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

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No. 1 6- 41 53

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Lit tl e Ott ers of Lo ve , LLC; E. Ham m on d M ered it h

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

ff s - Ap pe ll an ts

v.

Kail en Ro se nb erg ; Gl ob al Lov e Me rg ers , Inc ., do in g b us in es s as Kail en Lov e an d

Life Arch it ect s; The Lo dg e, 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 Dis tri ct of M in ne so ta - Mi nn eap ol is

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Su bm it te d: Octo be r 18 , 20 17 Fil ed : Fe br

ua ry 20 , 20 18 [Un pu bl is he d]

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Befo re WOL LMAN, BEAM, an d S HEPHERD, Circ ui t J ud ge s.

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PER CURI AM.

Lit tl e Ott ers of Lov e, LLC (Lit tl e Ott ers ), a n d E. H am m on d Mer ed it h (co ll ect iv el y pl ai nt iff

s) ap pe al th e di st ric t co ur t’s su a sp on te di sm is sa l of th ei r act io n 1

The Hon or ab le Ri ch ard H. Ky le
, Uni te d St at es Dis tri ct Ju dg e fo r th e Dis tri ct 1 of Mi nn es ot a.a ga in st Kail en Ro se nb erg , Glo ba l Lov e Mer ge rs , d/ b/ a Kail en Lov e an d Li f e A r c h i t e c ts (Lif

e Arch it ect s)
, an d The Lod ge , LLC (The Lod ge ) (co ll ect iv el y de fen da nt s) , for want of c om pl et e d iv ers it y

un de r 28 U.S.C. § 1 33 2( a). W e aff irm.

I. Back gr ou nd

Me redi th fir st m et Ro se nb erg in 20 12
, whe n he ret ai ne d he r pr of es si on al datin g

se rv ic e, Life Arch it ect s, t o a s s is t hi m in fin di ng a ro m an ti c pa rtn er. Alt ho ug h

un su cces sf

ul in 20 12 , Mere di th co nt ract ed wit h Li fe Arch it ect s ag ai n in Nov em be r 20 14 fo r a on e-year te rm

. W he n th e co nt ract ex pi red in Nov em be r 20 15
, Life
Arch it ect s se nt Mer ed it h a f in al in vo ic e, al on g wit h ei gh t po te nt ia l m at ch es

. In
Ja nu ary 20 16 , Mere di th ex pr es se d i nt eres t i n on e of th e ei gh t wom en . Becau se th e

co nt ract ha d e xp ire d, Ro se nb erg de m an de d a n a dd it io na l $1 00 ,00 0 fee t o a rran ge a

m eet in g. W he n Mer ed it h refu se d, Ro se n b e r g s u gg es te d th at Mer ed it h be co m e an in ve st or in he r ne w bu si ne ss —Th e Lod ge — in ret ur n fo r whi ch sh e wou ld in tro du ce Mer ed it h t o t he m at ch

.

The Lod ge was fo rm ed as an “ up sc al e on li ne si ng le s da ti ng cl ub ” on or aro un d
Decem be r 18
, 20 15

. Ro se nb erg al le ge dl y to l d Mer ed it h th at al th ou gh m il li on s of
do ll ars ha d al read y be en in ve st ed in The Lod ge , sh e ne ed ed an ad di ti on al in ve st m en t

to bu il d th e web si te

. Afte r ne go ti at io ns , Mer ed it h ag reed to in ve st $5 00 ,00 0 th ro ug h 2
hi s li m it ed li ab il it y co m pa ny, Lit tl e Ott ers , in ex ch an ge fo r a t w e n t y p e r cen t

m em be rs hi p in te res t. Und er th is ag reem en t, Lit tl e Ott ers was to be co m e on e of se ve n

m em be rs of The Lod ge

. Lit tl e Ott ers th erea fte r tra ns ferr ed $5 0,0 00 to The Lod ge on Feb ru ary 5 , 2 01 6, an d th e rem ai ni ng $4 50 ,00 0 s erv ed as a li ne of c red it to be sp en t

at th e d is cret io n o f The Lod ge ’s m an ag ers

.

