UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION
IVF CRYO LLC, ) ) Plaintiff, ) ) v. ) No. 1:24-cv-00016-JPH-MKK ) H&W HOLDCO LLC, ) BRIAN HOFF, ) ) Defendants. ) ) ) BRIAN HOFF, ) H&W HOLDCO LLC, ) ) Counter ) Claimants, ) ) v. ) ) IVF CRYO LLC, ) ) Counter ) Defendant. )
ORDER DENYING MOTION TO REMAND Plaintiff IVF Cryo brought this case in Indiana state court seeking a declaratory judgment that it was not required to purchase back Defendant H&W Holdco LLC's shares. Dkt. 1-2 at 5. Defendants H&W and Brian Hoff removed this action to this court, dkt. 1 at 4, and IVF Cryo LLC filed a motion to remand, arguing that the $75,000 amount in controversy requirement was not met. Dkt. [21]. Because Defendants have shown that the amount in controversy exceeded the jurisdictional amount, the motion to remand is DENIED. I. Facts and Background In December 2021, H&W and its principal and sole member, Brian Hoff, entered into an operating agreement with Fish Business Holdings, Vykk Drago Enterprises, and Don and Edward Fish to manage IVF Cryo. Dkt. 1-2 at 2–3. At that time, H&W contributed $200,000 for a stake in the company. Dkt. 1.
Don Fish, Edward Fish, and Mr. Hoff served as the IVF Cryo board of directors and worked for the company. Dkt. 1-2 at 3. In September 2023, the other members of IVF Cryo expelled H&W under the operating agreement, and Don and Edward Fish expelled Brian Hoff from the Board of Directors. Dkt. 1 at 2. The next month, H&W demanded payment of the fair market value of its shares in IVF Cryo. Dkt. 1-2 at 3. IVF Cryo brought this case against H&W and Mr. Hoff in the Hamilton Superior Court in December 2023, seeking a declaratory judgment that H&W
was not entitled to have its shares purchased back. Id. at 5. Defendants removed the case to this court in January 2024, dkt. 1, and Plaintiff filed a motion to remand, dkt. 21. II. Applicable Law Because federal courts are of limited jurisdiction, "district courts may not exercise jurisdiction absent a statutory basis." Home Depot U. S. A., Inc. v. Jackson, 139 S. Ct. 1743, 1746 (2019). For the Court to have diversity jurisdiction under 28 U.S.C. § 1332, the litigation must be between citizens of different states and the amount in controversy must exceed "$75,000, exclusive of interest and costs."
The proponent of federal jurisdiction has the burden of proving contested factual allegations by a preponderance of the evidence. Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006). Once the material jurisdictional facts have been established, then "the case stays in federal court unless it is legally certain that the controversy is worth less than the jurisdictional minimum." Id. If at any time the court lacks subject-matter jurisdiction, "the case shall be remanded." 28 U.S.C. § 1447(c). III. Analysis IVF Cryo argues that this case must be remanded because H&W's stake in IVF Cryo was worth less than the $75,000 jurisdictional amount. Dkt. 21. More specifically, IVF Cryo contends that it is worth less than it was in 2021 when H&W invested in IVF Cryo, and that H&W's shares are "non-marketable"
and therefore "worthless." Dkt. 21 at 4. Defendants respond that in the absence of contrary evidence, H&W's stake is worth at least as much as it paid for it—$200,000. Moreover, since that investment, IVF Cryo has grown substantially, and its revenue has dramatically increased. Therefore, H&W's investment in IVF Cryo is easily worth more the $75,000 threshold. Dkt. 23 at 5. "The amount in controversy is the amount required to satisfy the plaintiff's demands in full . . . on the day the suit was removed." Oshana v. Coca-Cola, 472 F.3d 506, 510–11 (7th Cir. 2006). So, in suits seeking equitable remedies such as a declaratory judgment, the amount in controversy is determined by the "value of the object of the litigation." America’s Moneyline,
Inc. v. Coleman, 360 F.3d 782, 786 (7th Cir. 2004). A district court may consider "post-filing events, including production of evidence during discovery, to the extent they clarify what the plaintiff was actually seeking at the beginning of the case." Sykes v. Cook Inc., 72 F.4th 195, 209–10 (7th Cir. 2023). Once the material jurisdictional facts have been established, "the case stays in federal court unless it is legally certain that the controversy is worth less than the jurisdictional minimum." Meridian Sec. Ins. Co., 441 F.3d at 542.
