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Kleiman v. Wright

United States District Court, S.D. Florida

August 15, 2019

IRA KLEIMAN, et al., Plaintiffs,
CRAIG WRIGHT, Defendant.



         THIS CAUSE is before the Court upon Defendant Craig Wright’s Motion for Judgment on the Pleadings, ECF No. [144] (“Motion”). The Court has reviewed the Motion, all supporting and opposing submissions, the record and applicable law, considered the arguments presented by counsel at the hearing on July 10, 2019, and is otherwise fully advised. For the reasons that follow, the Motion is denied.

         I. BACKGROUND

         The factual background giving rise to this action has been set forth previously in prior opinions issued by this Court and are incorporated by reference. See e.g. ECF No. [68]. The facts relevant to the instant Motion are as follows. On April 15, 2019, the Defendant filed the instant Motion challenging the Court’s subject matter jurisdiction. Specifically, the Defendant argues that the record evidence demonstrates that Dave Kleiman was not the sole member of Plaintiff W&K Info Defense Research, LLC (“W&K”), and that other members of the company exist whose membership would destroy diversity. The other proposed members include: 1) Uyen Nguyen (“Nguyen”); 2) Coin-Exch PTY Ltd. (“Coin-Exch”); and 3) Lynn Wright.

         Further, the Defendant argues that the Second Amended Complaint (“SAC”), ECF No. [83], is deficient because it alleges that both that W&K’s exact ownership structure is “unclear due to Craig’s contradictory statements” and that “[a]s best as can presently be discerned, [Dave Kleiman] was the sole ‘member’ of W&K.” ECF No. [83], at ¶¶ 70-71. Therefore, the Defendant challenges the Court’s subject matter jurisdiction in both a factual and facial attack. On July 10, 2019, the Court held an extensive hearing (“Hearing”) on the instant Motion.


         “Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). It is presumed that a federal court lacks jurisdiction in a particular case until the plaintiff demonstrates the court has jurisdiction over the subject matter. See Id. (citing Turner v. Bank of No. Am., 4 U.S. 8, 11 (1799); McNutt v. Gen. Motors Acceptance Corp. of Ind., 298 U.S. 178, 182 (1936) (“It is incumbent upon the plaintiff properly to allege the jurisdictional facts ....”)). A district court may inquire into the basis of its subject matter jurisdiction at any stage of the proceedings. See 13 C. WRIGHT, A. MILLER & E. COOPER, Federal Practice & Procedure § 3522 (1975).

         Attacks on subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure may be either facial or factual. See Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir. 1990). Like a Rule 12(b)(6) motion, “[a] ‘facial attack’ on the complaint requires the court merely to look and see if plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in the complaint are taken as true....” Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir. 1980) (citing Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir. 1977)). Factual attacks differ because they “challenge[ ] the existence of subject matter jurisdiction in fact ... and matters outside of the pleadings, such as testimony and affidavits, are considered.” Id. If a defendant shows a lack of diversity by meeting its burden of production for a factual attack, then the plaintiff must respond with proof definitively evincing diversity exists. See OSI, Inc. v. United States, 285 F.3d 947, 951 (11th Cir. 2002). Factual attacks also differ from facial attacks because “no presumptive truthfulness attaches to plaintiff’s allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Mortensen, 549 F.2d at 891.


         In the instant Motion, the Defendant argues that the SAC should be dismissed because the Court lacks subject matter jurisdiction over this action. Federal district courts have subject matter jurisdiction over civil actions where the amount in controversy exceeds $75,000.00 and the suit is between citizens of different states. See 28 U.S.C. § 1332(a). In analyzing diversity, the citizenship of a limited liability company is determined by the citizenship of its members. See Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004) (requiring all LLC members to be diverse from all opposing parties). In the Defendant’s Motion, he asserts a factual challenge on subject matter jurisdiction. However, in his Reply, the Defendant has focused on a facial challenge. Compare ECF No. [144], at 9-14 with ECF No. [171], at 5. As for his factual attack, the Defendant suggests that other foreign members of W&K exist and thus diversity jurisdiction is destroyed. ECF No. [144], at 9-14. As for the Defendant’s facial argument, the Defendant contends that the SAC fails to allege the complete membership of W&K and includes language that reveals that the Plaintiff may be uncertain as to the company’s actual ownership. ECF No. [171], at 5. Thus, the Defendant claims that the SAC is facially deficient by failing to adequately allege diversity jurisdiction exists. The Court addresses each argument in turn.

         a) Factual Attack

         Defendant first focuses his factual attack on the Court’s subject matter jurisdiction. “While the plaintiff has the burden to prove diversity in a factual attack, that burden exists only if the defendant has first proffered evidence to show a lack of diversity.” JPMCC 2005-CIBC13 Collins Lodging, 2010 WL 11452084, at *3 (denying motion because defendant’s “factual attack on diversity of citizenship is devoid of evidentiary support”) (emphasis added); see also RG Martin Investments, LLC v. Virtual Tech. Licensing, LLC, 2017 WL 7792564 at *2 (S.D. Fla. July 7, 2017) (“The burden of pleading diversity of citizenship is upon the party invoking federal jurisdiction, and if jurisdiction is properly challenged, that party also bears the burden of proof.”) (emphasis added). For the reasons that follow, the Court finds that the Defendant has failed to provide credible evidence showing a lack of diversity. As such, he has failed to satisfy his burden of production.

         In his Motion, Defendant argues that both Nguyen and Coin-Exch were members of W&K, and that their membership would destroy diversity in this action. ECF No. [144], at 11-13. Then, for the first time in his Reply, the Defendant argues that his ex-wife Lynn Wright was also a member of W&K. ECF No. [171], at 6-7.

         “Oh! What a tangled web we weave when first we practice to deceive.” Sir ...

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