CHARLES S. HAIGHT, Jr., Senior District Judge.
Petitioners Marshall Caro and Indii.com USE, LLC ("Indii") bring the present action against Fidelity Brokerage Services LLC ("Fidelity") pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10, to petition the Court to vacate an award of a three-member arbitration panel of the Financial Industry Regulatory Authority ("FINRA") in a binding arbitration action entitled, Indii.com USE, LLC and Marshall Caro v. Fidelity Brokerage Services LLC, Docket No. 11-00298 (decided 4/24/2012).
After asserting their petition in the Complaint [Doc. #1], Petitioners filed a Motion to Amend the Complaint [Doc. #25] against Fidelity and five individual defendants.
Although this is Petitioners' first attempt to amend their complaint, the timing is such that they may not do so as a matter of course. Instead, the question is governed by Rule 15(a)(2), Fed. R. Civ. P., which provides that in the circumstances of the case at bar "a party may amend its pleading only with the opposing party's written consent or the court's leave" and "[t]he court should freely give leave when justice so requires." From its letter response to the motion to amend, it is clear that Fidelity does not consent to the amendment, so the Rule requires Petitioners to obtain leave of court to do so.
"In the absence of any apparent or declared reason—such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of the amendment, etc.—the leave sought should, as the rules require, be `freely given.'" Foman v. Davis, 371 U.S. 178, 182 (1962). See also Milanese v. RustOleum Corp., 244 F.3d 104,110 (2d Cir.2001) ("Leave to file an amended complaint `shall be freely given when justice so requires,' Fed.R.Civ.P. 15(a), and should not be denied unless there is evidence of undue delay, bad faith, undue prejudice to the non-movant, or futility.").
Although leave to amend must be freely given under ordinary circumstances, denial of leave to amend is proper where the proposed amendment would be "futile."
A federal court is a court of limited jurisdiction pursuant to Article III of the Constitution. The Court may only exercise subject matter jurisdiction if either (1) plaintiff sets forth a colorable claim arising under the Constitution or federal statute, creating "federal question" jurisdiction, 28 U.S.C. § 1331;
Moreover, it is incumbent on a federal court to determine with certainty whether it has subject matter jurisdiction over a case pending before it. If necessary, the court has an obligation to consider its subject matter jurisdiction sua sponte. 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); see also Univ. of South Alabama v. American Tobacco Co., 168 F.3d 405, 410 (11th Cir. 1999) ("a federal court is obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking").
In general, if subject matter jurisdiction is lacking, the action must be dismissed. Fed. R. Civ. P. 12(h)(3) ("If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action."). See, e.g. 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."); Bernstein v. Universal Pictures, Inc., 517 F.2d 976, 979 (2d Cir. 1975) ("There can be little doubt that a district court should be alert to terminate an action under Rule 12(h)(3) when lack of subject matter jurisdiction becomes apparent."). It thus follows that the Court must deny a motion to amend the complaint if the Court lacks subject matter jurisdiction over the claims set forth in the proposed amended complaint. See, e.g., Jackson v. AFSCME Local 196, No. 3:07-CV-471 (JCH), 2008 WL 544730, at *2-3 (D.Conn. Feb. 25, 2008).
In their proposed Amended Complaint, Petitioners, the named Plaintiffs in the Amended Complaint, Marshall Caro and Indii.com USE, LLC ("Indii"), assert that the Court has diversity subject matter jurisdiction pursuant to 28 U.S.C. §1332 (a). Doc. #25-1, p. 2 (¶ B). In fact, in order for this Court to possess subject matter jurisdiction over the proposed amendment, there must be diversity jurisdiction in this case. There exists no basis for the Court to exercise federal question jurisdiction over the Amended Complaint. Four of the claims arise under state law: trespass to chattel, abuse of process, breach of duty, and intentional interference with contractual relations. Furthermore, the FAA petition itself, although a product of federal law, does not provide an independent basis for subject matter jurisdiction. Applicants who seek to confirm or vacate an arbitration award under the FAA, 9 U.S.C. §§ 9-10, "must demonstrate independent grounds of subject matter jurisdiction" because the provisions of the Act "do not in themselves confer subject matter jurisdiction." General Atomic Co. v. United Nuclear Corp., 655 F.2d 968, 968 (9th Cir. 1981), cert. denied, 455 U.S. 948 (1982), rehearing denied, 456 U.S. 939 (1982). See also Luong v. Circuit City Stores, Inc., 368 F.3d 1109, 1111 (9th Cir. 2004) ("It is well settled that federal courts must have an independent basis for federal jurisdiction to hear claims under the FAA, and that 9 U.S.C. § 10 does not provide it") (internal citations omitted).
