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Discovery Ortho Partners, LLC v. Osseous Technologies of America

August 17, 2010

DISCOVERY ORTHO PARTNERS, LLC PLAINTIFF,
v.
OSSEOUS TECHNOLOGIES OF AMERICA, INC., DEFENDANTS.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge*fn1

OPINION & ORDER

Plaintiff Discovery Ortho Partners, LLC ("Plaintiff" or "DOP") offers consulting services to companies that develop and market medical and dental products and technologies. DOP entered into an agreement to provide such services to Defendant Osseous Technologies of America, Inc. ("OTA" or "Defendant"), a corporation that develops and markets sinus and dental surgery-related products and technology. DOP brings suit against OTA for breach of contract and unjust enrichment, because OTA allegedly failed to compensate them as specified by a written agreement between the companies. OTA has moved to dismiss the complaint for lack of diversity jurisdiction or, alternatively, under the Colorado River abstention doctrine. For the reasons that follow, Defendant's motion to dismiss is DENIED.

I. BACKGROUND

DOP is a limited liability company registered in Delaware, with its principal place of business in New York City. Am. Compl. ¶1. The primary source of dispute on this motion is DOP's citizenship, and it claims to be an LLC comprised of only four members, three of whom are citizens of New York and one of whom is a citizen of North Carolina. Id. ¶ 3; see also Mullen Decl. ¶¶ 9-16. OTA is a Delaware corporation with its primary office located in Newport Beach, California. Am. Compl. ¶ 2.

This case arises out of a consulting relationship that soured. Plaintiff was hired by Defendant to find business partners to market and develop their dental and medical products, and in December 2008, the two companies entered into a written agreement to govern this relationship. See Am. Compl. ¶¶ 7-13. Under this agreement, DOP was to perform "certain marketing and business development services" for OTA's sinus and dental products and technologies. Id. ¶¶ 5-7; Ex. A (copy of original agreement). In exchange for such work, DOP would receive a percentage of the value of any "final license or asset sale transaction" that the company helped OTA obtain. See Id., Ex. A at 3. In January 2009, the parties allegedly agreed upon an addendum to the written agreement. The addendum increased DOP's percentage share from 5% to 8.5% of the overall value of the deal, and broadened the scope of compensable activities. Id. ¶¶ 15-17; Ex. B (copy of addendum).

OTA allegedly breached its contract with DOP, after DOP successfully brokered a business relationship with a company called Zimmer, Inc., and its subsidiary, Zimmer Dental (collectively "Zimmer"). See Am. Compl. ¶¶ 19-20. According to Plaintiff, DOP expended significant capital, time, and resources to develop a "comprehensive strategic plan" to reach prospective business partners for OTA, including Zimmer. Id. ¶¶ 21-23. Over the course of 2009, DOP worked to develop a licensing and distribution agreement with Zimmer. Although some last-minute issues arose, in June 2009 a distribution agreement between OTA and Zimmer was established. See id. ¶¶ 30-40.

Despite the successful development of this agreement, Plaintiff claims that OTA failed to compensate DOP according to the terms of the Agreement, allegedly because OTA said that it "had not realized that it was 'a lot of money.'" Am. Compl. ¶ 44. Plaintiff brings causes of action for breach of contract and unjust enrichment. Id. ¶¶ 51-59. Defendant has moved to dismiss for two reasons. First, Defendant claims DOP lacks diversity jurisdiction, because one of DOP's members is allegedly a citizen of California, which is OTA's domicile state. In the alternative, Defendant asks this Court to either dismiss or stay the proceedings under the "parallel proceeding" abstention doctrine developed in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). Defendant alleges that Plaintiff's suit is duplicative of a state action that OTA filed against DOP in California state court, which is now on appeal.

II. DISCUSSION

A. Diversity Jurisdiction

1. Legal Standard

On a motion to dismiss for lack of diversity jurisdiction pursuant to Rule 12(b)(1), "the party invoking federal jurisdiction bears the burden of establishing that jurisdiction exists." Sharkey v. Quarantillo, 541 F.3d 75, 82-83 (2d Cir. 2008) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)). Diversity jurisdiction requires complete diversity amongst the parties. See 28 U.S.C. § 1332(a). It exists if and only if "the citizenship of each plaintiff is diverse from the citizenship of each defendant," Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996), meaning that no plaintiff may be a citizen of a state where any defendant is also a citizen. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). The citizenship status of the parties at the time the complaint was filed are controlling for diversity jurisdiction purposes. See Leblanc v. Cleveland, 248 F.3d 95, 100 (2d Cir. 2001); see also Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570 (2004) ("It has long been the case that the jurisdiction of the court depends upon the state of things at the time of the action brought.").

2. Analysis

The jurisdictional issue presently before this Court comes to this: is one of Plaintiff's members a citizen of California? The parties do not dispute that Defendant is a citizen of California. A corporation's citizenship is usually determined by its state of incorporation as well as the state where it has its principal place of business. See Hertz Corp. v. Friend, 130 S.Ct. 1181, 1185 (2010); 28 U.S.C. § 1332(c)(1). To determine a corporation's "principal place of business," courts are instructed to use the so-called "nerve center approach." Hertz Corp., 130 S.Ct. at 1186. Under this approach, "principal place of business" means "the place where a corporation's officers direct, control, and coordinate the corporation's activities," which usually means the state where the corporation's headquarters is located, "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." Id. at 1192. The parties agree that OTA was incorporated in Delaware and has its only office in California. Defendant additionally alleges that OTA's California office serves as the center of its business, and Plaintiff does not contest this fact.

As a limited liability corporation or "LLC," Plaintiff's citizenship is a more muddled and contested issue. Unlike corporations, the citizenship of an unincorporated association depends on the citizenships of all the individual members of the partnership. See Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990) (finding that limited partnership must look to citizenship of all members). A limited liability company in particular is deemed to be a citizen of all states of which its partners or members are citizens. See UBS Secs. LLC v. Voegeli, 684 F. Supp. 2d 351, 354 n.5 (S.D.N.Y. 2010) (citing Carden, 494 U.S. at 195-96; Handelsman v. Bedford Vill. Assocs. Ltd., 213 F.3d 48, 51-52 (2d Cir. 2000)).*fn2 Thus for diversity jurisdiction to exist, the citizenship of each member or partner of an LLC must be different from the citizenship of each opposing party. Plaintiff claims that it is comprised of four members, three of whom are citizens of and domiciled in New York; and one of whom is a citizen of and domiciled in North Carolina. OTA, however, alleges that DOP is comprised of only two members, and that one of them, Steven Reineck, is a citizen of and domiciled ...


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