Hedge Capital Investments Limited v. Sustainable Growth Group Holdings LLC , 593 F. App'x 937 ( 2014 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-13358
Non-Argument Calendar
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D.C. Docket No. 2:12-cv-14100-JEM
HEDGE CAPITAL INVESTMENTS LIMITED,
a company incorporated in England and Wales,
Plaintiff-Appellant,
SUSTAINABLE WEALTH INVESTMENTS (UK) LIMITED,
Sustainable Wealth Investments (UK) Limited, et al.,
Intervenor-Plaintiffs-Appellees,
versus
SUSTAINABLE GROWTH GROUP HOLDINGS LLC,
a Delaware corporation,
SUSTAINABLE GROWTH GROUP USA,
a Delaware corporation,
Defendants-Appellees.
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Appeal from the United States District Court
for the Southern District of Florida
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(December 4, 2014)
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Before ED CARNES, Chief Judge, WILSON and ANDERSON, Circuit Judges.
PER CURIAM:
Plaintiff Hedge Capital Investments Limited appeals the district court’s
decision granting summary judgment to defendants Sustainable Growth Group
Holdings LLC and Sustainable Growth Group USA. Hedge Capital contends, for
the first time on appeal, that the district court lacked subject matter jurisdiction to
adjudicate this case.
I.
This case is part of the fallout from a Ponzi scheme in Great Britain. The
basic facts are these: Sustainable Growth Group (UK) Limited1 duped British
investors into buying stakes in environmentally friendly farm projects in foreign
countries. SG Limited never developed the proposed farms. It simply paid off its
current investors by duping new investors into buying stakes in new bogus farm
projects in different locales. One of those duped investors was Hedge Capital.
From December 2011 to February 2012, Hedge Capital wired £1.83 million to one
of SG Limited’s affiliate companies so that it could invest in a development project
in Florida. The project was headed by the two defendants in this case, SG
Holdings and SG USA. The day after the last wire transfer, the United Kingdom’s
1
Because the Ponzi scheme involved using a host of companies with “Sustainable Growth”
or “Sustainable Growth Group” in their titles, we will distinguish those various companies by the
last part of their title, calling them “SG ______.” For example, we will refer to Sustainable
Growth Group (UK) Limited as “SG Limited.”
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Serious Fraud Office took possession of certain assets of SG Limited and placed
them in receivership. 2
Hedge Capital filed suit in federal district court against SG Holdings and SG
USA in March 2012. Its amended complaint raised seven claims, the gist being
that the £1.83 million Hedge Capital was duped into investing had been transferred
to the defendants and used to purchase land in Florida, yet the defendants refused
to recognize Hedge Capital’s ownership interest in that land. About a year after
the suit was first filed, the district court granted a motion to intervene by the
Receiver in charge of the various assets of SG Limited that were then in
receivership. The intervenor-complaint sought declaratory relief against Hedge
Capital. The requested relief would, among other things, enjoin Hedge Capital
from recovering proceeds that were fraudulently transferred to the defendants and
enter judgment in favor of the defendants on all of Hedge Capital’s claims. The
intervenor-complaint justified that relief in part on the ground that Hedge Capital
was a creditor in the receivership proceedings in the United Kingdom and was
therefore barred from trying to recover its money through litigation outside those
proceedings.
2
The entities placed in receivership included: (1) SG Limited, (2) Sustainable Wealth
Investments (UK) Limited, and (3) Sustainable Agroenergy PLC. The second and third
companies were affiliates owned by SG Limited. In fact, Sustainable Wealth was the company
to which Hedge Capital wired the £1.83 million. All three entities are now in liquidation.
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Two months later, the district court granted the defendants’ summary
judgment motion after determining that Hedge Capital had not produced any
evidence that it had made an agreement with the defendants before SG Limited and
its assets were placed in receivership. The order did not mention any ruling on the
Receiver’s intervening complaint. Nor did it specifically address Hedge Capital’s
pending motion for sanctions based on spoliation of evidence. The order did,
however, declare that: “This case is closed and all pending motions are denied as
moot.” (Capitalization omitted.) The final judgment, filed separately three days
later, granted judgment in favor of SG Holdings and SG USA, but did not mention
the Receiver or the intervenor-complaint.
