Phila. Indem. Ins. Co. v. U.S. Olympic Comm.

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. UNITED STATES OLYMPIC COMMITTEE, Defendant.

Civil Action No. 19-cv-01231-CMA-KMT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

August 18, 2020

Judge Christine M. Arguello

ORDER ADOPTING THE JANUARY 28, 2020 RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE KATHLEEN M. TAFOYA AND GRANTING DEFENDANT'S MOTION TO VACATE

This matter is before the Court on review of the Recommendation of United States Magistrate Judge ("the Recommendation") (Doc. # 59), wherein Magistrate Judge Kathleen M. Tafoya recommends that the instant action be dismissed for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1). For the following reasons, Plaintiff Philadelphia Indemnity Insurance Company's objections are overruled, and the Court affirms and adopts the Recommendation. Accordingly, the Court grants Defendant United States Olympic & Paralympic Committee's Motion to Vacate Order Dated October 25, 2019 ("Motion to Vacate"). (Doc. # 61.)

I. BACKGROUND

Judge Tafoya described the relevant background of this case in her Order to Show Cause (Doc. # 51 at 2-2) and the Recommendation (Doc. # 59 at 1-2), which is incorporated herein by reference. See 28 U.S.C. § 636(b)(1)(B) (2018); Fed. R. Civ. P. 72(b). The Court therefore recounts only the facts necessary to address Plaintiff's Objections to the Recommendation and Defendant's Motion to Vacate.

Plaintiff initiated this lawsuit in federal court on the basis of diversity jurisdiction and does not assert that the Court has federal question jurisdiction. (Doc. # 1 at 1-2.) During the December 10, 2019 Scheduling Conference before Judge Tafoya, Defendant United States Olympic Committee ("USOC"), a federally chartered corporation, indicated that the Court lacks subject matter jurisdiction over this action under either 28 U.S.C. § 1332(c) or the Ted Stevens Amateur Sports Act ("ASA"), 36 U.S.C. § 220505(b)(9), because it is not a citizen of any state. (Doc. # 49 at 3.) Subsequently, Judge Tafoya sua sponte ordered Plaintiff to show cause why the instant case should not be dismissed for lack of subject matter jurisdiction. (Doc. # 51.) Plaintiff filed a Response to Judge Tafoya's Order to Show Cause on January 3, 2020 (Doc. # 55), and USOC filed a Statement Regarding Subject Matter Jurisdiction on January 17, 2020 (Doc. # 56). Judge Tafoya granted leave for Plaintiff to file a Reply to Defendant's Statement, which Plaintiff filed on January 24, 2020. (Doc. # 57-1.) On January 28, 2020, Judge Tafoya issued her Recommendation, in which she recommends that the instant action be dismissed because Plaintiff has failed to establish that the Court has subject matter jurisdiction. (Doc. # 59.)

On February 6, 2020, Plaintiff timely filed its objection to Judge Tafoya's Recommendation, contending that Judge Tafoya: (1) misinterpreted 28 U.S.C. § 1332(c) in concluding that it does not apply to federally chartered corporations; (2)improperly concluded that the ASA prohibits citizenship over USOC in Colorado; and (3) erroneously found that USOC is not localized in Colorado. (Doc. # 60.) Defendant United States Olympic & Paralympic Committee's Response in Support of Magistrate Judge Tafoya's Recommendation to Dismiss Action followed. (Doc. # 62.) Subsequently, USOC filed its Motion to Vacate (Doc. # 61), in which it argues that if this Court adopts the Recommendation, the Court should also vacate Judge Tafoya's October 25, 2019 Order denying Defendant's Motion to Stay Proceedings (Doc. # 23). Plaintiff's Response to Defendant's Motion to Vacate Order Dated October 25, 2019 (ECF 23) followed. (Doc. # 63.) For the following reasons, the Court adopts the Recommendation and grants Defendant's Motion to Vacate.

II. STANDARDS OF REVIEW

A. REVIEW OF A RECOMMENDATION

When a magistrate judge issues a recommendation on a dispositive matter, Fed. R. Civ. P. 72(b)(3) requires that the district judge "determine de novo any part of the magistrate judge's [recommended] disposition that has been properly objected to." An objection is properly made if it is both timely and specific. United States v. One Parcel of Real Prop. Known As 2121 E. 30th St., 73 F.3d 1057, 1059 (10th Cir. 1996). In conducting its review, "[t]he district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed. R. Civ. P. 72(b)(3).

B. FEDERAL RULE OF CIVIL PROCEDURE 12(b)(1)

Federal subject matter jurisdiction arises under 28 U.S.C. § 1332(a)(1) if theamount in controversy exceeds $75,000 and the conflict is between citizens of different states. A corporation is "a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business . . . ." § 1332(c). "The party invoking federal jurisdiction bears the burden of establishing such jurisdiction as a threshold matter." Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1224 (10th Cir. 2004). Fed. R. Civ. P. 12(b)(1) "allows a court to dismiss a complaint for lack of subject matter jurisdiction." Pueblo of Jemez v. United States, 790 F.3d 1143, 1151 (10th Cir. 2015).

