Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-00138/USCOURTS-casd-3_08-cv-00138-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Breach of Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

SCHNEIDER RUCINSKI ENTERPRISES, a

California company,

Plaintiff,

CASE NO. 08CV138 WQH (POR)

ORDER GRANTING DEFENDANTS’

MOTIONS TO DISMISS PLAINTIFF’S

COMPLAINT FOR LACK OF SUBJECT

MATTER JURISDICTION

vs.

TOUCH ASIA OUTSOURCING

SOLUTIONS, INC. dba TOUCH ASIA

CALL CENTER, INC., a California

company; STRATASOFT, INC.; RUDY

NGAW, individually and as an employee

and/or agent of STRATASOFT, INC.;

STRATASOFT, INC.; LANE MCCARTY,

individually and as an employee and/or agent

of STRATASOFT, INC.; JASON PACE,

individually and as an employee and/or agent

of STRATASOFT, INC.; MIKE BRIDGES,

individually and as an employee and/or agent

of STRATASOFT, INC.; INX, INC., a Texas

corporation formerly known as I-SECTOR

CORPORATION; COLO 6 LLC dba U.S.

COLO, a California corporation; HAJI

NAVROZ, an individual; and DOES 1

through 20, inclusive,

Defendants.

HAYES, Judge:

Pending before the Court are motions to dismiss Plaintiff’s Complaint filed by Defendants

Stratasoft, Inc. and INX, Inc. (Docs. # 7, 8, 17, 18). The Court heard oral argument on these matters

on Monday, April 28, 2008.

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PROCEDURAL BACKGROUND

On January 23, 2008, Plaintiff Schneider Rucinski Enterprises filed the Complaint in this

matter against Defendants Touch Asia Outsourcing Solutions, Inc. (Touch Asia), Rudy Ngaw,

Stratasoft, Inc. (Stratasoft), INX, Inc. (INX), Lane McCarty, Jason Pace, Mike Bridges, Michael

Bridges, Jr., Navros Haji, and U.S. Colo dba Colo 6 (US Colo). (Doc. # 1). The Complaint asserts

twenty claims for relief, including claims for specific performance, breach of contract, breach of lease

agreement, breach of guarantee, claim and delivery, conversion, fraud and deceit, declaratory relief,

account stated, imposition of constructive trust, injunctive relief, unfair competition, intentional and

negligent interference with contractual relations, intentional and negligent interference with

prospective economic advantage, breach of the implied covenant of good faith and fair dealing,

negligent misrepresentation, fraudulent inducement, and civil conspiracy. (Doc. # 1).

On February 19, 2008, and March 14, 2008, Defendants INX, Inc. and Stratasoft, Inc. filed the

presently pending motions to dismiss for lack of subject matter jurisdiction. (Docs. # 7, 8, 17, 18).

On February 21, 2008, Defendants Colo 6 LLC and Haji Navroz filed an answer. (Doc. # 9). On

March 7, 2008, and April 3, 2008, Plaintiff filed oppositions to Defendants’ motions to dismiss.

(Docs. # 10, 24, 31). On March 17, 2008, and April 21, 2008, Defendants INX and Stratasoft filed

replies to support the motions to dismiss. (Doc. # 19, 45, 47).

On April 3, 2008, Plaintiff filed motions requesting that the Court allow oral argument on

Defendants’ motions to dismiss for lack of subject matter jurisdiction. (Docs. # 24, 33). On April 3,

2008, the Court granted Plaintiff’s motions for oral argument, and set oral argument on Defendants’

motions to dismiss for April 28, 2008. (Doc. # 34).

On April 28, 2008, the parties appeared for oral argument.

ALLEGATIONS OF THE COMPLAINT

Plaintiff Schneider Rucinski Enterprises “was and now is a sole proprietorship licensed to

conduct business in the County of San Diego . . ., State of California.” Complaint (Doc. # 1), ¶ 1.

Defendant Rudy Ngaw “is and at all times herein mentioned was an individual residing in Sacramento,

County of Sacramento, California and doing business in the County of San Diego, California.”

Compl., ¶ 2. Defendant Touch Asia “is duly organized under the laws of the State of California with

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its principal place of business at 7214-B Florrin Mall Drive, Sacramento, County of Sacramento,

California 95823.” Compl., ¶ 3. Defendant Stratasoft is “a corporation duly organized under the laws

of the State of Texas with its principal place of business at 519 N. Sam Houston Pkwy E., Ste 550

Houston, TX 77060-4074.” Compl., ¶ 4. Defendant Lane McCarty “is and at all times herein

mentioned was an individual residing in Houston, Texas and doing business in the County of San

Diego, California.” Compl., ¶ 5. Defendant Jason Pace “is and at all times herein mentioned was an

individual residing in Houston, Texas and doing business in the County of San Diego, California.”

