can ever be used to hold a successor liable for breach of contract when the previous us or the party originator of the contract was found not liable for the contract i think is important in a tough argument don't you  think i don't think i think it's important to keep in mind that this is a narrow issue and it applies to the facts of this case and similar contracts that this isn't a broad pronouncement that this can always occur but what we have here under this type of contract is one party to the contract performs and return obligation usually payment is contingent on some future event so we have performance by stalwart in this case and  payment as is triggered by closing on a capital raise and then after stall reforms or after the one part of the contract performs but while that future event is still contingent on the other party simply forms a new al c and they do it for the very purpose of taking the plaintiff's performance and putting it under a new l c so that when the contingent event occurs it occurs under a new name under a new hat but isn't washington washington laws not all of the success or liability cases i would argue except for dahmer vs wheeler and jones were just francis none of them addressed this issue they just cite the elements of the case but if you look at really all the cases what they're really saying is we're not going to lay down bright line rules because we're not going to allow people to abuse the corporate form to escape an obligation or a liability and that if you say you always have to prove a breach of contract for the first party to the contract before you can even can sit or whether its successor is the same entity or implicitly assume the obligation well so would you tell me the washington case that you think most strongly support your argument that there can be successor lab bill of the when the predecessor was not liable what's the strong as washington case in your favor i think it's the dumber case first dollar versus off because in that case it was a breach of contract case and that's the question dan if it's a breach of contract case and that's saying that the predecessor was liable the predecessor was not found liable in that case the presence or was dismissed from the was there a breach of contract found though with no he could well against the successor we have a contract that was for use of an invention and the contingent future event was if this is still being used for years into the up the company forms a new entity to carry on the business of the company and they continue to use the invention and when they get sued the court held that first they dismissed the original contract and party from the case and they held that the successor was liable because in actuality it was the what considered under the law or under equitable principles one company it was one company and the two so the court did in that case exactly what the district court said can't ever be done and that is in iraq and i want you just for a second because i want to take a giant step backward to the jurisdictional question this case was brought in federal court based on diversity jurisdiction and there are a number of elsie's involved and the original pleadings made no reference to the members was your client's burden to show that there was complete diversity of citizenship and it's come to the court's attention since then and i know we're long into this and it might seem frustrating to be back at square one but at least i kept real estate fund to has been identified as having no member as it  we can't tell from the record before us that it was diversity jurisdiction in the trial court don't we send this back to make a finding i don't think jurisdiction was challenge and in fairness to the trial court i don't think this was raised but this sounds a whole lot like my appeal so the you do have an opportunity to try to make the showing on appeal but it's just christiansand we can't find that's but if there's something in the record that would enable us to say that there's diversity jurisdiction we can look to that so you're telling us to conclusively decide determine that there was diversity jurisdiction and i'm and i'm delighted to be corrected if i'm wrong because this is unfortunate but just to understand it's not that i'm not looking at that evidence i don't think i can get there from what i've got so i think it depends on which  hasn't been briefed but if you look at the definition of an l c out of the washing the liability company it's and state formed under this statute with one or more members but at least one member there has to be at least if there's not a member though that they entered well i guess the issue is if there's no washington if there's no member the question is not even considered an l l see you soon l see as as the contracting party you can have a was a member well chris christiansen's testimony at trial was that it was probably made you think that that article had to include let's just back up it was your burden right you have to establish is this and i want to be clear is that the conclusion is that it has no members than the case gets dismissed and we go to state court and we start over because they're not going to build a correct or you know if it gets remain well there's a difference between not being able to determine whether diversity exist or not because the evidence wasn't we don't have it and there is i wasn't at the trial court i know what you've got what you've given us here there's a difference and and as judge johnson indicated as far as we can tell this wasn't raised so that the district court had an opportunity to really take a look at it so maybe it's in their i'm not suggesting that i think we have what we need to determine there was not diversity jurisdiction i'm saying that it looks to me like we can't tell their wives very well my suggestion would be to follow the case law i think there's one in the first circuit and the eleventh circuit where they essentially ask the parties to submit declarations as to the citizenship and then give that would be asking them to do it and then give the opportunity to respond to that the difficulty with that is then you turn this into a fact finding body and that's really not our function that's what judge kristen was was talking about understood that there is some sort of