defendants assert the federally chartered credit unions of CU-CMS are not 10 considered citizens of any particular state, therefore complete diversity does not exist in 11 a dispute between a citizen of a state and a federally chartered credit union.3 (ECF No. 12 23 at 8-10.) Plaintiffs counter that the citizenship of a federal chartered credit union 13 should be based on its principal place of business pursuant to 28 U.S. C. § 1332(c)(1) 14 as set forth in Navy Fed. Credit Union v. LTD Fin. Servs., 972 F. 3d 344 (4th Cir. 2020). 15 (ECF No. 24 at 10-13.) As further support, Plaintiffs cite to Lloyd v. Navy Fed. Credit 16 Union, Case No. 17-cv-1280-BAS-RBB, 2019 WL 2269958 (S.D. Cal. May 28, 2019). 17 (Id. at 12.) While courts appear split on this issue, the Court agrees with Defendants. 18 In Hancock Fin. Corp. v. Fed. Sav. & Loan Ins. Corp., the Ninth Circuit held there 19 was no subject matter jurisdiction under 28 U.S.C. § 1332 over Federal Savings and 20 Loan Insurance Corporation (“FSLIC”) because the agency was an instrumentality of 21 the federal government and thus not a citizen of any state for the purposes of diversity. 22 492 F.2d 1325, 1329 (9th Cir. 1974). In reaching this conclusion, the Ninth Circuit relied 23 on Fed. Deposit Ins. Corp. v. Nat’l Sur. Corp., 345 F. Supp. 885, 888 (S.D. Iowa 1972) 24 (holding that the Federal Deposit Insurance Corporation (“FDIC”)—chartered by the 25 federal government—had no citizenship in any particular state thus no diversity of 26 citizenship existed). The rationale in both cases was that if the FSLIC and FDIC were

27 2See Colo. River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). 28 3The Court notes the parties due not dispute that CMMG is a diverse Defendant 2 upon diversity jurisdiction, and this would have circumvented the intent of Congress to 3 limit the scope of jurisdiction over federally chartered corporations in 28 U.S.C. § 1349. 4 Id.; Hancock, 492 F.2d at 1329. 5 Here, CU-CMS is a limited liability company and a credit union service 6 organization. CU-CMS includes three federally chartered credit unions: Jefferson 7 Financial, Freedom Northwest, and SunState.4 Thus, under Hancock, as federally 8 chartered credit unions, these entities have no citizenship in any particular state for 9 purposes of diversity jurisdiction. 10 Plaintiffs argue this Court should apply the Navy Fed.’s principal place of 11 business approach, pursuant to 28 U.S.C. § 1332(c)(1), to establish citizenship of the 12 federally chartered credit unions as Louisiana, Idaho, and Florida. (ECF No. 24 at 13.) 13 However, Hancock implicitly rejected application of the principal place of business 14 analysis to federally chartered entities. The Ninth Circuit, in holding the FSLIC is not a 15 citizen of any particular state for diversity purposes, explicitly noted the FDIC, as was 16 the FSLIC, was “also chartered by the federal government.” Hancock, 492 F.2d at 1329. 17 Moreover, as the court in Pierson v. Alaska USA Fed. Credit Union articulated, if 28 18 U.S.C. § 1332(c) were to be read as permitting jurisdiction over federally-chartered 19 corporations based on their principal place of business, it “would contravene the 20 statute’s primary purpose to reduce the caseload in the federal courts.” Case No. 2:19- 21 cv-1685-RAJ, 2020 WL 747857, at *2 (W.D. Wash. Feb. 14, 2020) (citing S. Rep. No. 22 1830 (1983)). After it rejected the § 1332(c) argument, the Pierson court went on to find 23 24 4The Court notes that Plaintiffs included in their response a brief reference to a case in the U.S. District Court for the District of Kansas whereby CU-CMS was a party. 