Compl., ¶ 5. Defendant Mike Bridges “is and at all times herein mentioned was an individual

residing” in “Houston, Texas.” Compl., ¶ 7. Defendant Michael Bridges, Jr. “is and at all times herein

mentioned was an individual residing in Houston, Texas.” Compl., ¶ 8. Defendant INX is “a Texas

corporation.” Compl., ¶ 9. Defendant Navros Haji is “a resident of the State of California, County

of Los Angeles.” Compl., ¶ 10. Defendant US Colo is “a corporation duly organized under the laws

of the State of California with its principal place of business at 650 S. Grand Ave. Los Angeles CA

90001.” Compl., ¶ 11. “Jurisdiction is proper in this court pursuant to 28 U.S.C. § 1332, since the

parties in this action are citizens of different states, and the amount in controversy, excluding interest

is greater than $75,000.00.” Compl., ¶ 13.

“On or about May 11, 2004,” Plaintiff and Defendant Stratasoft entered into an agreement

whereby Defendant Stratasoft “agreed to sell and Plaintiff agreed to buy telephony servers and

software equipment for the sum of [$]555,000.00.” Compl., ¶ 17. “[P]ursuant to the terms of the

Agreement, Plaintiff paid Stratasoft the sum of $128,000.00 as a deposit for the purchase of the

Equipment,” and at that time, the “Equipment had a reasonable value of $555,000.00.” Compl., ¶¶

17-18.

On or about May 11, 2004, and “[i]n reliance on the Agreement to purchase the Equipment,”

“Plaintiff and [Defendant] Touch Asia entered into an Equipment Lease Agreement . . . by which

Plaintiff . . . agreed to lease” the recently purchased equipment to Defendant Touch Asia. Compl., ¶

19. Defendant Stratasoft “fully understood and agreed that Plaintiff would . . . lease the Equipment

to Touch Asia and Ngaw,” and that “after payment and installation, Stratasoft would enter into a

contract with Touch Asia/Ngaw for service and maintenance of the Equipment only.” Compl., ¶¶

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20(e), 20(j). Defendant Stratasoft further agreed “that the Equipment would not be installed at Touch

Asia until a waiver was signed by the landlord,” and that Stratasoft would send a copy of the service

and maintenance contract and an invoice to Plaintiff. Compl., ¶¶ 20(k)-20(n).

“On June 28, 2004, without Plaintiff’s knowledge or consent, [Defendants] Stratasoft and INX

cause[d] the Equipment to be delivered to [Defendant] Touch Asia” at Defendant US Colo’s property

at “650 S. Grand Ave” in Los Angeles, California. Compl., ¶ 22. “Thereafter, Plaintiff demanded an

invoice, purchase order, and the maintenance and service contract as promised by Stratasoft and INX.”

Compl., ¶ 22. “Plaintiff’s request was refused by Stratasoft and INX,” and “Stratasoft and INX

thereafter ceased any and all communications with Plaintiff.” Compl., ¶ 22. 

“Plaintiff has performed all of the conditions of the Agreement that are required to be

performed by Plaintiff.” Compl., ¶ 23.

STANDARD OF REVIEW

Unlike state courts, federal courts are courts of limited jurisdiction. See U.S. Const. art. III,

§ 2. Federal courts “possess only that power authorized by the Constitution and statute, . . . and it is

presumed that a cause lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. Of

Am., 511 U.S. 375, 377 (1994). The party which invokes jurisdiction bears the burden of

demonstrating its existence. Id., see also McCune Motors v. New Century Buildings, LLC, Case No.

08CV396 LAB (WMc), 2008 U.S. Dist. LEXIS 16850, 2-3 (S.D. Ca. Mar. 5, 2008). 

FED.R.CIV.P. 12(b)(1) allows for dismissal of a suit where there is a “lack of jurisdiction over

the subject matter” of the suit. A motion to dismiss pursuant to FED. R. CIV. P. 12(b)(1) “may either

attack the allegations of the complaint or may be made as a ‘speaking motion’ attacking the existence

of subject matter jurisdiction in fact.” Thornhill Pub. Co. v. General Tel. & Electronics Corp., 594

F.2d 730, 33 (9th Cir. 1979). If a defendant brings a facial attack–arguing that the allegations in the

complaint are insufficient to attain jurisdiction–the Court’s inquiry is the same as when ruling on a

motion to dismiss under FED. R. CIV. P. 12(b)(6). Organization for Advancement of Minorities with

Disabilities v. Brick Oven Restaurant, 406 F. Supp. 2d 1120, 1124 (S.D. Cal. 2005). Specifically, the

reviewing court must accept as true the allegations of the complaint and must construe the complaint

in favor of the complaining party. U.S. ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181, 1189 (9th

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Cir. 2001). If a defendant attacks jurisdiction as a matter of fact, “no presumptive truthfulness

attaches to plaintiff’s allegations,” and the trial court determines whether there is jurisdiction based

on the evidence submitted. Thornhill Pub. Co., 594 F.2d at 733.

