Megalomedia v. Philadelphia Indemnity
Summary of the case Megalomedia v. Philadelphia Indemnity
The Fifth Circuit Court of Appeals remanded the case for jurisdictional discovery because the parties failed to establish the citizenship of the LLCs involved, which is necessary for determining diversity jurisdiction under 28 U.S.C. § 1332. Philadelphia Indemnity sought a declaratory judgment against Megalomedia entities, which counterclaimed for breach of contract and torts. The court emphasized that the citizenship of an LLC is determined by its members, and the parties did not provide sufficient evidence of this.
Key Issues of the case Megalomedia v. Philadelphia Indemnity
- Establishing citizenship of LLCs for diversity jurisdiction
- Failure to provide evidence of LLC members' citizenship
Key Facts of the case Megalomedia v. Philadelphia Indemnity
- Philadelphia Indemnity sought a declaratory judgment against Megalomedia entities.
- The parties failed to establish the citizenship of the LLCs involved.
Decision of the case Megalomedia v. Philadelphia Indemnity
Remanded for jurisdictional discovery
Impact of the case Megalomedia v. Philadelphia Indemnity
The case highlights the importance of properly establishing jurisdictional facts, particularly the citizenship of LLC members, in diversity cases.
Opinions
Case: 23-20570 Document: 92-2 Page: 1 Date Filed: 09/20/2024 United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit ____________ FILED September 20, 2024 No. 23-20570 Lyle W. Cayce ____________ Clerk Megalomedia Incorporated; Megalomedia Studios, L.L.C.; Mansfield Films, L.L.C.; DBA Holdings, L.L.C., Plaintiffs—Appellants, versus Philadelphia Indemnity Insurance Company, Defendant—Appellee. ______________________________ Appeal from the United States District Court for the Southern District of Texas USDC No. 4:20-CV-1644 ______________________________ PUBLISHED ORDER Before Ho, Duncan, and Oldham, Circuit Judges. Andrew S. Oldham, Circuit Judge: This is yet another case presenting an evergreen problem in our circuit: The parties failed to establish the citizenship of limited liability companies in a diversity case under 28 U.S.C. § 1332.
We therefore remand for jurisdictional discovery. Case: 23-20570 Document: 92-2 Page: 2 Date Filed: 09/20/2024 * Philadelphia Indemnity Insurance Company (“Philadelphia Indemnity”) brought this action against Megalomedia Inc., Megalomedia Studios, LLC, Mansfield Films, LLC, and DBA Holdings, LLC (the “Megalomedia entities”) in federal court. Philadelphia Indemnity sought a declaratory judgment that it had no duty to defend or indemnify the Megalomedia entities. The Megalomedia entities counterclaimed for breach of contract and various torts.
The contractual claims were resolved on summary judgment, and the tort claims were resolved after a bench trial. The claimed basis of subject matter jurisdiction over the case was diversity of citizenship under 28 U.S.C. § 1332. Diversity jurisdiction is proper only if there is complete diversity of citizenship among the parties. See Strawbridge v.
Curtiss, 7 U.S. (3 Cranch) 267, 267 (1806). This means “[e]ach plaintiff must be diverse from each defendant.” In re Levy, 52 F.4th 244, 246 (5th Cir. 2022) (per curiam). We have repeatedly held that the citizenship of an LLC is determined by the citizenship of its members. See, e.g., Harvey v.
Grey Wolf Drilling Co., 542 F.3d 1077, 1079–80 (5th Cir. 2008); Settlement Funding, LLC v. Rapid Settlements, Ltd., 851 F.3d 530, 536 (5th Cir. 2017); MidCap Media Fin., LLC v. Pathway Data, Inc., 929 F.3d 310, 314 (5th Cir. 2019); Acadian Diagnostic Lab’ys, LLC v. Quality Toxicology, LLC, 965 F.3d 404, 408 n.1 (5th Cir. 2020).
At the pleading stage, the party invoking the federal court’s jurisdiction must allege the citizenship of each LLC’s members. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992) (explaining that standing “must be supported . . . with the manner and degree of evidence required at the successive stages of the litigation”). At the summary judgment stage, that party must provide evidence sufficient to support a jury finding of the citizenship of each LLC’s members.
See ibid. And at trial, that party must prove the citizenship Case: 23-20570 Document: 92-2 Page: 3 Date Filed: 09/20/2024 of each LLC’s members. See ibid. The parties cannot stipulate to diversity jurisdiction, just as they cannot stipulate to any other form of subject matter jurisdiction. E.g., J.A.
Masters Invs. v. Beltramini, --- F.4th ---, No. 23-20292, 2024 WL 4115280, at (5th Cir. Sept. 9, 2024) (per curiam) (diversity stipulations insufficient); see also Ins. Corp. of Ir. v.
Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982) (“[N]o action of the parties can confer subject-matter jurisdiction upon a federal court. Thus, the consent of the parties is irrelevant . . . .”). Here, the complaints alleged only where the LLC parties were “doing business” and had their “principal place of business.” The latter allegation is relevant to the citizenship of a corporation, see 28 U.S.C. § 1332(c)(1), but neither allegation is relevant to an LLC’s citizenship. We can amend defective jurisdictional allegations on appeal under 28 U.S.C. § 1653, but only if there is record evidence establishing the necessary jurisdictional facts.
See MidCap, 929 F.3d at 314. This case had already proceeded to trial, so we requested the parties to file a letter brief identifying record evidence proving the citizenship of the LLCs’ members. The parties’ joint letter admitted there is no such evidence. We thus cannot proceed to the merits.
See Beltramini, 2024 WL 4115280, at . * The case is REMANDED for jurisdictional discovery. This panel will retain jurisdiction pending any further appeal.