Platinum-Montaur Life Sciences, LLC v. Navidea Biopharmaceuticals, Inc.
Citation943 F.3d 613
Date Filed2019-11-25
Docket18-3535-cv
Cited215 times
StatusPublished
Full Opinion (html_with_citations)
18-3535-cv
Platinum-Montaur Life Sciences, LLC v. Navidea Biopharmaceuticals, Inc.
1
2 United States Court of Appeals
3 for the Second Circuit
4
5 August Term, 2019
6
7 (Argued: September 5, 2019 Decided: November 25, 2019)
8
9 Docket No. 18-3535-cv
10
11 _____________________________________
12
13 PLATINUM-MONTAUR LIFE SCIENCES, LLC,
14
15 Plaintiff-Appellant,
16
17 v.
18
19 NAVIDEA BIOPHARMACEUTICALS, INC.,
20
21 Defendant-Third-Party-Plaintiff-Appellee,
22
23 v.
24
25 PLATINUM PARTNERS CREDIT OPPORTUNITIES MASTER FUND, LP,
26
27 Third-Party-Defendant.
28
29 _____________________________________
30 Before:
31
32 KATZMANN, Chief Judge, WALKER AND PARK, Circuit Judges.
33
34 Plaintiff Platinum-Montaur Life Sciences, LLC (âPlatinum-Montaurâ),
35 appeals a decision of the United States District Court for the Southern District of
36 New York (Caproni, J.) granting the motion to dismiss of defendant Navidea
1 Biopharmaceuticals, Inc., on grounds that Platinum-Montaur lacked Article III
2 standing. Because the district court did not first determine whether there was
3 complete diversity of citizenship between the parties, it is unclear whether it had
4 subject-matter jurisdiction under 28 U.S.C. § 1332. We thus VACATE and 5 REMAND for further proceedings consistent with this opinion. 6 7 ROBERT J. BURNS (Warren E. Gluck, Barbara 8 P. Parlin, and Kathryn B. Daly on the brief), 9 Holland & Knight LLP, New York, New 10 York for Plaintiff-Appellant. 11 12 ROBERT C. FOLLAND, Barnes & Thornburg, 13 LLP, Columbus, Ohio for Defendant- 14 Appellee. 15 16 Park, Circuit Judge: 17 Platinum-Montaur Life Sciences, LLC (âPlatinum-Montaurâ) sued 18 Navidea Biopharmaceuticals, Inc. (âNavideaâ) in state court over a contract 19 dispute. Navidea removed the case to the United States District Court for the 20 Southern District of New York (Caproni, J.). Navidea asserted that the district 21 court had diversity jurisdiction under28 U.S.C. § 1332
but it did not identify
22 Platinum-Montaurâs citizenship. The parties conducted limited informal
23 jurisdictional discovery but failed to determine Platinum-Montaurâs citizenship.
24 Instead of ordering further jurisdictional discovery, the district court assumed
25 that it had subject-matter jurisdiction, stating that it could proceed because it had
26 no âgood faith basis to believe that there is not complete diversity.â
2
1 We hold that the district court erred by failing to determine whether it had
2 diversity jurisdiction before deciding Navideaâs motion to dismiss. Accordingly,
3 we VACATE and REMAND for further proceedings consistent with this
4 opinion.
5 BACKGROUND
6 In 2017, Platinum-Montaur sued Navidea in New York state court to
7 collect on a debt. Navidea then filed a notice of removal in the United States
8 District Court for the Southern District of New York. Navidea claimed that the
9 federal court had âdiversity jurisdiction under 28 U.S.C. § 1332(a).â 10 Section 1332(a) gives federal courts jurisdiction to hear controversies 11 âbetween . . . citizens of different States.â Navidea stated that it was âa Delaware 12 corporation, with a principal place of business in Ohio,â making it a citizen of 13 Delaware and Ohio.28 U.S.C. § 1332
(c)(1) (â[A] corporation shall be deemed to
14 be a citizen of every State . . . by which it has been incorporated and of the
15 State . . . where it has its principal place of business.â).
16 But Navideaâs notice of removal did not fully specify Platinum-Montaurâs
17 citizenship. Platinum-Montaur is a limited liability company (âLLCâ), which
18 takes the citizenship of all of its members. See Bayerische Landesbank, New York
3
1 Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49(2d Cir. 2012). Navidea 2 stated that Platinum-Montaur was an LLC with three membersâtwo individual 3 residents of New Jersey and Platinum Partners Value Arbitrage Fund, L.P. 4 (âPPVAâ), a Cayman Islands Limited Partnership (âLPâ). For the purposes of 5 diversity jurisdiction, a partnership takes the citizenship of all of its partners. See 6 Carden v. Arkoma Assocs.,494 U.S. 185