Federal courts are courts of limited jurisdiction and, as such, "are duty bound to examine facts and law in every lawsuit before them to ensure that they possess subject matter jurisdiction." The Wilderness Soc. v. Kane Cty., Utah, 632 F.3d 1162, 1179 n.3 (10th Cir. 2011) (Gorsuch, J., concurring). A federal court must satisfy itself as to its own jurisdiction and may take sua sponte action to do so. See Citizens Concerned for Separation of Church & State v. City & Cty. of Denver, 628 F.2d 1289, 1297 (10th Cir. 1980). A court should not proceed without having first assured itself that jurisdiction exists. See Cunningham v. BHP Petroleum Great Britain PLC, 427 F.3d 1238, 1245 (10th Cir. 2005). "If [a] court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action." Fed. R. Civ. P. 12(h)(3); see Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974).

Dismissal under Fed. R. Civ. P. 12(b)(1) is without prejudice because judgment is not made on the merits of a plaintiff's case. Brereton v. Bountiful City Corp., 434 F.3d 1213, 1218 (10th Cir. 2006). Rather, dismissal under Fed. R. Civ. P. 12(b)(1) is basedon a determination that the court lacks authority to adjudicate a matter on its merits. Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir. 1994).

III. ANALYSIS

The Court considers three issues in analyzing whether it possesses subject matter jurisdiction over the instant action: (1) whether diversity jurisdiction over federally chartered corporations such as USOC arises under 28 U.S.C. § 1332(c); (2) whether Congress conferred diversity jurisdiction over USOC through the ASA, 36 U.S.C. §§ 220501-220512; and (3) whether the Court should apply the judicially created "localization exception" to conclude that USOC is a citizen of Colorado for diversity jurisdiction purposes. Ultimately, the Court concludes that it does not have diversity jurisdiction over USOC and, therefore, that it lacks subject matter jurisdiction over the instant action.

A. JURISDICTION UNDER 28 U.S.C. § 1332(c)

Plaintiff's first objection is to Judge Tafoya's conclusion that 28 U.S.C. § 1332(c) does not apply to federally chartered corporations. The Court overrules Plaintiff's objection and affirms Judge Tafoya's conclusion that § 1332(c) is inapplicable to USOC.

USOC is a federally chartered corporation. 36 U.S.C. § 220502. Therefore, it "is incorporated under acts of Congress rather than state laws, and . . . generally has national citizenship but no state citizenship." Fed. Nat'l Mortg. Ass'n v. Amerson, No. 19-CV-02361-PAB, 2019 WL 4410009, at *2-3 (D. Colo. Sept. 16, 2019) (brackets omitted) (citing Hayward v. Chase Home Fin., LLC, 2011 WL 2881298, at *3 (N.D. Tex. July 18, 2011)). "In a suit where one of the [parties] has only national citizenship but nostate citizenship, diversity is impossible because the suit is not between citizens of different states." Id.

The Supreme Court first concluded that federally chartered corporations have no state citizenship in 1916 in Bankers Trust Co. v. Tex. & Pac. R.R. Co., 241 U.S. 295, 309 (1916). Plaintiff argues that Bankers Trust is no longer good law because Congress's 1958 amendment to 28 U.S.C. § 1332 conferred diversity jurisdiction over federally chartered corporations. Importantly, Plaintiff's position is contrary to the great weight of authority.

First, Plaintiff's position is unsupported by this circuit's precedent, which has reliably applied Bankers Trust in concluding that federally chartered corporations do not have state citizenship under § 1332. See, e.g., Fed. Nat'l Mortg. Ass'n, 2019 WL 4410009, at *2-3; Multibank 2009-1 RES-ADC Venture, LLC v. CRM Ventures, LLC, No. 10-CV-02001-PAB-CBS, 2010 WL 3632359, at *2 (D. Colo. Sept. 10, 2010) (citations omitted) ("Federal courts do not have diversity jurisdiction over federally-chartered corporations such as the FDIC because such corporations have no state citizenship."); CU Capital Mkt. Sols., LLC v. Olden Lane Sec., LLC, No. 18-2597-DDC-KGG, 2019 WL 2612940, at *5 (D. Kan. June 26, 2019) (citations omitted) (noting that "traditionally, federally chartered corporations are not citizens of any state, and they thus operate as diversity-destroying entities"). The Tenth Circuit cases on which Plaintiff relies to argue the contrary concern a limited exception applied to tribal corporations organized under the Indian Reorganization Act, 25 U.S.C. § 477.¹ This exception isinapplicable to the instant case, and the Court declines to broaden the exception to apply to USOC, which was organized under a different statute. Further, Plaintiff's position is contrary to the great weight of authority in other circuits.² Moreover, the Supreme Court has favorably cited to its ...