The mere potential that the value is less than the jurisdictional amount is therefore not enough to require remand. See Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008). Here, the amount in controversy at the time of removal is the fair market value of H&W's 15% equity stake in IVF Cryo when H&W was expelled from ownership. See dkt. 1 at 2 (arguing that Indiana law requires IVF Cryo to pay "the fair value of the member's interest . . . as of the date of dissociation"). In 2021, H&W invested $200,000 for that 15% equity stake1, id., and IVF Cryo
does not dispute that this investment reflected a fair value, see dkt. 21 at 4.
1 Defendants allege that the $200,000 was for a 12.5% stake, which would further increase the amount in controversy, but the Court does not address this disagreement because the jurisdictional amount is met even if the $200,000 was for a 15% stake. Therefore, when the shares at issue were purchased at the end of 2021, they were worth more than the $75,000 jurisdictional amount. Since then, IVF Cryo's Profit and Loss statements—which were prepared
for business purposes rather than for litigation and which IVF Cryo does not question—suggest that its value based on revenue has only increased. In the year of H&W's initial investment, IVF Cryo's total income was $862,870.32. Dkt. 22-6. In 2022, IVF Cryo's total income grew to $1,551,354.65. Dkt. 22-7. And from January to July 2023, IVF Cryo had already surpassed 2022's revenue, with total income of $1,579,463.55. Dkt. 22-8. Defendants' exhibits—which show the initial investment value of $200,000, the company's increase in income, and the company's growth plan—show by a preponderance
of the evidence that H&W's 15% ownership stake was worth more than $75,000 at H&W's dissociation. See Meridian Sec. Ins. Co., 441 F.3d at 542. Defendants have therefore shown "a reasonable probability that the value of the stock in a private transaction would exceed the jurisdictional amount." Gould, 1 F.3d at 547. That is enough for this case to "stay[ ] in federal court" unless Plaintiffs can show that "it is 'legally certain'" that the 15% ownership stake is worth less than $75,000. Meridian Sec. Ins. Co., 441 F.3d at 542. In an attempt to do so, Plaintiffs rely on an affidavit from one of its
directors, Don Fish. Dkt. 21-1. Mr. Fish's affidavit states that IVF Cryo had a net loss of about $176,000 in 2022, and that the 15% stake at issue should be valued at 4.4 times earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which would be less than the jurisdictional amount. Id. at 2. Defendants argue that Mr.
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION
IVF CRYO LLC, ) ) Plaintiff, ) ) v. ) No. 1:24-cv-00016-JPH-MKK ) H&W HOLDCO LLC, ) BRIAN HOFF, ) ) Defendants. ) ) ) BRIAN HOFF, ) H&W HOLDCO LLC, ) ) Counter ) Claimants, ) ) v. ) ) IVF CRYO LLC, ) ) Counter ) Defendant. )
ORDER DENYING MOTION TO REMAND Plaintiff IVF Cryo brought this case in Indiana state court seeking a declaratory judgment that it was not required to purchase back Defendant H&W Holdco LLC's shares. Dkt. 1-2 at 5. Defendants H&W and Brian Hoff removed this action to this court, dkt. 1 at 4, and IVF Cryo LLC filed a motion to remand, arguing that the $75,000 amount in controversy requirement was not met. Dkt. [21]. Because Defendants have shown that the amount in controversy exceeded the jurisdictional amount, the motion to remand is DENIED. I. Facts and Background In December 2021, H&W and its principal and sole member, Brian Hoff, entered into an operating agreement with Fish Business Holdings, Vykk Drago Enterprises, and Don and Edward Fish to manage IVF Cryo. Dkt. 1-2 at 2–3. At that time, H&W contributed $200,000 for a stake in the company. Dkt. 1.