dispute that it would go back for a fact finding but i  able to prove that as the other entities though if there is just missing evidence then they should be able to submit that was released on it back to the district court for the district court to sort all of this out well that would be the other solution which understood and i think they've made an effort has made an effort to prove the citizenship of each of these entities i truly believe there was just sort of an unfortunate comment by mr christiansen both at trial and later where they're trying to prove they're trying to under the law as i have read it since you raised that the complaint does not allege sufficient facts as your section ok but i think there's also case law that even on appeal you can fix that  may please a court morning to the panel my name is james williams and i have the honor of being before you my counsel my co counsel reka connelly we're going to divide our time with the court's permission i will argue the underlying appeal in this column will deal with the questions of subject matter jurisdiction that have been raised by the court there are three reasons why this case should be affirmed on appeal first reason is the appellant is asking this court to do something that no court in washington or the next circuit has done there's no case where you have a jury rendering a verdict that there is no liability for any of that if indeed and then you have a court subsequently saying it is going to impose excess reliability there's absolutely no case in washington there's no case we found anywhere the nice circuit there's no case we've been able to find anywhere where you have a jury rendering a verdict saying that there is no there is no jury verdict and the democrats saying that there is no liability in fact it is as i think one of you said during his oral argument there is a finding of liability in fact of ten thousand five hundred dollars what does that mean that means you have a judgment a judgment debtor and a judgment creditor and the ability to use this doctrine called success or liability the whole reason it's there is if you don't have an institution or an energy that is capable of paying something that is owed and that something that is o has to be created as a result of a judgement a liability based on common law claims that have been proven either to or trier of fact as a judge or to a jury in the dumber case it's even better for us because in that case they had a direct assignment from the predecessor company to the successor we do not have that here there's nothing in common with dahmer in this case the second reason why this case ought to be affirmed is this jury instruction i have in my hand this is why we're here this is instruction number fifteen from judge zilly talking about the law on success or liability and we're here to tell you it's rock solid and rooted in washington law we know that because they've not cited one case anywhere that undermines the law as stated by judge zilly in this ward not one case challenging it not one case contradicting it not one case qualifying the articulation of what success or liability law is in washington and how it should be applied the third reason why this case should be a firm is because everything you've heard this morning everything you've been reading in these briefs is essentially a real it occasion of the facts and as  has said before this is not a fact finding tribunal the jury in this case had four days of hearing everything you saw in that brief and a lot of what you heard this morning four full days of all the things you can say nancy about our clients mr christensen about the shell game about the fraud four full days of testimony in that jury was not in doubt those twelve washingtonians rendered their judgment on this case in less than two hours and by judge zillah's order assumed by i can't really state for him to that's it there are no other parties to this contract there is nobody else to be brought in or parachuted in as a party to this contract in fact number two the jury unanimously determined that there was no breach of contract by any defendant under any formulation of liability they came up with just really gave him a wide latitude to come up with every conceivable way to buy into a breach of contract theory circumvention bad faith you name it they heard it and they decided no unanimously the last point factually that we think is important there was no liability found against chris christianson or i kept income fund to under any protection effect they said no the liability to these entities now want to shift focus and talk a little bit about the law the law i want to make sure i also reserves in time for my council so why i actually would like to get back to the act because it's a threshold issue and a very strong argument on that yeah i might work hard i'm just speaking for myself but i'm concerned about diversity touristic now i'm concerned about reconciling the statement you made in your supplemental brief where you admitted that i can't really state fund to now i had no members ok well and i know to take your time away though so if there's something that you want to leave us with i want to leave it up with a few observations i'm not going to go through the case law he's said the murs his best case and i've told you why doesn't make sense to even follow dummer it's the point is this judge zilly made some factual findings in the record that we believe are entitled to deference on a nice circuit authority with a district court has had a chance to evaluate the evidence before the testimony before him to render findings of fact those findings are entitled to deference by this court unless there is a clear air a mistake and what i'm specifically focused on is a finding of fact related to ikea income for him to where he said that there was no assumption of any kind of responsibility or the contract there's not a piece of evidence in this record to suggest a judge zilly got it wrong as made a fact all the evidence says he got it absolutely right and we would ask this court to defer to judge zillah's judgement with respect to all of those findings of fact because we think they are spot on he's right on the facts he's right on the law lessing will leave you with is this as we said in the opening of this brief this case begins