# U ni te d S ta te s Co ur t of A pp ea ls
For the Eig hth Circu it

__ __ __ __ __ __ __ __ __ __ __ __ __ _

No. 1 4- 30 51

__ __ __ __ __ __ __ __ __ __ __ __ __ _

The Bran so n Lab el , Inc ., a Flo rid a Co rp or at io n

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

Ci ty of Bra ns on , Mis so ur i; Em pi re Di st ric t El ect ric Co .; HCW Devel op m en t Co m pa ny, L LC; HCW Priv at e Dev el op m en t, LLC; HCW Nort h, LLC

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

__ __ __ __ __ __
App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Weste rn Dis tri ct of M is so ur i - Sp rin gf ie ld

__ __ __ __ __ __

Su bm it te d: Feb ru ary 12 , 20 15
Fil ed : J ul y

17 , 20 15

__ __ __ __ __ __

Befo re RI LEY, Chi ef J ud ge , LOKE N and SMITH, Ci rcu it Ju dg es

.

__ __ __ __ __ __

SMI TH, Circ ui t J ud ge

.

The Bran so n Lab el

, In c., a Fl o r i d a c or po rat io n ("F lo rid a Bran so n Lab el "),

ap pe al s th e di st ric t co ur t's di sm is sa l of it s su it

. The di st ric t co ur t fo un d th at Fl or id a 1

The Hon or ab le Gary A. Fen ne r, Uni te d St at es Dis tri ct Ju dg e fo r th e W es te rn 1
Dis tri ct of M is so ur i.Bran so n Lab el co ll us iv el y m an uf act ur ed subj ect -m at te r juri sd ic ti on in vi ol at io n of 28

U.S.C. § 13 59

. Fl or id a Bran so n Lab el arg ue s th at th e di st ric t co ur t erre d by ad op ti ng
th e wro ng le ga l te st fo r de te rm in in g co ll us io n. Fu rth er, it arg ue s th at th e co rp or at e

act s l e a d i n g u p to th e co m m en cem en t of th is act io n were no t do ne to m an uf act ur e
di ve rs it y bu t wer e m ot iv at ed by leg it im at e b us in es s p ur po se s. We affi rm

.

I. Bac kg ro un d

Thi s act io n an d rel at ed act io ns in Mi ss ou ri st at e co ur t ch ro ni cl e th e de cad elo ng di sp ut e ov er own ers hi p of 27 acre s of la nd in Bran so n, M i ss ou ri. Fl or id a

B r a n s o n Lab el cl ai m s th at it ha s an un br ok en ch ai n of ti tl e to th is la nd th at c a n b e

tra ced ba ck to th e 19 50 s. Thro ug h a qu it cl ai m de ed

, th e la nd w a s pa ss ed fro m th e

or ig in al own ers to Tori

, In c. ("To ri" ). Tori was ad m in is tra ti ve ly di ss o l v e d

, an d

th ro ug h var io us qu it cl ai m tra ns act io ns , Pet er and Darl en e Rea acq ui red th e la nd

. In

19 92

, th e Rea s q u i t c l ai m ed th e de ed to th e Bran so n Lab el

, a Mi ss ou ri co rp or at io n ("M is so ur i Bran so n Lab el ") th at th ey own ed

. Fl or id a Bran so n Lab el was m erg ed wit h

Mi ss ou ri Bran so n Lab el

, th eref or e acq ui rin g th e own ers hi p in te res t in th e la nd

. Thu s,
Fl or id a Bran so n Lab el al le ge s th at th e Ci ty of Bran so n, Mi ss ou ri; th e Em pi re Dis tri ct

Elec tri c Co m

pa ny; HCW Dev el op m en t Co m pa ny, LLC; HCW Pri va te Dev el op m en t,

LL C; an d HCW Nor th

, LLC (co ll ect iv el y , "Ap pe ll ees ") in fri ng ed on it s pr op ert y rig ht s by br eak i n g gr ou nd on it s la nd on May 15

, 20 04

, to de ve lo p th e Bran so n

Lan di ng , a m ix ed -u se ret ai l, re si de nt ia l, an d e nt ert ai nm en t co m pl ex

.

In ad di ti on to Fl or id a Bran so n Lab el 's cl ai m , Dou gl as s Co ve rd el l al so cl ai m s

own ers hi p of th e di sp ut ed la nd

. Co ve rd el l's cl ai m to ti tl e ari se s fro m Tori 's qu it cl ai m

-2

-of th e de ed to hi m in 19 99

. Co ve rd el l's cl ai m of own ers hi p ha s sp ur red at le as t two 2

act io ns in th e Ci rcu it Co ur t o f Tan ey Co un ty. 3

Mar vi n E lf

an t, a busi ne ssm an livin g in Fl or id a, ha s fu nd ed Co ve rd el l's la wsu it s
th ro ug h h i s bu si ne ss es Nek om e, LLC ("Ne ko m e") an d ME Hol di ng s, LLC ("M E

Hol di ng s" ). Bo th Nek om e an d ME Hol di ng s are Dela ware LLCs, bu t Elfa nt ru ns th ei r

op erat io ns fro m hi s ho m e in Fl or id a. Elf a n t ' s i nv es tm en t in th e Co ve rd el l act io ns , ho wev er, su ffer ed se tb ack s in May, Ju ne , an d Aug us t 20 13

, whe n Mi ss ou ri st at e

co ur ts is su ed rul in gs ad ve rs e to Co ve rd el l's cla im of o wne rs hi p.

