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Sachdeva v. Cardone

United States District Court, D. Colorado

January 6, 2017



          CHRISTINE M. ARGUELLO United States District Judge.

         Currently before the Court is Defendant Richard Cardone's Rule 12(b)(1) Motion to Dismiss and to Compel Arbitration, which was filed on May 23, 2016. (Doc. # 24.) On June 9, 2016, Plaintiff Sandeep Sachdeva filed his opposition to Defendant's motion (Doc. # 41), to which Defendant replied on June 23, 2016 (Doc. # 43). For the reasons that follow, the Court grants Defendant's motion.

         I. BACKGROUND

         This matter involves a business dispute between two individuals. Plaintiff alleges that, in March 2013, he entered into a limited partnership agreement with Defendant, and Roaring Fork Advisors L.L.C. (“RFA LLC”)[1] to create Roaring Fork Advisors L.P. (“RFA LP” or “the Partnership”). (Doc. # 1 at 2 ¶ 5.) RFA LLC was designated as the general partner, and Plaintiff and Defendant were limited partners. (Doc. # 1 at 2 ¶ 5.) Plaintiff alleges that he “sought to make the Partnership a profitable business venture, despite [Defendant's] failure to assist him.” (Doc. # 1 at 3 ¶ 6.) Ultimately, Plaintiff's efforts were “unsuccessful.” (Doc. # 1 at 3 ¶ 6.)

         Plaintiff alleges that in his efforts to make the Partnership profitable, he personally paid the “normal operating expenses” of the Partnership. (Doc. # 1 at 3 ¶ 7.) As a result, the Partnership owed $4, 358, 941.00 to Plaintiff. (Doc. # 1 at 3 ¶ 7.) Prior to the failure of the Partnership, Defendant executed a guaranty “personally guarantee[ing] all amounts due and owing under the terms of the Partnership Agreement for his partnership share (14.5%) if [the Partnership] defaulted on any of its obligations.” (Doc. # 1 at 2 ¶ 6.)

         On January 11, 2016, the Partnership and Plaintiff sued Defendant in Colorado district court. (Doc. # 24-1.) Among the 17 causes of action, the eleventh claim alleges that Defendant breached the guaranty when he “failed and refused to perform the obligations required of him by the Guarantee (sic).” (Doc. # 24-1 at 32-33 ¶¶ 228-235.) The state court litigation is currently pending.

         On March 7, 2016, Plaintiff wrote a letter to the Partnership “demand[ing] satisfaction of the Partnership's legal obligations towards him within seven days.” (Doc. # 1 at 3-4 ¶ 8.) The Partnership responded on March 15, 2016, in a letter signed by Plaintiff as its Managing Partner, stating that it was unable to pay the alleged debt. (Doc. # 1-4.) However, in lieu of payment, the Partnership offered to assign its rights under Defendant's guaranty to Plaintiff. (Doc. # 1 at 4 ¶ 10.) Plaintiff accepted and, that same day, Plaintiff and the Partnership executed an assignment of the Guaranty. (Doc. # 1 at 4 ¶ 11.) Also that same day, Plaintiff filed this instant lawsuit, which asserts a single claim based on Defendant's alleged breach of the guaranty. (Doc. # 1.) Plaintiff asserts that this Court has subject-matter jurisdiction over the dispute under 28 U.S.C. § 1332. (Doc. # 1 at 2 ¶ 3.)

         In his motion to dismiss, Defendant challenges Plaintiff's assertion of subject-matter jurisdiction, arguing that Plaintiff “improperly manufactures diversity of citizenship where none exists” by assigning RFA LP's claims to himself and additionally that Plaintiff “cannot satisfy the amount in controversy requirement.” (Doc. # 24 at 1, 3.) Defendant also argues that the limited partnership agreement contains an arbitration provision that governs Plaintiff's claim under the guaranty. Plaintiff responds that he did not manufacture diversity of citizenship and has a legitimate business reason for the assignment in that he sought to “streamline the process of recovery by removing RFA LP, a non-operational, judgment-proof entity.” (Doc. # 41.)


         Dismissal pursuant to Federal Rule of Civil Procedure 12(b)(1) is appropriate if the Court lacks subject matter jurisdiction over claims for relief asserted in the complaint. Dismissal under Rule 12(b)(1) is not a judgment on the merits of the plaintiff's claims. Instead, it is a determination that the court lacks authority to adjudicate the matter. See Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir. 1994) (recognizing that federal courts are courts of limited jurisdiction and may only exercise jurisdiction when specifically authorized to do so). The burden of establishing subject- matter jurisdiction is on the party asserting jurisdiction. Basso v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974).

         Rule 12(b)(1) challenges generally take two forms: “ [t]he moving party may (1) facially attack the complaint's allegations as to the existence of subject matter jurisdiction, or (2) go beyond allegations contained in the complaint by presenting evidence to challenge the factual basis upon which subject matter jurisdiction rests.” Merrill Lynch Bus. Fin. Servs., Inc. v. Nudell, 363 F.3d 1072, 1074 (10th Cir. 2004) (quoting Maestas v. Lujan, 351 F.3d 1001, 1013 (10th Cir. 2003)); see also Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir. 2002). Here, Defendant makes a factual attack on subject matter jurisdiction. When reviewing a factual attack on subject matter jurisdiction, a district court does not presume the truthfulness of the complaint's factual allegations. Holt v. United States, 46 F.3d 1000, 1003 (10th Cir. 1995). A court has wide discretion to consider affidavits, other documents, and to conduct a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1). Id.[2]

         III. ANALYSIS

         Federal courts are courts of limited jurisdiction, empowered to hear only those cases authorized and defined in the Constitution which have been entrusted to them under a jurisdictional grant by Congress. Henry v. Office of Thrift Supervision, 43 F.3d 507, 511 (10th Cir.1994). This Court has diversity jurisdiction to hear cases where the parties are citizens of different states and the amount in controversy exceeds $75, 000, exclusive of interest and costs. 28 U.S.C. § 1332. If this Court lacks subject matter jurisdiction over this case, the Court must dismiss the case. Fed.R.Civ.P. 12(h)(3). “This rule is inflexible and without exception, requiring a court to deny jurisdiction in all cases where jurisdiction does not affirmatively appear in the record.” Reinhart Oil & Gas, Inc. v. Excel Directional Techs., LLC, 463 F.Supp.2d 1240, 1243 (D. Colo. 2006) (citations omitted).

         It is undisputed that this Court would lack jurisdiction over a case by RFA LP against Defendant because complete diversity would be lacking. Defendant, who is a resident of New York, is a limited partner of RFA LP. (Doc. # 1 at 2.) For diversity purposes, a partnership is a citizen of all states of which any of its partners are citizens. Carden v. Arkoma Assocs., 494 U.S. 185, 195 (1990). Thus, the citizenship of RFA LP would be both Colorado and New York and complete diversity would be lacking in a suit by RFA LP against Defendant, also a citizen of New York. On March 15, 2016, however, RFA LP ...

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