F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

C A R O L I N A C A S U A L T Y I N S U R A N C E C O ., an I owa corporation,

Plaintiff-Appellant
,

v

.

T E A M E Q U I P M E

N T , I N C

. , a California corporation; B E L L H O P C L E A N E R S O F C A L I F O R

N I A , I N C ., a New Mex ico corporation; G A M E T E N T E R P R I S E S , L L C, a New Mex ico limited liability
company ; U.S. D R

Y C L E A N I N G S E R V I C E S C O R

P ., a Delaware corporation, DB A U.S. Dry Cleaning Corporation; S T E A M P R E S S H O L D I N G S , I N C ., a Hawaii corporation, DB A Young L aundry and Dry Cleaning ; C L E A

N E R S C L

U B A C Q U I S I T I O N S , I

N C

. , a California corporation, DB A B oston Cleaners; USDCC CVR M E R

G E R S U B , L L C, a California limited liability company , DB A Roadrunner Cleaners; USDC P O R T S M O U T H , I

N C ., a California corporation; USDC T U C H M A N I N D I A N A , I N C ., a California corporation; USDC F R E S N O , I N C

. , a California corporation; USDC F R E S N O 2
, I

N C ., a California Nos. 12-56203 12-56235

D.C. No. 2:12-cv-03133- J F W-J EM

OPI NI O NC A R O L I N A C A S

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corporation; T I M O T H Y D E N A R I , an individual; R I A Z C H A T A U N I , an individual; R O B E R

T Y. L E E , an individual, AKA Robbie L ee; M A R T I N B R I L L , an individual; M I C H A E L D R

A C E , an individual; K I M C O X , an individual; E A R L G R E E N B E R G , an individual; A N T H O N Y J .A. B R

Y A N , an individual, Defendants-Appellees

.

A ppeal from the United States District Court for the Central District of California J ohn F . W a lter, District J udg e, Presiding

Arg ued and Submitted November 8, 2013—Pasadena, California

F iled F ebruary

4, 2014

B efore: Ray

mond C. F isher and Richard R. Clifton, Circuit J udg es, and J ames K. Sing leton, Senior District J udg e. *

Opinion by

J udg e Clifton

* T h e Ho n o rab le J am es K. Sin g leto n , Sen io r District J u d g e f o r th e U .S. District Co u

rt f o r th e District o f

A lask a, sittin g b y

d esig n atio n

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SUMMARY * *

Diversity Jurisdiction

The panel reversed the district court’s dismissal based on failure to establish diversity jurisdiction.

The panel held that the orig inal complaint should n ot have been dismissed without leave to a mend because the distr i ct court did not f

ind that any attempt to amend the compl aint would be fu t i l e

. The panel a lso held that when information
reg arding a d efendant that is necessary to establish diversity of citiz enship is not reasonably available to a plain t iff, the plaintiff should be permi t ted to p lead jurisdictional alleg atio n s a s to those defendants on information and belief and without affirmatively a sserting specific details reg arding the citiz e nship of those defendants.

COUNSEL

J ames K. T hurston, Melissa A. Murphy -Petros (arg ued)
, W ilson E l s er Moskowitz Edelman & Dicker L L P, Chicag o, I llinois, for Plaintiff-Appellant.

J onathan B

. Sokol, L os Ang eles, California, fo r D e fendantAppellee Team Equipment, I nc.

** T h is su m m ary co n stitu

t es n o p ar t o f t h e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.C A R O L I N A C A S

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OP INION

CL I F TON, Circuit J udg e :

This appeal concerns the sufficiency of allega t ions

r e quired to plead diversity jurisdiction under 28 U .S.C. § 1332. Plaintiff-Appellant Carolina Casualty I nsurance Co. (“Carolina”) filed suit asserting federal jurisdiction based on diversity a

nd thus bore the b ur d e n of establishing the diversity

. B efore the complaint was served, the district court dismissed it wi t h o u t leave to amend because Carolina h ad failed to alleg e the citiz enship of any of t h e members of the defendants that were limited liability compan i e s (“L L Cs”), had alleg ed that certain individual defendants w ere residents rather than citiz ens of a state, and had made its jurisdictional alleg ations on i n f

ormation and belief. Carolina then filed a proposed amended complaint. The court did not accept this complaint as sufficient b ecause Carol ina still pled its j u r i s d ictional alleg ations on information and belief and still failed to establish the citiz enship of some def e n d a nts, including the L L Cs.

