Court Opinion

ID: 9324361
Source: CourtListenerOpinion
Date Created: 2022-12-12 00:01:05.617007+00
Date Added: 2024-06-11T17:14:54.648712
License: Public Domain

USCA4 Appeal: 21-1648      Doc: 32         Filed: 12/09/2022    Pg: 1 of 6

                                            UNPUBLISHED

                               UNITED STATES COURT OF APPEALS
                                   FOR THE FOURTH CIRCUIT

                                              No. 21-1648

        TEE FERAL GOLF, LLC,

                            Plaintiff - Appellant,

                     v.

        MJM GOLF, LLC; VIRGINIA ELECTRIC AND POWER COMPANY, d/b/a
        Dominion Virginia Power; 3G REAL ESTATE HOLDINGS, LLC,

                            Defendants - Appellees.

        Appeal from the United States District Court for the Eastern District of Virginia, at
        Norfolk. Raymond A. Jackson, Senior District Judge. (2:20-cv-00300-RAJ-DEM)

        Submitted: August 16, 2022                                   Decided: December 9, 2022

        Before NIEMEYER, WYNN, and RUSHING, Circuit Judges.

        Affirmed as modified by unpublished per curiam opinion.

        ON BRIEF: Richard S. Phillips, Sr., PHILLIPS LAW FIRM, P.A., Cape Charles,
        Virginia, for Appellant. Richard J. Cromwell, Benjamin L. Hatch, Norfolk, Virginia,
        Kenneth W. Abrams, MCGUIREWOODS LLP, Richmond, Virginia; Mark R.
        Baumgartner, Anne Catherine Lahren, Richard Hoyt Matthews, PENDER & COWARD,
        PC, Virginia Beach, Virginia; Clark J. Belote, Dennis T. Lewandowski, KAUFMAN &
        CANOLES, PC, Norfolk, Virginia, for Appellees.

        Unpublished opinions are not binding precedent in this circuit.
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        PER CURIAM:

               Tee Feral Golf, LLC (“Tee Feral”) sued MJM Golf, LLC; Virginia Electric and

        Power Company (“Dominion”); and 3G Real Estate Holdings, LLC (collectively,

        “Defendants”), alleging several causes of action under state law related to the sale and

        construction of a golf course located in Chesapeake, Virginia. Although the claims

        originated with CPM Virginia, LLC (“CPM”), CPM merged with Tee Feral 20 days before

        the current suit was filed. Defendants moved to dismiss the complaint for lack of subject

        matter jurisdiction, asserting that Tee Feral was improperly or collusively made to

        manufacture jurisdiction, in violation of 28 U.S.C. § 1359. Defendants also moved for

        attorney’s fees.

               After conducting jurisdictional discovery, the district court granted Defendants’

        motions for dismissal and attorney’s fees. The court ordered additional briefing on the

        amount of attorney’s fees; Tee Feral did not submit briefing on the issue of attorney’s fees

        but instead filed a motion to reconsider pursuant to Federal Rule of Civil Procedure 59(e).

        After the district court denied the Rule 59(e) motion, Tee Feral timely noted an appeal from

        the orders granting dismissal and attorney’s fees and denying the Rule 59(e) motion.

        Dominion requested that the district court pierce the corporate veil and award fees jointly

        and severally against Tee Feral’s sole member, Neil Wallace.              The court granted

        Dominion’s request and held Wallace jointly and severally liable for all attorney’s fees.

        Tee Feral did not file a notice of appeal from this order.

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               On appeal, Tee Feral contends that the district court wrongly applied 28 U.S.C.

        § 1359. Tee Feral further asserts that attorney’s fees were unwarranted and that the court

        should not have held Wallace jointly and severally liable. We affirm.

               With respect to the district court’s application of § 1359, whether the district court

        possessed subject matter jurisdiction is a question we review de novo. Burrell v. Bayer

        Corp., 918 F.3d 372, 379-80 (4th Cir. 2019). A district court may exercise diversity

        jurisdiction in cases that arise between citizens of different states where the amount in

        controversy exceeds $75,000. 28 U.S.C. § 1332. “For purposes of diversity jurisdiction,

        the citizenship of a limited liability company . . . is determined by the citizenship of all of

        its members.” Cent. W. Va. Energy Co. v. Mountain State Carbon, 636 F.3d 101, 103 (4th

        Cir. 2011). However, “[a] district court shall not have jurisdiction of a civil action in which

        any party, by assignment or otherwise, has been improperly or collusively made or joined

        to invoke the jurisdiction of such court.” 28 U.S.C. § 1359. Section 1359 is designed to

        prevent “jurisdiction . . . created by assignments of this kind, which are easy to arrange and

        involve few disadvantages for the assignor.” Kramer v. Caribbean Mills, Inc., 394 U.S.

        823, 828 (1969). “If a nominal plaintiff . . . has no stake in the outcome, if he is a real party

        in interest only in the narrow procedural sense of those words and his appointment was

        secured solely for the purpose of creating diversity of citizenship, the apparent diversity is

        pretensive.” Lester v. McFaddon, 415 F.2d 1101, 1106 (4th Cir. 1969). In other words, a

        person may not create diversity jurisdiction by “collusively assigning his interest in an

        action.” Mississippi ex rel. Hood v. AU Optronics Corp., 571 U.S. 161, 174 (2014).

