United States District Court, E.D. Virginia, Richmond Division
Hannah Lauck, United States District Judge
matter comes before the Court on Plaintiffs Littlestone LC
("Littlestone") and Chadwick Development LLC's
("Chadwick, " and collectively with Littlestone,
"Plaintiffs") Motion to Remand. (ECF No. 7.)
Defendants Robert J. Chauvin and Chauvin LLC (collectively
with Chauvin, "Defendants") responded, and
Plaintiffs replied. (ECF Nos. 14, 15.) The matter is ripe for
disposition. The Court dispenses with oral argument because
the materials before it adequately present the facts and
legal contentions, and argument would not aid the decisional
process. For the reasons that follow, the Court will grant
Plaintiffs' Motion to Remand.
Factual and Procedural Background
Summary of Allegations in the Complaint
two-count Complaint arises from events resulting in two
failed real estate developments. Count I sets forth a breach
of contract claim in which Littlestone alleges that it formed
Amelia Wayside, LLC ("Amelia Wayside") with Chauvin
LLC "to acquire three parcels of land in Amelia County,
Virginia for mixed use development." (Not. Removal Ex. A
"Complaint" ¶¶ 6-7, ECF No. 1-1.)
Plaintiffs allege that Chauvin LLC's actions caused the
development project to fail. Plaintiffs seek $7, 500, 000.00
in damages for Count I. Count II sets forth a breach of
fiduciary duty and duty of loyalty claim in which Chadwick
alleges that it formed Amelia Village, LLC ("Amelia
Village") with Chauvin LLC "to acquire land in
Amelia County, Virginia for mixed use development."
(Id. ¶ 15.) Plaintiffs allege that Chauvin LLC
and Chauvin's actions also caused this project to fail.
Plaintiffs seek $12, 500, 000.00 in damages for Count II.
Chadwick, a member of Amelia Village, brings Count II
derivatively on behalf of Amelia Village. The outcome of the
instant Motion to Remand depends solely on Count II, the
discussing Amelia Village, Plaintiffs explain that
"[p]er the Operating Agreement, Robert J. Chauvin was
the sole manager of Amelia Village, with exclusive authority
to sell property, refinance loans, approve land development
plans, secure permits for development and building and all
other actions necessary to achieve the purposes of Amelia
Village." (Id. ¶ 18.) Plaintiffs allege
that "[i]n his capacity as Manger, Mr. Chauvin
negligently engaged in the same behavior set out in Paragraph
hereinabove, and Chauvin [LLC] did not loan sufficient funds
to Amelia Village to carry the mortgage obligation nor to
acquire the property." (Id. ¶ 19.)
"As a result of the delays, the failure/refusal to make
sufficient loans to Amelia Village, and the failure/refusal
to acquire the property, the project failed."
(Id. ¶ 20.)
aver that "[t]hroughout this time, and with knowledge
that [Chadwick] would eventually be unable to continue
with the debt service on the property ... Mr. Chauvin
(unbeknownst to Mr. Soden) was engaged in discussions ... to
purchase the property for himself or for his entity at a
foreclosure auction." (Id. ¶ 21.)
Plaintiffs maintain that "[i]t became Mr. Chauvin's
intention that [Chadwick] default under [the] Deed of Trust
Note, to allow Mr. Chauvin or his entity to purchase the
property at a discounted price upon foreclosure."
(Id. ¶ 22.) Plaintiffs assert that "Mr.
Chauvin's actions and omissions as Manager of Amelia
Village were committed fraudulently, in bad faith, and/or
constituted gross negligence." (Id. ¶ 30.)
originally filed their Complaint in the Circuit Court for the
County of Amelia (the "Amelia Circuit Court").
Defendants removed the action to this Court citing, in
relevant part, 28 U.S.C. § 1441,  and relying on the
Court's exercise of diversity jurisdiction. Four days
after it removed the action to this Court, Defendants filed a
motion to dismiss pursuant to Rule 12(b)(6). (ECF No.5.)
filed the Motion to Remand and a motion to dismiss pursuant
to Rule 12(b)(1), (ECF No. 9). In the Motion to Remand,
Plaintiffs argue that complete diversity does not exist in
this case because Amelia Village, on whose behalf Chadwick
brings Count II, constitutes a citizen of both New York and
Virginia, which destroys diversity. Defendants responded in
opposition and Plaintiffs replied.