W e reverse a

nd remand

. B ecause the district court did
not conclude that any amendment would be futile, it should have dismissed th e i n itial complaint with leave for Carolina
to amend it to correct, as far as possible, t h e d efective jurisdi ct i o nal alleg ations. F urthermore, the district court should not have dismissed the complaint for failure to plead alleg ations of citiz enship af f i rm atively and on knowledg e , rather than on information a nd belief, when the n e cessary information was not reasonably available to Carolina.C A R O L I N A C A S

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I. Background

Despite its n ame, Carolina is an insurance comp a n y incorporated in I owa and with its principal place of business in F lorida. Carolina issued a corporate liability and directors and o fficers’ liability i n s u rance policy to U.S. Dry Cleaning Corp. (“Dry Cleaning ”) tha t w a s effective b etween J anuary 2009 a nd J anuary 2 011. The policy ex cluded from coverag e losses “for which the I nsureds a re no t f i n ancially liable o r which are without leg al recourse to the I nsureds.”

Dry Cleaning purchased dry cleaning st o r es from Team Equipment, I nc. and two affiliated entities ( c o l lectively
, “Team E quipment”) in F eb r u a ry 2008. F or partial pay ment of the purchase price, Dry C l e a n ing issued notes to Team Equipment. Two y ears later, Team Equipment filed an action
ag ainst Dry Cleaning and certain of its officers, directors, a nd affiliated entities (collectively
, the “Underly ing Defendants”)
to enforce the notes. Team Equipment s e t t l ed its c laims
ag ainst Dry Cleaning in J u ne 2011 and a g reed to “limit the enforce m e n t o f any judg ment or award

. . . , including attorney ’s fees, solely to the pr o ce e d s of [ Dry Cleaning ’s] I nsurance Policy .” Team Equipment also released its c laims
ag ainst the Underly

ing Defendants.

Caro l i n a filed a complaint in the United States District Court f or the Central District of California a ga i n s t Team Equipment, Dry Cleaning
, and the other Underly ing Defendants for a declaratory judg ment that Carolina was not liable under Dry Cleaning ’s insurance poli c y

. Carolina alleg ed that, b ecause the defendants had ag reed to limit the

e n forcement of the judg ment to the proceeds from D r y Cleaning ’s insurance policy
, the settlement constituted a loss f or which there was no recourse to the I nsureds and w h i c hC A R O L I N A C A S

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was therefore outside the scope of coverag e. The asserted basis of jurisdiction was diversity of citiz e nship under 28 U.S.C. § 1332.

The district court dismissed the complaint, without prior notice to Carolina, seventeen day s after it was filed. Carolina had not y et served the c o mplaint, n o r h a d a ny of the defendants responded to it. The d istrict court ru led that Carolina had “not a dequately alleg ed t h e f acts essential for

. . . subject matter j u ri s d i ction.” F irst, the district court observed that two of the entit y defendants were L L Cs, but Carolin a had not alleg ed the citiz enship of the L L Cs b y alleg ing the citiz enship of their members. S e e Johnson v

. Columbia P rops. Anchorage, LP
, 437 F .3d 894, 899 (9th Cir. 2006) (“[ A] n L L C is a citiz en of ev e r y state of which its owners/members are citiz en s

. ”)

. I nstead, Carolina h ad alleg ed the states under whose laws the L L Cs were org a niz ed and where they had their principal places of business, as if the L L Cs were corporations. See 28 U.S.C. § 1332(c)(1). As to the individual d efendants, the district co u r t n oted that Carolina had alleg ed their states of r es i d ency and not their
states of citiz enship, as required f o r diversity jurisdiction. F inally
, the court ob s e rved that Carolina h ad made its alleg ations “on information and be l i e f ,” not on knowledg e , and held that this was insufficient to alleg e jurisdiction. The
court dismissed the complaint under F ederal Rule of Civil Procedure 12(h)(3), which p r ovides that “[ i] f the court determines a t any time that it lacks s u b ject-matter jurisdiction, the court must dismiss the action.”

Carolina filed a motion t o alter or a mend the judg ment under F ederal Rule of Civil Procedure 59(e )

. A s part of the motion, Carolina submitte d a proposed amended complaint. C a rolina advised the court in its moving papers that it w a sC A R O L I N A C A S

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unable to determine the citiz enship of the L L Cs, because their
org aniz ational filing s did not list their members. As a r esult, Carolina alleg e d simpl y t h at the members of the L L Cs were “citiz e ns of neither I owa nor F lorida.” As to the e ig ht individual defendants, C a r o l i na alleg ed that four of them

were citiz ens of California and that four of them were citiz ens of neither I owa nor F lorida. Carolina continued to make its alleg ations on information and belief but made clear that the basis for its alleg ations were the f our complaints or proposed complaints filed in the underly ing action.

