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Howard v. Pearl Interactive Network Inc.

United States District Court, E.D. Kentucky, Central Division, Lexington

July 12, 2018

JASON HOWARD, Plaintiff,



         In this Opinion, the Court (1) evaluates the basis for (and ultimately assures itself of the existence of) diversity jurisdiction in this case, and (2) dismisses Defendant Scully under Rule 4(m). The topics arise from the issuance of two show-cause orders, see DE ##22 & 34, and an order providing notice to Plaintiff of the potential 4(m) dismissal, see DE #33. The Court has evaluated full record, including the parties' briefing on the issues. See DE ##23, 24, 35, 36, & 37. The matters are ripe for consideration.


         In August 2016, Jason Howard sued Pearl Interactive Network, Inc. (Pearl), Robert (Todd) Scully, Merry Korn, and Diane Schrimpf in Clark Circuit Court. See DE #1-1 (Complaint). Within a month, Pearl, Korn, and Schrimpf (collectively, Removing Defendants) removed the case to this court, putatively premised on the diversity of the parties. See DE #1 (Notice of Removal); see also DE #4 (Answer).[1] Judge Caldwell ultimately instituted a case schedule, DE #13 (Scheduling Order), and the case proceeded on a normal course of litigation. The Complaint centers on Howard's allegedly tumultuous employment relationship with Pearl (including, at least initially, accusations of discrimination, harassment, intentional infliction of emotional distress, retaliation, and breach of contract), which came to a head during the period between September 2014 and December 2015. Todd Scully, Howard's “former supervisor, ” DE #23, at 1, though enduring as a named defendant, has never appeared or participated in the case.

         On the mid-discovery call, in September 2017, the undersigned (then the case's referred magistrate judge) raised some “doubts” concerning the existence of diversity jurisdiction. See DE #22, at 1. Specifically, as relevant here, the Court flagged the issue that considering Scully's citizenship “would destroy complete diversity, ” id. at 2-3, and ordered briefing on any relevant topic. The parties complied, DE ##23 & 24, and Judge Caldwell's case transfer, DE #31, sent the issues to the undersigned. Post-transfer, the Court identified yet another basis to doubt the existence of subject-matter jurisdiction and, again, ordered briefing. DE #34. The parties, again, complied. DE ##35 & 37.

         II. LAW & ANALYSIS

         This scenario necessitates consideration of a number of related or interlocking jurisdiction-related concepts. The ultimate question is whether the Court has diversity jurisdiction in this case.

         A. Background Legal Principles

         District courts “have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between, ” as relevant here, “citizens of different States.” 28 U.S.C. § 1332(a)(1); see also U.S. Const. Art. III § 2 (“The judicial power shall extend . . . to controversies . . . between citizens of different states[.]”). Courts refer to this concept as “diversity jurisdiction, ” a form of subject-matter jurisdiction in a case. See Grupo Dataflux v. Atlas Global Grp., LP, 124 S.Ct. 1920, 1925-26 (2004).

         Exercising diversity jurisdiction “require[s] complete diversity of citizenship, ” i.e., “the citizenship of each plaintiff” must be “diverse from the citizenship of each defendant.” Caterpillar Inc. v. Lewis, 117 S.Ct. 467, 472 (1996). Thus, phrased another way, for diversity to exist, “no plaintiff” can be “a citizen of the same state as any defendant.” V & M Star, LP v. Centimark Corp., 596 F.3d 354, 355 (6th Cir. 2010). “[C]omplete diversity, ” though, “is not a constitutional requirement.” Owen Equip. & Erecting Co. v. Kroger, 98 S.Ct. 2396, 2402 n.13 (1978).

         Importantly, “Federal courts are courts of limited jurisdiction, ” and “the burden of establishing” a jurisdictional basis “rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 114 S.Ct. 1673, 1675 (1994). Based on these foundational principles, the Court has an omnipresent “duty to consider [its] subject matter jurisdiction in regard to every case and may raise the issue sua sponte.” Answers in Genesis of Ky., Inc. v. Creation Ministries Int'l, Ltd., 556 F.3d 459, 465 (6th Cir. 2009). Indeed, that is just what the Court did in DE ##22 & 34 and continues to do in this Opinion. See also Hertz Corp. v. Friend, 130 S.Ct. 1181, 1193 (2010) (“Courts have an independent obligation to determine whether subject-matter jurisdiction exists, even when no party challenges it.”). The Court resolves “all doubts” concerning the existence of subject-matter jurisdiction “against removal.” Her Majesty The Queen in Right of the Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th Cir. 1989); Fenger v. Idexx Labs., Inc., 194 F.Supp.2d 601, 602-03 (E.D. Ky. 2002) (“Where there is doubt as to federal jurisdiction, the doubt should be construed in favor of remanding the case to the State court[.]”).

         B. Pearl is a citizen only of Ohio.

         The Court first addresses Pearl's citizenship. The parties initially made conflicting citizenship allegations as to Pearl. Compare DE #1, at ¶ 7 (Pearl alleging Ohio citizenship), and DE #4, at ¶ 2 (same), with DE #1-1, at ¶ 2 (Howard alleging facts that would establish Kentucky and Ohio citizenships). Neither party presented proof on the issue. If Pearl, in fact, has Kentucky citizenship, it would not be diverse from Howard, see DE #22, at 1, leaving the Court without subject-matter jurisdiction.

         “A defendant removing a case has the burden of proving the diversity jurisdiction requirements.” Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000). When “allegations of jurisdictional facts are challenged, ” the party invoking the Court's jurisdiction “bears the burden of supporting the allegations by competent proof.” Janzen v. Goos, 302 F.2d 421, 424 (8th Cir. 1962). Here, conflicting record allegations suggested an equal likelihood that Pearl is, or is not, a citizen of Kentucky. See, e.g., Walden v. Broce Constr. Co., 357 F.2d 242, 244 (10th Cir. 1966) (repeating prior holding that “an allegation of diversity of citizenship alone, when challenged, is not enough”); cf. Citizens Bank v. Plasticware, LLC, 830 F.Supp.2d 321, 325 (E.D. Ky. 2011) (holding that Plasticware “prove[d] its citizenship lies outside of Kentucky by a preponderance” when Citizens Bank “did not contradict” the defense's allegations).

         In the briefing the show-cause order prompted, Pearl contended, per a specific analysis, that it is a citizen only of Ohio. DE #35, at 2-3. In support, Pearl attached an affidavit of its CEO, a certificate of good standing from the Ohio Secretary of State, and various other documents. DE #35-1, at 1-6. These items of proof do, indeed, support the claim that Pearl possesses solely Ohio citizenship. Howard, assessing the same evidentiary offerings, concedes the point and no longer claims Pearl has Kentucky citizenship. See DE #37, at 1. Accordingly, per Pearl's (now) unchallenged assertion of solely Ohio citizenship and the solid proof Pearl tendered, the Court concludes, under the applicable standard, that Pearl is a citizen only of Ohio.

         C. The Court must consider the citizenship of Scully, an unserved and nonparticipating defendant, ...

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