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In re Security First, LLC

United States District Court, M.D. Louisiana

October 4, 2019

IN RE SECURITY FIRST, LLC

          NOTICE AND ORDER

          ERIN WILDER-DOOMES UNITED STATES MAGISTRATE JUDGE

         This is an action for dissolution and liquidation of Security First, LLC (“Security First”), which is a limited liability company comprised of two members, Robert Talbot (“Talbot”) and Joanna Koong (“Koong”).[1] On August 27, 2019, Talbot filed a Petition for Judicial Dissolution and Liquidation (“Petition”) of Security First[2] in the Twenty-Third Judicial District Court for the Parish of Ascension. In the Petition, Talbot seeks dissolution of Security First pursuant to La. R.S. § 12:1335 because the members “are at a deadlock in the management of Security First, ” and because Koong: “has committed multiple violations of the Operating Agreement…including…repeatedly issued checks in amounts greater than $10, 000.00 without joint agreement and signature of [Talbot]; [made] improper income distributions to non-members; has refused to provide access to all books and records of Security First to [Talbot]; and transferred membership interests in violation of the employment contract with [Talbot].”[3]

         On October 1, 2019, Koong removed the matter to this Court, asserting that this Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332.[4] The Notice of Removal makes the following allegations regarding the citizenship of the parties:

Ms. Koong recognizes that for the purposes of diversity jurisdiction, the membership of a limited liability company is determined by the citizenship of its members. See Greenville Imaging, LLC v. Wash. Hosp. Corp., 326 Fed.Appx. 797, 798 (5th Cir. 2009). As such, the Company, in an “ordinary” diversity proceeding, is a citizen of the State of Texas and the State of Louisiana. Ms. Koong respectfully represents that she is a domiciliary of the State of Texas. Mr. Talbot represents in his Petition that he is a domiciliary of the State of Louisiana. Thus, on the face of the pleadings it is arguable that diversity of citizenship may be lacking as the Company and Mr. Talbot are citizens of the State of Louisiana.

         Proper information regarding the citizenship of all parties is necessary to establish the Court's diversity jurisdiction, as well as to make the determination required under 28 U.S.C. § 1441 regarding whether the case was properly removed to this Court. It is not clear from the Notice of Removal that the Court has diversity jurisdiction because it does not appear that the parties are diverse or that the amount in controversy is met.

         Diversity of Citizenship

         As set forth above, it is not facially apparent from the Notice of Removal that the parties are diverse because Talbot, the “Petitioner” in the state court action, and Security First, the “Defendant” limited liability company of which Talbot is a member, are both citizens of Louisiana.[5] Removing party Koong argues that the citizenship of Security First should be disregarded because Talbot seeks no relief against Security First aside from dissolution, and Security First has “no interest in this case, ” rendering it a “nominal party” whose citizenship can be disregarded, citing Ouber v. JPMorgan Chase Bank, Nat'l Ass'n.[6] In particular, Koong further argues that she is mischaracterized as a “Petitioner” in the state court Petition. Koong avers that she is actually a Defendant because “the real issues in dispute implicate the conduct of Mr. Talbot and Ms. Koong and not the conduct of the Company.”[7] According to Koong, a Texas citizen, only she, Talbot, and a third party Massachusetts citizen (who has yet to be joined) have a real interest in this case, and they are diverse from each other.[8]

         It is not clear from the foregoing that Security First is a nominal party whose citizenship can be disregarded. Both the Petition and Notice of Removal indicate that Security First, a separate juridical entity under Louisiana law, [9] owns assets/property (at least some of which is in Louisiana);[10] therefore, contrary to Koong's representations, Security First may have an interest in these dissolution proceedings. The Oubre decision does not support Koong's position that Security First is a nominal party whose citizenship should be disregarded because the Oubre decision did not reach that issue as to the party alleged to be “nominal” in that case.[11] In contrast, the Court's research has revealed authority that appears to contradict Koong's argument.[12]Accordingly, Koong is ordered to file a memorandum that presents argument and evidence in support of Koong's contention that Security First is a nominal party whose citizenship may be disregarded. As an alternative, Koong may file a Motion to Withdraw her Notice of Removal, which will result in remand, [13] in light of the authority that appears to refute Koong's argument.

         Amount in Controversy

         It is also not clear that the amount in controversy exceeds $75, 000, exclusive of interest and costs. In support of the amount in controversy, the Notice of Removal alleges as follows:

The Company has assets valued substantially in excess of $75, 000.00; thus, by a preponderance of the evidence, the amount in controversy - that is, the amount subject to dissolution - exceeds the threshold requirement. See 28 U.S.C. § 1332. Accordingly, this lawsuit is properly removable to this Court. See 28 U.S.C. §§ 1441, 1446 (action removable based on diversity jurisdiction if preponderance of evidence demonstrates that amount in controversy exceeds jurisdictional threshold). Mr. Talbot has offered to Ms. Koong in settlement $410, 000.00 for her “half” of the membership of the Company, and her “half” of the membership in separate company which owns immovable property. See Exhibit 5. It is respectfully submitted that the value of the Company comprises the majority of the $410, 000.00 amount. “Although settlement negotiations are not admissible at trial pursuant to Federal Rule of Evidence 408 to prove liability for or invalidity of the claim or its amount, they can be considered ‘to show the stakes' when determining whether the amount in controversy is met.” Grinnell Mut. Reinsurance Co. v. Haight, 697 F.3d 582, 585 (7th Cir. 2012), citing Rising-Moore v. Red Roof Inns, Inc., 435 F.3d 813, 816 (7th Cir.2006).[14]

         However, the forgoing, and Talbot's offer letter referenced therein and submitted with the Notice of Removal, do not adequately establish that the amount in controversy is met with respect to Security First's dissolution. While Talbot's offer letter reflects an offer of $410, 000, it was conditioned upon a buy-out of Koong's interest in two companies, Security First and Ascension RV and Boat Storage, LLC.[15] There is no evidence that reflects the respective value of either company, and therefore, it is unclear if the value of the proposed settlement of Koong's interest in Security First alone exceeds the requisite jurisdictional threshold. Other than the offer letter, the only other evidence presented regarding the amount in controversy are Koong's self-serving allegations that the value of Security First “comprises the majority of the $410, 000 amount, ” and that Security First “has assets valued substantially in excess of $75, 000.00.”[16] However, Koong has not offered any independent evidence to substantiate these claims, which, standing alone, do not establish that the amount in controversy is met.[17]

         Although a Motion to Remand has not been filed, the Court sua sponte raises the issue of whether it may exercise diversity jurisdiction in this matter.[18]

         Accordingly, IT IS ORDERED that, on or before October 16, 2019, removing party Joanna Koong shall file a memorandum regarding subject matter jurisdiction, which specifically presents argument and evidence in support of Koong's contention that Security First, LLC is a nominal party whose citizenship may be disregarded, and also presents evidence and argument in support of the amount in ...


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