Zeetogroup, LLC v. Digital Media Solutions, LLC

• Court: District Court, S.D. California
• Decided: March 25, 2024
• Docket: 3:22-cv-01396
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 DIGITAL MEDIA SOLUTIONS, LLC, Lead Case No.: 3:22-cv-01184-AHG 12 Plaintiff, (Consolidated with No. 3:22-cv-01396- AHG) 13 v.

14 ZEETOGROUP, LLC, ORDER:

15 Defendant. (1) DISMISSING THIS ACTION FOR 16 LACK OF SUBJECT-MATTER JURISDICTION; 17

18 (2) REMANDING RELATED MEMBER CASE FOR LACK OF 19 SUBJECT-MATTER 20 JURISDICTION; and

21 (3) DENYING MOTION FOR 22 SUMMARY JUDGMENT AS MOOT

23 [ECF No. 39] 24 25 26

27 28 1 This matter comes before the Court on Defendant Zeetogroup, LLC’s 2 (“Defendant”) or (“Zeetogroup”) Motion for Summary Judgment. ECF No. 39. However, 3 as explained in the Court’s Scheduling Order, the Court must resolve a threshold 4 jurisdictional question before turning to the merits of the summary judgment motion. 5 I. BACKGROUND OF THE JURISDICTIONAL QUESTION 6 The Court previously dismissed this case without prejudice for lack of subject 7 matter jurisdiction, on the basis that neither party had provided “conclusive evidence” of 8 the citizenship of Stephan Goss, who is the sole member of Zeetogroup. ECF No. 18 at 7. 9 Without sufficient evidence of Mr. Goss’s domicile from either side, the Court found that 10 Plaintiff Digital Media Solutions, LLC (“Plaintiff” or “DMS”) failed to meet its burden to 11 adequately allege complete diversity, dismissed Plaintiff’s Complaint without prejudice, 12 and permitted Plaintiff to file an amended complaint within 30 days to cure the 13 deficiencies noted in the order. Id. at 8-11. Following dismissal, the Court permitted 14 Plaintiff to conduct limited jurisdictional discovery regarding Mr. Goss’s citizenship. 15 ECF No. 23. Based on Mr. Goss’s deposition testimony, DMS filed an Amended 16 Complaint in this action and responded to the Court’s Order to Show Cause in the related 17 action with evidence tending to show that Mr. Goss is a citizen of California for purposes 18 of diversity jurisdiction. Although neither party continues to actively challenge subject- 19 matter jurisdiction, because defects in subject-matter jurisdiction are nonwaivable, see 20 Broce v. Arco Pipe Line Co., 28 F. App’x 653, 654 (9th Cir. 2002), the Court will sua 21 sponte analyze that threshold question before it reaches the merits of the summary 22 judgment motion. 23 II. DISCUSSION OF JURISDICTION 24 Diversity jurisdiction lies in federal court where the amount in controversy exceeds 25 $75,000, exclusive of interest and costs, and the action is between: 26 (1) citizens of different States; (2) citizens of a State and citizens or subjects of a foreign state, except that 27 the district courts shall not have original jurisdiction under this subsection of 28 an action between citizens of a State and citizens or subjects of a foreign 1 state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State; 2 (3) citizens of different States and in which citizens or subjects of a foreign 3 state are additional parties; and (4) a foreign state [] as plaintiff and citizens of a State or of different States. 4 5 28 U.S.C. § 1332. The amount-in-controversy requirement is undisputedly met. DMS 6 seeks to recover $944,176.27 in compensatory damages from Defendant Zeetogroup. See 7 ECF No. 1 ¶¶ 10, 11, 16, 23; id. at 5-6. Therefore, the Court focuses its discussion on 8 whether the parties are completely diverse. 9 Plaintiff and Defendant are both limited liability companies (“LLCs”). An LLC “is 10 a citizen of every state of which its owners/members are citizens.” Johnson v. Columbia 11 Properties Anchorage, 437 F.3d 894, 899 (9th Cir. 2006). Therefore, all members of 12 DMS must be completely diverse from all members of Zeetogroup to establish diversity 13 jurisdiction. 