In th e sp rin g of 20 13

, th e Rea s en te red ne go ti at io ns wit h Elfa nt fo r Nek om e to

bu y Mi ss ou ri Bran so n Lab el

. On Ju ly 18

, 20 13 —af te r th e Co ve rd el l act io ns sustain ed

ne ga ti ve de ci si on s fro m th e st at e co ur ts —an or al ag reem en t was reac he d fo r Nek om e

to acq ui re Mi ss ou ri Bra n s o n La be l. In a m em or an du m to Elfa nt
, hi s ta x ad vi so rs
de sc rib e d " th e acq ui si ti on of th e st oc k of [Mi ss ou ri Bran so n Lab el ]" as be in g
"d eem ed by [Elf

an t] to be an im

po rta nt el em en t in th e le ga l st rat eg y to real iz e a

su cces s[ ] on [h is ] i n v es tm en t." The Rea s di d no t in it ia ll y co m pl y wit h th e or al

ag reem en t, an d El fan t h ad to su e th e Rea s t o s et tl e th e m at te r.

On May 2, 20 14

, Nek om e fin al ly acq ui red Mi ss ou ri Bran so n Lab el

. Onl y da y s
be fo re, Elfa nt so ug ht an d rece iv ed ad vi ce fro m hi s ta x ad vi so rs th at m erg in g Mi ss ou ri

Bran so n Lab el in to an ou t-o f-s ta te co rp or at io n wou ld be su ffi ci en t to av oi d Mi ss ou ri

st at e ta xe s on an y le ga l award th at m ig ht co m e fro m Mi ss ou ri Bran so n Lab el 's cl ai m

Iro ni cal ly, Co ve rd el l su ed th e Rea s in 20 14 al le gi ng th at th e Rea s th em se lv es 2

crea te d hi s com

pe ti ng cl ai m of

ti tl e whe n t he y

qu it cl ai m ed th e d eed to hi m th ro ug h
Mi ss ou ri Bran so n Lab el

, whi ch he al le ge d was th e m ere al te r eg o o f Tori

. Se e Co ver de ll v. Th e Bra ns on La be l, In c. , No. 14 22 -CC0 07 61 (Ci r. Ct

. St

. Lou is 20 14 ).

Se e Empi re Dis t. Co

. v. Dou gl as Co ver de ll

, No. 03 -CV-7 87 03 4 (Ci r. Ct

. 3

Tan ey Cn ty. 20 13 ); U.S. Ban k v. Co ver de ll

, N o

. 11 -AF-CC 00 24 4 (Ci r. Ct

. Tan ey Cn ty. 20 12 ).

-3

-to th e la nd

. On Ma y 8

, 2 0 1 4

, Nek om e be cam e th e so le m em be r in a ne wly fo rm ed

co m pa ny, Fl or id a Bran so n Lab el

. On May 9, N e k o m e m erg ed Mi ss ou ri Bran so n
Lab el in to Fl or id a Bran so n Lab el

, effe ct iv el y tra ns ferr in g th e fo rm er's le ga l cl ai m of

own in g th e di sp ut ed la nd to th e la tt er. A f ew da y s la te r on May 14

, 20 14

, Fl or id a

Bran so n Lab el fil ed th e in s t a n t su it in fed eral di st ric t co ur t as se rti ng di ve rs it y juri sd ic ti on on acco un t of it s Fl or id a ci ti zen sh ip an d th e A p p el le es ' Mi ss ou ri

ci ti zen sh ip s. Si nc e fil in g su it

, Elfa nt ha s ad m it te d th at th e on ly bu si ne ss act iv it y th at

Fl or id a Bran so n Lab el co nd uc ts in cl ud es "d ire ct in g an d ov ers eei ng th is la wsu it an d

a se co nd la wsu it pe rta in in g to th e [d is pu te d la nd ]

. . . ; co nf erri ng wit h an d di rect in g

c ou ns el in co nn ect io n wit h th e Bran so n Lab el Lawsu it s; rev ie win g an d rev is in g pl ead in gs , de cl arat io ns , an d ot he r co ur t pa pe rs in co nn ect io n wit h th e Bran so n Lab el

Lawsu it s; an d fu nd in g t he Bran so n Lab el Lawsu it s."

The App el le es m ov ed to di sm is s th e cas e fo r la ck of su bjec t-matte r juri sd ic ti on

un de r Fed eral R ul e of Ci vi l Pro ced ur e 12 (b )(1 ), an d th e di st ric t co ur t gr an te d th e

m ot io n. The co ur t fo un d th at Fl or id a Bran so n Lab el 's co rp or at e m an eu ve rs were do ne

to m an uf act ur e di ve rs it y in vi ol at io n of 28 U.S.C. § 13 59 ; fu rth er, th e co ur t fo un d th at

th e pu rp or te d ta x pu rp os e fo r m erg in g th e Mi ss ou ri an d Fl or id a Bran so n Lab el s was

m erel y pr et ex tu al to ob ta in in g di ve rs it y juri sd ic ti on

. In co m in g to th is co nc lu si on , th e
di st ric t co ur t ut il iz ed th e fo ll owi ng si x- fact or te st em pl oyed by co ur ts ou ts id e of th is

ci rcu it :

(1 ) w he th er th ere was no m in al or no co ns id erat io n in vo lv ed in th e

as si gn m en t; (2 ) whe th er th e as si gn ee ha d an y pr ev io us co nn ect io n to th e

as si gn ed cl ai m ; (3 ) whe th er th ere was a le gi ti mat e bu si ne ss reas on fo r th e as si gn m en t; (4 ) whe th er th e ti m in g of th e as si gn m en t su gg es ts it was

m erel y an effo rt to se cu re fed eral di ve rs it y juri sd ic ti on ; (5 ) whe th er th e

as si gn or ex erci se s an y co nt ro l ov er th e co nd uc t of th e li ti ga ti on ; an d (6 )
whe th er th e as si gn or ret ai ns an y in te res t in th e act io n su ch as rece iv in g
a p or ti on of t he ass ig ne e's reco ve ry

.

