Middel v. Middel

471 F.Supp.3d 688

Jacob E. MIDDEL, Plaintiff,

v.Jacob R. MIDDEL, Old Silver Hill, LLC, Wellington-Richmond Investments, LLC, Defendants.

Jacob R. Middel, Old Silver Hill, LLC, Wellington-Richmond, Investments, LLC, Plaintiffs,

v.Jacob E. Middel, Defendant.

Case No.: 8:19-cv-498-PWG

Case No.: 8:20-cv-682-PWG

United States District Court, D. Maryland, Southern Division.

Filed July 9, 2020

Mitchell J. Rotbert, Rotbert Business Law P.C., Gaithersburg, MD, for Jacob E. Middel.

Douglas Neil Gottron, Morris Palerm LLC, Jeffrey D. Goldstein, Law Office of Jeffrey D. Goldstein, LLC, Rockville, MD, for Jacob R. Middel, Old Silver Hill, LLC, Wellington-Richmond Investments, LLC.

MEMORANDUM OPINION AND ORDER

Paul W. Grimm, United States District Judge

This Memorandum Opinion and Order addresses two related cases involving a family business dispute. The first case, No. 19-cv-498-PWG, was filed in this Court by Jacob E. Middel ("Middel Jr.") against his father, Jacob R. Middel ("Middel Sr."), and two limited liability companies, Old Silver Hill, LLC ("OSH") and Wellington-Richmond Investments, LLC ("WRI"), in which the father and son were members. The second case, No. 20-cv-682-PWG, was filed by Middel Sr., OSH, and WRI against Middel Jr. in the Circuit Court for Montgomery County, Maryland and removed to this Court by Middel Jr. The cases involve the same basic facts that led to Middel Sr. allegedly terminating Middel Jr. from membership in the LLCs after Middel Jr. allegedly took money (or "borrowed" it, as Middel Jr. says) from the companies. Middel Jr. alleges that this Court has subject matter jurisdiction over both cases based on diversity of citizenship jurisdiction. Middel Sr., OSH, and WRI argue that the Court lacks subject matter jurisdiction, and on that basis have filed a motion to dismiss the first case and a letter outlining a proposed motion to remand the second. Because determining the citizenship of the LLCs requires resolving a factual dispute central to the merits of these cases, it must be resolved by a proceeding on the merits. Therefore both cases will proceed before this Court, and the motions to dismiss and remand for lack of jurisdiction are DENIED (for the former, until the underlying disputed facts necessary to determine the jurisdictional issue have been established).

Background

The first case at issue here, No. 19-cv-498-PWG, was filed by Middel Jr. against his father, OSH, and WRI. The complaint alleges that Middel Sr. and Middel Jr. created OSH and WRI to own and control real estate in Prince George's County, Maryland, and were members with equal rights. 19-cv-498-PWG, ECF No. 1 at 2–3. Middel Jr. alleges that both father and son borrowed funds from the LLCs, but that in "approximately August 2017," Middel Sr. declared that he alone owned and controlled OSH and WRI and asserted "absolute dominion" over them because Middel Jr. had borrowed funds from the companies. Id. at 4. Middel Jr. brings claims for breach of contract and breach of fiduciary duty against Middel Sr., and for a declaratory judgment against Middel Sr., OSH, and WRI that he is entitled to co-manage and co-own the LLCs. Id. at 4–7. Middel Jr. alleges that this Court has jurisdiction based on diversity of citizenship under 28 U.S.C § 1332. Middel Sr., OSH, and WRI filed a motion to dismiss for lack of jurisdiction, arguing that there is not complete diversity between the parties because Middel Jr. is a member of OSH and WRI, and therefore they share the same citizenship. The motion is fully briefed. See 19-cv-498-PWG, ECF Nos. 46, 49, 50.

While the motion to dismiss for lack of jurisdiction was being briefed in the first case, Middel Sr., OSH, and WRI filed the second case at issue here against Middel Jr. in the Circuit Court for Montgomery County, Maryland. Middel Jr. removed the case to this Court where it was docketed as case number 20-cv-682-PWG. In the complaint in that case, Middel Sr., OSH, and WRI allege that Middel Jr. took funds from OSH and WRI for his personal use without authorization and with no intention to repay the businesses. 20-cv-682-PWG, ECF No. 3 at 3–4. Middel Sr., OSH, and WRI bring claims for breach of contract, fraud and misrepresentation, gross negligence, and for a declaratory judgment regarding the interests and obligations of the parties in OSH and WRI. Id. at 4–8. OSH and WRI also bring a claim for conversion. Id. at 6–7. Middel Jr. removed the case to this Court on the basis of diversity of citizenship jurisdiction under 28 U.S.C § 1332. In accordance with my pre-motion procedures, Middel Sr., OSH, and WRI filed a letter outlining a proposed motion to remand. 20-cv-682-PWG, ECF No. 8. The issue is precisely the same as the parties have briefed in the motion to dismiss in the first case. Therefore, I will construe Middel Sr., OSH, and WRI's letter as a motion to remand and resolve the issue here along with the motion to dismiss in the first case. A hearing is not necessary. See Loc. R. 105.6 (D. Md. 2018).