14 For a natural person to be deemed a citizen of a State within the meaning of the 15 diversity statute, the person “must both be a citizen of the United States and be domiciled 16 within the State.” Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828 (1989). “A 17 person’s domicile is [his] permanent home, where [he] resides with the intention to 18 remain or to which [he] intends to return.” Kanter v. Warner-Lambert Co., 265 F.3d 853, 19 857 (9th Cir. 2001). As discussed in the Court’s previous order regarding subject-matter 20 jurisdiction, United States citizens who are domiciled abroad are considered “stateless” 21 for purposes of § 1332(a) and destroy complete diversity. ECF No. 18 at 4 (quoting 22 Marcus v. Alexandria Real Est. Equities, Inc., No. 2:21-CV-08088-SB-SK, 2022 WL 23 2815904, at *3 (C.D. Cal. May 3, 2022)) (other citation omitted); see also Newman- 24 Green, 490 U.S. at 828-29. Further, any “stateless” member of an LLC renders the LLC 25 “stateless” as well. See ECF No. 18 at 5 (collecting cases). 26 The record establishes—and neither party disputes—that Plaintiff DMS is a citizen 27 of the states of Florida, Delaware, and New Jersey, as well as the foreign state of Canada. 28 See id. at 6; ECF No. 8 at 3-4; ECF No. 8-1, Borghese Decl. ¶¶ 2-9. The point of 1 contention leading to the Court’s previous order dismissing the case for lack of subject- 2 matter jurisdiction is the citizenship of Defendant Zeetogroup’s sole member, Stephan 3 Goss. See generally ECF Nos. 8, 9, 18. At the time, Plaintiff alleged that Mr. Goss is a 4 citizen of the state of California, based on a Statement of Information from the California 5 Secretary of State showing that Mr. Goss shares a San Diego address with Zeetogroup. 6 See Borghese Decl. ¶ 10; Ex. 1. Defendant refuted that allegation, contending that Mr. 7 Goss was a “stateless alien,” because he “has not lived in the United States since the 8 beginning of the COVID-19 pandemic and is currently residing in Dubai.” ECF No. 9-1, 9 Cardwell Decl. ¶ 3. Ultimately, the Court determined that neither party had provided 10 conclusive evidence of Mr. Goss’s citizenship, because Plaintiff had at best established 11 that Mr. Goss was a resident of the State of California—not that he was domiciled in 12 California—and Defendant provided “equally weak evidence regarding the domicile of 13 Mr. Goss” by failing to state how long Mr. Goss had been living in Dubai or whether he 14 intended to remain there. ECF No. 18 at 8. Therefore, neither party presented sufficient 15 evidence to show where Mr. Goss was domiciled. Finding that Plaintiff failed to meet its 16 burden of showing by a preponderance of evidence that Mr. Goss is a citizen of the State 17 of California, as opposed to a “stateless alien”—i.e., a United States citizen domiciled 18 abroad—the Court dismissed the case without prejudice. ECF No. 18 at 8-11. 19 Thereafter, the Court permitted Plaintiff to conduct limited jurisdictional discovery 20 regarding Mr. Goss’s citizenship. ECF No. 23. As part of that jurisdictional discovery, 21 counsel for DMS deposed Mr. Goss on December 21, 2022. See ECF No. 13-1, Ex. A 22 (“Goss Dep.”). Mr. Goss testified that he had traveled to “30-some countries since 23 COVID started” after leaving the United States on June 10, 2020, and was currently 24 living Dnipro, Ukraine. Goss Dep. 6:13-7:4; 7:18-20. Mr. Goss confirmed that before the 25 COVID-19 pandemic began in the United States, he resided in San Diego, California for 26 several years as a resident alien with Green Card status. Id. 10:7-24; 14:6-18; 40:2-22; 27 28 1 41:23-42:1. He further testified that he has never been a United States citizen. Id. 39:19- 2 21. 