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Allen v. Campbell

United States District Court, D. Idaho

March 1, 2019

MICHAEL ALLEN, an individual; CAMP BENCH HOLDINGS, LLC, an Idaho limited liability company; CAMP RIVER HOLDINGS, LLC, an Idaho limited liability company; and CAMPBELL FARMS, INC., an Idaho corporation, Plaintiffs,
NEIL CAMPBELL, an individual, and CAMPBELL CONTRACTING, LTD., a Nevada limited liability company, Defendants.



         Now pending are several motions related to the subject-matter jurisdiction of this Court. The Court originally remanded this case on February 19, 2019, granted attorney's fees to Plaintiffs, but invited Defendants to “file an amended notice of removal if they believe they can cure the jurisdictional defect in the original notice.” (Dkts. 21, 27). Defendants filed an Amended Notice of Removal on February 22, 2019 (Dkt. 29). Plaintiffs then filed a Motion to Remand and for Attorney's Fees and Costs Rule 11 Sanctions (Dkt. 31) and a Motion to Expedite Decision on Motion to Remand (Dkt. 32).


         A party to a civil action brought in state court may remove that action to federal court if the district court would have had original jurisdiction at the time of both commencement of the action and removal. See 28 U.S.C. § 1441(a); Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 3723 (4th ed. 2013). Once removed, the case can be remanded to state court for either lack of subject matter jurisdiction or defects in the removal procedure. See 28 U.S.C. § 1447(c). District courts have diversity jurisdiction where no plaintiff and defendant are citizens of the same state and the amount in controversy is greater than $75, 000. See 28 U.S.C. § 1332(a)(1); Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). “The party seeking to invoke the district court's diversity jurisdiction always bears the burden of both pleading and proving diversity jurisdiction.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 613-14 (9th Cir. 2016).

         District courts analyze a challenge to removal jurisdiction under the same standard applied to a motion to dismiss for lack of subject matter jurisdiction. See Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014) (“Challenges to the existence of removal jurisdiction should be resolved within [the Rule 12(b)(1)] framework, given the parallel nature of the inquiry.”). A challenge to the Court's subject matter jurisdiction can be either facial or factual. Id. “A facial attack accepts the truth of the plaintiff's allegations but asserts that they are insufficient on their face to invoke federal jurisdiction.” Id. In contrast, a factual attack “contests the truth of the plaintiff's factual allegations, usually by introducing evidence outside the pleadings.” Id.

         Here, Plaintiffs challenge the factual allegations Defendants make in support of removal, so bring a “factual attack” on this Court's subject-matter jurisdiction. When the defendant raises a factual attack, the plaintiff must support her jurisdictional allegations with “competent proof, ” Hertz Corp. v. Friend, 559 U.S. 77, 96-97 (2010), under the same evidentiary standard that governs in the summary judgment context. See Norse v. City of Santa Cruz, 629 F.3d 966, 973 (9th Cir.2010) (en banc). The plaintiff bears the burden of proving by a preponderance of the evidence that each of the requirements for subject-matter jurisdiction has been met. Harris, 682 F.3d at 851.


         In their Amended Notice of Removal, Defendants attempt to cure the jurisdictional defect from their first Notice of Removal by showing Defendant Neil Campbell is not a member of Plaintiffs Camp Bench Holdings, LLC and Camp River Holding, LLC. To do so, Defendants filed a declaration from Mr. Campbell that, “[a]s of January 3, 2019, [he] was no longer a member of [the LLC] Plaintiffs.” Dkt. 29, Ex. 6. Defendants bolster their allegation that Mr. Campbell was not a member with several pieces of circumstantial evidence pointing to Mr. Campbell's noninvolvement with the LLCs. See Dkt. 34. Plaintiffs counter that Defendants' evidence does not establish that Mr. Campbell in fact withdrew from the LLCs as required by Idaho Code § 30-25-602.

         Because Plaintiffs have mounted a factual attack, Defendants must support their jurisdictional allegations with competent proof. See Safe Air for Everyone, 373 F.3d at 1039. And Defendants bear the burden of proving these facts by a preponderance of the evidence. See Leite 749 F.3d at 1122.

         A. Mr. Campbell Was a Member of Plaintiff LLCs as of September 22, 2014

         As in their prior Motion to Remand, Plaintiffs argued that Defendant Neil Campbell is a member of the two LLC plaintiffs, which destroys diversity jurisdiction and justifies remand of this case to state court. Dkt. 31-1 at 2. The diversity statute, “28 U.S.C. § 1332(a), . . . applies only to cases in which the citizenship of each plaintiff is diverse from the citizenship of each defendant.” Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). Because an LLC is a citizen of every state of which its owners/members are citizens, if Neil Campbell is in fact a member of Plaintiffs Camp Bench and Camp River LLCs, there is not complete diversity under § 1332. See Johnson v. Columbia Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006).

         Plaintiffs point to several pieces of evidence in support of their argument that Mr. Campbell was, and still is, a member of both LLCs. First, Plaintiffs highlight the LLC operating agreements, which identify Mr. Campbell and Mr. Allen as the only two members. Dkt. 18-1, Exs. B, E. Neither LLC agreement contains a special provision for withdrawal. See Id. Therefore, Idaho Code § 30-25-602 governs whether a member has withdrawn from an LLC: “a person is dissociated as a member when: The limited liability company knows or has notice of the person's express will to withdraw as a member.” Neither party's briefing identifies an instance where Mr. Campbell expressed his will to withdraw, either directly to his co-member Mr. Allen or in any capacity tied to the LLCs. Instead, both sides argue that circumstantial evidence points in their favor. The Court considers each party's evidence of withdrawal to determine whether Defendants have met their burden of showing Mr. Campbell withdrew from the Plaintiff LLCs under I.C. § 30-25-602(1).

         B. Plaintiffs' Evidence Tends to Show Mr. Campbell Did Not Formally Withdraw

         The Plaintiffs present evidence that suggests Mr. Campbell was still a member of the LLCs when the amended notice of removal was filed. Plaintiffs first note that Defendants filed an initial notice of removal with the Court that identified Mr. Campbell as a current member of the Plaintiff LLCs. Dkt. 35 at 5 (“Defendant Neil Campbell is a member of Plaintiff Camp Bench Holdings, LLC and Camp River Holdings, LLC.”). Plaintiffs also show that the proposed settlement agreement between the parties refers to Mr. Campbell agreeing to surrender “all of his ownership interests in the Entities [which includes the two LLCs], whether in the form of shares, membership units, options, or otherwise.” Dkt. 34 at 18. Finally, Plaintiff Mr. Allen submitted a declaration which confirmed his belief concerning Mr. Campbell's membership: “to this day, to the best of my knowledge and belief, Neil Campbell remains a ...

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