After Hedge Capital filed its notice of appeal, this Court noted several
jurisdictional issues in this case. We issued an order directing the parties to
address three questions: (1) whether the district court’s order had resolved the
intervenor-complaint and what effect, if any, that had on the judgment’s status as a
final order under 28 U.S.C. § 1291; (2) whether the amended complaint’s failure to
allege the citizenship of all SG Holdings’ members created a defect regarding
subject matter jurisdiction under 28 U.S.C. § 1332; and (3) assuming the amended
complaint was defective, whether the defect could be cured by amendment or other
action. The initial response Hedge Capital filed was noncommittal about whether
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we had jurisdiction over the appeal. But the later brief that it filed took the
position that we lack subject matter jurisdiction. 3
I.
Complete diversity is an absolute requirement for a federal court to have
jurisdiction under 28 U.S.C. § 1332.4 See Cabalceta v. Standard Fruit Co., 883
F.2d 1553, 1557 (11th Cir. 1989). That requirement is not met “where there are
foreign entities on both sides of the action, without the presence of citizens of a
state on both sides.” Iraola & CIA, S.A. v. Kimberly-Clark Corp., 232 F.3d 854,
860 (11th Cir. 2000). That rule creates three issues of subject matter jurisdiction
here.
A.
The first two issues concern diversity between Hedge Capital and SG
Holdings. Hedge Capital is a British Corporation. SG Holdings, as a limited
3
In that brief, Hedge Capital also argues that, assuming the district court had subject matter
jurisdiction, it erred by entering summary judgment because (1) the court failed to expressly
address Hedge Capital’s pending motion for sanctions based on spoliation of evidence, which
could have led to the discovery of material disputed facts; and (2) the court “allowed belated
intervention” by the Receiver, but did not provide adequate time for discovery into potential
material facts in the Receiver’s possession. We cannot address those merits issues because
further factfinding is needed to resolve the threshold issue of subject matter jurisdiction. See
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95, 118 S. Ct. 1003, 1012 (1998). If on
remand the district court’s factfinding reveals that it does have subject matter jurisdiction over
Hedge Capital’s complaint, the district court may revisit those two non-jurisdictional issues.
4
That requirement cannot be satisfied by consent, stipulation, or waiver. See Mallory &
Evans Contractors & Eng’rs, LLC v. Tuskegee Univ., 663 F.3d 1304, 1304 (11th Cir. 2011);
MacGinnitie v. Hobbs Grp., LLC, 420 F.3d 1234, 1239 n.1 (11th Cir. 2005). So the defendants’
frequent references to the parties’ stipulations, and Hedge Capital’s failure to raise the issue
below, are irrelevant.
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liability company, is considered to be a citizen of every state and country of which
its members are citizens. See Rolling Greens MHP, LP v. Comcast SCH Holdings
LLC, 374 F.3d 1020, 1022 (11th Cir. 2004). That wrinkle raises two issues
relating to subject matter jurisdiction.
The first issue is that Hedge Capital’s amended complaint failed to allege the
citizenship of all the members of SG Holdings. It was required to do so under this
Court’s precedent. See Mallory & Evans Contractors & Eng’rs, LLC v. Tuskegee
Univ., 663 F.3d 1304, 1305 (11th Cir. 2011). If the evidence in the record were
clear that all of SG Holdings’ members were United States citizens, we could cure
the technical defect by allowing an amendment, 28 U.S.C. § 1653, but it is not
clear what the citizenship of all its members or even their identity is. Because the
diversity of the parties was not raised in the district court, there was no specific
factfinding about the identity or citizenship of SG Holdings’ members. The
snippets of the record that do reference SG Holdings’ membership create a muddy
picture. There is deposition testimony stating that the LLC has one member and
that he was a Florida resident. But there are also documents in the record
indicating that the LLC had a member residing in Hong Kong, as well as
deposition testimony indicating that the LLC had British members.
When a court of appeals discovers “a serious question regarding the factual
predicate for subject-matter jurisdiction, we should remand for a finding to resolve
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the jurisdictional question.” Belleri v. United States, 712 F.3d 543, 548 (11th Cir.
2013) (quotation marks and alterations omitted). Such factfinding is needed here
to resolve the membership of SG Holdings and its resulting citizenship for
purposes of diversity jurisdiction. 5
B.