3 In DMS’s response to the Court’s Order to Show Cause (“OSC”) regarding 4 subject-matter jurisdiction in the member case Zeetogroup, LLC v. Digital Media 5 Solutions, LLC, et al., 3:22-cv-001396-AHG (“Member Case”), after deposing Mr. Goss, 6 DMS continued to focus on the issue of Mr. Goss’s domicile to argue that he is a citizen 7 of the State of California. See Member Case, ECF No. 13. Specifically, DMS explained 8 that “[t]here is a rebuttable presumption that, once established, a person’s last known 9 domicile remains their domicile until and unless rebutted with sufficient evidence of 10 change.” Id. at 2 (citing Buscher v. Edelman, 2021 WL 969208, at *4 (C.D. Cal. Mar. 4, 11 2021)). Since Mr. Goss has not established a new domicile since leaving California, DMS 12 insists that he “remains a citizen of the State of California, for purposes of diversity 13 jurisdiction.” Id. at 3. 14 However, by focusing on Mr. Goss’s last known domicile in California, DMS 15 ignores the most salient piece of information it gleaned from Mr. Goss’s deposition: he is 16 not a United States citizen at all. To establish state citizenship for diversity purposes, “a 17 party must (1) be a citizen of the United States, and (2) be domiciled in the state.” Kantor 18 v. Wellesley Galleries, Ltd., 704 F.2d 1088, 1090 (9th Cir. 1983). Although DMS recites 19 this same two-part test in its OSC Response in the Member Case, it fails to address how 20 Mr. Goss’s last known domicile in California is even relevant to the discussion when he 21

22 23 1 The excerpts of the Goss deposition provided to the Court do not reveal the foreign state where Mr. Goss holds citizenship. However, in response to the question of whether he 24 votes in the United States, Mr. Goss responded, “I was never a citizen, so I was never 25 able to vote.” Goss Dep. 39:19-21. Publicly available information indicates he is a Swiss citizen. See FORBES, 30 Under 30 – Marketing & Advertising (2018), Profile of Stephan 26 Goss, available at https://www.forbes.com/profile/stephan-goss/?sh=502731355537 (last 27 visited Mar. 22, 2024). For purposes of determining jurisdiction, however, the Court need not identify Mr. Goss’s specific foreign citizenship; what is important to the analysis is 28 1 is not a U.S. citizen in the first place. See PW W. Coast LLC v. Monteverde, No. 17- 2 22233-CIV, 2018 WL 1795486, at *3 n.3 (S.D. Fla. Feb. 13, 2018) (“The Defendants’ 3 argument fails to distinguish between § 1332(a)(1), which applies to litigants who are 4 United States citizens who from different American states, from § 1332(a)(2), which 5 applies to litigants who are foreign nationals, rather than U.S. citizens or lawful 6 permanent residents, for purposes of diversity jurisdiction. It is for this reason that the 7 Defendants’ arguments regarding domicile being established through residence and intent 8 to remain are not relevant.”). 9 Although DMS’s argument for diversity jurisdiction fails, the Court has 10 independently examined the possibility that diversity jurisdiction lies in this Court under 11 either 28 U.S.C. § 1332(a)(2) or (a)(3), given that Mr. Goss is a foreign national. As 12 recited above, subsection (a)(2) of the diversity statute provides that federal jurisdiction 13 lies in civil actions between “citizens of a State and citizens or subjects of a foreign state, 14 except that the district courts shall not have original jurisdiction under this subsection of 15 an action between citizens of a State and citizens or subjects of a foreign state who are 16 lawfully admitted for permanent residence in the United States and are domiciled in the 17 same State.” Subsection (a)(3) states that diversity jurisdiction lies in civil actions 18 between “citizens of different States and in which citizens or subjects of a foreign state 19 are additional parties.” 