Acco rd in g to th e ag reeme n t ’s “ Sch ed ul e of Mem be rs an d Perc en ta ge 2 In te res ts ,” Ro se nb erg ha d $ 74 ,76 5.4 5 i nv es te d i n Th e Lod ge

.
-2

-Mer ed it h th erea fte r si gn ed a co py of an am en de d an d res ta te d op erat in g

ag reem en t (ag reem en t) o n b e h a l f of Lit tl e Ott ers

. On Mar ch 18
, 20 16
, pl ai nt iff s’

at to rn ey se nt th e si gn ed co py of th e ag reem en t to Th e Lo d g e ’s at to rn ey , st at in g,

“ Att ach ed he ret o pl eas e fin d th e si gn at ur e pa ge s ex ecu te d by m y cl ie nt on be ha lf of
hi s Nev ad a LLC. Pl eas e ho ld th es e in tru st un ti l y ou ha ve ga th ered th e rem ai nd er of
th e si gn at ur e pa ge s fro m y ou r si de .” Ro se nb erg si gn ed th e ag reem en t on Mar ch 23
, 20 16 , and pro vi de d p la in ti ffs wit h a co py.

Su sp ect in g th a t R o s e n be rg was us in g hi s in ve st m en t fo r ex pe ns es rel at ed to Life Arch it ect s an d no t The Lod ge , Mer ed it h co nf ro nt ed he r ab ou t th es e co nc ern s on Mar ch 29
, 20 16

. Late r t ha t da y , Mer ed it h’s at to rn ey at te m pt ed to wit hd raw Lit tl e Ott ers ’ si gn at ur e pa ge , cl ai m in g th at be cau se The Lod ge ha d y et to co ll ect si gn at ur es fro m ev ery m em

be r, th e ag reem en t ha d no t be en fu ll y ex ecu te d. Pl ai nt iff s’ at to rn ey al so de m an de d a ret ur n of th e $1 13 ,14 4.8 0 th at Lit tl e Ott ers ha d ad va nc ed to The
Lod ge —m or e th an $3 0,0 00 of whi ch was te nd ered aft er Mer ed it h’s ex ecu ti on of th e
ag reem en t. The Lod ge refu se d to do so an d st at ed th at it wou ld ag ree to rel eas e Mer ed it h fr om

The Lo dg e in ex ch an ge for a pa y m en t o f $3 42 ,28 4.2 1.

Pl ai nt iff s fil e d a co m

pl ai nt in fed eral di st ric t co ur t, al le gi ng st at e-l aw cl ai m s fo r fr au dul en t an d ne gli ge nt m is rep res en ta ti on , un jus t en ric hm en t, br each of fid uc ia ry du ty, ci vi l th eft
, co nv ers io n, an d fai lu re to reg is te r Th e Lo dg e’s se cu rit ie s. As

am en de d, th e co m

pl ai nt as se rte d th at Mer ed it h is do m ic il ed in Fl or id a an d th at Lit tl e Ott ers is a Nev ad a li m it e d li ab il it y co m pa ny, wit h it s pr in ci pa l pl ace of bu si ne ss in
Las Veg as , Nev ad a. The co m pl ai nt al so al le ge d th at al l of th e de fen da nt s “ are ei th er

re s i d en ts of Mi nn es ot a, th ey are in co rp or at ed in Mi nn es ot a, an d/ or th ei r pr in ci pa l pl ace o f bu si ne ss is in Mi nn es ot a.” Am . Com pl . ¶ 4.

Upo n rev ie win g th e am en de d co m pl ai nt , th e di st ric t co ur t de te rm in ed th at pl ai nt iff s ha d fai le d to al le ge “ ‘w it h sp eci fic it y th e ci ti zen sh ip of th e pa rti es .’ ” Lit tl e Ott ers of Lov e, LLC, e t al . v

. K a il en Ro se nb erg , e t al
., No. 0: 16 -CV-0 11 42 -RHK-

-3

-SER, at 2 (Au g. 9, 20 16 ) (q uo ti ng Barc la y Sq ua re Pro ps

. v. Mi d w e s t S a v

. & Loa n

Ass ’n of Mi nn eap ol is
, 8 9 3 F.2 d 96 8, 96 9 (8 th Ci r. 19 90 )). The di st ric t co ur t al so

no te d th at th e ag reem en t st at ed th at Lit tl e Ott ers was a m em be r of th e Lod ge , whi ch
ha d th e effe ct of “ crea ti ng th e an om al ou s si tu at io n th at [Lit tl e Ott ers ] is on bo th si de s of th e cas e (as a Pl ai nt iff an d as a m em be r o f Th e Lo dg e)

. . . whi ch wou ld

au to m at ic al ly de feat di ve rs it y juri sd ic ti on .” Id

. at 4. Acco rd in gl y , th e di st ric t co ur t

co nc lu de d th at pl ai nt iff

s ha d no t ad eq ua te ly al le ge d th e ex is te nc e of juri sd ic ti on ov er th e cas e an d or de red pl ai nt iff s to sh ow cau se why th e act io n sh ou ld no t be di sm is se d
fo r la ck of s ub ject- m at te r juri sd ic ti on

.

