Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-01262/USCOURTS-azd-2_05-cv-01262-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Carl V. Nablo )

)

Plaintiff, ) No. CIV 05-1262 PHX RCB

)

vs. ) O R D E R 

)

Desert Plastics, LLC, et al., )

)

Defendants. ) )

This matter arises out of a diversity action brought in this

Court by Plaintiff Carl Nablo based on the alleged breach of an

employment contract. Compl. (doc. # 1); Am. Compl. (doc. # 7). 

Currently pending before the Court are Defendants' motion to

dismiss Plaintiff's first amended complaint and motion for

attorneys' fees pursuant to section 12-341.01(A) of the Arizona

Revised Statutes. Mot. (doc. # 10). Plaintiff filed a response in

opposition to Defendants' motions on June 29, 2005 (doc. # 11), and

Defendants filed a reply on July 11, 2005 (doc. # 12). The Court

finds the matter suitable for decision without oral argument. See

LRCiv 7.2(f) and 12.1(a). Having carefully considered the 

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 1 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

arguments raised by the parties' briefs, the Court now rules.

I. BACKGROUND

A. Procedural History

On April 27, 2005, Plaintiff filed a complaint in this Court,

seeking damages in contract and purporting to base jurisdiction on

diversity of citizenship pursuant to 28 U.S.C. § 1332. Compl.

(doc. #1) ¶¶ 1-3, 20-34. On May 31, 2005, the defendants named in

that complaint-- Desert Plastics, LLC ("Desert Plastics"), Westcap

Partners, Inc. ("Westcap"), Peter Barnhart, Len Lillard, and Rudco,

Inc. ("Rudco")-- filed a motion to dismiss (doc. # 5) arguing,

inter alia, that diversity jurisdiction was improper on account of

the citizenship of Barnhart, Lillard, and Rudco.

Thereafter, Plaintiff filed a response (doc. # 8) accompanied

by an amended complaint (doc. # 7), which attempted to cure the

jurisdictional shortcomings of the original complaint by dropping

all defendants except Desert Plastics and Westcap (collectively

"Defendants"). Plaintiff should have realized that, having waited

until after Defendants had responded to his complaint with their

first motion to dismiss, he could no longer amend his complaint

without first obtaining leave from this Court or written consent

from Defendants. See Fed. R. Civ. P. 15(a). Plaintiff did

neither. Moreover, Plaintiff failed to submit his amended

complaint in the proper form required by Local Rule of Civil

Procedure 15.1. Nevertheless, because Defendants subsequently

moved to dismiss the amended complaint on its merits, see Mot.

(doc. # 10), the Court will proceed on the basis that Defendants

have waived any objection on these procedural grounds. Inasmuch as

the original complaint (doc. # 1) has been amended, Defendants'

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 2 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

original motion (doc. # 5) is thus denied and dismissed as moot.

B. Factual History

The operative facts necessary for the resolution of the

pending motions are relatively brief. On or about November 24,

2003, Plaintiff entered into a written employment contract with

Desert Plastics, accepting the position of Chief Operating Officer. 

Am. Compl. (doc. # 7) ¶ 11. On or about April 4, 2005, Plaintiff

was apparently terminated without cause, and Defendants have since

failed to honor the written terms of the contract with respect to

salary, bonus, vacation, and severance payments. Id. ¶¶ 25, 32. 

During this time, Plaintiff was a United States citizen "residing

in Maricopa County, State of Arizona." Id. ¶ 2. Although

Plaintiff contends that Desert Plastics and Westcap should not be

deemed Arizona citizens for purposes of diversity, Defendants have

presented unrefuted evidence demonstrating that both entities had

principal places of business in Arizona at the time this action was

commenced. See Mot. (doc. # 10), Ex. A ("Lillard Decl.") ¶¶ 6-7. 