, 195â96 (1990). Therefore, Platinum-
7 Montaur is a citizen of every state of which PPVAâs partners are citizens.
8 Navidea did not identify these partners in its notice of removal, leaving
9 Platinum-Montaurâs citizenship uncertain.
10 Because it was unclear whether the parties before it were diverse, the
11 district court ordered âinformal jurisdictional discovery in order to determine the
12 citizenship of [PPVA].â After looking into its own citizenship, Platinum-
13 Montaur determined that one of PPVAâs partners was Platinum Partners Value
14 Arbitrage Funds (USA) L.P. (âPPVA Onshoreâ), a âfeeder fund intended for U.S.
15 investorsâ with around 220 limited partners and which took the citizenship of
16 each partner. Carden, 494 U.S. at 195â96. Platinum-Montaur stated that it had
17 tried but failed to determine whether any of PPVA Onshoreâs partners was a
4
1 citizen of either Delaware or Ohio, which would destroy diversity of citizenship
2 between Platinum-Montaur and Navidea. 1
3 At a status conference, Platinum-Montaur told the court that it was
4 âseeing . . . hundreds of feeder funds, multiple LLCs, [and] unincorporated
5 entities,â in its ownership structure. After contacting some of PPVA Onshoreâs
6 partners in an effort to identify their citizenship, Platinum-Montaur decided to
7 stop and wait on the district courtâs direction because it was âunclearâ to them
8 âwhen you are just one cog in the chain of the uphill ownership structure how
9 that affects diversity jurisdiction.â
10 The district court asked Platinum-Montaur whether it planned to move for
11 a remand to state court, and Platinum-Montaur responded that it was âreally
12 trying to follow the Courtâs directivesâ on this issue. The court decided to
13 conclude its jurisdictional inquiry and stated, âIâm not inclined to order [further
14 jurisdictional discovery]. At this point I donât have a good faith basis to believe
15 that there is not complete diversity.â
1 PPVAâs two other partners were an offshore feeder fund and a Delaware LLC that served as
PPVAâs general partner. Platinum-Montaur would have to identify the citizenship of these two entities
as well as PPVA Onshore to determine its own citizenship.
5
1 Having assumed subject-matter jurisdiction, the district court later granted
2 Navideaâs motion to dismiss, finding that as a matter of contract law, Platinum-
3 Montaur had assigned away all of its rights to Navideaâs debts and therefore
4 lacked standing to sue. Platinum-Montaur appealed that ruling, and both parties
5 briefed the issue of standing but not subject-matter jurisdiction.
6 STANDARD OF REVIEW
7 This court may âsua sponte delve into the issue of whether there is a factual
8 basis to supportâ subject-matter jurisdiction. Velez v. Sanchez, 693 F.3d 308, 314 9 (2d Cir. 2012) (cleaned up). We consider âquestions of subject matter jurisdiction 10 de novoâ and are ânot limited in our right to refer to any material in the record.â 11Id.
(citations omitted). 2
2 If we were to agree with the district courtâs conclusion that Platinum-Montaur lacked Article III
standing to bring this suit, then we would face two threshold jurisdictional questionsâArticle III
standing and statutory diversity jurisdiction. In that event, we would have âinherent flexibilityâ to
choose between them as grounds for dismissal. Disability Rights New York v. New York, 916 F.3d 129, 131
n.1 (2d Cir. 2019). We need not make such a choice in this case because the district courtâs holdingâthat
Platinum-Montaur had no legal right to collect on Navideaâs debt because it had assigned away its rights
to that debtâis best understood as a merits ruling, not a jurisdictional, Article III standing decision. âAs
a matter of the English language, the word âstandingâ can be used to describe [the] contention [that a
plaintiff lacks the legal right to sue under a contract], but âstandingâ in this context is entirely distinct
from âstandingâ for purposes of Article III.â Novartis Seeds, Inc. v. Monsanto Co., 190 F.3d 868, 871 (8th Cir.