Afte r rev ie win g pl ai nt iff ’s m em or an du m of la w in su pp or t of juri sd ic ti on an d
de fen da nt ’s res po ns e th eret o, th e di st ric t co ur t de te rm in ed th at Lit tl e Ott ers be cam e

a m em be r of The Lo d g e whe n Mer ed it h si gn ed th e ag reem en t on be ha lf of Lit tl e Ott ers an d Lit tl e Ott ers th erea fte r pe rfo rm ed un de r th e ag reem en t by pr ov id in g fu nd s
to The Lod ge

. Acco rd in gl y , it co nc lu de d th at be cau se Lit tl e Ott ers was on each si de
of th e cas e—a s a pl ai nt iff an d al so as a m em be r of Th e Lo dg e—d iv ers it y di d no t

ex is t.

II. Dis cu ss io n

W e rev ie w th e qu es ti on of su bjec t m at te r juri sd ic ti on de no vo an d th e fin di ng s
up on whi ch a di ve rs it y de te rm in at io n is b as ed fo r cl ear erro r. Alt im or e v. Mo un t
Mer cy Co ll ., 42 0 F .3d 76 3, 7 68 (8t h C ir. 2 00 5)

.

The di st ric t cou rt m

us t “ co ns id er whet he r it ha s su bjec t m at te r juri sd ic ti on in

e v e r y c as e.” Hart v. Uni te d St at es , 63 0 F.3 d 10 85
, 10 89 (8 th Ci r. 20 11 ). Th e pl ai nt iff be ars th e bu rd en of es ta bl is hi ng di ve rs it y juri sd ic ti on by a pr ep on de ran ce of
th e ev id en ce, an d th e di st ric t co ur t “ is free to weig h th e ev id en ce an d sa ti sf y it se lf as
to th e ex is te nc e of it s po wer to he ar th e cas e.” Osb or n v. Uni te d St at es , 91 8 F.2 d 72 4,
73 0 (8 th Ci r. 19 90 ) (q uo ti ng Mo rte ns en v. Fi rs t F e d

. Sav

. & Loa n Ass ’n, 54 9 F.2 d

-4

-88 4, 89 1 (3 d Ci r. 19 7 7 ) )

. The re is no “ pr es um pt iv e tru th fu ln es s at ta ch e[d ] to th e pl ai nt iff ’s al le ga ti on s, and th e ex is te nc e of di sp ut ed m at eri al fact s wil l no t pr ecl ud e th e tri al co ur t f

r o m ev al ua ti ng fo r it se lf th e m eri ts of juri sd ic ti on al cl ai m s.” Id

. (q uo ti ng Mo rte ns en , 54 9 F .3d at 8 91 ).

Div ers it y juri sd ic ti on ov er st at e-l aw cl ai m s ex is ts whe n th e am ou n t in

co nt ro ve rs y

ex ceed s $ 75 ,00 0 a nd th ere i s “ co m pl et e d iv ers it y

of c it iz en sh ip am on g th e li ti ga nt s.” One Po in t So ls ., LLC v. Bo rch ert , 4 86 F.3 d 34 2, 34 6 (8 th Ci r. 20 07 ) (ci ti ng 28 U.S.C. § 13 32 (a))

. “ Co m pl et e di ve rs it y of c i t i z en sh ip ex is ts whe re no de fen da nt ho ld s ci ti zen sh ip in th e sa m e st at e whe re an y pl ai nt iff ho ld s ci ti zen sh ip .”
Id . For p ur

po se s o f es ta bl is hi ng di ve rs it y , a li m it ed li ab il it y co m pa ny’ s ci ti zen sh ip
is th e ci ti zen sh ip of e ach of i ts m em be rs . Id.

