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Westgate Resort, Ltd. v. Sussman

United States District Court, M.D. Florida, Orlando Division

August 16, 2017

WESTGATE RESORT, LTD., Plaintiffs,
v.
MITCHELL REED SUSSMAN; and MITCHELL REED SUSSMAN & ASSOCIATES, Defendants.

          ORDER

          ROY B. DALTON JR. JUDGE

         In the instant action, forty Plaintiffs have filed suit against two Defendants for state law tort claims and injunctive relief. (Doc. 1 (“Complaint”).) In doing so, Plaintiffs purport to invoke the Court's diversity jurisdiction. (Id. ¶ 41.) Given the number of Plaintiffs-many of which are unincorporated entities-the Court has expended considerable judicial resources to conduct a jurisdictional review of the Complaint. But, as is all too often the case, Plaintiffs have failed to sufficiently allege the parties' citizenship. Thus, Plaintiffs' Complaint is due to be dismissed. Nonetheless, the Court will grant Plaintiffs leave to amend their Complaint to cure the jurisdictional deficiencies and, if necessary, submit additional briefing to support their citizenship allegations.

         I. Legal Standards

         “Federal law permits federal courts to resolve certain nonfederal controversies between ‘citizens' of different States.” Americold Realty Tr. v. Conagra Foods, Inc., 136 S.Ct. 1012, 1014 (2016). “This rule is easy enough to apply to humans, but can become metaphysical when applied to legal entities.” Id. For example, “[f]or a long time . . . Congress failed to explain how to determine the citizenship of a non-breathing entity like a business association.” Id. at 1015. The U.S. Supreme Court “later carved a limited exception for corporations, holding that a corporation itself could be considered a citizen of its State of incorporation.” Id. Thereafter, “Congress etched this exception into the U.S. Code, adding that a corporation should also be considered a citizen of the State where it has its principal place of business.” Id. (citing 28 U.S.C. § 1332(c)). “But Congress never expanded this grant of citizenship to include artificial entities other than corporations. . . .” Id. For such unincorporated entities, federal courts must adhere to the “oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of all its members.” Id.

         The Supreme Court has “equated an association's members with its owners or the several persons composing such association”-for example, it has identified “the members of a joint-stock company as its shareholders, the members of a partnership as its partners, and the members of a union as the workers affiliated with it.” Id.

         II. Analysis

         As it currently stands, the Court cannot determine whether it has diversity jurisdiction over this action due to the following shortcomings in Plaintiffs' citizenship allegations.

         First, the Court requires more information regarding the citizenship of the trusts (“Trusts”) identified as members or sub-members of certain Plaintiffs. In repleading such allegations, Plaintiffs should heed the differences between traditional trusts and unincorporated entities labeled as “trusts” under state law. Americold, 136 S.Ct. at 1016.

         As recently articulated by the Supreme Court,

[t]raditionally, a trust was not considered a distinct legal entity, but a “fiduciary relationship” between multiple people. Such a relationship was not a thing that could be haled into court; legal proceedings involving a trust were brought by or against the trustees in their own name. And when a trustee files a lawsuit or is sued in her own name, her citizenship is all that matters for diversity purposes. For a traditional trust, therefore, there is no need to determine its membership, as would be true if the trust, as an entity, were sued.
Many States, however, have applied the “trust” label to a variety of unincorporated entities that have little in common with this traditional template. So long as such an entity is unincorporated, . . . it possesses the citizenship of all its members.

Id.

         To constitute a traditional trust, the trustee must “possesses certain customary powers to hold, manage, and dispose of assets for the benefit of others.” See LMP Ninth St.

         Real Estate, LLC. v. U.S. Bank Nat'l Ass'n, Case No. 8:16-cv-2463-T-33AEP, 2016 WL 6068302, at *2-3 (M.D. Fla. Oct. 17, 2016) (quoting Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 462-66 (1980)). If the trustee possess such powers, the citizenship of the trustee is controlling for purposes of diversity jurisdiction. Id. Hence Plaintiffs must identify whether the Trusts referenced in the Complaint are traditional trusts and, if so, Plaintiffs must identify the trustees and allege their citizenship ...


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