In order for diversity of citizenship to exist, citizenship of each plaintiff 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 Equipment & Erection Co. v. Kroger, 437 U.S. 365, 373-74 (1978)) . Moreover, "[i]n an action in which jurisdiction is premised on diversity of citizenship, diversity must exist at the time the action is commenced." Universal Licensing Corp. v. Lungo, 293 F.3d 579, 581 (2d Cir. 2002).
In the Amended Complaint, Plaintiffs allege that "[a]ll defendants reside or are domiciled in other states and the amount in controversy exceeds $75,000." Doc. #25-1, p. 2 (¶ B. Jurisdiction). Accepting that Plaintiffs have alleged damages in excess of the jurisdictional amount, i.e., exceeding $75,000, the Court must examine the citizenship of the parties.
Plaintiffs state that Caro is a citizen of Connecticut and Indii "is a Delaware Limited Liability Company whose members are citizens of Connecticut and Florida." Doc. #25-1, p. 1 (¶ A. 1.-2.). As to the citizenship of the named defendants, Plaintiffs allege the following: Fidelity Brokerage Services ("Fidelity") is "a Limited Liability Company whose members are citizens of Massachusetts;" Katherine Ho, is "a citizen of Massachusetts;" and Bill Rothfarb, Even Rothfarb, Michael Shannon, and Michael Hoenig are all "citizen[s] of New York." Id. at p. 1-2 (¶ A (4.-8.)). As to each named individual defendant, Plaintiffs allege either the location of his or her "principal office" or current residence to bolster the allegations of citizenship.
First, Plaintiffs' allegations of citizenship are inadequate with respect to the two limited liability company parties in the proposed Amended Complaint, Indii and Fidelity. "The citizenship for diversity purposes of a limited liability company . . . is the citizenship of each of its members." Wise v. Wachovia Securities, LLC, 450 F.3d 265, 267 (7th Cir. 2006)(emphasis added), cert. denied, 549 U.S. 1047 (2006). Put simply, the "citizenship of a limited liability company is not the state in which it is organized or has its principal place of business, but rather, each of the states in which it has members." Lewis v. Allied Bronze LLC, No. 07 Civ. 1621(BMC), 2007 WL 1299251, at *1-2 (E.D.N.Y. May 2, 2007) (citing Handelsman v. Bedford Village Associates Ltd. Partnership, 213 F.3d 48, [51-52] (2d Cir.2000) and remanding removed action for lack of diversity jurisdiction).
Second, Petitioners' allegations with respect to the citizenship of individual defendants Ho, Rothfarbs (Bill and Evan), Shannon, and Hoenig are all clearly deficient in that Plaintiffs set forth the locations of the Defendants' principal offices for business and/or residences but do not state where defendants are domiciled. With respect to an individual's citizenship, it is "well-established that allegations of residency alone cannot establish citizenship." Canedy v. Liberty Mut. Ins. Co., 126 F.3d 100, 102-03 (2d Cir. 1997) (citing Leveraged Leasing Admin. Corp. v. PacifiCorp Capital, Inc., 87 F.3d 44, 47 (2d Cir. 1996)). This is because an individual's citizenship for diversity purposes is determined by his or her domicile, not residence. See Palazzo v. Corio, 232 F.3d 38, 42 (2d Cir. 2000). See also John Birch Soc. v. Nat'l Broadcasting Co., 377 F.2d 194, 199 (2d Cir. 1967) ("it has long been held that a statement of residence, unlike domicile, tells the court only where the parties are living and not of which state they are citizens").
"In general, the domicile of an individual is his true, fixed and permanent home and place of habitation" — i.e, "the place to which, whenever he is absent, he has the intention of returning." Martinez v. Bynum, 461 U.S. 321, 331 (1983). See also Palazzo, 232 F.3d at 42; 13B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3612, at 526 (2d ed. 1984). Although an individual may have several residences, he or she can have only one domicile.
At best, Plaintiffs have alleged residency of each individual defendant without establishing his or her citizenship. The latter may not be inferred from the former. See Realty Holding Co. v. Donaldson, 268 U.S. 398, 399 (1925). Accordingly, the citizenship of the individual defendants remains uncertain on the face of the Amended Complaint.