Standard of Review

In the first case, Middel Sr., OSH, and WRI move to dismiss pursuant to Fed. R. Civ. P. 12(b)(1). "A court should grant a Rule 12(b)(1) motion ‘if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.’ " El–Amin v. Int'l Longshoremen's Ass'n Local No. 333 , No. CCB-10-3653, 2011 WL 2580630, at *2 (D. Md. June 28, 2011) (quoting Evans v. B.F. Perkins, Co. , 166 F.3d 642, 647 (4th Cir. 1999) ). "A Rule 12(b)(1) motion to dismiss is not limited to challenges to jurisdiction appearing from the face of the complaint. In considering the allegations, the court may consider extrinsic evidence and, if such evidence is disputed, may weigh and determine the facts." United States ex rel. Ackley v. Int'l Bus. Mach. Corp. , 76 F.Supp.2d 654, 659 (D. Md. 1999). Courts "regard the pleadings’ allegations as mere evidence on the issue," and may consider additional evidence. Richmond, Fredericksburg & Potomac Ry. v. United States , 945 F.2d 765, 768 (4th Cir. 1991). Notably, if " ‘a defendant proffers evidence that calls the court's jurisdiction into question,’ " then "no presumption of truthfulness attaches to the plaintiff's allegations." Ackley , 76 F. Supp. 2d at 659 (quoting Commodity Trend Serv., Inc. v. Commodity Futures Trading Comm'n , 149 F.3d 679, 685 (7th Cir. 1998) ). When a defendant challenges subject matter jurisdiction, the burden is on the plaintiff—here, Middel Jr.—to prove that subject matter jurisdiction exists. See Evans , 166 F.3d at 647 ; El–Amin , 2011 WL 2580630, at *2. Rivero v. Montgomery Cty., Maryland , 259 F. Supp. 3d 334, 339–40 (D. Md. 2017)

Middel Jr. removed the second case from the Circuit of Montgomery County, Maryland and Middel Sr., OSH, and WRI filed a letter, construed as a motion to remand, to remand the case back to state court. If a federal court determines that it does not have subject matter jurisdiction over a case that has been removed from state court, the federal court must remand the case back to state court. 28 U.S.C. § 1447(c). The party seeking removal carries the burden of establishing federal jurisdiction. Jones v. Wells Fargo Co. , 671 F. App'x 153, 154 (4th Cir. 2016). Because of federalism concerns, a federal court's jurisdiction to hear a removed case must be strictly construed, with all doubts resolved in favor of remanding the case to state court. See, e.g. , Mulcahey v. Columbia Organic Chems. Co. , 29 F.3d 148, 151 (4th Cir. 1994). The party asserting subject matter jurisdiction—here, Middel Jr.—must prove the facts necessary to establish jurisdiction by a preponderance of the evidence. Simon v. Marriott Int'l, Inc. , No. PWG-19-2879, 2019 WL 4573415, at *2 (D. Md. Sept. 20, 2019). The Court may consider facts outside the pleadings and is not limited to the allegations in a plaintiff's complaint when evaluating a motion to remand. See United States v. Smith , 395 F.3d 516, 519 (4th Cir. 2005) (considering the entire record in evaluating a motion to remand); Linnin v. Michielsens , 372 F. Supp. 2d 811, 819 (E.D. Va. 2005) (holding that the court has "authority to look beyond the pleadings and consider summary-judgment-type evidence, such as the affidavits and the depositions accompanying either a notice of removal or a motion to remand").

In both cases, the jurisdiction of this Court depends on the state of the facts at the time the actions were brought. See Grupo Dataflux v. Atlas Global Group, L.P. , 541 U.S. 567, 570–71, 124 S.Ct. 1920, 158 L.Ed.2d 866, (2004) (" ‘[T]he jurisdiction of the court depends upon the state of things at the time of the action brought.’ This time-of-filing rule ... measures all challenges to subject-matter jurisdiction premised upon diversity of citizenship against the state of facts that existed at the time of filing—whether the challenge be brought shortly after filing, after the trial, or even for the first time on appeal.") (quoting Mollan v. Torrance, 9 Wheat. 537, 539, 6 L.Ed. 154 (1824) ).

Discussion

Middel Jr. alleges that this Court has subject matter jurisdiction in both cases based on diversity of citizenship jurisdiction under 28 U.S.C § 1332. That statute provides, in relevant part: "The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between—citizens of different States." 28 U.S.C § 1332(a)(1). The amount in controversy is not disputed here. Rather, the question is whether there is "complete diversity" between the parties. To have complete diversity, all plaintiffs must be diverse from all defendants. See Banca Del Sempione v. Provident Bank of Maryland , 85 F.3d 615 (4th Cir. 1996) ("Since Strawbridge v. Curtiss , 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806), courts have interpreted section 1332 to require complete diversity between all parties."); Dewhurst v. Telenor Invest AS , 83 F. Supp. 2d 577, 595 (...