Qi Qin v. Deslongchamps

31 F.4th 576

Qi QIN, Petitioner-appellant,

v.Paul DESLONGCHAMPS, Respondent-Appellee.

No. 21-1873

United States Court of Appeals, Seventh Circuit.

Argued November 10, 2021

Decided April 14, 2022

Douglas Eliot Litowitz, Attorney, Law Office of Douglas Litowitz, Deerfield, IL, for Petitioner - Appellant

James Dennis Kilroy, Stephanie Kanan, Attorneys, Snell & Wilmer, Denver, CO, for Respondent - Appellee

Before Manion, Rovner, and Wood, Circuit Judges.

Rovner, Circuit Judge.

Qi Qin intends to sue a limited liability corporation whose members and their respective citizenships are unknown to him. Without that information, he believes he cannot, as a practical matter, bring a diversity suit in federal court, which is his preferred forum. In an effort to surmount that obstacle, he filed a petition pursuant to Federal Rule of Civil Procedure 27, seeking leave to depose a known member of the parent entity of the LLC he wishes to sue so that he can ask that witness to identify the LLC's members. The district court denied the petition, reasoning in part that Qin's request is not one to perpetuate testimony that is at risk of being lost. We agree and affirm.

I.

Qin is among 165 foreign limited partners (Qin is from China) who in 2011 collectively invested some $82.5 million into a limited partnership called Colorado Regional Center Project Solaris LLLP ("CRCPS"), whose general partner is Colorado Regional Center I LLC ("CRC-I" or the "LLC"). The parent company of CRC-I is Waveland Ventures LLC, which has a member (Paul Deslongchamps) and office in Milwaukee, Wisconsin. CRCPS was part of an approved U.S. EB-5 immigrant visa program through which Qin and others were able to obtain permanent-resident visas as a result of their investment in a commercial enterprise in the United States. Qin is now a lawful permanent resident of the U.S. and makes his home in Florida, although his petition indicates that he remains a citizen of China.

Pursuant to the limited partnership agreement of CRCPS, the general partner, CRC-I, receives an annual management fee of 2%, which comes to $1.6 million per year. Essentially, Qin and the other limited partners are funding the salaries of CRC-I and its members. CRC-I invested CRCPS's funds in a condominium project in Vail, Colorado through a series of five-year loan advances. The investment was a failure, allegedly due in no small part to the CRC-I's malfeasance, with losses to the investors totaling between $40 and $70 million.

In the meantime, while the limited partners have paid millions of dollars in management fees to CRC-I over the past 10 years, they allegedly have received a "pittance" in return on their investments.

In 2019, two groups of investors filed complaints against CRC-I in the District of Colorado; and those actions were consolidated under the name Wu v. Colorado Regional Center Project Solaris, LLLP , Nos. 19-cv-2443 and 19-cv-2637. Qin is a party to that consolidated action and along with other investors asserted a claim against CRC-I that he characterizes as one for breach of contract. But the district court construed his claim instead as a common law tort claim and released CRCI from the case. See Wu v. Colo. Reg. Ctr. Project Solaris LLLP , 2021 WL 5038826, at *4 (D. Colo. Oct. 29, 2021) ("It is clear to the Court that the essence of the Li Plaintiffs' case is one that lies in tort."). That decision, among others, is pending on appeal before the Tenth Circuit (Nos. 21-1232 & 21-1253).

Believing he is free to pursue his breach of contract claim elsewhere, Qin, on behalf of a class of other disappointed investors, wants to sue CRC-I in the Eastern District of Wisconsin.¹ He has chosen that venue because Deslongchamps, a member of CRC-I's parent, Waveland Ventures LLC, lives in Milwaukee, and Waveland Ventures has an office there, which Deslongchamps manages. (There are also offices in Texas and Colorado.) But Qin does not know the identities and citizenships of all of the members of CRC-I and therefore cannot plead with reasonable certainty the existence of diversity of citizenship. See America's Best Inns, Inc. v. Best Inns of Abilene, L.P. , 980 F.2d 1072, 1074 (7th Cir. 1992) (per curiam) (citizenship of limited partnership's general and limited partners may not be established, after prior opportunities to demonstrate diversity of citizenship, on allegations made "to the best of [affiant's] knowledge and belief"); Page v. Wright , 116 F.2d 449, 451 (7th Cir. 1940) (expressing doubt that allegations of party's citizenship for diversity purposes made only on information and belief can suffice to establish jurisdiction). (Qin assumes that as a lawful permanent resident of the United States who is domiciled in Florida, he would be treated as a citizen of Florida for diversity purposes. His assumption may be mistaken, as we note below. See infra n.2.)