As the party bring suit here, Plaintiff bears the burden of demonstrating the basis for subject

matter jurisdiction. Kokkonen, 511 U.S. at 377; Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478

U.S. 804, 810 (1986).

DISCUSSION

Defendants INX and Stratasoft contend that this action has to be dismissed for lack of subject

matter jurisdiction because the allegations of the Complaint do not provide a basis for diversity or

federal question jurisdiction. Specifically, Defendants contend that there is no diversity jurisdiction

because the Complaint names Defendants which are not completely diverse from the Plaintiff, and

there is no federal question jurisdiction because the Complaint does not allege any claim which arises

under federal law.

Plaintiff contends that there is diversity jurisdiction because (1) at least one of the Defendants

is from Texas, and (2) some of the Defendants identified as California residents in the Complaint may

in fact be residents of other States or countries. Though it is not entirely clear, Plaintiff appears to

contend that there is federal question jurisdiction because it may be able to assert claims under federal

law in the future.

I. Diversity Jurisdiction

28 U.S.C. § 1332(a) provides in pertinent part that,

(a) the district courts shall 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--

(1) citizens of different states . . . .

28 U.S.C. § 1332(a). “Although the statute does not so require explicitly, the Supreme Court has

repeatedly held . . . that § 1332(a) requires complete diversity, whereby ‘in a case with multiple

plaintiffs and multiple defendants, the presence in the action of a single plaintiff from the same State

as a single defendant deprives the district court of original diversity jurisdiction over the entire

action.’” Abrego v. Dow Chem. Co., 443 F.3d 676, 679 (9th Cir. 2006) (citing Exxon Mobil Corp. v.

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Allapattah Servs., Inc., 545 U.S. 546 (2005)).

Plaintiff’s Complaint asserts diversity jurisdiction as the basis for subject matter jurisdiction.

Compl., ¶ 13. However, the allegations of the Complaint allege that (1) Plaintiff Schneider Rucinski

Enterprises is “a sole proprietorship licensed to conduct business” in California (Compl., ¶ 1), (2)

Defendant Rudy Ngaw resides and conducts business in California (Compl., ¶ 2), (3) Defendant Touch

Asia is a California corporation with its principal place of business in California (Compl., ¶ 3), (4)

Defendant Haji Navros is a resident of and conducts business in California (Compl., ¶ 10), and (5)

Defendant US Colo is “a corporation organized under the laws of the State of California with its

principal place of business” in California (Compl., ¶ 11). The Court concludes that the Complaint on

its face fails to establish complete diversity between Plaintiff and all the Defendants because (a) the

Complaint does not adequately allege the citizenship of each party, and (b) even assuming the

citizenship of the parties has been adequately alleged, Plaintiff appears to be a citizen of California,

and at least four Defendants appear to be citizens of California as well. 

“Absent unusual circumstances, a party seeking to invoke diversity jurisdiction should be able

to allege affirmatively the actual citizenship of the relevant parties.” Kanter v. Warner-Lambert, 265

F.3d 853, 857 (9th Cir. 2001). A “natural person’s state of citizenship . . . is determined by her state

of domicile, not her state of residence.” Id. “A person’s domicile is her permanent home, where she

resides with the intention to remain or to which she intends to return.” Id. (citing Lew v. Moss, 797

F.2d 747, 749 (9th Cir. 1986)). “A person residing in a given state is not necessarily domiciled there,

and thus is not necessarily a citizen of that state.” Id. For the purposes of diversity jurisdiction, a

corporation is “deemed to be a citizen of any State by which it has been incorporated and of the State

where it has its principal place of business . . . .” 28 U.S.C. § 1332(c)(1). A limited liability company,

or LLC, is deemed to be a citizen of “every state of which its owners/members are citizens.” Johnson

v. Columbia Props. Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). The citizenship of other

artificial business entities is generally determined by reference to the citizenship of each of the

artificial entities’ owners, partners, or members. Carden v. Arkoma Assoc., 494 U.S. 185, 187-152

(1990).

In this case, Plaintiff Schneider Rucinski Enterprises alleges that it is a sole proprietorship

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1

 Plaintiff has not submitted any evidence with respect to the citizenship of Schneider Rucinski

Enterprises. In addition, Plaintiff indicated at oral argument that Schneider Rucinski Enterprises may

in fact be a partnership, as opposed to a sole proprietorship.

