United States District Court, C.D. California
Smart Power Solutions, Inc.
Present: The GEORGE H. WU, United States District Judge
CIVIL MINUTES - GENERAL
(IN CHAMBERS): ORDER TO SHOW CAUSE RE DIVERSITY JURISDICTION
December 29, 2016, Battery-Biz, Inc.
(“Plaintiff”), sued Smart Power Solutions, Inc.
(“Defendant”) for: (1) breach of contract; (2)
breach of warranty; and (3) statutory indemnity. See
generally Complaint, Docket No. 1. On May 5, 2017,
Defendant filed its Answer to Plaintiff's Complaint,
asserting counterclaims against Plaintiff for fraud and
declaratory relief. See Docket No. 15 at 13-15.
Plaintiff subsequently filed a Motion to Dismiss
Counterclaims, which is currently set for hearing on July 13,
2017. See Docket Nos. 19, 27. In addition, Defendant
filed an Opposition to Plaintiff's Motion to Dismiss
Counterclaims on June 12, 2017. Docket No. 28.
Court has an obligation to ensure that subject matter
jurisdiction exists before proceeding. See Arbaugh v.
Y&H Corp., 546 U.S. 500, 514 (2006) (indicating that
courts must assure themselves of the existence of subject
matter jurisdiction before proceeding); Valdez v.
Allstate Ins. Co., 372 F.3d 1115, 1116 (9th Cir. 2004)
(same). Moreover, “the party asserting federal
jurisdiction has the burden of showing the case meets the
statutory requirements for the exercise of federal
jurisdiction and therefore belongs in federal court.”
Lewis v. Verizon Commc'ns., Inc., 627 F.3d 395,
399 (9th Cir. 2010).
Plaintiff and Defendant assert that this Court has subject
matter jurisdiction, pursuant to 28 U.S.C. § 1332.
See Docket No. 1 ¶ 1; see also Docket
No. 15 at 11. As Plaintiff invoked the Court's diversity
jurisdiction, Plaintiff bears the concomitant burden to
allege that such jurisdiction is proper - in particular, that
the citizenships of the parties are completely diverse.
Exxon Mobil Corp. v. Allapattah Servs., Inc., 545
U.S. 546, 553 (2005) (“[T]he presence . . . of a single
plaintiff from the same State as a single defendant deprives
the district court of original diversity
jurisdiction.”); accord O'Connell &
Stevenson, Cal. Prac. Guide: Fed. Civ. Pro. Before
Trial § 2:1405 (The Rutter Group 2016); see
also Kanter v. Warner-Lambert Co., 265 F.3d 853, 857-58
(9th Cir. 2001) (noting that the “party asserting
diversity jurisdiction bears the burden of proof” and
failure to state citizenship was “fatal” to
assertion of diversity jurisdiction).
diversity purposes, a corporation is a citizen of any state
or foreign state by which it has been incorporated, and of
the state or foreign state where it has its principal place
of business. 28 U.S.C. § 1332(c)(1); accord
O'Connell & Stevenson, Cal. Prac. Guide: Fed.
Civ. Pro. Before Trial § 2:1273 (The Rutter Group
2016) (citation omitted). The phrase “principal place
of business” means the location where high-level
corporate officers “direct, control, and coordinate the
corporation's activities, ”
referred to as the corporation's “nerve
center.” Hertz Corp. v. Friend, 559 U.S. 77,
80-81 (2010); see also Harris v. Rand, 682 F.3d 846,
850 (9th Cir. 2012) (confirming that proper diversity
pleading for incorporated entities requires “the
assertion of facts regarding the location of a party's
principal place of business”). In cases involving alien
corporations, “principal place of business” means
“the corporation's principal place of business
anywhere in the world, not merely within the United
States.” Continental Motion Pictures v.
Allstate Film Co., 590 F.Supp. 67, 71 (C.D. Cal. 1984)
(emphasis in original) (concluding that, where alien
plaintiff's worldwide place of business was Panama, the
plaintiff properly alleged diversity jurisdiction in
corporation's action against California citizen and
Nevada corporation, even though some of the plaintiff's
global business occurred in California); see also Danjaq
v. Pathe Commc'ns Corp., 979 F.2d 772, 774 (9th Cir.
claims to be an entity incorporated under the laws of
California, with its principal place of business in
California. Docket No. 1 ¶ 4. Additionally, Plaintiff
asserts that Defendant is a South Korean corporation
“who [sic] at all times . . . manufactur[ed],
produc[ed], suppl[ied], and import[ed] electronic products .
. . from South Korea, ” and “[sold] these
products throughout the United States, including in this
judicial district.” Id. ¶ 5. Despite
alleging its own principal place of business, Plaintiff fails
to allege Defendant's principal place of business
anywhere in the Complaint. Compare Id. ¶ 4,
with Id. ¶ 5.
assertion that Defendant's conduct in this judicial
district flows “from South Korea” alone
provides an insufficient basis for concluding that the
parties' citizenships are completely diverse. See
Id. ¶ 5 (emphasis added). Indeed, Defendant may, in
fact, manufacture, produce, supply, and import goods from
South Korea while maintaining its operational “nerve
center” in the State of California. On the face of the
Complaint, the Court cannot rule out this possibility; the
allegations supporting diversity jurisdiction are not
sufficient. See generally id.
that the Court has an obligation to confirm subject matter
jurisdiction, and that it is a plaintiff's burden to
allege such jurisdiction when the suit is originally filed in
federal court, the Court will require that Plaintiff address
this issue before the lawsuit proceeds. The parties are
currently scheduled to appear before this Court on July 3,
2017 for a scheduling conference. The Court orders Plaintiff
to show cause in writing no later than June 27, 2017 why this
action should not be dismissed for lack of subject matter
jurisdiction. The Court will also entertain any arguments the
parties wish to present on the issue at the scheduling
Court further orders the Court Clerk promptly to serve this
order on all ...