1999). Platinum-Montaur plausibly alleged that it retained a right to the unassigned portion of Navideaâs
debt, that Navidea âfailed to pay [it] the amounts owingâ under the debt agreement, and sought damages
for that alleged breach. That was enough to allege âan injury in fact . . . that is likely to be redressed by a
favorable judicial decision,â and therefore enough to allege Article III standing. Spokeo, Inc. v. Robins, 136
S. Ct. 1540, 1547 (2016). The district courtâs decision is better understood as a ruling on the merits. See
Perry v. Thomas, 482 U.S. 483, 492 (1980) (rejecting the âcontention that resolvingâ whether a party could
6
1 DISCUSSION
2 ââIt is a fundamental precept that federal courts are courts of limited
3 jurisdictionâ and lack the power to disregard such limits as have been imposed
4 by the Constitution or Congress.â Durant, Nichols, Houston, Hodgson & Cortese-
5 Costa P.C. v. Dupont, 565 F.3d 56, 62(2d Cir. 2009) (quoting Owens Equipment & 6 Erection Co. v. Kroger,437 U.S. 365, 374
(1978)). Perhaps the most important limit 7 is subject-matter jurisdiction, which defines âa courtâs competence to adjudicate a 8 particular category of cases.â Wachovia Bank v. Schmidt,546 U.S. 303, 305
(2006). 9 â[B]ecause it involves a courtâs power to hear a case,â subject-matter jurisdiction 10 cannot be forfeited, waived, or conferred by consent of the parties. See United 11 States v. Cotton,535 U.S. 625, 630
(2002); Cable Television Assân of New York v. 12 Finneran,954 F.2d 91, 94
(2d Cir. 1992). âIt is well-settled that the party asserting 13 federal jurisdiction bears the burden of establishing jurisdiction,â and it must 14 prove jurisdiction by a âpreponderance of evidence.â Blockbuster, Inc. v. Galeno, 15472 F.3d 53, 57
(2d Cir. 2006); Liranzo v. United States,690 F.3d 78, 84
(2d Cir.
16 2012).
enforce an arbitration agreement was a question of Article III standing and instead characterizing the
question as âa straightforward issue of contract interpretationâ). We express no view on the proper
interpretation of the contracts at issue in this case.
7
1 This case involves diversity jurisdiction. Under 28 U.S.C. § 1332, federal 2 courts have jurisdiction to hear civil actions between âcitizens of different Statesâ 3 as long as âthe matter in controversy exceeds . . . $75,000.â The Supreme Court 4 has interpreted âcitizens of different Statesâ to grant jurisdiction only âif 5 diversity of citizenship among the parties is complete, i.e., only if there is no 6 plaintiff and no defendant who are citizens of the same State.â Wis. Depât of Corr. 7 v. Schacht,524 U.S. 381, 388
(1998). The issue presented in this case is how a 8 district court should proceed when a defendant seeks to remove an action from 9 state court on the basis of diversity jurisdiction, but the notice of removal and 10 underlying pleadings do not establish whether complete diversity exists between 11 the parties. 12 We have remanded or dismissed cases when a plaintiff has invoked the 13 original diversity jurisdiction of a federal district court but failed to include 14 adequate allegations of diversity in the complaint and the record does not allow 15 us to determine the citizenship of one of the parties. In Durant, Nichols, Houston, 16 Hodgson & Cortese-Costa P.C. v. Dupont,565 F.3d 56
(2d Cir. 2009), the parties 17 disputed the citizenship of the defendant, and the court remanded âfor 18 supplementation of the record with findingsâ regarding his citizenship.Id.
at 65â
8
1 66. In John Birch Society v. National Broadcasting Co., 377 F.2d 194(2d Cir. 1967), 2 we dismissed a suit for lack of subject-matter jurisdiction when the plaintiff 3 failed to plead a defendantâs citizenship with apparent âintent[] to delayâ after 4 receiving multiple opportunities to do so.Id. at 199
; see also Van Buskirk v. United 5 Grp. of Companies, Inc.,935 F.3d 49, 55
(2d Cir. 2019) (noting that dismissal may be 6 appropriate âeven absent an intent to delayâ if âthe party seeking to invoke 7 federal jurisdiction has been given an opportunity to amend their pleadingsâ but 8 âfailed to do soâ). 9 âIn light of the congressional intent to restrict federal court jurisdiction, as 10 well as the importance of preserving the independence of state governments, 11 federal courts construe the removal statute narrowly, resolving any doubts 12 against removability.â Somlyo v. J. Lu-Rob Enters., Inc.,932 F.2d 1043
, 1045â46 (2d 13 Cir. 1991), superseded by rule on other grounds as recognized by Contino v. United 14 States,535 F.3d 124, 127
(2d Cir. 2008). As a result, â[w]e are not inclined to 15 countenance prolonged preliminary litigation over the removal issue simply 16 because [the defendant] failed in the first instance to aver a proper jurisdictional 17 basis for removal.â Lupo v. Human Affairs Intern.,28 F.3d 269, 274
(2d Cir. 1994).