II. STANDARD OF REVIEW

Unlike a Rule 12(b)(6) motion to dismiss for failure to state

a claim, a Rule 12(b)(1) motion to dismiss for lack of subject

matter jurisdiction does not require a presumption of truthfulness

as to the allegations of the complaint. "Where the jurisdictional

issue is separable from the merits of the case, the judge may

consider the evidence presented with respect to the jurisdictional

issue and rule on that issue, resolving factual disputes if

necessary." Thornhill Pub. Co. v. Gen. Tel. & Elec. Corp., 594

F.2d 730, 733 (9th Cir. 1979).

. . .

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 3 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

III. DISCUSSION

A. Motion to Dismiss for Lack of Subject Matter Jurisdiction

Defendants argue that the amended complaint should be

dismissed in its entirety because Plaintiff, by failing to allege

his own citizenship, has not sufficiently pleaded the basis for

invoking diversity jurisdiction. Mot. (doc. # 10) at 3-4. For the

reasons explained below, the Court agrees.

Federal Rule of Civil Procedure 12(b)(1) allows a party to

seek dismissal of a claim if the court in which the claim is filed

would lack jurisdiction over the subject matter. The subject

matter jurisdiction of the federal district courts is defined by

Congress. U.S. Const. art. III, § 1; Livingston v. Story, 34 U.S.

(9 Pet.) 632, 656 (1835). Although a claim for relief must contain

a "short and plain statement of the grounds upon which the court's

jurisdiction depends," see Fed. R. Civ. P. 8(a)(1), the Ninth

Circuit has held that, where the statements in the complaint are

sufficient for the district court to recognize that it has

jurisdiction, the particular congressional statute conferring

jurisdiction need not be specifically pleaded. Aguirre v. Auto.

Teamsters, 633 F.2d 168, 174 (9th Cir. 1980).

The diversity jurisdiction of the federal courts exists in all

civil actions between citizens of different states in which the

amount in controversy exceeds $75,000. 28 U.S.C. § 1332(a)(1). A

party seeking to invoke diversity jurisdiction need only allege--

not prove-- the actual citizenship of the relevant parties such

that the district court may determine whether there exists complete

diversity. Kanter v. Warner-Lambert Co., 265 F.3d 853, 857 (9th

Cir. 2001); Shaw v. Quincy Mining Co., 145 U.S. 444, 447 (1892). 

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 4 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Plaintiff's amended complaint mysteriously invokes section 12-

401(1) of the Arizona Revised Statutes as an additional basis for

either jurisdiction or venue. See Am. Compl. (doc. # 7) ¶ 9.

Although the Court would apply state substantive law in a diversity

action, federal procedural law still governs. Erie R.R. v. Tompkins,

304 U.S. 64, 78-79 (1938).

- 5 -

In Kanter, the Ninth Circuit explained the simple allegations

needed to establish a natural person's state of citizenship: 

To be a citizen of a state, a natural person must first 

be a citizen of the United States. . . . . The natural 

person's state citizenship is then determined by her 

state of domicile, not her state of residence. A 

person's domicile is her permanent home, where she 

resides with the intention to remain or to which she 

intends to return. . . . . A person residing in a given 

state is not necessarily domiciled there, and thus is not

necessarily a citizen of that state.

Kanter, 265 F.3d at 857 (citations omitted). The distinction

between domicile and residence is an uncontroversial principle to

which the Supreme Court has spoken long ago:

. . . [A]n averment that a party resided within the State

or the district in which the suit was brought was not 

sufficient to support the jurisdiction, because in the 

common use of words a resident might not be a citizen, 

and therefore it was not stated expressly and beyond 

ambiguity that he was a citizen of the State, which was 

the fact on which the jurisdiction depended under the 

provisions of the Constitution and of the Judiciary Act.

Shaw, 145 U.S. at 447 (1892).

In the case at hand, it is apparent from the face of the

amended complaint that Plaintiff seeks to invoke the diversity

jurisdiction of this Court pursuant to 28 U.S.C. § 1332(a)(1).1

See Am. Compl. (doc. # 7) ¶¶ 1-5, 9, 32. However, the Court need

not look beyond the second paragraph of the amended complaint to

see the deficiency of the jurisdictional allegations. As to his

own citizenship, Plaintiff avers that he "was at all times

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 5 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

 Plaintiff could have supplied affidavits to show his state of

citizenship with his responsive brief. See Robertson v. Cease, 97

U.S. 646, 648 (1878) (where federal jurisdiction depends on the

parties' citizenship, the essential facts must appear somewhere in

the record and need not necessarily be averred in the pleadings).