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which conducts business in California. However, there is no allegation indicating what person owns

Schneider Rucinski Enterprises, and there is no allegation with respect to the citizenship of that

person. This deficiency makes it impossible to determine the citizenship of Schneider Rucinski

Enterprises for the purpose of determining whether there is diversity jurisdiction in this case.1 See

Carden, 494 U.S. at 187-192 (citizenship of artificial entities besides corporations determined by

examining the citizenship of each of the artificial entities’ partners or owners or members). In

addition to issues related to the citizenship allegations of Schneider Rucinski Enterprises, the

Complaint names Rudy Ngaw and Navros Haji as Defendants, but fails to allege anything more than

those persons’ States of residence. The Court concludes that allegations describing the residence of

a person are insufficient to establish a person’s citizenship for the purposes of diversity jurisdiction.

See Kanter, 265 F.3d at 857, 858 (holding that allegations of residence are not sufficient to establish

citizenship, and therefore fatal to assertion of diversity jurisdiction). Plaintiff has the burden to

affirmatively allege the citizenship of the parties and to establish diversity jurisdiction. After

reviewing the allegations of the Complaint, the Court concludes Plaintiff has not met its burden to

affirmatively allege the citizenship of the parties, and therefore has not met its burden to establish

diversity jurisdiction.

Even if the Court were to construe Plaintiff’s allegations as alleging that Plaintiff was a citizen

of California, Defendant Ngaw was a citizen of California, and Defendant Haji was a citizen of

California, as appears to be Plaintiff’s intention, the Court would still conclude that the Complaint

fails to establish diversity jurisdiction because the Complaint fails to allege complete diversity

amongst Plaintiff and the Defendants. Assuming Plaintiff was a citizen of California for the purposes

of diversity jurisdiction, diversity jurisdiction would still be lacking in this case because four

Defendants are also alleged to be citizens of California. See Abrego, 443 F.3d at 679 (noting that

diversity jurisdiction fails where a single plaintiff is a citizen of the same State as a single defendant).

Accordingly, and assuming that the allegations of the Complaint properly alleged citizenship, there

is not complete diversity between the Plaintiff and all Defendants, and therefore no diversity

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jurisdiction.

The Court concludes that Plaintiff has not met its burden to establish diversity jurisdiction.

II. Federal Question Jurisdiction

28 U.S.C. § 1331 provides that, “the district courts shall have original jurisdiction of all civil

actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. “[I]n

order for a complaint to state a claim ‘arising under’ federal law, it must be clear from the face of the

plaintiff’s well-pleaded complaint that there is a federal question.” Duncan v. Stuetzle, 76 F.3d 1480,

1485 (9th Cir. 1996) (citing Oklahoma Tax Comm’n v. Graham, 489 U.S. 838, 840-41 (1989)).

“Subject matter jurisdiction must exist as of the time the action is commenced.” Morongo Band of

Mission Indians v. Calif. St. Bd. of Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988).

Though it is not entirely clear, Plaintiff appears to contend that this Court has federal question

jurisdiction in this case because (1) certain equipment crossed “state lines,” and (2) Plaintiff may be

able to allege federal claims for violation of the Federal Statute of Frauds, the Computer Fraud and

Abuse act, and the Electronic Fund Transfer Act. However, after reviewing the allegations of the

Complaint, the Court concludes that is not clear from the face of the Complaint that there is a cause

of action which arises under federal law. See Duncan, 76 F.3d at 1485. Indeed, the Complaint asserts

twenty claims pursuant to California state law, but does not assert or mention a single claim under

federal law. (Doc. # 1). In addition, the Complaint does not allege federal question jurisdiction as a

basis for jurisdiction, and the Court cannot assume federal question jurisdiction where each of the

claims for relief is pled under state law and no claim for relief depends upon the resolution of a

substantial question of federal law. Duncan, 76 F.3d at 1486; see Compl., ¶ 13. The Court finds the

issue of whether equipment crossed state lines irrelevant to jurisdiction.

After reviewing the allegations of the Complaint and the moving papers, the Court concludes

that Plaintiff has not met its burden to establish federal question jurisdiction.

CONCLUSION

The Court concludes that Plaintiff has not met its burden to establish the existence of subject

matter jurisdiction, and “[i]f jurisdiction is lacking at the outset, the district court has no power to do

anything with the case except dismiss.” Orff v. United States, 358 F.3d 1137, 1149 (9th Cir. 2004).

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Accordingly, the Court hereby GRANTS Defendants’ motions to dismiss the Complaint for lack of

subject matter jurisdiction. (Docs. # 7, 8, 17, 18).

Plaintiff’s Complaint is hereby DISMISSED in its entirety without prejudice. In addition, all

pending motions in this case are hereby DENIED as moot. See (Docs. # 6, 26, 35, 36, 37, 42). If

Plaintiff wishes to file and serve an Amended Complaint, she may do so on or before May 30, 2008.

IT IS SO ORDERED.

DATED: April 29, 2008

WILLIAM Q. HAYES

United States District Judge

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