25 (ECF No. 24 at 4.) The reference seeks to highlight that Defendants asserted in that case, upon a show cause order regarding diversity jurisdiction, CU-CMS’s federal credit 26 unions were not members of CU-CMS but rather “Unit Holders.” (Id.) Plaintiffs fail to provide much else in their response and it is unclear to the Court if Plaintiffs are seeking 27 to factually attack that the federal credit unions are not members of CU-CMS as Defendants allegedly argued in the Kansas case. Additionally, it is not clear to the Court 28 whether Plaintiffs are arguing offensive collateral estoppel. As such, the Court declines to address the issue further as it is Plaintiffs’ burden to prove that the case is properly in 2 purpose of establishing diversity of citizenship.” Id. See also Broadbridge Fin. Sols., Inc. 3 v. CNBS, LLC, Case No. 15 Civ. 4978 (PAC), 2016 WL 1222339, at *1 (S.D.N.Y. Mar. 4 23, 2016) (brackets and citation omitted) (“The general rule with respect to federal credit 5 unions is that . . . they are not considered to be citizens of any particular state for the 6 purpose of establishing diversity of citizenship.”) 7 Because Plaintiffs do not dispute the federal credit unions of CMS are federally 8 chartered, and in light of Hancock’s rejection of the principal place of business 9 approach, the Court concludes that it lacks diversity jurisdiction over this action. 10 2) Localized Exception 11 Plaintiffs argue the general rule that federally chartered corporations are not 12 citizens of any state does not apply to CU-CMS because of the “localized exception.” 13 (ECF No. 24 at 6-10.) Under this exception, Plaintiffs argue Jefferson Financial, 14 Freedom Northwest, and SunState are localized credit unions with limited geographical 15 presence respectively in Louisiana, Idaho, and Florida, and therefore complete diversity 16 exists in this action. (Id. at 9.) Defendants counter that at least one of CU-CMS’s credit 17 unions—Jefferson Financial—does not have a limited presence. (ECF No. 28 at 6.) The 18 Court agrees with Defendants. 19 Plaintiffs quote Lehman Bros. Bank, FSB v. Frank T. Yoder Mortg., Inc., 415 F. 20 Supp. 2d 636, 640 (E.D. Va. 2006) in their opposition to set forth the localized exception 21 rule. (ECF No. 24 at 7 (“a federally chartered corporation may be eligible for diversity 22 jurisdiction where its activities are sufficiently localized so that it may be deemed a 23 citizen of a single state.”).) Plaintiffs subsequently state, “Jefferson Financial is 24 headquartered in Metairie, Louisiana, with more than a dozen locations in south 25 Louisiana” and that “eligibility for membership in Jefferson Financial is limited only to 26 certain counties and parishes in Louisiana and Alabama.” (Id. at 8, 9 (emphasis 27 added).) 28 /// 1 Defendants attached a declaration to their reply from the Chief Executive Officer 2 || of Jefferson Financial declaring that it conducts business and makes loans in Louisiana 3 || and Alabama, and that “15% of the revenues of Jefferson Financial is received from 4 || business conducted outside of the state of Louisiana.” (ECF No. 28-1 at 2-3.) Because it 5 || is undisputed that Jefferson Financial has a business presence outside of Louisiana— 6 || specifically Alabama—its activities are thus not sufficiently localized and not the kind of 7 || “peculiarly local’ federally chartered credit union to warrant it be deemed a citizen of 8 || one state for diversity jurisdiction. See Feuchtwanger Corp. v. Lake Hiawatha Fed. 9 || Credit Union, 272 F.2d 453, 455 (3rd Cir. 1959) (exercising diversity jurisdiction over a 10 || federal credit union with a “peculiarly local institution of a single community” in a state); 11 || see also Pierson, 2020 WL 747857, at *2 (finding the localized exception did not apply 12 || to a federal credit union with locations in three different states). Accordingly, and in 13 || consideration of Jefferson Financial being federally chartered as discussed above, the 14 || Court finds it does not have diversity jurisdiction over this action. 15 || V. CONCLUSION 16 The Court notes that Plaintiffs and Defendants made several arguments and 17 || cited to several cases not discussed above. The Court has reviewed these arguments 18 || and cases and determines that they do not warrant discussion as they do not affect the 19 || outcome of the Motion. 20 It is therefore ordered that Defendants’ motion to dismiss (ECF No. 23) is 21 || granted. 22 The Clerk of Court is directed to enter judgment accordingly and to close this 23 || case. 24 DATED THIS Day of September 2021. 25 / Cf . 26 MIRANDA M. DU 27 CHIEF UNITED STATES DISTRICT JUDGE 28