9
1 That being said, a district court has discretion to order jurisdictional
2 discovery in a removal case with improperly pleaded citizenship. For example,
3 in United Food & Commercial Workers Union, Local 919, AFL-CIO v. Centermark
4 Properties Meriden Square, Inc., 30 F.3d 298(2d Cir. 1994), a union sued several 5 shopping centers in state court. When the defendants removed the case to 6 federal court, their notice of removal improperly asserted the unionâs citizenship 7 because, in the context of that case, the union took âthe citizenship of each of its 8 members,â and the notice of removal did not list the unionâs members or their 9 citizenship.Id. at 302
. We remanded for the district court to determine whether 10 it had jurisdiction because âwe [were] not free to speculate on the citizenshipâ of 11 the unionâs members âin the complete absence of any evidence.âId.
at 302â03. 12 In this case, Platinum-Montaur filed suit in state court and Navidea sought 13 to remove the action to federal court pursuant to28 U.S.C. § 1441
. As the party 14 invoking federal jurisdiction, it was Navideaâs burden to establish the existence 15 of diversity jurisdiction. United Food,30 F.3d at 301
. But as we have noted,
10
1 Navideaâs notice of removal and the underlying state-court record failed to
2 establish whether the parties to this action were completely diverse. 3
3 A district court may not assume subject-matter jurisdiction when the
4 record does not contain the necessary prerequisites for its existence. Here, the
5 district court erred by exercising diversity jurisdiction on the basis that it did not
6 have a âgood faith basis to believeâ that the parties before it were not completely
7 diverse.
8 After the parties began conducting informal jurisdictional discovery, they
9 realized that it would be difficult to ascertain Platinum-Montaurâs citizenship
10 because of the companyâs complex ownership structure. 4 Platinum-Montaur
11 acknowledged, however, that further discovery would likely allow it to identify
12 the citizenship of the partners of PPVA Onshore and the other entities that made
13 up PPVA, and therefore, to determine its own citizenship.
14 At this stage, the district court had two options. First, it could have
15 remanded the case to state court because Navidea had failed to allege complete
3 We note, however, that because Navidea was a citizen of Delaware, there would be no diversity
if any one of PPVA Onshoreâs 220 partners were also a citizen of Delaware. It seems unlikely that none of
these 220 American corporate entities was a citizen of Delaware, but âwe are not free to speculateâ on
Platinum-Montaurâs citizenship without further evidence. United Food, 30 F.3d at 302.
4 Although Platinum-Montaur told the district court it was willing to consent to federal
jurisdiction, âparties may not confer subject matter jurisdiction on the court by consent.â Cable Television,
954 F.2d at 94.
11
1 diversity of citizenship or to establish diversity through discovery. See 28 U.S.C.
2 § 1447(c). Second, the district court could have exercised its discretion to order
3 further discovery to determine whether there was complete diversity of
4 citizenship. See United Food, 30 F.3d at 302â03. We note, however, that such
5 discretion should be exercised with caution. See Lupo, 28 F.3d at 274(âRemoval 6 procedures seek a rapid determination of the proper forum for adjudicating an 7 action.â). 8 Here, none of the underlying state-court pleadings, the notice of removal, 9 or the record as a whole reflected that the parties were completely diverse. Thus, 10 the district court erred by proceeding to the merits of this case. We therefore 11 remand so that the district court can exercise its discretion to conduct further 12 proceedings, if any, as it deems appropriate. 13 It bears noting that scrupulous enforcement of these jurisdictional rules 14 may make it more difficult for many business entities to sue or to be sued in 15 federal court under diversity jurisdiction. âLLCs have become the dominant 16 vehicle for doing business in the United States,â and LLCs with many members 17 may share the citizenship of their adversaries in litigation, meaning that they 18 cannot proceed in federal court under Section 1332. Lincoln Benefit Life,800 F.3d 12
1 at 112 (Ambro, J., concurring) (citation omitted). Nonetheless, even when the
2 citizenship of an LLC or LP is in question, a district court may not proceed to the
3 merits without first determining whether it has subject-matter jurisdiction.
4 CONCLUSION
5 For the foregoing reasons, the judgment of the district court is VACATED
6 and REMANDED for further proceedings consistent with this opinion.
13