and starts with a man in an entity who want something for nothing he didn't do the work to get a free the jury saw through it very quickly in regard to judgment in our favor in less than two hours with asking this court to honor the jury's verdict and for thank you its order i think it's important to keep in mind that i think the concern is that there is complete diversity between the parties and there's no real dispute that stalwart is a citizen of new jersey and there is nothing in the record to indicate that any of the icap and cities no matter how many levels you go down at any point shared residency well originally there was nothing in the record to indicate where any of these members were residents of because the pleadings were based on the wrong level of analysis talked about where these were formed not the members now and subsequently have submitted a lot of information about the members of i kept income fund to and frankly i'm satisfied that the information you've provided for that entity is sufficient at this point i am primarily concerned though about i kept real estate fun to and your clients admission that it had no members establish that here there was no l l c agreement that was ever executed so there's that mean that the l s e had no members and therefore was stateless well no i think you there are two different questions your honor just posed is can you have a member appointed to an l l c under washington law without an l l c agreement and now that having looked back at the r c w s in the uniform limited liability company act i think there is some wiggle room to be able to find that a member was appointed because it's reflected in the records of the company and that's an r c w twenty five fifteen one sixteen but that is a question of fact as this panel's already raised that i don't think there's enough  the record before us to to reach that conclusion but i think there are ways that you can get a member appointed but your second question and i think the morrison what happens when the l l c is a member lists and i  don't think that it is a foregone conclusion that a member list l l c must also be stateless for one there's no controlling authority on that i think the all we've been able to find are three district court opinions two of them really just cite back to this submit that's the wrong result when you look at the supreme court case law that says what happens to a stateless individual and the very purpose for diversity jurisdiction well i mean isn't the rule if you're state ss as an individual you can establish diversity jurisdiction yes but you're absolutely right your honor but the what they found there is that in in cases like the newman green versus  saluting case that looked at what happens when an individual status the the problem a court face there is that that individual was a u s citizen but lived abroad and there was nothing they could find that hide that individual to any one state so that they could say they are a citizen of the state we have a very different factual situation here where there is a lot of evidence that i kept real estate fund to is a citizen of washington is that if i'm to go fact then we would need to say when you talk about this evidence  of citizenship yeah who's going to make that finding in cases like like newman green and in other cases where diverse jurisdiction has come up after sailed under the radar unfortunately at the district court level the appellate court has taken the liberty to look at the record and i think make the necessary findings just and i think it's been a for judicial economy rather than sending it certain degree we can do that but we can't take evidence and i think that we're coming  that if you're asking us to to make that find what would be your response to a decision from the piano remain in this matter to the district court and retaining jurisdiction in the event the district court determined that there admitted that the l l c was member of us and want us i think to consider that as if it were like a corporation and look at the state where it was formed to determine its citizen ship but that sort of defeats the whole statutory analysis that an l l c is not as a dent where its form it is or is it is a citizen ship of its members if it has no members it can't be just default to being a citizen of the state it was formed in that turns jurisdictional requirements on its head it you're making an l l c a corporation then and it's not i would respectfully disagree that it turns the jurisdictional now says on its head because i think if we go back the purpose for the diversity jurisdiction requirement is to provide a federal forum for important disputes were state courts might favor or or be perceived disfavoring home state litigants and this court has has warned against having legal technicalities and legal fictions allowing a local business engaged in purely local institution gaijin local business and in many cases locally owned securing for itself diversity jurisdiction because of a technical legal  felt forgive me that's the part we know so and we're willing to look at the facts the evidence you've got in the record it sounds like you think that if we swept it up we might have enough but to get to the legal conclusion you want to get to can you tell us just what it what it what do you think you've got in that record and i'll  evidence we have that's trigger formation shows that it was formed under washington law the registered agent a washing company principal place of business was in washington the manager was you know in washington state there is  the private placement agreement for that company as well that shows that it was based here in washington that it and you know to the extent it ever meant to do any business it was going to be based here in western washington to sufficient evidence from which we could find support for the notion that there was a member oh i see i'm sorry did i misunderstand yes i'm sorry i think that what i meant to say that i think there's enough evidence here to show that instead of being state if it does but i mean this is not a situation i think it's a highly unusual situation that is sort of like trying to fit a square peg into a round hole and i answer is were a court a limited jurisdiction and if you can't fit in our round hole your square peg should