Calchi v. Topco Assocs.

1

NANCY CALCHI, individually and on behalf of all others similarly situated, Plaintiff, v. TOPCO ASSOCIATES, LLC, Defendant.

No. 22-cv-747

United States District Court, N.D. Illinois, Eastern Division

June 7, 2023

MEMORANDUM OPINION AND ORDER

HON STEVEN C. SEEGER UNITED STATES DISTRICT JUDGE

District courts must stand guard over their own jurisdiction, and make sure that parties don't put cases in front of them that they lack the power to hear. Courts must keep the doors of the federal courthouse closed to cases that don't belong. But sometimes a well-intentioned sentry will refuse entry to someone who does, in fact, belong, which leads to a second knock and a second look. This case is a good example.

Two months ago, this Court dismissed Plaintiff Nancy Calchi's complaint with leave to amend for failing to sufficiently allege a basis for subject matter jurisdiction. See 3/15/23 Order (Dckt. No. 43). Calchi sued Defendant TopCo Associates, LLC, a limited liability company, and invoked this Court's diversity jurisdiction. But the complaint did not list each of TopCo's members and reveal their citizenship.

That omission seemed problematic. In a typical case, the citizenship of the members is what counts when it comes to the citizenship of a limited liability company. Most of the time, a court can't tell where an LLC is a citizen without knowing where its members are citizens.

So the Court dismissed the complaint and ordered the parties to provide more information on jurisdiction. This Court took that proactive step because courts have a duty to police the boundaries of their own jurisdiction. Courts must ensure that they do not overstep the line, and exercise power when they have none.

The parties later filed a document that they dubbed a joint response and motion for reconsideration. See Joint Mtn., at 1 (Dckt. No. 44). The parties pointed out that Calchi brought her claim under the Class Action Fairness Act (“CAFA”). And CAFA cases have their own set of jurisdictional rules.

The CAFA uses a different measuring stick for the citizenship of a limited liability company than the more common statutory provision that governs diversity jurisdiction in non-CAFA cases. See 28 U.S.C. § 1332(d)(10); 28 U.S.C § 1332(c)(1). Under the CAFA, an LLC is a citizen of the state where it is organized and the state where it has its principal place of business, not the state(s) where each of its members is a citizen.

The punchline is that the Court agrees with the parties. This is a CAFA case, so TopCo's citizenship depends on its state of organization and the state of its principal place of business. The Court issues this Opinion to pin down the existence of subject matter jurisdiction, and answer the question that this Court posed at the beginning of this jurisdictional detour.

Background

This case is about non-drowsy cold medicine that allegedly made people drowsy. In August 2021, Plaintiff Nancy Calchi bought a bottle of TopCare Non-Drowsy Tussin CF Multi-Symptom Cold Medication. See Cplt., at ¶ 26 (Dckt. No. 1). “The package said ‘Non-Drowsy' prominently on the label, and she read and relied on those statements when purchasing the product.” Id.

Calchi alleges that she “took the medication as directed” but “became unexpectedly drowsy.” Id. So, she sued the medicine's manufacturer Defendant TopCo Associates, LLC, for a violation of state consumer-protection laws, breach of express warranty, a violation of the Magnuson-Moss Warranty Act, and intentional misrepresentation. Id. at ¶¶ 37-85.

Calchi believes that she is not the only purchaser of the TopCare cold medicine who was duped. So, she brings this case as a class action, hoping to represent “all persons who purchased a Non-Drowsy TopCare Product in the United States during the applicable statute of limitations.” Id. at ¶ 27.^[1] She also seeks to represent a subclass of consumers “who live in certain identified states” and, in the alternative, who live in New York. Id. at ¶¶ 28-29.

Calchi's complaint invoked the Court's diversity jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d). Id. at ¶ 8. The complaint then provided information about the citizenship of the parties.

Specifically the complaint alleged that Calchi is a citizen of New York. Id. at ¶ 6. It also alleged that “Defendant TopCo Associates, LLC is a limited liability company organized and existing under the laws of the state of Delaware, with its principal place of business in Elk Grove, Illinois, and has been doing business in the State of Illinois during all relevant times.” Id. at ¶ 7. The complaint stated that “TopCo LLC has ‘nearly 45 member-owners' that are supermarkets, wholesalers, and distributors, including members based in Michigan, New York, California, Texas, and other states.” Id.