Applicable Legal Standard: Removal and Remand
28 U.S.C. § 1447(c), "[i]f at any time before final
judgment it appears that the district court lacks subject
matter jurisdiction, the case shall be remanded." 28
U.S.C. § 1447(c). "The party seeking removal bears
the initial burden of establishing federal
jurisdiction." Abraham v. Cracker Barrel Old Country
Store, Inc., No. 3:1 lcvl82, 2011 WL 1790168, at*1 (E.D.
Va. May 9, 2011) (citing Mulcahey v. Columbia Organic
Chem. Co., 29 F.3d 148, 151 (4th Cir. 1994)). No.
presumption favoring the existence of federal subject matter
jurisdiction exists because federal courts have limited, not
general, jurisdiction. Id. (citing Pinkley Inc.
v. City of Frederick, 191 F.3d 394, 399 (4th Cir.
1999)). Courts must construe removal jurisdiction strictly.
Id. (citing Mulcahey, 29 F.3d at 151).
"'If federal jurisdiction is doubtful, a remand is
necessary.'" Id. (quoting
Mulcahey, 29 F.3d at 151). "[T]he parties'
characterization of themselves or their claims is not
determinative for federal jurisdiction purposes."
Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d
114, 118 (4th Cir. 2004) (quoting Roche v. Lincoln Prop.
Co., 373 F.3d 610, 615-16 (4th Cir. 2004)).
defendant may remove a civil action initially filed in state
court if the plaintiff could have originally brought the
action in federal court. Abraham, 2011 WL 1790168,
at *2 (citing Yarnevic v. Brink's Inc., 102 F.3d
753, 754 (4th Cir. 1996)); see 28 U.S.C. §
1441(a). A federal district court has diversity jurisdiction
over "all civil actions where the matter in controversy
exceeds ... $75, 000 ... and is between ... [c]itizens of
different states." 28 U.S.C. § 1332(a)(1). Federal
diversity jurisdiction requires complete diversity of
citizenship. Abraham, 2011 WL 1790168 at *2 (citing
Carden v. Arkoma Assocs., 494 U.S. 185, 187 (1990));
see also 28 U.S.C. § 1332(a)(1). "[T]he
'citizenship of each plaintiff [must be] diverse from the
citizenship of each defendant.'" Abraham,
2011 WL 1790168, at *2 (quoting Caterpillar Inc. v.
Lewis, 519 U.S. 61, 68 (1996) (second alteration in
analyzing whether complete diversity exists in a case in
which a party asserts a derivative claim, the Court must
consider the citizenship of the entity on whose behalf the
party asserts the derivative claim. See Gen. Tech.
Applications, Inc., 388 F.3d at 121 n.3 (noting that
"[d]iversity jurisdiction is also judged by the real
parties in interest" and that "the legal rights
asserted here belong to" the entity on whose behalf the
party asserted a derivative claim (citations omitted));
Racetime Invs., LLC v. Moser, No. 3:12cv860, 2013 WL
987834, at *2-*3 (E.D. Va. Mar. 8, 2013) (remanding the case
to state court because "[i]n a derivative suit, 'the
claim pressed by the stockholder against directors or third
parties is not his own but the corporation's.'"
The Court Will Remand the Action Because the Citizenship
of Amelia Village Destroys Diversity
entity on whose behalf a party asserts a derivative claim,
constitutes the "real part[y] in interest" and its
citizenship must be considered when determining whether
complete diversity exists. See Gen. Tech. Applications,
Inc., 388 F.3d at 121 n. 3 (citing Ross v.
Bernhardt, 396 U.S. 531, 538 (1970)). Because Chadwick
brings Count II of the Complaint-a claim for breach of
fiduciary duty and duty of loyalty-derivatively on behalf of
Amelia Village, the Court must consider the citizenship of
Amelia Village when analyzing diversity of
citizenship. Because Amelia Village is both a
citizen of New York and Virginia, complete diversity does not
exist and the Court lacks subject matter jurisdiction over
The Court Must Consider Amelia ...