The district court d e n i e d the motion for reconsideration and held that the proposed amended complaint also suffered from jurisdictional d efects. The d istrict court pointed o ut that C a r olina had n ot alleg ed the principal place of busine s s o f

one of the corporate defendants, USDC Tuchman I ndiana, I nc., and had simply stated that it was “unknown.” 1 The court faulted Carolina for not being able to specify the citiz e nship of the members of the L L Cs and held that it was insufficient
to alleg e simply that they were not citiz ens of I o w a o r

1 T h e orig in al co m

p l ain t also s u f

f ered f ro m th is p ro b lem
, alth o u g h th e d istrict co u rt did n o t ex p licitly po in t th at o u t in its f irst ord er. C aro lin a’ s

m o tio n f o r reco n sid eratio n stated th at in t h e u n d er l y i n g actio n th e

co rp o ratio n h ad b een id en tif ie d as “ a Calif

o rn ia co rp o ratio n w ith its

co rp o rate he a d q u arters in Calif orn ia bu t d oin g b u sin ess in th e State of Virg in i a.” N o tw ith stan d in g th e co m pan y ’ s n am e, th at sh o u ld h av e g iv en Caro lin a en ou g h to alleg e, at least o n in f o rm atio n an d b eli e f, t h at th e

co m pan y ’ s p rin cip al p lace o f b u s in ess w as i n Calif o rn ia. S ee Hertz Co rp

. v. Frien d
, 5 5 9 U.S. 7 7
, 9 2 –9 3 (2 0 1 0). Y et th e p ro p o sed am en ded

co m plain t su b m i tted w ith th e m otio n f or reco n sid eratio n alleg ed o n ly
, as th e d istrict co u rt n o t ed
, th at th e co rp oratio n ’ s p rin cip al p lace of b u sin ess

w as “ u n k n o w n ,” an alleg atio n th at is in su f f icien t. It w o u ld b e ap p ro p riate
to m ak e Caro lin a alleg e m o re th an “ u n k n o w n ,” b u t, as d iscu ssed b e l ow , th at i s a co rrectab le d ef

ect an d w o u ld n o t j u stif

y u ltim ate d ism issal o f th e actio n , u n less Caro l in a f

ailed to co rrect it.C A R O L I N A C A S

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Fl orida. A nd, the court a g ain rejected Carolina’s a ttempt t o plead jurisdictional alleg ations on information and belief.

Carolina a

ppealed, arg u i n g t hat the district court should
not have dismissed the c o mplaint or denied Carolina leave to amend.

II. Discussion

W e r e v iew a district court’s decision to dismiss a complaint f

or lack of subject-matter jurisdicti on de n ovo

. Carter v. Health Net of Cal., Inc.
, 3 74 F

. 3d 830, 833 (9th Cir. 2004). The district court’s decision to deny leave to amend a complaint is reviewed for abuse of d iscretion. Universal Mortg. Co. v. Prudential Ins. Co.
, 799 F .2d 458, 459 ( 9th Cir. 1986).

W e conclud e t h at the district court should not have dismissed Carolina’s orig inal complaint w ithout leave to amend, because it d id not find that any attempt to amend the complaint would be futile. I n ad d i t i on, because the in formation necessary to establish the diversity of the citiz enship of some of the d efendants was not reaso n a bly available to plaintiff, we conclude that the court should have permitted Carolina to p lead its jurisdictional alleg ations a s to those d efendants on information and belief and without affirmatively a sse r t i ng those defendants’ citiz enship. The diversity issues can be better considered by the court after the defendants have been served and had an opportunity to respond.C A R O L I N A C A S

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A. Dismissal without leave to amend

A complaint should not b e dismissed without l eave to amend u nless amendment would be futile. McQuillio n v. Schwarzenegger
, 369 F .3d 1091, 1099 ( 9th Cir. 2004). The
court should “freely

g ive leave” to amend a complaint when justice so requires. F ed. R. Civ. P. 15(a)(2).

