Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_24-cv-01192/USCOURTS-caed-1_24-cv-01192-0/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1332 Diversity-Breach of Fiduciary Duty

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

MARK MEIER, et al.,

Plaintiffs,

v.

LARRY E. DAVIS, et al.,

Defendants.

Case No. 1:24-cv-01192-KES-SKO

ORDER TO SHOW CAUSE RE: SUBJECT 

MATTER JURISDICTION

Doc. 1

Plaintiffs’ complaint filed October 3, 2024, asserts shareholder derivative claims, 

including for breach of fiduciary duties, “gross mismanagement,” “waste of corporate assets,” 

breach of the duty of honest services, conspiracy, and conversion against various defendants. 

Doc. 2 (“Compl.”). Plaintiffs assert their claims individually and on behalf of a class consisting 

of “all . . . similarly situated shareholders within the State of California.” Compl. ¶ 2. On 

December 12, 2024, defendant Air-O-Fan Products Corp. (“Air-O-Fan”) filed a consolidated 

motion to dismiss for failure to state a claim, motion for a more definite statement, and motion to 

strike, and, separately, a motion for bond pursuant to California Corporations Code 

section 800(b). Docs. 7, 8. Defendants Larry E. Davis; Larry Davis and Charlotte Davis, 

Trustees of the Larry and Charlotte Davis Living Trust; David Lincoln; Brent A. Davis, Trustee 

of the Brent A. Davis 2012 Irrevocable Trust; Davis and Davis Distributors; Davis Equipment, 

Case 1:24-cv-01192-KES-SKO Document 16 Filed 01/15/25 Page 1 of 4
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Inc.; Davis and Davis Distributors No. 2, Inc.; and Vrad Products, Inc. (collectively, “Davis 

Defendants”) also filed a motion for bond on December 13, 2024. Doc. 11. On January 6, 2025, 

following plaintiffs’ failure to oppose the motions, the Court took the motions under submission. 

Doc. 15.

Defendants do not move to dismiss based on lack of subject matter jurisdiction. However, 

the Court has reviewed the allegations in the complaint, and finds, as addressed below, that the 

complaint fails to establish federal subject matter jurisdiction.

“[C]ourts . . . have an independent obligation to determine whether subject-matter 

jurisdiction exists, even in the absence of a challenge from any party.” Arbaugh v. Y&H Corp., 

546 U.S. 500, 514 (2006). “Federal courts are courts of limited jurisdiction,” and the burden of 

establishing subject matter jurisdiction “rests upon the party asserting jurisdiction.” Kokkonen v. 

Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). “A federal court is presumed to lack 

jurisdiction in a particular case unless the contrary affirmatively appears.” Stock W., Inc. v.

Confederated Tribes of the Colville Rsrv., 873 F.2d 1221, 1225 (9th Cir. 1989).

First, 28 U.S.C. § 1331 grants federal courts jurisdiction “of all civil actions arising under 

the Constitution, laws, or treaties of the United States.” In their complaint, plaintiffs state that 

this Court “has subject matter jurisdiction over all causes of action asserted herein pursuant to . . . 

the California Constitution . . . because this is a civil action in which the matter in controversy, 

exclusive of interest, exceeds $25,000, and because each cause of action asserted arises under the 

laws of the State of California or is subject to adjudication in the courts of the State of 

California.” Compl. ¶ 28 (emphasis added). Therefore, plaintiffs do not facially allege any claim 

based on federal question jurisdiction. Nor does a review of the allegations within the complaint 

indicate otherwise. See Flenory v. Macy’s Inc., 1:23-cv-00297-JLT-SKO, 2023 WL 2313387, at 

1 (E.D. Cal. Mar. 1, 2023) (issuing order to show cause regarding subject matter jurisdiction 

where plaintiff failed to “assert a claim under any federal law”). 

Second, 28 U.S.C. § 1332(a) provides jurisdiction over certain state law actions between 

citizens of different states, commonly known as “diversity jurisdiction.” Complete diversity is a 

requirement of 28 U.S.C. § 1332(a). Accordingly, the “citizenship of each plaintiff [must 

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be] diverse from the citizenship of each defendant.” Caterpillar Inc. v. Lewis, 519 U.S. 61, 68 

(1996). For diversity purposes, the citizenship of an individual is “determined by her state of 

domicile, not her state of residence.” Kanter v. Warner-Lamber Co., 265 F.3d 853, 857 (9th Cir. 

2001). Corporations are citizens of their states of incorporation and their principal places of 

business. 28 U.S.C. § 1332(c); Harris v. Rand, 682 F.3d 846, 850 (9th Cir. 2012). 

The four named plaintiffs in the complaint are individuals domiciled in Indiana, 

Pennsylvania, and South Carolina. Compl. ¶¶ 5–8. However, plaintiffs purport to bring their

claims on behalf of a class consisting of “all similarly situated shareholders within the State of 

California.” Id. at ¶ 2. As plaintiffs allege the defendants to be domiciled in California, id. at 

¶¶ 9–26, it appears that the parties are not completely diverse. See Jefferson v. City of Fresno, 

1:16-cv-01298-LJO-SKO, 2016 WL 8731385, *3 (E.D. Cal. Nov. 4, 2016) (dismissing complaint 

for lack of diversity where both plaintiff and defendant were citizens of California). Nor have 

plaintiffs alleged that the $75,000 amount-in-controversy requirement has been met. See Compl. 

¶ 28; 28 U.S.C. § 1332(a).

To the extent that plaintiffs intend to bring their claim pursuant to the provisions of the 

Class Action Fairness Act, see 28 U.S.C. § 1332(d), they fail to plead such jurisdiction. For 

example, nothing in their complaint suggests compliance with the requirements that the class 

comprise 100 or more members and that the amount-in-controversy exceed $5,000,000. See Dart 

Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 84–85 (2014) (affirming the 

requirements of 28 U.S.C. § 1332(d)); 28 U.S.C. § 1332(d)(2)–(5). Indeed, the complaint alleges 

that the entire outstanding common and preferred stock of defendant Air-O-Fan is “held by 35 

shareholders of record.” Compl. ¶ 76. Therefore, the complaint fails to adequately plead 

jurisdiction under § 1332(d).

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Accordingly, the Court ORDERS: 

1. Within fifteen days of the entry of this Order, plaintiffs SHALL show cause in writing 

why this action should not be dismissed for lack of subject matter jurisdiction. 

2. Alternatively, within fifteen days of the entry of this Order, plaintiffs may voluntarily 

dismiss their complaint.

3. Failure to comply with this order will result in dismissal of this action for lack of 

jurisdiction.

IT IS SO ORDERED.

Dated: January 14, 2025 

 UNITED STATES DISTRICT JUDGE

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