United States District Court, D. Utah
MEMORANDUM DECISION AND ORDER DENYING DEFENDANTS'
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER
N. Parrish United States District Court Judge
September 26, 2017, Plaintiff Celtig, LLC filed a complaint
against Defendants Aaron A. Patey; Evergreen Strategies, LLC;
PSD International, LLC (“PSDI”); and Relay
Advanced Materials, Inc. (“RAM”) (collectively,
“Defendants”). Celtig alleged that the court had
subject matter jurisdiction based on 28 U.S.C. §
1332(a). That section allows district courts to exercise
original jurisdiction when the controversy is between
citizens of different states and the amount in controversy
exceeds $75, 000.
have moved to dismiss based on lack of subject matter
jurisdiction, arguing that the controversy is not between
citizens of different states. Specifically, Defendants argue
that RAM was a member of Celtig when Celtig commenced this
action. According to Defendants, Celtig transferred a 30
percent ownership interest in itself to Evergreen pursuant to
an agreement the two entities entered into. Shortly after
this, Evergreen supposedly transferred the 30 percent
ownership interest to RAM. As an LLC, Celtig is deemed to be
a citizen of every state of which its members are citizens.
So according to Defendants, Celtig was deemed to be citizen
of the states of which RAM was a citizen-Delaware and Utah.
If Defendants are correct, both Celtig and RAM were citizens
of the same states at the time of filing, robbing the court
of subject matter jurisdiction.
attacks the foundation of Defendants argument. Celtig
concedes that it “agreed” to make Evergreen a
member of Celtig. But Celtig argues that neither Evergreen
nor RAM actually became a member of Celtig because Celtig did
not take the necessary steps under its operating agreement to
make Evergreen a member. In short, Celtig contends that it
agreed to make Evergreen a member but never actually did.
This, according to Celtig, means that neither Evergreen nor
RAM was (or is) a member of Celtig. The court agrees, and it
has determined that it has jurisdiction based on §
1332(a). Defendants' motion is therefore denied.
commenced this action on September 26, 2017. Celtig is a
Tennessee LLC. Exhibit A to Celtig's operating agreement
(the “Operating Agreement”) shows that it has
five members. As of September 26, 2017, four of the members
were citizens of Tennessee and one of the members was a
citizen of South Carolina.
Patey is a citizen of Utah. Mr. Patey owned and operated the
following entities: Evergreen, PSDI, and RAM. Evergreen is a
Nevada LLC, and all of its members are citizens of Utah. PSDI
is a Utah LLC, and all of its members are citizens of Utah.
RAM is a Delaware corporation, and its principal place of
business is in Utah.
around March 28, 2017, Celtig and Evergreen executed the
“Definitive Agreement.” Evergreen promised to,
among other things, pre-pay $750, 015 to Celtig for the
purchase of grapheme-one of the strongest materials on earth.
In exchange for this and other promises, Celtig agreed to,
among other things, “transfer through an appropriate
legal instrument a 30.0% voting ownership interest in Celtig
to Evergreen, and Evergreen shall become a member of
Celtig.” Celtig also agreed that it would “amend
its Operating Agreement, which Evergreen agrees to join as a
11, 2017, Celtig proposed to Evergreen an amended Operating
Agreement. Celtig requested Evergreen's comments, but
Evergreen never responded. To date, Celtig has not amended
its Operating Agreement to make Evergreen a member of Celtig,
and the five current members of Celtig have not approved the
transfer of any membership interest to Evergreen.
connection with this lawsuit, Celtig seeks, among other
things, a declaration that it can rescind its promise to
convey a 30 percent ownership interest to Evergreen. In
response to Celtig's complaint, Evergreen and RAM filed a
counterclaim and third-party complaint. Evergreen and RAM
allege that Celtig has breached the Definitive Agreement by,
among other things, not transferring to Evergreen the 30
percent ownership interest. Evergreen and RAM seek specific
performance of the Definitive Agreement, among other things.
reviewing the pleadings, the court was concerned that it may
lack subject matter jurisdiction. Celtig alleged that the
court had jurisdiction based on 28 U.S.C. § 1332(a). But
Defendants, in their answer, stated that they were without
sufficient information to determine whether the court had
jurisdiction, and they denied, without explanation or
clarification, various allegations as to the parties'
citizenship. Accordingly, the court issued an order to show
cause as to why the case should not be dismissed for lack of
jurisdiction. Shortly after the court issued the order,
Defendants moved to dismiss for lack of subject matter
argue that the court lacks subject matter jurisdiction
because the controversy is not between “citizens of
different states.” Defendants contend that Evergreen
became a member of Celtig when Celtig agreed to transfer a 30
percent ownership interest to Evergreen. According to
Defendants, Evergreen then transferred the 30 percent
ownership interest in Celtig to RAM, making RAM a member of
Celtig. If either Evergreen or RAM was a member of Celtig
when the initial complaint was filed, the controversy would
not be between citizens of different states and the court
would lack subject matter jurisdiction. But neither Evergreen
nor RAM was (or is) a member of Celtig, and the controversy
is between citizens of different states. Accordingly, the
court has subject matter jurisdiction based on 28 U.S.C.
federal courts are courts of limited jurisdiction, there is a
presumption against . . . jurisdiction . . . .”
Penteco Corp. Ltd. P'ship-1985A v. Union Gas Sys.,
Inc., 929 F.2d 1519, 1521 (10th Cir. 1991).
Consequently, the party invoking federal jurisdiction bears
the burden to show that it exists. Id. This burden
may be met by presenting “affidavits or other evidence
sufficient to establish the court's subject matter
jurisdiction by a preponderance of the evidence.”
United States ex rel. Hafter D.O. v. Spectrum Emergency
Care, Inc., 190 F.3d 1156, 1160 n.5 (10th Cir. 1999).