Ordinarily in such circumstances, the Court would order Plaintiffs to file supplementary affidavits and/or supply documentary evidence to provide sufficient facts from which the Court could determine the citizenship of each named party for purposes of diversity. In this unusual case, however, the Court takes judicial notice that, as disclosed by Fidelity's counsel Michael G. Shannon in a letter to the Court dated December 3, 2012 [Doc. # 40], Plaintiff Indii is not diverse from one or more defendants in this action. In Shannon's letter, he informs the Court that, despite the limited allegations in the Amended Complaint (i.e., that Indii is a Delaware limited liability company "whose members are citizens of Connecticut and Florida"), Indii also possesses members who are citizens of New York. In a prior interpleader action in the United States District Court for the Southern District of New York, involving both Petitioners and Fidelity, Plaintiffs Caro and Indii argued that diversity was lacking based on representations in Caro's affidavit that Indii's members included members who were citizens of New York.
Furthermore, attached to a memorandum supporting a motion to dismiss the interpleader complaint, Indii's then counsel, Sheldon Eisenberger, attested in a declaration that several of Indii's strategic members are citizens of New York for purposes of diversity. Fidelity Brokerage Services LLC v. Caro, et al., No. 10-CV-5893 (BSJ) (S.D.N.Y.), Doc. #25 (Declaration of Sheldon Eisenberger in Support of Motion to Dismiss the Interpleader Complaint, filed 10/21/2010), p. 2 (¶ 4). In particular, Attorney Eisenberger stated:
Id., Doc. #25 at ¶¶ 4-5. In sum, in Caro's affidavit and the sworn testimony of, and accompanying documents filed by, Indii's then counsel, several members of Indii are citizens of New York.
Turning to the defendants named in the Amended Complaint, in the absence of knowing the citizenship of each of its members, the Court cannot determine whether Fidelity, as a limited liability company, is a citizen of New York. However, the Court does find that at least one or more of the proposed individual defendants is a citizen of New York. Attorney Michael Shannon attests to his own New York citizenship — in light of his New York residence (i.e., more properly termed "domicile") — in his letter to the Court (dated 12/3/2012). See Doc. #40 (Shannon Letter), p. 2 ("The proposed amended complaint includes claims against several New York residents (the Rothbergs [sic], Mr. Hoenig, and me)"). Also, according to the allegations in the proposed Amended Complaint, Bill Rothfarb "is a citizen of New York and currently resides at 5025 39th St. Sunnyside, NY 11104-4507."
Furthermore, as set forth supra, none of the proposed causes of action in the Amended Complaint gives rise to "federal question" subject matter jurisdiction pursuant to 28 U.S.C. § 1331. Absent a basis for federal question jurisdiction and lacking diversity of citizenship, the Court has no subject matter jurisdiction over the Amended Complaint. If the Court were to allow the proposed amendment to proceed, the Court would then be required to dismiss the action for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(h)(3). Where amendment would be futile, the Court must deny Petitioners' request to amend the complaint.
In denying the Motion to Amend, the Court clarifies that it does so without prejudice to renewal should Plaintiffs successfully establish, with the necessary factual precision, the citizenship of each party to the action and then elect to drop all nondiverse defendants whose presence would defeat diversity of citizenship. See, e.g., Samaha v. Presbyterian Hospital in City of New York, 757 F.2d 529, 531 (2d Cir.1985) (per curiam); Prescription Plan Service Corp. v. Franco, 552 F.2d 493, 498 (2d Cir.1977). At present, the Court must deny Petitioners' current request to amend the complaint because such amendment would be futile due to lack of subject matter jurisdiction.
Because plaintiff Indii, as evidenced by sworn statements of counsel in prior litigation, and one or more of the individual defendants are citizens of New York, the Court lacks diversity subject matter jurisdiction over the proposed Amended Complaint. A court lacking subject matter jurisdiction must dismiss the action. Accordingly, because the proposed amendment is futile, Petitioners' Motion to Amend the Complaint [Doc. #25] is DENIED without prejudice.
Petitioners are of course at liberty to file a timely action in another court of competent jurisdiction. Petitioners may also renew their motion to amend their petition and complaint in this Court, if they are able, consistent with the provisions of Fed. R. Civ. P. 11, to propose an amended complaint with allegations as to the citizenship of the parties which are sufficient to demonstrate that full diversity of citizenship exists between all plaintiffs and all defendants in the action.
It is SO ORDERED.