- 6 -

mentioned herein [in the amended complaint], a citizen of the

United States and residing in Maricopa County, State of Arizona." 

Am. Compl. (doc. # 7) ¶ 2 (emphasis added). This allegation is

defective for two reasons.

First, the amended complaint appears to speak to the

citizenship of the parties at the time the underlying events took

place, not at the time the action was commenced. It is well

settled that allegations invoking diversity jurisdiction must show

that complete diversity existed at the time the action was filed,

not at the time the cause of action accrued. Freeport-McMoRan,

Inc. v. K N Energy, Inc., 498 U.S. 426, 428 (1991); see also Smith

v. Sperling, 354 U.S. 91, 93, n. 1 (1957) (federal jurisdiction

depends on facts in existence at the time the complaint is filed). 

Second, the amended complaint merely alleges Plaintiff's state

of residence and not his state of domicile, repeating the error of

the original complaint. Despite ample opportunity to do so,

Plaintiff has consistently refused to cure this problem. Plaintiff

was first alerted to this defect by Defendants' first motion to

dismiss. See Mot. (doc. # 5) at 4:15-17. In response, Plaintiff

took the liberty to amend his complaint without seeking leave of

the Court, see Fed. R. Civ. P. 15(a), yet failed again to plead his

state of domicile. Reminded once again to do so by Defendants'

second motion to dismiss, see Mot. (doc. # 10) at 3-4, Plaintiff

still offered no cure with his responsive brief.2 Instead, he

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 6 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Instead, Plaintiff attached exhibits addressing only Defendants'

state of citizenship. See Resp. (doc. # 11), Ex. 1-2.

- 7 -

defended the deficient allegation with this inscrutable argument:

"Plaintiff is unclear of how he can be a 'citizen' of Arizona." 

Resp. (doc. # 11) at 2. If this is indeed the case, it is even

more unclear why he has come before this Court attempting to invoke

jurisdiction under 28 U.S.C. § 1332. In the absence of an

affirmative allegation of Plaintiff's state of domicile, the Court

cannot simply assume his state of citizenship. Because the record

is devoid of facts supporting diversity jurisdiction, this case

must be dismissed. 

The Court is mindful that "[d]efective allegations of

jurisdiction may be amended, upon terms, in the trial or appellate

courts." 28 U.S.C. § 1653. However, the allowance or refusal of

amendments under section 1653 is within the discretion of the

courts, and the Supreme Court has cautioned that such amendments

are only warranted to cure defects of jurisdictional allegations

and not jurisdictional facts. See Newman-Green, Inc. v.

Alfonzo-Larrain, 490 U.S. 826, 830-31 (1989); see also Snell v.

Cleveland, Inc., 316 F.3d 822, 828 (9th Cir. 2002) ("The primary

purpose of section 1653 is to permit correction of incorrect

statements about extant jurisdiction."). The Ninth Circuit has

suggested that courts need not permit section 1653 amendments where

"it is clear, upon de novo review, that the complaint could not be

saved by amendment." Snell, 316 F.3d at 828 (citing Lee v. City of

Los Angeles, 250 F.3d 668, 692 (9th Cir. 2001)); see also Holman v.

Carpenter Tech. Corp., 484 F. Supp. 406, 409 (E.D. Pa. 1980)

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 7 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

(denying plaintiff leave to amend complaint where plaintiff had

failed to rebut defendant's contest of diversity jurisdiction,

because section 1653 does not require "futile gestures").