-4

-H

y t k e n Fa m il y Lt d. v. Sc ha ef

er , 43 1 F. Su pp

. 2d 69 6, 69 9– 70 0 (S.D. Tex

. 20 06 ) (ci ti ng Lo ng & Fos te r Rea l Es ta te , Inc . v. NRT Mid –At l., In c. , 35 7 F. Su pp

. 2d 91 1,

92 2– 23 (E.D. Va. 20 05 )). Afte r fi nd in g t ha t ea ch fact or weig he d a ga in st ex erci si ng

su bjec t-matte r juri sd ic ti on , th e d is tri ct co ur t d is m is se d t he cas e.

II. Dis cu ss io n
Fl or id a Bran so n Lab el arg ue s on ap pe al th at th e di st ric t co ur t's ad op ti on of th e
si x- fact or te st was im

pr op er be cau se it di d no t co ns id er th e to ta li ty of th e
ci rcu m st an ces

. Fu rth er, Fl or id a Bran so n Lab el arg ue s th at ev en if th e si x- fact or te st

was th e pr op er le ga l st an da rd

, th e te st weig hs in fav or of ex erci si ng su bjec t

- mat te r juri sd ic ti on

.

"We rev ie w de no vo th e gr an t of a m ot io n to di sm is s fo r la ck of su bjec t m at te r juri sd ic ti on un de r Ru le 12 (b )(1 )." Gre at Rive rs Hab it at All ia nc e v. Fed

. Emerg en cy Mgmt

. Age nc

y , 61 5 F.3 d 98 5, 98 8 (8 th Ci r. 20 10 ) (q uo ta ti on an d ci ta ti on om it te d)

. Fi rs t, "[a ] co ur t de c i d in g a m ot io n un de r Ru le 12 (b )(1 ) m us t di st in gu is h be twee n a
'faci al at ta ck ' an d a 'fact ua l att ack .'" Osb or n v. Uni te d St at es , 91 8 F.2d 72 4, 72 9 n.6 (8 th Ci r. 19 90 ) (q uo ti ng Men ch ac a v. Ch ry sl er Cr ed it Co rp

. , 61 3 F.2 d 50 7, 51 1 (5 th

Ci r. 19 80 )). In a faci al at ta ck

, "t he co ur t m erel y [n eed s] to lo ok an d se e if pl ai nt iff ha s

su ffi ci en tl y al le ge d a ba si s of su bjec t m at te r juri sd ic ti on ." Men ch ac a , 61 3 F.2 d at 51 1 (ci ta ti on om it te d)

. Acco rd in gl y , "t he co ur t res tri ct s it se lf to th e face of th e pl ead in gs

an d th e no n- m ov in g pa rty rece iv es th e sa m e pr ot ect io ns as it wou ld de fen di ng ag ai ns t

a m ot io n br ou gh t un de r Ru le 12 (b )(6 )." Osb or n , 91 8 F.2 d a t 7 2 9 n

. 6 (in te rn al

ci ta ti on s o m it te d)

.

Co nv ers el y , in a fact ua l at ta ck

, "t he ex is te nc e of su bjec t m at te r juri sd ic ti on [is

ch al le ng ed ] in fact

, irr es pe ct iv e of th e pl ead in gs , an d m at te rs ou ts id e th e pl ead in gs ,

s u c h a s t es ti m on y an d affi da vi ts
, are co ns id ered ." Men ch ac a , 61 3 F.2 d at 51 1 (ci ta ti on om it te d)

. Thu s, th e no nm ov in g pa rty wou ld no t en joy th e be ne fit of th e
al le ga ti on s in it s pl ead in gs b ei ng acce pt ed as tru e by th e rev ie win g co ur t. Se e

-5

-Has ti ng

s v. W il so n , 51 6 F.3 d 10 55

, 10 58 (8 th Ci r. 20 08 ) (s ta ti ng co ur ts m us t "ac cep t

al l fact ua l all eg at io ns in th e pl ead in gs as tru e" fo r fac ia l at ta ck s) . "Un de r 28 U.S.C.
§ 13 59

, whe th er an as si g n men t w as im pr op erl y m ad e to m an uf act ur e di ve rs it y juri sd ic ti on is a fact -in te ns iv e qu es ti on

. . . ." Na t'l Fit ne s s H o l d i n g s , I nc . v . Gr an d

View Co rp or at e Cen tr e, LLC

, 74 9 F.3 d 12 02

, 12 05 (1 0t h Ci r. 20 14 ). As a res ul t, th e

pa rti es in th is cas e su bs ta nt ia l l y de ve lo pe d th e reco rd

, an d th e di st ric t co ur t

co ns id ered ev id en ce ou ts id e th e sc op e of th e pl ead in gs

. Thu s, we co ns id er App el le es '

ch al le ng e un de r § 13 59 to be a fact ua l at ta ck in whi ch th e al le ga ti on s in Fl o r i d a

Bran so n Lab el 's c om

pl ai nt wil l n ot be ass um ed to be tru e.

Seco nd

, we m

us t de te rm in e th e pr op er st an da rd of rev ie w on ap pe al of fact ua l

is su es

. Se e Osb or n , 91 8 F.2 d at 73 0. "Tru e, we rev ie w th e ul ti m at e qu es ti on of

whe th er di ve rs it y juri sd ic ti on ex is ts de no vo

. Bu t we rev ie w th e di stri ct co ur t's fact ua l

fin di ng s un de r th e cl ear- erro r st an da rd

, an d whe th er an as si gn m en t pa ss es m us te r

un de r § 13 59 is a fact qu es ti on su bjec t to th at de fere nt ia l st an da rd ." Na t'l Fit ne ss , 74 9

F.3 d at 12 06 (in te rn al ci ta ti on s om it te d) ; se e al so E3 Bio fu el s, LLC v. Bio th an e, LLC