I n dismissing the complaint, the court relied on the plain lang uag e of Rule 12(h)(3) and the proposition that “the subject matter of the district court is not a waivable matter.” Emerich v. Touche Ross & Co.
, 8 46 F

. 2d 1190, 1194 n.2 (9th Cir. 1988). B ut the district co u r t did not c onclude that amendment would be f

utile, nor d id it g ive a n y r eason that mig ht support such a conclusion. The defects in the orig inal complaint were not of a kind t h a t we re uncorrectable, if Carolina had or could obtain the n ecessar y information. A plaintiff should be permitted to amend a complaint to cure “technical” defects. Lopez v. Smith
, 203 F .3d 1122, 1129 (9th Cir. 2000) ( en banc). The technical defects in this case include alleg ing diversity jurisdicti on based on residency rather than c itiz enship, and fai l i n g to alleg e the principal place of business of a corporation.

Ev e n w h ere, as here, the district court entertained a motion for reconsidera t ion after deny ing the complaint, dismissing the complaint without leave to a men d w as still improper. The district court n o t e d that a motion for reconsideration is an “ex traordinary re m e dy
, to be used sparing ly .” Carroll v. Nakatani
, 3 4 2 F .3d 934, 945 (9th Cir. 2003) (internal quotation m a r k s o mitted). Even thoug h the

c ourt went on to c onsider Carolina’s new jurisdictio n al alleg ations, the a p p l ication of the Rule 5 9(e) standard could h ave affected the court’s decision to reject the p rop o s e dC A R O L I N A C A S

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amended complaint. At least in theory
, if perhaps not in practice in this case, that Rule 59(e) standard is much toug her than the Rule 15(a)(2) standard for g ranting leave to amend a complaint. I n its initial dismissal, the district court should have permitted Carolina t o a t tempt to cure the defects b y amending the complaint.

B. Pleading

jurisdiction when the

jurisdictio n a l

f a c t s are in the control of the opposing party

The n ovel issue presented by t h i s case is how a p laintiff
may alleg e diversity j urisdiction where the facts supporting jurisdiction a

re not reasonably ascertainable by the plaintiff. Carolina ex p lained in its motion for reconsideration that it had made efforts to determine the citiz e nship of the two L L Cs and four of the eig ht individual defendants but it was unable
to do so from publicly available information. T h e business filing s that Carolina submitted to the district court show that information necessary to d etermining the ci t i z e nship of the L L Cs could not be d etermined from the public f iling s of those companies. F urthermore, Carolina rep o r t ed that it was not able to alleg e the citiz e nship of some of the in d i v i d u al def e n d a n ts based on their r esidency
, as there was no information a

bout their residency in t h e underly ing complaints. 2 S

e e M o ndragon v. Capital One Auto Fin.
, 736 F

. 3d 880, 8 86 (9th Cir. 2013) (“[ A ] court should consider the entire r ecord to determine whether evidence of residency

2 If Caro l i n a i s u n ab le to d eterm in e th e resid en ce of th o se i n d iv id u al d ef en d an t s, it can b e an ticip ated th at serv in g a co m p lain t an d s u m

m o n s on th em m ig h t also p o se a p ro blem
, bu t th at p ro blem is n o t b ef o re u s at th is tim e. W e p resu m e th at Caro lin a m ay o b t ain th e in f o rm atio n it n eed s v ia d isco v ery f ro m th e d ef en d an ts it can lo cate.C A R O L I N A C A S

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can properly establish citiz e nship.” ( internal quotation marks omitted)).

Carolina made a showing that at least some of the information necessary to establish the diversity of the parties’ citiz enship was within the d efendants’ control a nd arg ued that it should have been ex cused from the g eneral r equirement that it must plead d iversity affirmatively a n d on knowledg e

. W e have a lready noted that in “unusual circumst a n ce s” a party n eed n ot affirmatively a lleg e the citiz enship of an opposing p arty

. Kanter v. W arner-Lambert Co.
, 265 F .3d 853, 857 (9th Cir. 2001). We conclude that in this situation it was sufficient f

or Carolina to alleg e simply that the defendants were d i verse to it. Relatedly
, we hold that Carolin a should have been permitted to plead its alleg ations

o n the basis of information and belief. See 5 Char l e s A l a n W r ig ht e t al., Federal Practice and Procedure: Federal Rules of Civil Procedure § 1 224 (3d ed., updated 2013) (noting that permitting alleg ations to b e pled o n information and belief “ is

a practical necessity ”); id. § 1 206 (observing that it would be “unduly restrictive ” to p revent a party from pleading jurisdiction on information and belief).