20 However, because Plaintiff DMS is a citizen of the foreign state of Canada, and 21 there is no citizen of any State on Defendant Zeetogroup’s side, neither of these 22 provisions establishes diversity jurisdiction here. That is, if Plaintiff DMS’s members 23 were all citizens of States within the United States bringing an action against an LLC that 24 takes on the foreign citizenship of its sole member, diversity jurisdiction would lie under 25 28 U.S.C. § 1332(a)(2), because the action would be between “citizens of a State and [a] 26 citizen[] or subject[] of a foreign state.” However, this subsection cannot apply because 27 DMS is a citizen of the foreign state of Canada in addition to being a citizen of the U.S. 28 States of Florida, Delaware, and New Jersey. See ECF No. 8 at 3-4; ECF No. 8-1, 1 Borghese Decl. ¶¶ 2-9. If, on the other hand, there were a citizen of any U.S. State on 2 Zeetogroup’s side of the case—say, if the Zeetogroup LLC included another member 3 who were a citizen of Texas—diversity jurisdiction would lie under § 1332(a)(3), 4 because the action would be between completely diverse U.S. citizens of different States 5 (Florida, Delaware, and New Jersey on one side and Texas on the other), in which 6 citizens or subjects of a foreign state (Canada on one side and Mr. Goss’s foreign state of 7 citizenship on the other) are “additional parties.” See, e.g., Transure, Inc. v. Marsh & 8 McLennan, Inc., 766 F.2d 1297, 1298 (9th Cir. 1985) (“All of the authorities that have 9 considered [whether aliens on both sides of the case destroy diversity jurisdiction] agree 10 that federal diversity jurisdiction is not defeated where (1) there is a legitimate 11 controversy between diverse citizens and aliens are additional parties; and (2) there is 12 complete diversity as to the citizens.”). 13 But with aliens on both sides of the case, and no party with U.S. citizenship on 14 Zeetogroup’s side, the law is well-established that diversity jurisdiction cannot lie. See, 15 e.g., Grupo Dataflux v. Atlas Glob. Grp., L.P., 541 U.S. 567, 569 (2004) (explaining that 16 the case was properly dismissed for lack of subject-matter jurisdiction where the plaintiff, 17 Atlas, “is a citizen of each State or foreign country of which any of its partners is a 18 citizen. Because Atlas had two partners who were Mexican citizens at the time of filing, 19 the partnership was a Mexican citizen. (It was also a citizen of Delaware and Texas based 20 on the citizenship of its other partners.) And because the defendant, Dataflux, was a 21 Mexican corporation, aliens were on both sides of the case, and the requisite diversity 22 was therefore absent.”); Faysound Ltd. v. United Coconut Chemicals, Inc., 878 F.2d 290, 23 294–95 (9th Cir. 1989) (finding no diversity jurisdiction where there were aliens on both 24 sides of a case, despite the presence of a United States party on the defendants’ side, 25 because “[d]iversity jurisdiction does not encompass foreign plaintiffs suing foreign 26 defendants” and “[n]o reason occurs why we should seek to expand our jurisdiction by 27 overturning the simple, firm, long-established, and unbroken interpretation of the 28 jurisdictional statute, 28 U.S.C. § 1332(a)(2). As to the meaning of this statute the rule 1 established by Chief Justice Marshall controls: diversity must be complete.”) (internal 2 quotations and citations omitted); Nike, Inc. v. Comercial Iberica de Exclusivas 3 Deportivas, S.A., 20 F.3d 987, 991 (9th Cir. 1994) (“Although the federal courts have 4 jurisdiction over an action between ‘citizens of a State and citizens or subjects of a 5 foreign state,’ 28 U.S.C. § 1332(a)(2), diversity jurisdiction does not encompass a foreign 6 plaintiff suing foreign defendants, such as an action