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Cott Corporation v. Star

United States District Court, Second Circuit

October 18, 2013

STANLEY A. STAR, as Sellers' representative for the sellers of Cliffstar Corporation and its subsidiaries under an asset purchase agreement dated as of July 7, 2010, Defendant.


WILLIAM M. SKRETNY, Chief District Judge.


In August of 2010 Cott Corporation and Cliffstar Corporation, including various Cliffstar Corporation subsidiaries, executed a purchase agreement authorizing the sale of Cliffstar's assets to Cott. Cott now alleges that Cliffstar breached that purchase agreement, and, invoking this Court's diversity jurisdiction, it brings this breach-of-contract action against Defendant Stanley Star, as Cliffstar's representative.

Star moves to dismiss this action under Federal Rule of Civil Procedure 12(b)(1), arguing that this Court lacks subject-matter jurisdiction over the suit. For the following reasons, that motion is denied.


A. Facts

On August 17, 2010 Cott purchased the assets of Cliffstar Companies. The composition of "Cliffstar Companies" requires clarification at the outset. It appears that, as used in the purchase agreement, "Cliffstar Companies" consists of the Cliffstar Corporation and four subsidiaries - Star Real Property LLC, ShanStar Biotech, Inc., Star World Trading Company, and Harvest Classic LLC.[1] Cott purchased all five of these companies for a base price of $500, 000. (Am. Compl., at 1; Docket No. 18). The parties arrived at this price by calculating "Cliffstar Companies' earnings[, ] or net income[, ] before interest, taxes, depreciation, and amortization (EBITDA') times a multiple." (Id.)

The amended complaint, however, uses the umbrella title "Cliffstar or Cliffstar Companies" differently than the purchase agreement; in the amended complaint, Cott refers to only three of those five companies as the "Cliffstar Companies, " intentionally omitting Harvest Classic LLC and Star Real Property LLC. The import of this will be discussed further below. But for now, it suffices to note that Cott alleges that the purchase agreement contained "several representations and warranties by Cliffstar about Cliffstar's financial condition." ( Id., at 2.) According to Cott, after closing on the deal, it realized that Cliffstar had breached several of these representations and warranties. ( Id., at 3.) It now brings this action to recover damages against Cliffstar (as defined in the amended complaint) in connection with those alleged breaches.

B. Procedural History

Cott filed a complaint in this Court on October 19, 2012. (Docket No. 1.) Then, on December 7, 2012, Star moved to dismiss the complaint for lack of subject-matter jurisdiction. Cott responded with an amended complaint and a memorandum, in which it argued that the new complaint rendered moot the motion to dismiss. Star, however, disagreed, and filed a reply arguing as much. Also, in an "abundance of caution, " Star filed a motion to dismiss the amended complaint, but requested that his previous briefing be considered in support of the new motion. (Docket No. 21.) This Court then denied the first motion to dismiss as moot, permitted Cott to file a response to the new motion, and allowed Star to file a reply to Cott's response. (Docket No. 24.)

Briefing concluded on February 4, 2013, at which time this Court took the matter under consideration.


Star mounts a three-pronged attack on this Court's diversity jurisdiction.

First, Star argues that he - not the Cliffstar companies under any definition - is the real party to the controversy, and that therefore his citizenship should control for the purposes of determining diversity jurisdiction. If it did, because there is no dispute that Cott and Star are both citizens of Florida, the requisite complete diversity would not exist and dismissal would be mandatory. See 28 U.S.C. ยง 1332 (a)(1); see also, e.g., Wisconsin Dep't of Corr. v. Schacht , 524 U.S. 381, 388, 118 S.Ct. 2047, 141 L.Ed.2d 364 (1998).

Second, he contends that the citizenship of the corporate entities that Cott has not sued must be considered in determining whether complete diversity exists. Because those entities are not identified, Star argues, Cott has not met its burden demonstrating that diversity jurisdiction exists.

And third, he argues that the citizenship of Cliffstar Corporation, an entity that is named in the complaint, is actually Florida, not New York - ...

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