The qu es ti on th en is whe th er Lit tl e Ott ers be cam e a m em be r of The Lod ge an d
th ereb y de st ro y ed co m

pl et e di ve rs it y

. Bec au se bo th si de s rel y on Mi nn es ot a la w in
th ei r br ie fs an d nei th er part y arg ue s th at th e la w of an y ot he r st at e sh ou ld ap pl y , we lo ok to Mi nn es ot a l a w to de te rm in e whe th er Lit tl e Ott ers en te red in to a bi nd in g
ag ree men t w i t h The Lod ge

. Alt ho ug h th e ex is te nc e of a co nt ract is ge ne ral ly a
qu es ti on fo r th e fact -fi nd er, whe n “ th e rel ev an t fact s are un di sp ut ed
, th e ex is te nc e of

a co nt ract is a qu es ti on of la w, whi ch th is co ur t revi ews de no vo .” TNT Pro p., Ltd.
v. Tri -St ar Dev el op ers LLC, 67 7 N.W.2d 9 4, 1 01 (Mi nn . Ct. Ap p. 2 00 4)

.

Lit tl e Ott ers arg ue s th at it s en try int o t he ag reem en t was co nd it io na l b ecau se

o f i t s d ire ct io n th at The Lod ge ho ld it s si gn at ur e pa ge s in tru st un ti l al l memb e r si gn at ur es were ob ta in ed

. Und er Mi nn es ot a la w, a pa rty to a co nt ract “ m ay co nd it io n hi s en try in to co nt ract rel at io ns as he se es fit [.]” Mas se e v. Gib bs
, 21 0 N.W

. 87 2, 87 4 (Mi nn

. 19 26 ). If a pa rty co nd it io ns it s in te nt to be bo un d up on th e si gn in g of a fo rm al

co nt ract , th en th ere is no co nt ract un ti l th at si gn in g ha s oc cu rred

. Id

. St at ed an ot he r
way , un ti l th e si gn in g of the co nt ract , “ th e m at te r rem ai ns in ne go ti at io n, an d e it he r
pa rty m ay wit hd raw.” Id

. If, on th e ot he r ha nd
, a p a r t y h a s “ as se nt ed to al l th e

-5

-es se nt ia l te rm s of th e co nt ract an d pr oc eed [s ] to pe rfo rm in rel ia nc e up on it
, th e m ere

refe ren ce to a fu tu re co nt ract

. . . wil l no t ne ga ti v e th e ex is te nc e of th e pr es en t, bi nd in g co nt ract .” Asb es to s Pro ds
., In c. v. Heal y Mec h. Co nt ract or s, I n c

. , 2 35
N.W .2d 80 7, 8 09 (Mi nn . 19 75 ).

Lit tl e Ott ers arg ue s th at th e ab se nc e of th e si gn at ur es of The Lod ge s’ ot he r

m em be rs co ns ti tu te d it s fai lu re to fu lfi ll a co nd it io n pr eced en t th at pr ecl ud ed th e fu ll

ex ecu ti on of th e ag reem en t an d pe rfo rce m ean t th at Lit tl e O t t e r s n e v er be cam e a

m em be r of The Lod ge

. It is un di sp ut ed
, ho wev er, th at Lit tl e Ott ers in ve st ed $5 0,0 00
in The Lod ge aft er ne go ti at in g th e te rm s of it s m em be rs hi p. It is al so un di sp ut ed th at it ad va nc ed ap pr ox im at el y $6 0,0 00 th ro ug h a li ne of cred it
, whi ch in cl ud ed ad va nc es of m or e th an $3 0,0 00 aft er Lit tl e O t t e r s ha d si gn ed th e ag reem en t. W e th us ag ree wit h th e di st ric t co ur t’s de te rm in at io n th at by ass en ti ng to th e m at eri al te rm s of th e

co nt ract wit h Th e Lod ge an d th erea fte r pr oc eed in g to pe rfo rm un de r th e co nt ract , pl ai nt iff s’ po st -ex ecu ti on in ve st m en t be li es th ei r co nt en ti on th at th ey ne ve r in te nd ed

to be bo un d by th e co nt ract

. Lit tl e Ott ers ’ m em be rs hi p in The Lod ge th us pr ecl ud ed
th e ex is te nc e of co m

pl et e di ve rs it y , an d so th e di st ric t co ur t di d no t err in di sm is si ng th e co m pl ai nt for want of ju ris di ct io n.

The jud gm en t i s af

fir m ed

.

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