The LLC business form is of relatively recent vintage and popularity. See Lincoln Benefit Life Co. v. AEI Life, LLC , 800 F.3d 99, 112 (3d Cir. 2015) (concurrence); Christine M. Kailus, Note, Diversity Jurisdiction & Unincorporated Businesses:

Collapsing the Doctrinal Wall , 2007 UNIV. OF ILL. L. REV. 1543, 1546–48 (2007). As relevant here, one feature of the LLC is that, in the handful of states that allow it (among them Delaware), its members can be anonymous: an authorized third-party representative can register the LLC without disclosing the identities of the LLC's members. See Larry Donahue, Regular LLC vs. Anonymous LLC , LAW 4 SMALL BUSINESS (Oct. 6, 2016), available at https://l4sb.com/blog/regular-llc-versus-anonymous-llc/ (visited April 12, 2022). Even in states that do not formally permit anonymous LLCs, it can be challenging to ascertain the citizenship of the LLC's members from publicly available sources, particularly when the membership roster includes additional LLCs or other non-corporate entities. See Lincoln Benefit Life , 800 F.3d at 108 ("The membership of an LLC is often not a matter of public record.") & id. n.39 (collecting cases); West v. Louisville Gas & Elec. Co. , 951 F.3d 827, 830 (7th Cir. 2020) (noting that partnership in that case had ownership structure 17 layers deep).

Carden v. Arkoma Assocs. , 494 U.S. 185, 195–96, 110 S. Ct. 1015, 1021, 108 L.Ed.2d 157 (1990), deems a limited partnership to be a citizen of every state in which any of its partners, general or limited, is a citizen; and because an LLC is an "animal ... like a limited partnership," Cosgrove v. Bartolotta , 150 F.3d 729, 731 (7th Cir. 1998), we have extended this treatment to the LLC, see Thomas v. Guardsmark, LLC , 487 F.3d 531, 534 (7th Cir. 2007) (citing Camico Mut. Ins. Co. v. Citizens Bank , 474 F.3d 989, 992 (7th Cir. 2007) ); Wise v. Wachovia Sec., LLC , 450 F.3d 265, 267 (7th Cir. 2006) (collecting cases); Cosgrove , 150 F.3d at 731. So, in contrast to a corporation, which is a citizen of its state of incorporation and the state where it maintains its principal place of business (two states at most), see 28 U.S.C. § 1332(c)(1) ; Hertz Co. v. Friend , 559 U.S. 77, 130 S. Ct. 1181, 175 L.Ed.2d 1029 (2010), an LLC can be a citizen of many states. And in states where the members of the LLC need not be publicly identified, it can be difficult if not impossible for a prospective plaintiff to ascertain the membership and in turn determine whether he can sue the LLC in diversity.

E.D. Wisconsin Civil Local Rule 8 makes plain what the dilemma is for Qin. Local Rule 8 provides:

If a pleading or notice of removal asserts jurisdiction based on diversity of citizenship, the pleading or notice must identify the amount in controversy and the citizenship of each party to the litigation. If any party is a corporation, the pleading or notice must identify both the state of incorporation and the state in which the corporation has its principal place of business. If any party is an unincorporated association, limited liability company, or partnership, the pleading or notice must identify the citizenship of all members.

(Emphasis supplied.) In compliance with Rule 8, Qin must identify the citizenship of all of the members of CRC-I. But he does not know who they are. His briefs lay out the various efforts he has made to identify the partners through publicly available records, tax returns, and social media (among other sources). Based on what he knows about the members of CRC-I and its parent, Waveland Ventures, he believes there is complete diversity as among himself and the LLC's membership, but unless CRC-I discloses the identity of all of its members, he cannot be sure.

In an attempt to obtain this information, Qin filed a petition in the Eastern District of Wisconsin pursuant to Rule 27, which in relevant part provides:

A person who wants to perpetuate testimony about any matter cognizable in a United States court may file a verified petition in the district court for the district where any expected adverse party resides. The petition must ask for an order authorizing the petitioner to depose the named persons in order to perpetuate their testimony.

Rule 27(a)(1). Qin identified Deslongchamps as the person he wants to depose. And, of course, what he is seeking to learn from Deslongchamps is the identities of all of the members of CRC-I, so that he can establish whether diversity of citizenship exists.

Judge Adelman denied the petition on two grounds. First , Qin had not shown that his contemplated suit against CRC-I would be cognizable in a United States court. In other words, because Qin cannot yet demonstrate that there is diversity of citizenship among the prospective parties to the action he wants to file, he cannot show that the anticipated suit falls within the subject matter jurisdiction of a federal court. The most he can state at this juncture is that, based on what he knows thus far, it is "likely" that there will be diversity jurisdiction, and Judge Adelman found that insufficient. Judge Adelman indulged Qin's assumption that he would be...