, 78 1 F.3 d 97 2, 97 5 (8 th Ci r. 20 15 ) ("[ W ]het he r di ve rs it y juri sd ic ti on was wro ng fu ll y

m an uf a c t u r e d th ro ug h as si gn m en t, is a qu es ti on of fact

, whi ch we rev ie w fo r cl ear

erro r."). 4

In Osb or n , we ad op te d th e ru le th at if th e ch al le ng e to su bje c t

- matt er 4 juri sd ic ti on is ba se d on "t he co m pl ai nt su pp le m en te d by un di sp ut ed fact s ev id en ced
in th e reco rd

, th e ap pe ll at e co ur t's rev ie w is ' l i mi t e d to de te rm in in g whe th er th e di st ric t co ur t's ap pl ic at io n of th e la w is co rrec t an d

. . . whe th er th os e fact s are in de ed

un di sp ut ed .'" 91 8 F.2 d at 73 0 (q uo ti ng W il li ams on v. Tu cker

, 64 5 F.2 d 40 4, 41 3 (5 th
Ci r. 19 81 )). Thi s ru le is in ap pl ic ab le to § 13 59 ch al le ng es be cau se whe th er a pl ai nt iff

co ll us iv el y m an uf

act ur ed di ve rs it y is al way s a qu es ti on of fact

. E3 Bio fu el s , 78 1 F.3 d

at 97 6; Na t'l Fit ne ss , 74 9 F.3 d at 12 06

. Thu s, th e di st ric t co ur t's fact ua l de te rm in at io n of whe th er a pl ai nt iff co ll us iv el y m an uf act ur ed d i v ers it y wil l be rev ie wed un de r a cl ear- erro r st an da rd

.

-6

-A. Fac to rs to Co ns id er in Ass ig nme nt

s C ha ll en ge d Un de r § 13 59

Fi rs t, we ad dr es s w he th er th e di st ric t co ur t erre d us in g a si x- fact or te st to

de te rm in e if a pa rty co ll ud ed to m a n u f a ct ur e di ve rs it y

. Thi s co ur t ha s se ld om

an al y zed § 13 59

, an d whe n we ha ve , it was in th e m at eri al ly di f f e r e n t c o nt ex t of

es ta te s or in

jure d pl ai nt iff

s ap po in ti ng ou t-o f-s ta te ex ecu to rs to pr os ecu te to rt act io ns
in fed eral co ur ts

. Se e, e.g

. , Rog er s v. Bat es , 43 1 F.2 d 16 (8 th Ci r. 19 70 ); To dd Cn ty

., Min n. v. Lo eg er in g , 2 97 F.2 d 47 0 (8 th Ci r. 19 61 ); McCo y v. Bla kel

y , 2 17 F.2 d 22 7 (8 th Cir . 19 54 ). Thu s, we s eek gu id an ce fro m pe rs ua si ve au th or it y

.

Fl or id a Bran so n Lab el arg ue s th at th e co r r ect le ga l st an da rd sh ou ld be a

co ns id erat io n of th e to ta li ty of th e ci rcu m st an ces

. The refo re, it arg ue s th at th e di st ric t

co ur t's si x- fact or te st is to o m ech an ic al

. W e di sa gr ee. The sta tem en t of a no ne xc lu si ve

an d no ne xh au st iv e li st of co ns id erat io ns do e s no t pr ecl ud e co ns id erat io n of al l

ci rcu m st an ces rel ev an t to a le ga l de te rm in at io n. The m ere li st in g of fact or s is no t as
li m it i n g a s so m e so -cal le d le ga l te st s. Iro ni cal ly, th e ve ry co ur ts th at ha ve us ed th e

ap pe lla nt' s fa vor ed "t ot al it y of th e ci rcu m st an ces " st an da rd co ns id er m an y of th e sa m e
fact or s us ed by th e di st ric t co ur t in th is cas e. Se e Na t'l Fit ne ss , 74 9 F.3 d at 12 05 –0 6;

Y ok en o v. Maf

na s , 97 3 F.2 d 80 3, 81 0 (9 th Ci r. 19 92 ). In Na t i o n al Fit ne ss , fo r

ex am pl e, th e Ten th Ci rcu it st at ed th at an an al y si s of § 13 59 tu rn s on "t he to ta li ty of

th e ci rcu m st an ces ." 74 9 F.3 d at 12 05

. Im m ed ia te ly th erea f

t e r, th e Ten th Ci rcu it

ou tl in ed se ve n fact or s to co ns id er, in cl ud in g th e fo ll owi ng : (1 ) "Di d th e as si gn ee la ck

a pr io r co nn ect io n wit h th e m at te r? "; (2 ) "Di d th e as si gn or se le ct th e as si gn ee's

at to rn ey a n d p a y th e as si gn ee's li ti ga ti on ex pe ns es ? "; (3 ) "Di d th e as si gn or ret ai n

co nt ro l of th e li ti ga ti on ? "; (4) "Di d t he as si gn ee ag ree to pa y th e as si gn or a po rti on
of an y reco ve ry ? "; (5 ) "Di d th e as si gn ee pr ov id e m ean in gf ul co ns id er a t io n fo r th e

as si gn m en t? "; (6 ) "Is th e as si gn m en t' s ti m in g su sp ic io us ? "; an d (7 ) "Was th e

as si gn m en t m ot iv at ed by a de s i r e to crea te di ve rs it y juri sd ic ti on ? " Id

. at 12 05 –0 6.