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               “A defendant may challenge subject matter jurisdiction in one of two ways: facially

        or factually.” Beck v. McDonald, 848 F.3d 262, 270 (4th Cir. 2017). In a factual challenge,

        such as here, “the defendant argues that the jurisdictional allegations of the complaint are

        not true, providing the trial court the discretion to go beyond the allegations of the

        complaint and in an evidentiary hearing determine if there are facts to support the

        jurisdictional allegations.” Id. (cleaned up). In a factual challenge, “the presumption of

        truthfulness normally accorded a complaint’s allegations does not apply.” Id. (internal

        quotation marks omitted).

               Tee Feral asserts that § 1359 is inapplicable once it is established that diversity

        exists. However, when applying § 1359, courts seek to determine whether the parties’

        diversity was improperly or collusively made or joined. See Toste Farm Corp. v. Hadbury,

        Inc., 70 F.3d 640, 642-43 (1st Cir. 1995). Therefore, § 1359 assumes that the parties to a

        case are diverse, at least on paper. See Nat’l Fitness Holdings, Inc. v. Grand View Corp.

        Ctr., LLC, 749 F.3d 1202, 1203-04 (10th Cir. 2014) (noting that parties were facially

        diverse). Alternatively, Tee Feral contends that if we were to assume that Wallace changed

        his domiciliary to Florida, then CPM—an entity for which Wallace was also the sole

        member—was also a Florida domiciliary. Therefore, Tee Feral argues, its formation and

        merger with CPM is irrelevant to the inquiry, because CPM could have brought the claims

        itself. However, Wallace clearly believed that Tee Feral’s existence was necessary to bring

        the instant claims in federal court based on his formation of the company and its subsequent

        merger with CPM. “Such manufacture of federal jurisdiction was the very thing which

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        Congress intended to prevent when it enacted § 1359 and its predecessors.” Kramer, 394

        U.S. at 829.

               Moreover, we have reviewed the record and conclude that the district court’s § 1359

        analysis was sound. Tee Feral was formed after CPM obtained numerous unfavorable

        verdicts when litigating against Defendants in state courts for over a decade. Tee Feral’s

        formation and the initiation of the instant case appear extremely suspicious. Therefore, the

        district court did not err in dismissing for lack of subject matter jurisdiction. However,

        because a dismissal for lack of subject matter jurisdiction must be without prejudice, see

        S. Walk at Broadlands Homeowner’s Ass’n., Inc. v. OpenBand at Broadlands, LLC, 713

        F.3d 175, 185 (4th Cir. 2013) (noting when a court lacks subject matter jurisdiction,

        dismissal must be without prejudice because court lacks authority to adjudicate the claims),

        we affirm the dismissal of Tee Feral’s claims as modified to reflect that dismissal was

        without prejudice.

               Turning next to the district court’s award of attorney’s fees, we “review a district

        court’s grant of [attorney’s] fees for abuse of discretion, but review legal determinations

        de novo.” Legacy Data Access, Inc. v. Cadrillion, LLC, 889 F.3d 158, 168 (4th Cir. 2018).

        Our review of an attorney’s fees award is extremely deferential, however, and we will thus

        “only reverse such an award if the district court is clearly wrong or has committed an error

        of law.” Jones v. Southpeak Interactive Corp. of Del., 777 F.3d 658, 675 (4th Cir. 2015)

        (internal quotation marks omitted). As we have explained, our review of an attorney’s fees

        award is circumscribed because “we recognize that our review of the record, no matter how

        careful, cannot substitute for the district court’s close and intimate knowledge of the efforts

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        expended and the value of the services rendered.” Id. (internal quotation marks omitted).

        Tee Feral asserts that it acted in good faith in this matter, because it acted under the belief

        that a change of domicile was all that was necessary, regardless of motive. But if Tee Feral

        believed that a change of domicile was all that was necessary, CPM would have brought

        the suit. However, CPM merged into Tee Feral, and Tee Feral brought the instant case.

        Therefore, Wallace did not, as Tee Feral contends, solely change his domicile to bring a

        federal lawsuit through CPM. He changed his domicile, formed Tee Feral, merged it with

        CPM, and then brought a lawsuit. Tee Feral has thus failed to demonstrate that it acted in

        good faith, and, therefore, we conclude that the district court did not abuse its discretion.

               Finally, Tee Feral asserts that Wallace should not have been held jointly and

        severally liable for attorney’s fees. Because Tee Feral did not file a notice of appeal from

        the court’s order setting the award of attorney’s fees, we lack jurisdiction to consider this

        argument. See Fed. R. App. P. 4(a)(1)(A); Hudson v. Pittsylvania Cnty., 774 F.3d 231, 236

        (4th Cir. 2014).

               Accordingly, we affirm the district court’s orders. We dispense with oral argument

        because the facts and legal contentions are adequately presented in the materials before this

        court and argument would not aid the decisional process.

                                                                        AFFIRMED AS MODIFIED

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