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S Rock Partners LLC v. Kiselev

United States District Court, D. Connecticut

February 14, 2018



          CHARLES S. HAIGHT, JR., Senior United States District Judge


         Plaintiff S Rock Partners, LLC ("S Rock") brings this action against Defendant Aleskei Kiselev (a/k/a Alex Kiselev) for fraudulently inducing S Rock to invest the sum of $400, 000 in a limited liability company ("LLC") by representing that he would fund the company with "thousands of shares of valuable stock in an engineering, utility, and power company known as Soyuz Holding S.A. ("Soyuz")."[1] Doc. 1, ¶1. Pursuant to an Equity Purchase Agreement, entered on October 8, 2015, S Rock purchased 100% of the membership interests of that LLC, which was allegedly created "for the sole purpose of receiving the Soyuz Shares." Id., ¶ 3. According to Plaintiff these shares were "intended to be the LLC's sole asset, and the reason for S Rock's purchase of the LLC." Id. However, Kiselev never transferred the Soyuz Shares to the LLC. Id., ¶ 2. Upon receiving S Rock's $400, 000 investment, Kiselev sold his home in Alexandria, Virginia, and left the United States to live in Ukraine. Id., ¶¶ 2, 11.

         There is evidence in the record that Plaintiff served Kiselev with the summons and complaint in this action in New York City on October 5, 2017.[2] Doc. 6. Despite said service, Kiselev never appeared or responded to the Complaint. S Rock moved for entry of default by the Clerk, which was granted. Doc. 7, 8, & 9. Thereafter, pursuant to Federal Rule of Civil Procedure 55(b), S Rock moved for default judgment. Doc. 10 (filed February 8, 2018). However, before the Court may consider whether it would be proper to enter judgment, it must confirm its subject matter jurisdiction based on diversity of citizenship. To do so, the Court must have additional facts regarding the citizenship of the parties and the amount in controversy. It thus follows that Plaintiff must make additional submissions so the Court may consider the existence vel non of its subject matter jurisdiction.


         A. Subject Matter Jurisdiction

         Federal district courts are courts of limited jurisdiction under Article III, Section 2, of the United States Constitution. See, e.g., Chicot Cnty. Drainage Dist. Baxter State Bank, 308 U.S. 371, 376 (1940), reh'g denied, 309 U.S. 695 (1940). The question of subject matter jurisdiction is fundamental so that a court must raise the issue sua sponte, of its own accord, when the issue is not addressed by the parties. Mansfield, C. & L.M. Ry. Co. v. Swan, 111 U.S. 379, 382 (1884). See also Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006) ("Although neither party has suggested that we lack appellate jurisdiction, we have an independent obligation to consider the presence or absence of subject matter jurisdiction sua sponte."), cert. denied, 549 U.S. 1282 (2007); Univ. of S. Alabama v. Am. Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999) ("[I]t is well settled that a federal court is obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking").

         In general, a federal district court may exercise subject matter jurisdiction over an action only if there is either: (1) "federal question" jurisdiction, applicable to "all civil actions arising under the Constitution, laws, or treaties of the United States, " 28 U.S.C. § 1331; or (2) there exists "diversity of citizenship, " complete diversity of citizenship between the plaintiff and all defendants and the amount in controversy exceeds "the sum or value of $75, 000, exclusive of interest and costs, " 28 U.S.C. § 1332(a). See also Strawbridge v. Curtiss, 7 U.S. 267, 267-68 (1806); Da Silva v. Kinsho Int'l Corp., 229 F.3d 358, 363 (2d Cir. 2000) (delineating two categories of subject matter jurisdiction).

         Unlike personal jurisdiction, "failure of subject matter jurisdiction is not waivable." Lyndonville Sav. Bank & Trust Co. v. Lussier, 211 F.3d 697, 700 (2d Cir. 2000). If subject matter jurisdiction is lacking, the action must be dismissed. See Fed. R. Civ. P. 12(h)(3); 211 F.3d at 700-01. See also, e.g., Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.À.R.L., 790 F.3d 411, 416-17 (2d Cir. 2015) ("A district court properly dismisses an action . . . for lack of subject matter jurisdiction if the court lacks the statutory or constitutional power to adjudicate it . . . .") (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)); Manway Constr. Co. v. Housing Auth. of Hartford, 711 F.2d 501, 503 (2d Cir. 1983) ("It is common ground that in our federal system of limited jurisdiction any party or the court sua sponte, at any stage of the proceedings, may raise the question of whether the court has subject matter jurisdiction; and, if it does not, dismissal is mandatory.").

         In order for diversity of citizenship to exist, the plaintiff's citizenship must be diverse from that of all defendants. See, e.g., St. Paul Fire and Marine Ins. Co. v. Universal Builders Supply, 409 F.3d 73, 80 (2d Cir. 2005) ("Diversity is not complete if any plaintiff is a citizen of the same state as any defendant.") (citing Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74 (1978)). Moreover, such diversity must exist at the time the action is commenced." Universal Licensing Corp. v. Lungo, 293 F.3d 579, 581 (2d Cir. 2002). See also Wolde-Meskel v. Vocational Instruction Project Comm. Servs., Inc., 166 F.3d 59, 62 (2d Cir.1999) ("Satisfaction of the § 1332(a) diversity requirements (amount in controversy and citizenship) is determined as of the date that suit is filed - the 'time-of-filing' rule.").

         In the case at bar, there appears to be no basis for the Court to exercise "federal question" jurisdiction - i.e., no claim arising under the Constitution or federal law. See 28 U.S.C. § 1331. Plaintiff S Rock has brought exclusively state law claims arising from Defendant Kiselev's alleged breach and/or failure to perform under the Equity Purchase Agreement. These claims include breach of contract, fraud, conversion, unjust enrichment, and specific performance. Doc. 1, at 12-15. Consequently, Plaintiff's sole asserted jurisdictional basis is "diversity of citizenship" pursuant to 28 U.S.C. § 1332(a), because, according to Plaintiff, "Plaintiff and Defendant are residents of different states and the amount in controversy . . . exceeds $75, 000, exclusive of interest and costs."[3] Doc. 1, ¶ 12. At the outset, the Court notes that this allegation is insufficient to establish diversity of citizenship in that it is the domicile of the parties, as opposed to residence, that is the basis for determining citizenship for diversity purposes. This distinction is discussed more fully below.

         In order for diversity of citizenship to exist, Plaintiff S Rock's citizenship must be diverse from that of Defendant Kiselev. See, e.g., St. Paul Fire & Marine Ins. Co., 409 F.3d at 80. Moreover, the "time-of-filing" rule dictates that "diversity must exist at the time the action is commenced, " in this case October 3, 2017. Universal Licensing Corp., 293 F.3d at 581.

         Finally, to invoke "diversity of citizenship" jurisdiction, there must be a minimum amount in controversy exceeding "$75, 000, exclusive of interest and costs, " 28 U.S.C. § 1332(a). The burden is on the plaintiff to allege in good faith that it sustained the mandatory minimum in damages. See, e.g., Scherer v. Equitable Life Assurance Soc'y of U.S., 347 F.3d 394, 397 (2d Cir. 2003) ("A party invoking the jurisdiction of the federal court has the burden of proving that it appears to a 'reasonable probability' that the claim is in excess of the statutory jurisdictional amount.") (quoting Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir.1994)). The amount in controversy must "appear on the face of the complaint or be established by proof." Miller v. European Am. Bank, 921 F.Supp. 1162, 1167 (S.D.N.Y. 1996).

         B. Citizenship of the Parties

         1. S ...

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