The next issue concerns the lack of diversity between Hedge Capital and the
Receiver. The black letter rule for complete diversity tells us that the issue turns
on whether “there are foreign entities on both sides of the action.” Iraola, 232 F.3d
at 860. That does not mean, however, that we assess diversity by simply looking at
which parties fall on which side of the “v.” in the case name. Instead, we “look to
the true interest of the parties and the positions asserted by them before the district
court.” Weller v. Navigator Marine, Inc., 737 F.2d 1547, 1548 (11th Cir. 1984). If
two parties are nominally placed on the plaintiff’s side of the action, but have
opposing interests in the outcome of the case, we must realign those parties. See
City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313–14 (11th Cir.
2012); Griffin v. Lee, 621 F.3d 380, 388 (5th Cir. 2010). So when an intervening
5
In responding to this Court’s three jurisdictional questions, the defendants attached an
affidavit attesting that SG Holdings had one member who was a Florida resident. We are
generally limited to the record in determining subject matter jurisdiction. See Travaglio v. Am.
Exp. Co., 735 F.3d 1266, 1269 (11th Cir. 2013). Though we may have the authority to expand
the current record and consider the defendants’ affidavit, see Ross v. Kemp, 785 F.2d 1467,
1474–75 (11th Cir. 1986), doing so would not be appropriate given the conflicting evidence in
the record and the disagreement between the parties.
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plaintiff asserts claims against the original plaintiff, it does not matter that both of
them have been labeled as “plaintiffs.” See City of Vestavia Hills, 676 F.3d at
1313–14. The intervening plaintiff and the original plaintiff must be diverse. TIG
Ins. Co. v. Reliable Research Co., 334 F.3d 630, 633–35 (7th Cir. 2003).
The Receiver and the entities he represents are all British citizens for
purposes of diversity jurisdiction. So is Hedge Capital. And the Receiver’s
intervening complaint seeks a declaratory judgment against Hedge Capital, which
means they have opposing interests in the outcome of the case. The district court
therefore lacked jurisdiction to consider the intervening complaint.
The Receiver’s arguments against this conclusion are not persuasive. He
points out that his proposed intervening complaint included claims against the two
defendants, and it was the district court’s order that limited the intervening
complaint to claims against Hedge Capital. But that is irrelevant under our
precedent. All we consider is the parties’ interest in the outcome of the suit as it
exists before the court. See City of Vestavia Hills, 676 F.3d at 1313–14. The
Receiver also asserts that 28 U.S.C. § 1367(b) allows the district court to exercise
supplemental jurisdiction over the intervening complaint. But that argument is
foreclosed by the plain text of the statute, which states that:
In any civil action of which the district courts have original jurisdiction
founded solely on section 1332 of this title, the district courts shall not have
supplemental jurisdiction . . . over claims by persons . . . seeking to
intervene as plaintiffs under Rule 24 of such rules, when exercising
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supplemental jurisdiction over such claims would be inconsistent with the
jurisdictional requirements of section 1332.
28 U.S.C. § 1367(b). See TIG Ins. Co., 334 F.3d at 634–35. We must therefore
remand with directions that the district court dismiss the intervenor-complaint for
lack of subject matter jurisdiction.6
II.
A district court has no power to enter judgment if it lacks subject matter
jurisdiction. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94–95, 118
S. Ct. 1003, 1012 (1998). We therefore vacate the district court’s judgment and
remand the case for further proceedings. The district court should find the facts
necessary to identify the membership of SG Holdings and its resulting citizenship
for purposes of diversity jurisdiction and, if those facts establish jurisdiction, allow
an amendment of the complaint to allege those facts. The intervenor-complaint
should be dismissed without prejudice. See Stalley ex rel. U.S. v. Orlando Reg’l
Healthcare Sys., Inc., 524 F.3d 1229, 1232–33 (11th Cir. 2008) (“A dismissal for
lack of subject matter jurisdiction is not a judgment on the merits and is entered
without prejudice”). If the district court determines that it does have subject matter
6
Because the intervenor-complaint is due to be dismissed, we need not address the first
jurisdictional question we asked the parties, which was whether the district court’s failure to
explicitly mention the intervening complaint in its final judgment affects the finality of its order
for purposes of 28 U.S.C. § 1291.
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jurisdiction over the complaint, it may revisit the other issues raised in Hedge
Capital’s brief to this Court. See supra note 3.
VACATED, REMANDED IN PART, and DISMISSED IN PART.
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