The se qu eri es do no t st rik e us as an ov erl y m ech an ic al , di sc ret io n- li m it in g te st th at

fai ls to co ns id er th e to ta li ty of th e ci rcu m st an ces

. Rat he r, Na ti on al Fit ne ss se em s to

si m pl y li st so m e fac tu al co ns id erat io ns th at sh ou ld no t b e o ve rlo ok ed when

-7

-de te rm in in g whe th er co ll us io n oc cu rred

. The se fact or s are th e pr od uc t of co nt ro ll in g

an d p ers ua si ve pre ced en t o f se ve ral well -rea so ne d o pi ni on s. 5

W e ne ed no t ad op t th e Ten th Ci rcu it 's pr eci se te st an d th us le av e th at qu es ti on
fo r an ot he r da y

. W he n co ns id eri ng "[t ]he ev id en ce as a who le ," Lo eg er in g , 29 7 F.2 d

at 47 4, we co nc lu de th at th e di st ric t co u r t ' s a na lysis su ffi ci en tl y ad dr es se d fact or s
rel ev an t to a d et erm in at io n o f whe th er an ass ig nm en t o f a le ga l clai m fu nc ti on ed as

p a r t o f a sc he m e to m an uf act ur e di ve rs it y juri sd ic ti on

. W hi le we do no t ad op t t h e
Ten th Ci rcu i t 's pr eci se li st of ci rcu m st an ces , we do co ns id er it s li st to be a he lp fu l

gu id e to th e so rts of fact s an d ci rcu m st an ces to be co ns id ered

. Thu s, di st ric t co ur ts

sh ou ld co ns id er fact or s su ch as th e fo ll owi ng whe n de te rm in in g whe th er an

as si gn m en t of a le ga l cl ai m is pr ecl ud ed fro m in vo ki ng di ve rs it y juri sd ic ti on un de r § 13 59 : (1 ) whe th er th e as si gn ee ha d an y pr ev io us co nn ect io n to th e as si gn ed cl ai m ; (2 ) whe th er th e as si gn ee ha s an y as se ts ot he r th an t he as si gn ed cl ai m an d ha s an y

Se e id .; se e al

so Kr ame r v. Ca ri bb ea n Mil ls

, In c. , 39 4 U.S. 82 3, 82 7– 28 5 (1 96 9) (co ns id eri ng pr ev io us co nn ect io n of as si gn ee to th e act io n, ex c ha ng e of

m ean in gf ul co ns id erat io n, an d ret en ti on of in te res t by as si gn or ); La nd Hol di ng s (S t. Th oma s) v. Meg a Hol di ng s , 28 3 F.3 d 61 6, 62 0 (3 d Ci r. 20 02 ) (co ns id eri ng ret en ti on of in te res t by as si gn or , un de rlyin g m ot iv e, an d ex ch an ge of co ns id erat io n) ; Air li ne s Rep or ti ng Co rp . v . S & N Tr av e l

, 5 8 F.3 d 85 7, 86 3– 64 (2 d Ci r. 19 95 ) (co ns id eri ng tim ing of as sig nm en t, ex ch an ge of m ean in gf ul co ns id erat io n, an d un de rl y ing m oti ve );
Ni ke, In c. v. Co mer ci al Ib er ic a de Excl us iv as Dep or ti va s, S.A.

, 20 F.3 d 98 7, 99 1 (9 th
Ci r. 19 94 ) (co ns id eri ng ti mi n g of as si gn m en t, pr eex is ti ng in te res t of as si gn ee,

un de rlyin g m ot iv e, an d ex ch an ge of m ean in gf ul co ns id erat io n) ; Y

ok en o , 97 3 F.2 d at 81 2 (co ns id eri ng un de rlyin g m ot iv e an d ex ch an ge o f m ean in gf ul co ns id erat io n) ; W es ti ng ho us e Cr ed it Co rp

. v. Sh el to n , 6 4 5 F

. 2d 86 9, 87 1 (1 0t h Ci r. 19 81 ) (co ns id eri ng u n d erl y in g m ot iv e an d th e ex ch an ge of m ean in gf ul co ns id erat io n) ; Rein ha rt Oil & Gas

, In c. v. Excel Dir ect io na l Tech s., LLC

, 46 3 F. Su pp

. 2d 12 40

, 12 45 (D. Co lo

. 20 06 ) (o ut li ni ng pr eced en t of "t ot al it y of ci rcu m st an ces " fac t o r s );
Lo ng & Fos te r , 35 7 F . Sup p. 2 d a t 9 22 –2 3 (s am e).

-8

-b u si ne ss fu nc ti on s ot he r th an pu rs ui ng th e li ti ga ti on ; (3 ) whe th er th ere was 6

mea n i ng fu l or m erel y no m in al co ns id erat io n fo r th e as si gn m en t; (4 ) whe th er th e
ti m in g of th e as si gn m en t su gg es ts i t was pr im ari ly ex ecu te d to se cu re fed eral

di ve rs it y juri sd ic ti on ; (5) whet he r th e as si gn or ret ai ns an y co nt ro l or in flu en ce ov er
th e co nd uc t of th e li ti ga t i o n o r t he as si gn ee's at to rn ey ; (6 ) whe th er th e as si gn or

ret ai ns an y in te res t in th e ou tc om e of th e li ti ga ti on ; (7 ) whe th er the as si gn m en t was

m ot iv at ed

, at l e a s t i n p a rt, by a de si re to crea te di ve rs it y juri sd ic ti on ; an d (8 ) th e

ex te nt th e pa rty as se rti ng di ve rs it y juri s d i c t i o n c an reb ut an y cl ai m of co ll us io n by

as se rti ng a le gi ti m at e bu si ne ss pu rp ose fo r the as si gn m en t. Bec au se th e di st ric t co ur t's

an al y si s cl os el y

m irr or ed th is li st of c on si de rat io ns , we fin d n o re ve rs ib le erro r.

B. App li ca ti on of

Fact or s
W e no w tu rn to th e ap pl ic at io n of th e ou tl in ed fact or s to th e i n s t a n t c as e.
Fl or i d a B r a n s o n Lab el arg ue s th at ev en if th e di st ric t co ur t art ic ul at ed th e co rrec t

le ga l s ta nd ard , it fai le d t o p ro pe rly adm in is te r it

.