have been in state court perhaps but i think it would be very hard to argue that that real estate fun too would be considered truly no member of any state such that the concerns about it having a hometown  i think it's i think goes back to whether you can have an l l c member appointed without an l l c agreement well the problem is if we send it if we decide to remain a it to the district court if there is a concession that there are no members we may as well just make the legal ruling now if there's some evidence that can be presented to the district court in perhaps we could remain and for the district court to take that evidence but if you if your representation now is that there are no members then that makes it much easier for us and so just related lee i thought you said that under r c w twenty five fifteen whatever it is one sixteen that th christianson and and jim about who was the likely owner and operator if so then i would just like to repeat and ask you to answer that question are you standing by the concession what's your position on whether they're not whether or not there was a member i think it's unclear based on the the factual record we have well i mean if it's your client i mean you've represented to the court in your supplemental briefing there were no members probably as a trial talking about a completely different issue don't help me either there were there were members of this l l c or there weren't and i think it's been your position and you really can't awful on it now is there were no members yes there was the position we've taken consistently unlike iraq atory responses and before the district court is that there is no l l c agreement and therefore there are no members right  roll quick if there is no members then the case has to be dismissed because it can there's no reason to remain and because the case law is legion across the country that a stateless and as he destroys jurisdiction there's numerous cases out there in terms of partnerships where one partner is stateless for whatever reason and there and i would that same case law would apply here but if the court is going to consider the merits i want to just briefly touch on the merits of this and you know referring to back to the dahmer case if you look at it i kept a brief that actually essentially admitted that were correct on the merits because they say that under dahmer vs wheeler the court resolve the case by no the original entity was dismissed from the case there was no finding of liability the original entity was no longer using the license and therefore could not have been found liable they resolved it by fine at the successor and the processor were the same company and this braises the issue when you have performance by one party like a broker and then payment obligation is contingent on some future event and a new entity is formed for the very purpose of preventing the original company from becoming liable for already at this language mean in dumber on page three eighty two with further links that september fifteenth one thousand thirty three the company assigned then transferred all of its rights under the contract to defendant sales corporation which company then became liable to the plaintiffs what's that find in the black bill of the well that's an allegation from the complaint right that what happened in the case actually is it's not entirely clear from the record but it wasn't the final decision of the case was based on alter ego and the fact that these were two companies will alter egos no different than successor liability it's they both neither one of them is a cause of action it requires an underlying cause of action like breach of contract and the question is do you determine are these alter egos are these the same entities before we determine whether that breach the contract or do we look just the first one and if you're only going to look at the first one it allows people to form a new entity for the very purpose of preventing a breach from occurring under the contracting entity and then the breach occurs under a successor entity does it matter to your analysis that the district judge found that these were separate these entities were doing separate things that they were not the same they had substantially different investment vehicles that they were pursuing so i don't think that that all he was referring to was that they were selling debentures which is that they were raising that equity vs so in equity or shares it doesn't they were all pursuing the same thing we have the private placement memorandum for each and see which describes the business model is exactly the same but that was finding of the fact that the court meant that they were separate they were different entities and we bound by that i don't believe that that was the court's find the court essentially said that these entities were for the second and he was formed for the very purpose of escaping liability and that they had admitted during the case you know obvious or answers that there was no legitimate difference between these two entities helsel what's your response to opposing counsel's reliance on the jury instruction that described its assess the liability and the jury subsequent determination of no liability what's your response to that the jury instructions on on success or liability are or what we've  air and they were advisory only the district court reserved ruling on and this all of this was briefed to the district court in connection with entering the fine fashion conclusions of law with the eat so you take issue with the jury instruction is not being consistent with washington law correct jury instruction and the court found that we would have to hold prove that i kept real estate fund to breach the contract before its successor could be found how are we supposed to prove that when a new entity was formed for the very purpose of taking the benefits of stalwart performance and putting that under a new entity and raising capital into that new entity so the original and she says to the jury hey this contract requires us to pay only if we raise capital and we never raise capital those guys did but but if they were that was formed for the very purpose of doing that we understand your argument counsel thank you thank you both counsel for your help your argument all three counsel for you