between NIL and these alien 7 defendants. Nike’s presence as a plaintiff does not salvage jurisdiction because diversity 8 must be complete.”) (internal citation omitted); Yarala v. Star Health & Allied Ins. Co. 9 Ltd., No. 12-CV-11849-IT, 2014 WL 12689938, at *3 (D. Mass. July 11, 2014) (“Neither 10 subsection (a)(2) nor (a)(3) grant this court jurisdiction over this case. Subsection (a)(2) 11 requires complete diversity and here foreign citizens appear on both sides of the action 12 . . . . Although subsection (a)(3) does not require complete diversity, it does require U.S. 13 citizens to be on both sides of the action. Consequently, this court lacks subject matter 14 jurisdiction over this case with the current configuration of parties.”) (internal citations 15 omitted). See also Stevenson & Fitzgerald, RUTTER GROUP PRAC. GUIDE: FED. CIV. PRO. 16 BEFORE TRIAL, Ch. 2C-4 §§ 2:1511-2:1515 (Calif. & 9th Cir. Edition 2023) (explaining 17 that there is no diversity jurisdiction if there are aliens on both sides of the case and there 18 are not completely diverse U.S. citizens on both sides, with no exception for permanent 19 resident aliens). 20 The same problem destroys diversity jurisdiction in consolidated member case 21 3:22-cv-01396-AHG, Zeetogroup, LLC v. Digital Media Solutions, LLC et al. Although 22 there are other parties named as Defendants on DMS’s side in the Member Case, 23 Zeetogroup, LLC remains the sole party on the plaintiff’s side, with Stephan Goss as its 24 sole member. Therefore, Zeetogroup has only foreign citizenship. Because DMS is a 25 citizen of Canada in addition to Florida, Delaware, and New Jersey, once again there are 26 aliens on both sides of the case with no U.S. citizens on the plaintiff’s side. Therefore, the 27 Court finds there is no federal jurisdiction over either action, and that this action must be 28 dismissed sua sponte for lack of subject-matter jurisdiction. See Scholastic Ent., Inc. v. 1 || Fox Ent. Grp., Inc., 336 F.3d 982, 985 (9th Cir. 2003) (holding that a federal court may 2 || dismiss an action sua sponte for lack of subject-matter jurisdiction without providing the 3 parties notice or an opportunity to respond). Further, because the Member Action was 4 ||removed from the Superior Court rather than originally filed in federal court like this 5 ||action, it is due to be remanded rather than dismissed. See Member Case, ECF No. 1 6 ||(Notice of Removal of case number 37-2022-00032443-CU-BC-CTL from Superior 7 || Court, State of California, San Diego County). 8 Ht. CONCLUSION 9 For the reasons explained above, the Court finds it lacks subject-matter jurisdiction 10 ||over this action or the consolidated member case Zeetogroup, LLC v. Digital Media 11 || Solutions, LLC et al, Case No. 3:22-cv-01396-AHG. 12 Therefore, the Court DISMISSES this action (3:22-cv-01184-AHG) for lack of 13 || subject-matter jurisdiction. Zeetogroup’s Motion for Summary Judgment (ECF No. 39) is 14 || DENIED as moot. 15 Pursuant to 28 U.S.C. § 1447(c), the Court REMANDS the Member Case 16 || (3:22-cv-01396-AHG) to the Superior Court of California, County of San Diego. 17 The Clerk is DIRECTED to file a copy of this Order in each action’ and to close 18 cases accordingly, with a certified copy of the Order sent to the State Court in the 19 ||Member Action. 20 IT IS SO ORDERED. 21 || Dated: March 25, 2024 AS able □□ H. Goddard 22 United States Magistrate Judge 23 24 || 26 |!2 In its Order consolidating this action with the Member Case, the Court ordered all 27 ||subsequent filings to be made only in the lead case. ECF No. 37 at 4. However, because 28 the Member case is due to be remanded rather than dismissed, it is appropriate to enter this Order in each, to keep the record clear in the Member Case on remand to state court.