"Th e bu rd en of es ta bl is hi ng th at a cau se of act io n li es wit hi n th e li m it ed juri sd ic ti on of th e fed eral co ur ts is on th e pa rty as se rti ng juri sd ic ti on

. . . ." Ark. Blu e
Cr os s & Blu e Sh ie ld v. Li tt le Roc k Ca rd io lo gy Cl in ic , P.A. , 5 51 F.3 d 81 2, 81 6 (8 th

Ci r. 20 09 ) (ci ti ng Ko kko ne n v. Gua rd ia n Li fe In s. Co

. of Am.

, 51 1 U.S. 37 5, 37 7 (1 99 4 )). Heig ht en ed sc ru ti ny co m po un ds th is bu rd en on Fl or id a Bran so n Lab el

be cau se it s as si gn m en t was m ad e be twee n cl os el y rel at ed bu si ne ss e n t i t i e s. Se e
Pru de nt ia l Oil Co rp

. v. Phi ll ip s Petr ol eu m Co

. , 54 6 F.2 d 46 9, 47 5 (2 d. Ci r. 19 76 ) ("Th e sc ru ti ny no rm al ly ap pl ie d to tra ns fers or as si gn m en ts of cl ai m s whi ch ha ve th e

Se e Gre at er Dev. Co

. of Co nn

. v. Amelu ng , 47 1 F.2 d 33 8, 33 9 (1 st Ci r. 19 73 ) 6 (fi nd in g th at di ve rs it y was co ll us iv el y m an uf act ur ed in vi ol at io n of § 13 59 whe re "t he
cl ai m whi ch is th e b as is of t hi s s ui t was th e on ly as se t tran sf erre d, and

, as far as t he

reco rd sh ows , th e on ly as se t of th e ne w co rp or at io n, whi ch ap pa ren tl y ha s no pa y ro ll

an d no ot he r act iv it ie s" ); se e al so To st e Far m C

or p. v. Had bu ry , I nc

. , 7 0 F.3 d 64 0,
64 5 (1 st Cir . 19 95 ).

-9

-effe ct of crea ti ng di ve rs it y m us t be do ub le d i n t h e c a s e of as si gn m en ts be twee n
rel at ed or a ffi li at ed co rp or at io ns

. . . .").

The Fi rs t Ci rcu it ad dr es se d a si m il ar si tu at io n d e a l i n g w it h a m erg er of a

co m pa ny in to a di ve rs e pl ai nt iff co m pa ny in To st e Far m

. In th at cas e, a co m pa ny th at

was a ci ti zen of Rh od e Is la nd br ou gh t su it in fed eral co ur t bu t la te r vo lu nt ari ly

di sm is se d it s cas e be cau se th ere was a la ck of fu ll di ve rs it y of ci ti zen sh ip

. 70 F.3 d at

64 1– 42

. A m on th la te r, th e Rh od e Is la nd co m pa ny was m erg ed in to a N e w Y or k

co m pa ny tha t was crea te d e arl ie r in th e y ear, tran sf erri ng al l of its as se ts to th e ne w

co m pa ny. Id

. at 64 2. The New Yor k co m pa ny t h e n b r o u gh t su it on e m on th la te r in

fed eral co ur t as se rti ng di ve rs it y juri sd ic ti on

. Id

. The Fi rs t Ci rcu it em ph as iz ed th at th e

mer g e d co m

pa ni es ha d on ly on e as se t of va lu e: th ei r le ga l cl ai m

. Id

. at 64 5

. Add it io na ll y , th e Rh od e Is la nd co m pa ny tra ns ferr ed a ba nk acco un t of ap pr ox im at el y $2 00 ,00 0 to t h e ne w co m pa ny, bu t th e co ur t di sm is se d th is as se t as a m ere "m ak eweig ht []." Id

. The ne wly fo rm ed co m pa ny al so ad m it te d th at th e m erg er was at le as t

pa rtl y m ot iv at ed by a des ire to en joy di ve rs it y juri sd ic ti on

. Id

.

Si m il ar to To st e Far m , th e reco rd in th is cas e rev eal s th at Mi ss ou ri an d Fl or id a

Bran so n Lab el s m erg ed pr im ari ly to in vo ke di ve rs it y juri sd ic ti on as pr os cri be d by
§ 13 59

. Fi rs t, Fl or id a Bran so n Lab el ha d no pr ev io us co n n e c t i o n t o th e as si gn ed

cl ai m

. The la ck of su ch a pr io r co nn ect io n cau se s Fl or id a Bran so n Lab el to res em bl e

an ou t-o f-s ta te ex ecu to r wit h no act ua l in te res t ot he r th an be in g th e ve hi cl e to in vo ke

di ve rs it y juri sd ic ti on

. Se e Lo eg e r i n g , 2 97 F.2 d at 47 3. Not ab ly, Fl or id a Bran so n
Lab el was crea te d on ly da y s be fo re th e in st an t act io n was f il ed

. Se e Amelu ng , 47 1

F.2 d at 33 9 (n ot in g th at a di ve rs e pl ai nt iff co m pa ny was fo rm ed an d as si gn ed a le ga l

in te res t m erel y

fou r ho ur s b efo re s ui t was fil ed ).

Seco nd

, ne it he r Mi ss ou ri no r Fl or id a Bran so n Lab el s ha s an y as se ts ot he r th an
th e le ga l cl ai m of own ers hi p to th e di sp ut ed la nd

. Thi s is m or e in di cat iv e of co ll us io n
th an ev en To st e Far m , in whi ch a n a d d i ti on al $2 00 ,00 0 was al so tra ns ferr ed in th e

-1 0-merge r be twee n co m pa ni es , y et th e co ur t st il l de em ed it as a "m ak e-wei gh t" in

co nt ex t. 70 F.3 d at 64 5. Add it io na ll y , El fan t ad m it te d th at Fl or id a Br a n s o n La b el 's

on ly bus in es s ac ti vi ty is l it ig at in g t he cu rren t an d a rel at ed act io n.