TopCo, in turn, moved to dismiss for failure to state a claim. See Def.'s Mtn. to Dismiss (Dckt. No. 16). When working on the motion to dismiss, this Court took another look at the complaint's jurisdictional allegations. See 3/15/23 Order (Dckt. No. 43).

Based on a preliminary look, the Court determined that the complaint's jurisdictional allegations left something to be desired. Id. at 1. So, it dismissed Calchi's complaint with leave to amend. Id.

The Court's Order focused on the jurisdictional allegations about TopCo, a limited liability company. “An LLC is not the same thing as a corporation, and when it comes to jurisdiction, the difference is everything. A corporation is a citizen where it is incorporated and where it has its principal place of business. That's not the case with an LLC. A limited liability company is a citizen wherever its members are citizens.” Id. at 1-2.

Calchi's complaint included allegations about where TopCo is organized and where it has its principal place of business. Id. at 3. That is, it seemingly provided the citizenship allegations for a corporation, not an LLC.

The complaint did provide a few details about TopCo's members, “but didn't get very far.” Id. The complaint alleged that “TopCo LLC has ‘nearly 45 member-owners' that are supermarkets, wholesalers, and distributors, including members based in Michigan, New York, California, Texas, and other states.” See Cplt., at ¶ 7 (Dckt. No. 1). But after that, “the details [came] to a screeching halt.” See 3/15/23 Order, at 3 (Dckt. No. 43). “The complaint does not reveal who the members are, or where they are citizens.” Id. Without more detail, this Court believed that it could not determine TopCo's citizenship as an LLC. Id. at 3-4.

This Court did flag the fact that Calchi brought a claim under the Class Action Fairness Act. The CAFA's jurisdictional requirements “add[ed] a wrinkle” to the case. Id. at 1. “The CAFA permits removal of a proposed class action to federal court as long as there is minimal diversity, meaning just one member of the plaintiff class needs to be a citizen of a state different from any one defendant.” Id. at 4 (quoting Dancel v. Groupon, Inc., 940 F.3d 381, 383 (7th Cir. 2019)). So, the CAFA “eliminated the requirement of complete diversity, but it did not eliminate the requirement of diversity.” Id. at 5 (emphasis in original).

Even under the CAFA's lower jurisdictional threshold, the Court found the complaint lacking. This Court thought that it lacked information to figure out TopCo's citizenship, because it didn't know the citizenship of the members. And without knowing TopCo's citizenship, the Court could not determine if there was diversity - even minimal diversity.

So, the Court required the parties to provide two pieces of information. Id. at 6. “First, this Court does not know the citizenship of Defendant, because it does not know who its members are, or where they are citizens, or even how many members there are. This Court cannot determine the diversity of citizenship - even for minimal diversity - without knowing Defendant's citizenship.” Id.

“Second, this Court does not know who, exactly, from the putative class is diverse from the Defendant.” Id. Maybe Calchi - as a citizen of New York - was diverse from Defendant. But maybe not. The Court could not determine if minimal diversity existed without knowing TopCo's citizenship.

After the Court dismissed the complaint and requested additional information, the parties filed a “Joint Response to Court's Order on Jurisdiction / Motion for Reconsideration.” See Joint Mtn., at 1 (Dckt. No. 44). The parties expressed the view that the complaint did, in fact, contain enough information to establish the existence of diversity jurisdiction. “Although[] an LLC's citizenship is the citizenship of its members for purposes of diversity jurisdiction, this rule does not apply to jurisdiction under CAFA.” Id. at 2 (citation omitted).

The parties pointed to one of the CAFA's jurisdictional provisions, which defines the citizenship of an “unincorporated association.” The statute provides: “[f]or purposes of this subsection and section 1453, an unincorporated association shall be deemed to be a citizen of the State where it has its principal place of business and the State under whose laws it is organized.” See 28 U.S.C. § 1332(d)(10).

As the parties see it, this provision means that “[f]or the purpose of determining citizenship under CAFA, limited liability companies and other business entities are treated as corporations.” See Joint Mtn., at 2 (Dckt. No. 44). If so, then the complaint's jurisdictional allegations - which alleged TopCo's states of organization and principal place of business -included enough information after all. Id.

After filing the joint motion, Calchi filed a first amended complaint. See First Am. Cplt. (Dckt. No. 47). The amended complaint expressly cites section 1332(d)(10) meaning the section...