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Carolina Casualty Ins. Co. v. Team Equipment, Inc.

United States Court of Appeals, Ninth Circuit

February 4, 2014

CAROLINA CASUALTY INSURANCE CO., an Iowa corporation, Plaintiff-Appellant,
TEAM EQUIPMENT, INC., a California corporation; Bell Hop Cleaners of California, Inc., a New Mexico corporation; Gamet Enterprises, LLC, a New Mexico limited liability company; U.S. Dry Cleaning Services Corp., a Delaware corporation, DBA U.S. Dry Cleaning Corporation; Steam Press Holdings, Inc., a Hawaii corporation, DBA Young Laundry and Dry Cleaning; Cleaners Club Acquisitions, Inc., a California corporation, DBA Boston Cleaners; USDCC CVR Merger Sub, LLC, a California limited liability company, DBA Roadrunner Cleaners; USDC Portsmouth, Inc., a California corporation; USDC Tuchman Indiana, Inc., a California corporation; USDC Fresno, Inc., a California corporation; USDC Fresno 2, Inc., a California corporation; Timothy Denari, an individual; Riaz Chatauni, an individual; Robert Y. Lee, an individual, AKA Robbie Lee; Martin Brill, an individual; Michael Drace, an individual; Kim COX, an individual; Earl Greenberg, an individual; Anthony J.A. Bryan, an individual, Defendants-Appellees.

Argued and Submitted Nov. 8, 2013.

Page 1083

James K. Thurston, Melissa A. Murphy-Petros (argued), Wilson Elser Moskowitz Edelman & Dicker LLP, Chicago, IL, for Plaintiff-Appellant.

Jonathan B. Sokol, Los Angeles, CA, for Defendant-Appellee Team Equipment, Inc.

Appeal from the United States District Court for the Central District of California, John F. Walter, District Judge, Presiding. D.C. No. 2:12-cv-03133-JFW-JEM.

Before: RAYMOND C. FISHER and RICHARD R. CLIFTON, Circuit Judges, and JAMES K. SINGLETON, Senior

Page 1084

District Judge.[*]


CLIFTON, Circuit Judge:

This appeal concerns the sufficiency of allegations required to plead diversity jurisdiction under 28 U.S.C. ยง 1332. Plaintiff-Appellant Carolina Casualty Insurance Co. (" Carolina" ) filed suit asserting federal jurisdiction based on diversity and thus bore the burden of establishing the diversity. Before the complaint was served, the district court dismissed it without leave to amend because Carolina had failed to allege the citizenship of any of the members of the defendants that were limited liability companies (" LLCs" ), had alleged that certain individual defendants were residents rather than citizens of a state, and had made its jurisdictional allegations on information and belief. Carolina then filed a proposed amended complaint. The court did not accept this complaint as sufficient because Carolina still pled its jurisdictional allegations on information and belief and still failed to establish the citizenship of some defendants, including the LLCs.

We reverse and remand. Because the district court did not conclude that any amendment would be futile, it should have dismissed the initial complaint with leave for Carolina to amend it to correct, as far as possible, the defective jurisdictional allegations. Furthermore, the district court should not have dismissed the complaint for failure to plead allegations of citizenship affirmatively and on knowledge, rather than on information and belief, when the necessary information was not reasonably available to Carolina.

I. Background

Despite its name, Carolina is an insurance company incorporated in Iowa and with its principal place of business in Florida. Carolina issued a corporate liability and directors and officers' liability insurance policy to U.S. Dry Cleaning Corp. (" Dry Cleaning" ) that was effective between January 2009 and January 2011. The policy excluded from coverage losses " for which the Insureds are not financially liable or which are without legal recourse to the Insureds."

Dry Cleaning purchased dry cleaning stores from Team Equipment, Inc. and two affiliated entities (collectively, " Team Equipment" ) in February 2008. For partial payment of the purchase price, Dry Cleaning issued notes to Team Equipment. Two years later, Team Equipment filed an action against Dry Cleaning and certain of its officers, directors, and affiliated entities (collectively, the " Underlying Defendants" ) to enforce the notes. Team Equipment settled its claims against Dry Cleaning in June 2011 and agreed to " limit the enforcement of any judgment or award ..., including ...

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