Thi rd

, th ere was no co ns id erat io n fo r th e as si gn m en t. At th e ti m e of th e m erg er,
Nek om e own ed bo th Bran so n Lab el s. Nek om e m erg ed t he two co m pa ni es wit ho ut gi vi ng an y co ns id erat io n to Mi ss ou ri Bran so n Lab el

. Bec au se th is was no t an arm sle ng th tra n sa ct io n, no co ns id erat io n was ne ces sa ry fo r th e m erg er. Elfa nt
, who

effe ct iv el y own ed Nek om e, si gn ed th e m erg er do cu m en ts on be ha lf of bo th Mi ss ou ri

an d Fl or id a Bran so n Lab el s. The la ck of co ns id erat io n an d an arm s- le ng th tra ns act io n
be twee n su bs id ia rie s on ly m ak es th e po ss ib il it y of co ll us io n to m an uf act ur e di ve rs it y

m or e li ke ly.

Fl or id a Bran so n Lab el arg ue s th at th e co ur t sh ou ld br oa d e n i t s v i ew of th e

tra ns act io n an d ta ke in to acco un t th e ne arl y y ear- lo ng ne go ti at io n wit h th e Rea s. Thi s

a r g u men t ha s no m eri t be cau se th e co ns id erat io n gi ve n to th e Rea s to acq ui r e
Mi ss ou ri Bran so n La be l is ou ts id e th e sc op e of th e as si gn m en t at is su e. Fl or id a

Bran so n Lab el it se lf ad m it s th at it s c h a i n of ti tl e co m es th ro ug h Mi ss ou ri Bran so n
Lab el

, th e co m

pa ny to whi ch th e Rea s qu it cl ai m ed th ei r de ed in 19 92

. Thu s, th e Rea s

are n ot th e ap pl ic ab le "as si gn or " o f th e le ga l i nt eres t at iss ue be cau se th ey ha ve no t

own ed an y in te res t in ov er two de cad es

. Fu rth er, th e sa le of Mi ss ou ri Bran so n Lab el

to Nek om e is on e tra ns act io n rem ov ed fro m Fl or id a Bran so n Lab el 's acq ui si ti on of

t he le ga l in te res t. The refo re, an y co ns id erat io n gi ve n to th e Rea s fo r th e sa le is n o t

rel ev an t to an an al y si s of th e effe ct iv e as si gn m en t of Mi ss ou ri Bran so n Lab el 's le ga l

in te res t t o F lo rid a Bra ns on Labe l t hr ou gh th ei r m erg er.

Fo ur th

, th e ti m in g of th e m erg er in rel at io n to th e co m m en cem en t of th e in st an t

cas e is su sp ic io us

. Afte r Nek om e acq ui red Mi ss ou ri Bran so n Lab el on May 2, 20 14

, Fl or id a Bran so n Lab el was crea te d on May 8. The Bran so n Lab el s were th en m erg ed

th e ne xt da y on May 9 , a nd Fl or id a Bran so n La b e l f i l e d th is act io n in fed eral co ur t

-1 1-by Ma y 14 . Th i s e x p e d i t e d ti m in g is ev en m or e su sp ic io us gi ve n th at th e ad vi ce of

Elfa nt 's ta x ad vi so rs —t ha t he m erg e Mi ss ou ri Bran so n Lab el i n t o a n ou t-o f-s ta te

co rp or at io n to av oi d Mi ss ou ri in co m e ta xe s— di d no t req ui re th at th e Bran so n Lab el s
be m erg ed in su ch ha st e. Mi ss ou ri Bran so n Lab el ha d no in co m e t o b e t a x e d a t th e
ti m e of Nek om e's acq ui si ti on ; an y po te nt ia l award fro m th e in ve rs e co nd em na ti on
li ti ga ti on wou ld arg ua bl y co m e se ve ral m on th s if no t se ve ra l ye a rs do wn th e li ne

. Als o, th e Uni te d St at es ta x co de al lo ws s ev eral m on th s fo r a co rp or at io n to el ect to

be co m e an S-Co rp or at io n— an ot he r pi ece of ad vi ce fro m Elfa nt 's ad vi so rs —an d st il l

ta ke ad va nt ag e of th e ta x ad va nt ag es of S-Co rp or at io n st at us fo r th at ta x y ear. Se e 26

U.S.C. § 13 62 ( b )

. Thu s, Fl or id a Bran so n Lab el ha s no t m et it s bu rd en to sh ow th at

th ere was a le gi ti m at e bu si ne ss reas on fo r it s ha st y m erg er wit h Mi ss ou ri Bran so n
Lab el ; al l of th e pu rp or te d ta x pu rp o s e s d i d no t req ui re su ch ex pe di ti ou s co rp or at e

man e u ve rs

. The on ly lo gi cal ex pl an at io n th at we can se e fo r th e hu rry was th at th e

ex pe di te d ti m el in e was ne ces sa ry co ns id eri ng th at th e te n- y ear st at ut e of li m it at io ns
th at ap pl ie s to Mi ss ou ri in ve rs e co nd em na ti on pr oc eed in gs was rap id ly ap pr oa ch in g.
Bec au se Fl or id a Bran so n Lab el al le ge d in it s co m pl ai nt th at App el le es br ok e gr ou nd

on th e Bran so n Land in g on May 15

, 20 04 , it ha d t o fi le it s ac ti on by May 14

, 20 14

, to en su re th at it was no t ou ts id e th e st at ut e of li m it at i o n s. Se e Mo

. Rev

. St at

. § 51 6.0 10 . I n ot he r wor ds , i t h ad to m erg e wit h Mi ss ou ri Bran so n Lab el as so on as
it di d t o b e ab le to fil e it s ac ti on at a ll in fed eral co ur t. 7