Other circuit courts h ave also adopte d the sensible principl e that, at this early stag e in the proceeding s, a party should not be required to p lead j u risdiction affirmatively based o n a ctual knowledg e. I n Medical Assurance Co. v

. Hellman
, 610 F .3d 3 71, 3 76 (7th Cir. 2010), the Seventh Circuit held that a plaintiff was per m i t t e d to plead on informati o n a n d belief that the defendants were citiz ens o f differ en t s tates. The defendants could not object that the plaintiff had not proven their citiz enship
, because they h ad

n o t p r offered any evidence rebutting the factual premise of the jurisdictional alleg ations. I d. I nstead, the court h e ld thatC A R O L I N A C A S

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the com p l a i nt could stand and the district court should reevaluate its jurisdiction if c on t r ary information emerg ed later. Id. I n Lewis v. Rego Co.
, 757 F

. 2 d 66, 68–69 (3d Cir. 1985), the Third Circuit h eld that three of the four defendants

were permitted to a lleg e in a removal petition “ on i nformation and belief” that the fourth defendant, w h o h a d
not joined the re m o v a l p etition, was “not a c itiz en o f Pennsy lvania,” and that thi s was “sufficient to establish diversity jurisdiction.”

The cases cited in the district court’s order do n ot support

a contrary conclusion. I n America’s Best Inns, Inc. v. B e st Inns of Abilene, L.P.
, 980 F .2d 1072, 1074 (7 t h C i r. 1 992) ( p e r c uriam), f

or ex ample, the Seventh Circuit held that a n affidavit o f citiz enship made “to the best of [ the plai n t i f f’s] knowledg e and belief” was insufficient to establish diversity jurisdi ct ion. B ut in remanding the case with instructions to dismiss, the court noted that the p arties had had “chance a fter

c h a n c e t o establish d iversity of citiz e nship.” Id

. Thus, the complaint was not d ismissed until after the plaintiff h ad served its complaint, the d efendant had a n s w e red, and the parties had been specifically reminded o f the need to establish diversity of citiz enship. Id. a t 1073–74. The approach of the Seventh Circuit d oes not support the district court’s d ismissal of the complaint without leave to amend.

The dis t r ict court also quoted the Supreme Court’s decision in Smith v. McCullough , 270 U.S. 456, 459 (1926), that “a plaintiff .

. . must show in his pleading , affirmatively and distinctly
, the ex istence of w hatever is essential to federal juris d iction.” B ut the d istrict court did not quote the end o f this sentence, in which t h e C ourt noted that a district court need not dismiss a defective complaint if “the d efect [ can] be corrected by amendment.” Id

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Carolina will be able to amend its complaint adequately if the defendants respond.

I f and when the d e f

endants respond to the complaint, the district c ourt can revisit t he jurisdictional alleg ations. I f the defendants deny that th e c o u rt has jurisdiction, the district
court should evaluate the r ecord created by the par ties to determine its jurisdiction. See Mondragon
, 736 F .3d a t 886. J urisdict i o n a l discovery may be appropriate. See Harris Rutsky & Co. Ins. Servs., I nc. v. Bell & Clements Lt d

. , 328 F .3d 1122, 1135 (9th Cir. 2003). Even if the defendants concede jurisdiction, the district court may still conclude that

some f u rt h er showing of citiz enship may be required to

c o n f i r m its jurisdiction. See Am.’s Best Inns
, 980 F .2d at 1074. B ut it should not be assumed at this stag e that a proper basis for jurisdiction cannot be established. 3

III. Conclusion

W e conclude that the orig inal complaint should not have been dismissed without leave to a mend. W e also hold that when information reg arding a defendant that is necessary to establish diversity o f citi z en s h ip is not r easonably available
to a plaintiff, the plaintiff shou l d b e p ermitted to plead jurisdictional alleg ation s a s to those defendants on information and belief and witho ut a ffirmatively asserting

3 It is, to be su

re, p o ssib l e th at n o n e o f th e d ef en d an ts, af

ter serv ice, w i l l

r e s p o n d t o t

h e co m p lain t. Giv en th e n atu re o f th is actio n an d th ese d ef en d an t s, th at seem s h ig h l y u n lik ely
, h o w ev er. W h at sh o u ld h ap p en in th at u n lik ely

ev en t is n o t a q u estio n

th at is b ef

o re u s.C A R O L I N A C A S

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specific details reg arding the citiz e nship of those d e fendants. The d iversit y issue is b etter addressed after the defendants have had an opportunity

to respond to the complaint.

REVERSED AND REMANDED.