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Xat.com Ltd. v. Hosting Services, Inc.

United States District Court, D. Utah, Northern Division

May 8, 2019

XAT.COM LIMITED, Plaintiff,
v.
HOSTING SERVICES, INC. aka 100TB.COM, Defendant.

          MEMORANDUM DECISION AND ORDER

          PAUL M. WARNER CHIEF UNITED STATES MAGISTRATE JUDGE.

         All parties in this case have consented to Chief Magistrate Judge Paul M. Warner conducting all proceedings, including entry of final judgment, with appeal to the United States Court of Appeals for the Tenth Circuit.[1] See 28 U.S.C. § 636(c); Fed.R.Civ.P. 73. Before the court is Plaintiff Xat.com Limited's (“Xat”) motion for determination of subject-matter jurisdiction.[2] The court has carefully reviewed the written memoranda submitted by the parties. Pursuant to Civil Rule 7-1(f) of the Rules of Practice for the United States District Court for the District of Utah, the court has concluded that oral argument is not necessary and will decide the motion on the basis of the written memoranda. See DUCivR 7-1(f).

         RELEVANT BACKGROUND

         In its motion, Xat requests that the court determine whether it has subject-matter jurisdiction over this matter. Xat asserts that when the complaint was filed, it was incorporated and had its principal place of business in the United Kingdom. Xat also argues that while, at the time the complaint was filed, Defendant Hosting Services, Inc. aka 100TB.com (“100TB”) was incorporated in Delaware, its principal place of business was in the United Kingdom. In support of that argument, Xat points to evidence that, according to Xat, shows that when the complaint was filed, 100TB's president, John Morris (“Morris”), and vice president and treasurer, Adam Kilgour (“Kilgour”), were overseeing 100TB's operations from the United Kingdom.[3] Based upon that evidence, Xat contends that 100TB's principal place of business was in the United Kingdom when the complaint was filed. Consequently, Xat maintains, both it and 100TB are foreign parties for purposes of subject-matter jurisdiction and, therefore, the court lacks subject-matter jurisdiction.

         100TB opposes Xat's motion. To rebut the evidence that Xat relies upon, 100TB relies upon the declaration of its vice president, Chris Matue (“Matue”), who resides in Utah and works in 100TB's Utah office. In that declaration, Matue asserts that he is “responsible for overseeing, directing and managing 100TB's business activities from 100TB's headquarters and principal office” in Utah and that “100TB's day-to-day operations and business activities were managed and directed by [him] and other senior 100TB employees in Utah.”[4] Matue admits that Morris and Kilgour reside in the United Kingdom, but asserts that, as of the date the complaint was filed, “neither of them was involved in overseeing 100TB's daily operations.”[5] Matue asserts that the roles of Morris and Kilgour primarily involved “providing input on long-term planning and strategic guidance for 100TB.”[6] Matue further asserts that Morris and Kilgour “fulfilled their roles from various locations, including 100TB's headquarters” in Utah; “Morris and Kilgour frequently travelled to Utah, typically on a quarterly basis, ” to participate in certain meetings; and Morris and Kilgour “regularly communicated with [Matue] and other 100TB personnel in Utah via phone, email, and Skype, sometimes from the United Kingdom and sometimes from other locations throughout the globe.”[7] Based upon Matue's declaration, 100TB contends that its principal place of business is located in Utah and, consequently, that this court has subject-matter jurisdiction.

         LEGAL STANDARDS

         “Subject-matter jurisdiction involves a court's authority to hear a given type of case and may not be waived.” Radil v. Sanborn W. Camps, Inc., 384 F.3d 1220, 1224 (10th Cir. 2004) (citations omitted). Subject-matter jurisdiction is to be determined based on the facts that existed at the time the complaint was filed. See Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570-71 (2004); Grynberg v. Kinder Morgan Energy Partners, L.P., 805 F.3d 901, 905 (10th Cir. 2015). “[B]ecause parties cannot waive subject-matter jurisdiction, they can challenge it ‘at any time prior to final judgment.'” City of Albuquerque v. Soto Enters., Inc., 864 F.3d 1089, 1093 (10th Cir. 2017) (quoting Grupo Dataflux, 541 U.S. at 571), cert. denied sub nom. Soto Enters., Inc. v. City of Albuquerque, N.M., 138 S.Ct. 983 (2018). “Where a party attacks the factual basis for subject[-]matter jurisdiction, the court does not presume the truthfulness of factual allegations in the complaint, but may consider evidence to resolve disputed jurisdictional facts.” Radil, 384 F.3d at 1224. “If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3).

         “To establish subject[-]matter jurisdiction under 28 U.S.C. § 1332, a party must show that complete diversity of citizenship exists between the parties and that the amount in controversy exceeds $75, 000.” Radil, 384 F.3d at 1225. Federal courts

have diversity jurisdiction over cases between citizens of the United States and citizens of foreign states, but . . . do not have diversity jurisdiction over cases between aliens. More specifically, diversity is lacking . . . where the only parties are foreign entities, or where on one side there are citizens and aliens and on the opposite side there are only aliens.

Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012) (quotations and citation omitted) (second alteration in original); see also Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987, 991 (9th Cir. 1994) (“Although the federal courts have jurisdiction over an action between ‘citizens of a State and citizens or subjects of a foreign state,' 28 U.S.C. § 1332(a)(2), diversity jurisdiction does not encompass a foreign plaintiff suing foreign defendants . . . .”).

         For purposes of subject-matter jurisdiction, a corporation is a citizen of the place where it is incorporated and has its principal place of business. See 28 U.S.C. § 1332(c)(1). The United States Supreme Court has held

that “principal place of business” is best read as referring to the place where a corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's “nerve center.” And in practice it should normally be the place where the corporation maintains its headquarters-provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center, ” and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion).

Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010). “At its heart, the nerve center test is an inquiry to find the one location from which a corporation is ultimately controlled. Put slightly differently, the federal court is to look for the place where the buck stops. And where it does, well, that's the corporation's nerve center and principal place of ...


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