Don Fish, Edward Fish, and Mr. Hoff served as the IVF Cryo board of directors and worked for the company. Dkt. 1-2 at 3. In September 2023, the other members of IVF Cryo expelled H&W under the operating agreement, and Don and Edward Fish expelled Brian Hoff from the Board of Directors. Dkt. 1 at 2. The next month, H&W demanded payment of the fair market value of its shares in IVF Cryo. Dkt. 1-2 at 3. IVF Cryo brought this case against H&W and Mr. Hoff in the Hamilton Superior Court in December 2023, seeking a declaratory judgment that H&W
was not entitled to have its shares purchased back. Id. at 5. Defendants removed the case to this court in January 2024, dkt. 1, and Plaintiff filed a motion to remand, dkt. 21. II. Applicable Law Because federal courts are of limited jurisdiction, "district courts may not exercise jurisdiction absent a statutory basis." Home Depot U. S. A., Inc. v. Jackson, 139 S. Ct. 1743, 1746 (2019). For the Court to have diversity jurisdiction under 28 U.S.C. § 1332, the litigation must be between citizens of different states and the amount in controversy must exceed "$75,000, exclusive of interest and costs."
The proponent of federal jurisdiction has the burden of proving contested factual allegations by a preponderance of the evidence. Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006). Once the material jurisdictional facts have been established, then "the case stays in federal court unless it is legally certain that the controversy is worth less than the jurisdictional minimum." Id. If at any time the court lacks subject-matter jurisdiction, "the case shall be remanded." 28 U.S.C. § 1447(c). III. Analysis IVF Cryo argues that this case must be remanded because H&W's stake in IVF Cryo was worth less than the $75,000 jurisdictional amount. Dkt. 21. More specifically, IVF Cryo contends that it is worth less than it was in 2021 when H&W invested in IVF Cryo, and that H&W's shares are "non-marketable"
and therefore "worthless." Dkt. 21 at 4. Defendants respond that in the absence of contrary evidence, H&W's stake is worth at least as much as it paid for it—$200,000. Moreover, since that investment, IVF Cryo has grown substantially, and its revenue has dramatically increased. Therefore, H&W's investment in IVF Cryo is easily worth more the $75,000 threshold. Dkt. 23 at 5. "The amount in controversy is the amount required to satisfy the plaintiff's demands in full . . . on the day the suit was removed." Oshana v. Coca-Cola, 472 F.3d 506, 510–11 (7th Cir. 2006). So, in suits seeking equitable remedies such as a declaratory judgment, the amount in controversy is determined by the "value of the object of the litigation." America’s Moneyline,
Inc. v. Coleman, 360 F.3d 782, 786 (7th Cir. 2004). A district court may consider "post-filing events, including production of evidence during discovery, to the extent they clarify what the plaintiff was actually seeking at the beginning of the case." Sykes v. Cook Inc., 72 F.4th 195, 209–10 (7th Cir. 2023). Once the material jurisdictional facts have been established, "the case stays in federal court unless it is legally certain that the controversy is worth less than the jurisdictional minimum." Meridian Sec. Ins. Co., 441 F.3d at 542.
The mere potential that the value is less than the jurisdictional amount is therefore not enough to require remand. See Spivey v. Vertrue, Inc., 528 F.3d 982, 986 (7th Cir. 2008). Here, the amount in controversy at the time of removal is the fair market value of H&W's 15% equity stake in IVF Cryo when H&W was expelled from ownership. See dkt. 1 at 2 (arguing that Indiana law requires IVF Cryo to pay "the fair value of the member's interest . . . as of the date of dissociation"). In 2021, H&W invested $200,000 for that 15% equity stake1, id., and IVF Cryo
does not dispute that this investment reflected a fair value, see dkt. 21 at 4.