The fif th an d si xt h fact or s do no t carr y si gn ifi can t weig ht in th is pa rti cu la r cas e
be cau se th es e fact or s m eas ur e th e ex te nt th at th e as si gn or st il l co nt ro ls an d be ne fit s
fro m th e li ti ga ti on . I n th is cas e, th e as si g n o r

— Mi ss ou ri Bran so n Lab el —n o lo ng er

ex is ts

. W e ne ve rth el es s co ns id er th e in di rect co nt ro l th at N ek om e an d Elfa nt m ai nt ai n

Fo r th is fac t o r , w e al so co ns id er Fl or id a Bran so n Lab el 's fact ua l co nt en ti on 7
th at it s ex pe di te d m erg er was ne ces sa ry be cau se of th e ne arl y y ear- lo ng ne go ti at io n, de la y , an d ev en tu al acq ui si ti on of Mi ss ou ri Bran so n Lab el fro m t h e Rea s. W e
ap pr op ria te ly gi ve th is co nt en ti on it s pr op er weig ht in co ns id eri ng th e to ta li ty of th e ci rcu m st an ces

.

-1 2-ov er th e li ti ga ti on as pa rt of th e to ta li ty of th e ci rcu m st an ces

. Mo vi ng to th e se ve nt h

fact or , Fl or id a Bran so n Lab el de ni es an y m ot iv at io n to in vo ke di ve rs it y juri sd ic ti on

. 8

Fi na ll y , Fl or id a Bran so n La b e l at te m pt s to reb ut cl ai m s of it s co ll us io n to

m an uf act ur e di ve rs it y by hi gh li gh ti ng ad vi ce it rece iv ed fro m it s ta x ad vi so rs

. Elfa nt

us ed Nek om e to bu y Mi ss ou ri Bran so n Lab el be cau se it "was de em ed by [Elf an t] to

be an im po rta nt el em en t in t he le ga l st rat eg y to real iz e a su cces s[ ] on [h is ]

i n ve st m en t." Thu s, he as ke d hi s ta x ad vi so rs fo r th ei r "re co m m en da ti on s reg ar d i n g
whe th er it wou ld be ad vi sa bl e to reo rg a n i ze [Mi ss ou ri Bran so n Lab el ] ou ts id e th e
St at e of Mi ss ou ri." Co ns id eri ng th e pr es um pt io n of co ll us io n, as well as th e ot he r
ci rcu m st an ces th at swi ng in fav or of fin di ng co ll us io n, th e di st ric t co ur t di d no t err
in fin di ng th at th e ad vi ce o f Elfa nt 's tax ad vi so rs was a p ret ex tu al bu si ne ss pu rp os e

to m as k th e real in te nt io n of m an uf act ur in g d i v e r s i ty juri sd ic ti on

. Und er th es e
ci rcu m st an ces , we fin d n o e rro r in th e d is tri ct co ur t's di sm is sa l o f th is tax ad vi ce as
a "m ak e-wei gh t."

Fl or id a Bran so n Lab el al so arg ue s th at it m erg ed wit h Mi ss ou ri Bran so n Lab el

fo r th e le gi ti m at e bu si ne ss pu rp os e of ad m in is tra ti ve co n v e ni en ce. Thu s, be cau se
Elfa nt op erat ed ME Hol di ng s an d Nek om e fro m hi s ho m e in Fl or id a, Fl or id a Bran so n
Lab el arg ue s i t m ad e se ns e to in co rp or at e th e n ew co m pa ny in F lo rid a to cen tra li ze
th e op erat io ns of Elfa nt 's co rp or at io ns

. Thi s arg um en t, h o w e ve r, is se lf- de feat in g
be cau se bo th ME Hol di ng s an d Nek om e are Dela ware LLCs. Elfa nt fin ds no tro ub le

ru nn in g th es e ou t-o f-s ta te co m pa ni es fro m hi s ho m e in Fl or id a; si m il arl y , ru nn in g a
Mi ss ou ri co rp or at io n fro m a he ad qu art ers in Fl or id a wou ld ha ve pr od uc ed no bu rd en

Thi s ci rcu m st an ce ap pl ie s to ad m it te d m ot iv at io ns

. Se e, e.g

. , To st e Far ms , 70 8
F.3 d at 64 2, 64 5 (p art y as se rti ng juri sd ic ti on ad m it te d t h a t mer ge r was pa rtl y

m ot iv at ed by crea ti ng di ve rs it y juri sd ic ti on ). A co ur t's di sc ret io n to in fer th e pa rti es ' real m ot iv at io n fr om

th e to ta li ty of th e ci rcu m st an ces is a se pa rat e an al y si s.

-1 3-wha ts oe ve r. Si m il ar to th e "ad m in is tra ti ve co nv en ie nc e" arg um en t th at was reject ed

in To st e Far m , 70 F.3d at 6 42 , Flo rid a Bra ns on Labe l's arg um en t h as no m eri t. 9

III. Co nc lu si on
Fo r th e reas on s st at ed ab ov e, th e rel ev an t ci rcu m st an ces jus ti fy th e d i s t r i ct

co ur t's f i n d i n g th at Fl or id a Bran so n Lab el co ll us iv el y m an uf act ur ed di ve rs it y juri sd ic ti on fo r th e pu rp o s e o f br in gi ng th e in st an t act io n in fed eral co ur t.

Acco rd in gl y , we affi rm

.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

Acco rd in gl y , we ne ed no t ad dr es s an y of th e App el le es ' al te rn at iv e arg um en ts 9
fo r de feat in g su bjec t-matte r juri sd ic ti on in th is cas e, whi ch la rg el y ad dr es s th e m eri ts of th e cas e an d th e le ga li ty of Elfa nt ru nn in g hi s bu si ne ss es fro m hi s ho m e in Fl or id a.

-1 4-