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Estate of Ruffu v. Collier

March 20, 2008

THE ESTATE OF WILLIAM RUFFU, DECEASED, AND DERIVATIVELY ON BEHALF OF JENSEN BEACH MARINE CENTER, INC. PLAINTIFF,
v.
CLIFF COLLIER, JR., I/D/B/A/ RIVERWALK MARINE SALES AND SERVICE AND VIVIAN COLLIER DEFENDANTS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

Before the Court is defendants' Cliff Collier, Jr. and Vivian Collier (the "Colliers") motion to dismiss plaintiff's amended complaint. Because we lack subject matter jurisdiction in this matter, the Colliers' motion is granted.

I. BACKGROUND

Plaintiff, William Ruffu, filed a derivative action in federal court on August 1, 2006 alleging that this Court had jurisdiction pursuant to 28 U.S.C. § 1332 (diversity of citizenship). Defendants filed a motion to dismiss on the grounds that plaintiff's complaint did not comply with Fed.R.Civ.P. 23.1, and because this Court could not exercise personal jurisdiction over the Colliers. Alternatively, the Colliers argued that this case should be dismissed under the doctrine of forum non conveniens.

Before reaching the merits of defendants' motion to dismiss, the Court held a hearing raising sua sponte the issue of subject matter jurisdiction because it appeared that complete diversity among the parties was lacking. Plaintiff plead that he was a citizen of New Jersey; that defendants, Cliff Collier, Jr. and his wife, Vivian Collier, were citizens of Florida; and defendant Jensen Beach Marine Center, Inc. ("Jensen Beach") was a New Jersey corporation with a principal place of business in Florida, thereby making Jensen Beach a citizen of both New Jersey and Florida. See 28 U.S.C. § 1332(c)(1).

Upon request by the Court, the parties submitted supplemental briefing on the issue of jurisdiction, as well as additional documentation concerning the status of Jensen Beach as an active corporation. The Court held another hearing on August 16, 2007, after consideration of the additional submissions and found that as plead in the complaint complete diversity did not exist between the plaintiff, William Ruffu, and the defendant, Jensen Beach, who were both citizens of New Jersey. The Court also found that Jensen Beach was not an active corporation at the time of the filing of the complaint and, therefore a citizen only of New Jersey, its place of incorporation. See Midlantic Nat'l Bank v. E.F. Hansen, Jr., 48 F.3d 693, 696 (3d Cir. 1995) (finding that a corporation that is inactive at the time of filing the complaint does not have a principal place of business), cert denied Hansen v. Midlantic Nat. Bank, 515 U.S. 1184 (1995). By Order entered the same day, plaintiff's complaint was dismissed for lack of subject matter jurisdiction with leave to file an amended complaint within thirty days.

Plaintiff filed an amended complaint substituting the decedent's estate as plaintiff (William Ruffu died shortly after the original complaint was filed) and repositioning Jensen Beach as a plaintiff. Plaintiff acknowledged that Jensen Beach ceased operations prior to the filing of the complaint so that it did not have a principal place of business thus making it a citizen of New Jersey only where it was incorporated. Plaintiff maintains that complete diversity exists between the plaintiffs who are New Jersey citizens and the defendants, Mr. and Mrs. Collier, who are Florida citizens.

The Colliers filed a motion to dismiss plaintiff's amended complaint. Because we find that Jensen Beach is improperly aligned as a plaintiff and should be aligned as a defendant, we grant defendants' motion on the ground that this Court lacks subject matter jurisdiction because complete diversity between the parties is lacking.

II. DISCUSSION

A. Standard for 12(b)(1) Motion to Dismiss for Lack of Subject Matter Jurisdiction

If the subject matter jurisdiction of the Court is challenged, the plaintiff bears the burden of persuasion. See Hedges v. U.S., 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991). In addition, "... the district court may not presume the truthfulness of plaintiff's allegations, but rather must 'evaluat[e] for itself the merits of [the] jurisdictional claims.'" Id. (citing Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)).

Here, we must determine whether Jensen Beach was properly named as a plaintiff in this suit. If Jensen Beach should be aligned as a defendant, then complete diversity is destroyed and this Court cannot exercise subject matter jurisdiction.

B. Party Alignment of Jensen Beach

In their motion to dismiss, defendants argue that in a derivative suit such as this, Jensen Beach must be aligned as a defendant. Plaintiff disagrees and argues that the general rule is that the corporation ...


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