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Sierp v. Degreen Partners LP

United States District Court, D. Arizona

February 4, 2015

Robert Sierp, et al., Plaintiffs,
DeGreen Partners LP, et al., Defendants.


DAVID G. CAMPBELL, District Judge.

Plaintiffs have moved to remand this case to state court. Doc. 10. They argue that the Court lacks diversity jurisdiction because their only requested relief, a court-ordered inspection of Defendants' corporate records, does not present an amount in controversy that exceeds $75, 000. The motion is fully briefed. Docs. 10, 14, 15. The Court will grant the motion.[1]

I. Background.

On October 15, 2014, Plaintiffs Robert Sierp and Monitor Street, LLC filed a complaint labeled "Application for Order to Produce Partnership Records" in Maricopa County Superior Court. Doc. 1-1 at 11. The complaint alleges that Defendant Keith DeGreen encouraged Plaintiffs to invest in DeGreen Partners, a Delaware Limited Partnership, which was a new venture that promised a generous rate of return. Id. at 12-13. Plaintiffs invested $1.25 million. Id. at 13. Plaintiffs ultimately lost 81% of their investment and DeGreen returned $240, 412. Id. at 14.

In 2014, Plaintiffs began to demand the production of various partnership records. Id. at 14-16. When DeGreen did not comply with these requests, Plaintiffs filed this lawsuit. Id. Plaintiffs named as Defendants Keith DeGreen, Lynn DeGreen, DeGreen Partners, LP, and DeGreen Capital Management, LLC. Id. at 12. Plaintiffs made only one request: that the "Court should order the immediate inspection and copying of the books and records pursuant to Plaintiffs' written demands." Id. at 20. Plaintiffs reserved "the right to amend the Complaint to assert any substantive claims that they discover upon review of the demanded materials." Id.

On October 23, 2014, Defendants removed the case to this Court. Doc. 1. The removal was based on diversity jurisdiction under 28 U.S.C. § 1332. Id. For the amount in controversy, the Notice of Removal stated: "The object of the litigation is Plaintiffs' $1, 250, 000.00 investment in Defendant DeGreen Partners LP and alleged loss thereof of nearly 81% or $1, 009, 588.00, for which Plaintiffs reserved the right to assert any substantive claims that they discover upon review of the demanded materials." Id. at 4. Plaintiffs argue that the amount in controversy requirement is unsatisfied because Plaintiffs merely seek to inspect Defendants' records. Doc. 10.

II. Legal Standards.

Under 28 U.S.C. § 1332, Congress has "authorized the federal courts to exercise jurisdiction based on the diverse citizenship of parties." Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 (1996). A federal court has jurisdiction if the amount in controversy is more than $75, 000 and "each plaintiff is diverse from the citizenship of each defendant." Id. "In cases removed from state court, the removing defendant has always' borne the burden of establishing federal jurisdiction, including any applicable amount in controversy requirement." Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 682-83 (9th Cir. 2006). "Where the complaint does not specify the amount of damages sought, the removing defendant must prove by a preponderance of the evidence that the amount in controversy requirement has been met." Id. at 683 (citing Sanchez v. Monumental Life Ins. Co., 102 F.3d 398, 404 (9th Cir. 1996)).

"In actions seeking declaratory or injunctive relief, it is well established that the amount in controversy is measured by the value of the object of the litigation.'" Cohn v. Petsmart, Inc., 281 F.3d 837, 840 (9th Cir. 2002) (quoting Hunt v. Wash. State Apple Adver. Comm'n, 432 U.S. 333, 347-48 (1977)). The Ninth Circuit has phrased this rule in different ways: the amount in controversy is "the value of the right to be protected or the extent of the injury to be prevented, " Jackson v. Am. Bar Ass'n, 538 F.2d 829, 831 (9th Cir. 1976), or "the value of the particular and limited thing sought to be accomplished by the action, " Ridder Bros. v. Blethen, 142 F.2d 395, 399 (9th Cir. 1944). This value may be measured from the perspective of either party. Ridder Bros., 142 F.2d at 399.

The amount in controversy must be reducible to a monetary amount. Whittemore v. Farrington, 234 F.2d 221, 225 (9th Cir. 1956) (citing Barry v. Mercein, 46 U.S. 103, 120 (1847)). Diversity jurisdiction does not exist where the amount in controversy is speculative or incapable of being translated into monetary terms. See, e.g., Smith v. Adams, 130 U.S. 167, 176 (1889); Macken ex rel. Macken v. Jensen, 333 F.3d 797, 799-801 (7th Cir. 2003); Jackson, 538 F.2d at 831. Furthermore, since there is a "strong presumption" against removal, "jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992).

III. Analysis.

As noted, Plaintiffs' only request for relief is a court-ordered inspection of the records and books of DeGreen Partners, LP. The question is whether this request is reducible to a monetary statement. The Court concludes that it is not. From Plaintiffs' perspective, the value of inspecting DeGreen Partners' records is simply unknown. If Plaintiffs find no evidence of wrongdoing in the records, this action may end with the inspection. If Plaintiffs find evidence of wrongdoing, the inspection could result in civil claims that are worth more than $75, 000. But deciding whether Plaintiffs will find evidence supporting civil claims, and how much those claims might be worth, is a speculative exercise. As another court explained, the "liberal standard for jurisdictional pleading is not a license for conjecture." Morrison v. Allstate Indem. Co., 228 F.3d 1255, 1268 (11th Cir. 2000).

Ample precedent supports the Court's conclusion. Addressing the question presented in this case, courts have found that the "right to inspect corporate documents... cannot be assigned a monetary value[.]" Davis v. DCB Fin. Corp., 259 F.Supp.2d 664, 676 (S.D. Ohio 2003); see also Baldwin v. Bader, No. 08-CV-431-P-H, 2009 WL 1585130, at *11 (D. Me. June 4, 2009); No-Burn, Inc. v. Murati, No. 5:08-CV-1990, 2008 WL 5725679, at *4 (N.D. Ohio Sept. 25, 2008) ("It is impossible to place a dollar value on the benefit, if any, [Plaintiff] would derive from obtaining access to [Defendant's] corporate records."); Greenough v. Independence Lead Mines Co., 45 F.2d 659, 660 (D. Idaho 1930).

In circumstances similar to this case, appellate courts have also found the amount in controversy requirement unsatisfied. For example, there was no amount in controversy in an action for an "accounting of all amounts by which the [fund] has been funded and reduced, " DiTolla v. Doral Dental IPA of New York, 469 F.3d 271, 272 (2d Cir. 2006), and in an action to obtain access to the text and amendments of a trust instrument, Macken, 333 F.3d at 799-801. In these cases, the value of the underlying fund ( DiTolla ) or trust ( Macken ) exceeded the requisite amount, but the courts found that the requested relief did not place the ...

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