1 Defendants allege that the $200,000 was for a 12.5% stake, which would further increase the amount in controversy, but the Court does not address this disagreement because the jurisdictional amount is met even if the $200,000 was for a 15% stake. Therefore, when the shares at issue were purchased at the end of 2021, they were worth more than the $75,000 jurisdictional amount. Since then, IVF Cryo's Profit and Loss statements—which were prepared
for business purposes rather than for litigation and which IVF Cryo does not question—suggest that its value based on revenue has only increased. In the year of H&W's initial investment, IVF Cryo's total income was $862,870.32. Dkt. 22-6. In 2022, IVF Cryo's total income grew to $1,551,354.65. Dkt. 22-7. And from January to July 2023, IVF Cryo had already surpassed 2022's revenue, with total income of $1,579,463.55. Dkt. 22-8. Defendants' exhibits—which show the initial investment value of $200,000, the company's increase in income, and the company's growth plan—show by a preponderance
of the evidence that H&W's 15% ownership stake was worth more than $75,000 at H&W's dissociation. See Meridian Sec. Ins. Co., 441 F.3d at 542. Defendants have therefore shown "a reasonable probability that the value of the stock in a private transaction would exceed the jurisdictional amount." Gould, 1 F.3d at 547. That is enough for this case to "stay[ ] in federal court" unless Plaintiffs can show that "it is 'legally certain'" that the 15% ownership stake is worth less than $75,000. Meridian Sec. Ins. Co., 441 F.3d at 542. In an attempt to do so, Plaintiffs rely on an affidavit from one of its
directors, Don Fish. Dkt. 21-1. Mr. Fish's affidavit states that IVF Cryo had a net loss of about $176,000 in 2022, and that the 15% stake at issue should be valued at 4.4 times earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which would be less than the jurisdictional amount. Id. at 2. Defendants argue that Mr. Fish's information is unreliable and insufficient to defeat their showing that the jurisdictional amount is satisfied. Dkt. 23 at 7–9.
Mr. Fish states that the 2023 EBITDA for IVF Cryo would be "at best" $10,000, so the value of the 15% stake would be approximately $44,000— based on his unexplained assumption that the value is EBITDA multiplied by 4.4. Dkt. 21-1 at 2. This value appears to contradict IVF Cryo's January to July 2023 P&L statement, which sets IVF Cryo's EBITDA through July at around $275,000. Dkt 22-8. More fundamentally, Mr. Fish does not explain why the company's value should be measured by EBITDA, when IVF Cryo's Growth Plan instead uses revenue to estimate the company's value. Dkt. 22-3.
Nor do Plaintiffs explain why their calculations, which were done for litigation purposes, should be given conclusive weight over Defendants' calculations, which are drawn from business records created for investors and IVF Cryo's financial management. Dkt. 22-3 through dkt. 22-8. In short, Plaintiffs' evidence at best shows uncertainty about the precise value of the 15% ownership stake at the time of H&W's dissociation. But when it comes to amount in controversy, "[u]ncertainty differs from impossibility." Spivey, 528 F.3d at 986. "Once the facts have been established, uncertainty
about . . . whether damages . . . will exceed the threshold, does not justify" remand. Meridian Sec. Ins. Co., 441 F.3d at 543. Finally, Plaintiff asserts that because the shares are "non-marketable" they are essentially "worthless." Dkt. 21 at 4. However, all that needs to be established is "a reasonable probability that the value of the stock in a private transaction would exceed the jurisdictional amount" for the amount in controversy requirement to be satisfied. Gould v. Artisoft, Inc., 1 F.3d 544, 547 (7th Circ. 1993). Since the value in that hypothetical private sale is enough, the non-marketability does not change the value of the company or prevent the amount in controversy requirement from being satisfied.2 See id. Therefore, the Court concludes that Plaintiffs' submissions do not allow the Court to be "legally certain that the controversy is worth less than [$75,000]." Meridian Sec. Ins. Co., 441 F.3d at 543. IV. Conclusion Plaintiffs motion to remand is DENIED. Dkt. [21]. SO ORDERED. Date: 7/29/2024 S| anus Patrick \ta Yon James Patrick Hanlon United States District Judge Southern District of Indiana
Distribution: All electronically registered counsel
2 The Court therefore does not address Defendants’ alternate argument that IVF Cryo's settlement offer also supports the jurisdictional amount.