Upon careful consideration of the record, the Court finds that

this case is properly dismissed without leave to amend. Under the

Ninth Circuit's standard from Lee and Snell, it is clear that an

amendment here cannot save the complaint. Such an amendment would

only show that Plaintiff and Defendants were all citizens of

Arizona, thereby destroying diversity. Although claiming ignorance

of the meaning of state citizenship embodied by the diversity

statute, Plaintiff apparently contends that he has sufficiently

pleaded that he is a citizen of Arizona. See Resp. (doc. # 11) at

2. Assuming Plaintiff's truthfulness in this argument, the Court

must conclude that, if granted leave to amend yet again, Plaintiff

would allege that he was domiciled in, and therefore a citizen of,

Arizona. However, at the time this action commenced Desert

Plastics and Westcap-- the sole remaining defendants in this

action-- held their principal places of business in Arizona, and

were therefore also Arizona citizens. See Lillard Aff. ¶¶ 6-7; 28

U.S.C. § 1332(c)(1). Plaintiff's unsworn exhibits attached to his

responsive brief tend to corroborate, rather than upset, this

claim. Resp. (doc. # 11), Ex. 1-2 (indicating the physical

presence of both defendants in Arizona). Because Plaintiff and

Defendants would all be citizens of the same state, there would be

no basis for diversity jurisdiction. Under these circumstances,

allowing a section 1653 amendment would be a futile gesture

prejudicial to Defendants.

Moreover, the Court takes notice of the troubling fact that

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 8 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

Plaintiff's original complaint actually differentiated between

"domicile" and "residence." See Compl. (doc. # 1) ¶¶ 2-3 (properly

describing the citizenship of defendants based on their state of

domicile). For all that appears, Plaintiff may have been aware of

the domicile requirement of state citizenship and, for reasons

unknown to the Court, has deliberately avoided pleading to it with

respect to his own citizenship throughout the pendency of the case.

For all of the foregoing reasons, this action must be

dismissed without leave to amend and without prejudice to the right

of Plaintiff making a claim for relief in an appropriate court.

B. Motion for Attorneys' Fees 

Defendants have moved for attorneys' fees pursuant to section

12-341.01(A) of the Arizona Revised Statutes. Mot. (doc. # 10) at

1-2, 6. Although under Arizona law litigants generally bear

responsibility for their attorneys' fees, U.S. Fid. & Guar. Co. v.

Frohmiller, 71 Ariz. 377, 227 P.2d 1007 (1951), section 12-341.01

provides for the recovery of reasonable attorneys' fees by the

successful party "[i]n any contested action arising out of a

contract." Ariz. Rev. Stat. § 12-341.01(A) (West 2003). Moreover,

adjudication on the merits is not required for a "successful party"

to recover its fees. See Wagenseller v. Scottsdale Mem'l Hosp.,

147 Ariz. 370, 710 P.2d 1025, 1046-49 (1985).

The Arizona Supreme Court has provided six factors for

consideration in determining whether attorneys' fees should be

awarded under section 12-341.01: (1) the merits of the unsuccessful

party's claim; (2) whether the litigation could have been avoided;

(3) whether assessing fees against the unsuccessful party would

cause extreme hardship; (4) whether the successful party prevailed

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 9 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 10 -

with respect to all of the relief it sought; (5) the novelty of the

legal question presented; and (6) whether the award in any

particular case would discourage other parties from litigating

tenable claims for fear of incurring liability for substantial

amounts of attorneys' fees. Associated Indem. Corp. v. Warner, 143

Ariz. 567, 694 P.2d 1181, 1184 (1985).

As to the first of the Warner factors, it is premature for the

Court to make any judgment as to the merits of the underlying

claims, particularly as there has been no discovery to date. 

Therefore, this factor does not favor or disfavor an award of fees.

Second, much of the litigation in this Court could certainly

have been avoided. Plaintiff should have realized that, absent

complete diversity of citizenship, his case was never properly

before this Court. Indeed, Plaintiff's original complaint

indicates some awareness of the significance of pleading "domicile"

as opposed to "residence" in establishing the basis for diversity

jurisdiction. See Compl. (doc. # 1) ¶¶ 2-3. This strongly

suggests that Plaintiff had some knowledge from the outset of this

action that complete diversity may have been lacking. Furthermore,

Plaintiff's professed ignorance as to the concept of state

citizenship contemplated by 28 U.S.C. § 1332, see Resp. (doc. # 11)

at 2, rather than excuse his misguided efforts to invoke

jurisdiction under that section, renders his conduct more

condemnable. By proceeding on the basis of legal arguments that he

later admitted not to understand, Plaintiff's conduct was

prejudicial to Defendants. The evidence overwhelmingly suggests

that the litigation in this Court could easily have been avoided by

Plaintiff. Therefore, the second factor weighs heavily in favor of

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 10 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 11 -

awarding fees.

Third, Plaintiff has not claimed that an assessment of fees

would cause him extreme hardship. Indeed, as a former executive

who was at one time paid an annual salary of $195,000, Am. Compl.

(doc. # 7) ¶ 19, a claim of financial hardship would be untenable.

Furthermore, the fact that Defendants succeeded in dismissing

the entire action on an easily perceived lack of subject matter

jurisdiction strongly favors an award of fees on the basis of the

fourth and fifth Warner factors. Not only did Defendants succeed

on all counts, but the legal arguments involved were hardly novel. 

It has been well settled for decades that a party's state of

citizenship for diversity purposes is determined based on the state

of domicile, not residence. See Shaw, 145 U.S. at 447 (1892). 

Thus, the fourth and fifth factors both favor an award of fees.

Finally, the Court does not find that an award of fees in this

particular case would discourage other parties from pursuing

tenable claims for breach of contract for fear of incurring

liability for fees. While most parties would simply pursue such

claims in state court, the Court would expect that those who choose

to come before the federal courts would have at least some

understanding of diversity jurisdiction better than that exhibited

by Plaintiff in this case. 

Plaintiff's only rebuttal is that an award of fees is not

warranted as to the former defendants, claiming that they were

voluntarily dismissed. Resp. (doc. # 11) at 2, 5. This hollow

assertion belies the fact that Plaintiff's so-called "voluntary

dismissal" did not occur until after Defendants' first motion to

dismiss (doc. # 5) had alerted him to the jurisdictional problem of

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 11 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 -

naming those non-diverse parties as defendants. More importantly,

Plaintiff fails to point to any reason why fees should not be

awarded now that the action is dismissed as to all Defendants.

On balance, the six Warner factors favor an award of fees in

this case, and therefore Defendants' motion for attorneys' fees

will be granted. Defendants shall have thirty (30) days from the

date of entry of this Order within which to serve and file a

renewed motion specifying the amount of attorneys' fees sought

along with a supporting memorandum of law. Plaintiff shall then

have fifteen (15) days within which to serve and file a responsive

memorandum, after which Defendants shall have ten (10) days to

serve and file a reply memorandum.

IV. CONCLUSION

In light of the foregoing analysis,

IT IS ORDERED that Defendants' Motion to Dismiss Amended

Complaint (doc. # 10) is GRANTED. Plaintiff's case is dismissed

without leave to amend and without prejudice to the right of

Plaintiff making a claim for relief in an appropriate court.

IT IS FURTHER ORDERED that Defendants' Motion for attorneys'

fees pursuant to section 12-341.01(A) of the Arizona Revised

Statutes (doc. # 10) is GRANTED. Defendants shall have thirty (30)

days from the date of entry of this Order within which to serve and

file a renewed motion specifying the amount of attorneys' fees

sought along with a supporting memorandum of law. Plaintiff shall

then have fifteen (15) days within which to serve and file a

responsive memorandum, after which Defendants shall have ten (10)

days to serve and file a reply memorandum.

IT IS FURTHER ORDERED that Defendants' first motion to dismiss

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 12 of 13
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 13 -

(doc. # 5) is DENIED and dismissed as moot.

IT IS FINALLY ORDERED directing the Clerk of the Court to

enter judgment in favor of Defendants.

DATED this 6th day of February, 2006.

Copies to counsel of record

Case 2:05-cv-01262-RCB Document 13 Filed 02/07/06 Page 13 of 13