Marc Rotenberg v. Politico LLC Seems Likely to Get Thrown Out of Federal Court

I blogged a few weeks ago about a COVID-related libel and privacy lawsuit by former Electronic Privacy Information Center head Marc Rotenberg against Politico, LLC, Protocol Media, LLC, and Robert L. Allbritton and Tim Grieve (who run Politico and Protocol). One of the things I noted was the possible jurisdictional problem: The lawsuit is in federal court on a "diversity of citizenship" theory, which doesn't work if plaintiff and any of the defendants share the same state citizenship ("state" here including D.C.); and both Rotenberg and, it appeared, Allbritton or Grieve or both were D.C. citizens.

A week ago, Judge Tanya S. Chutkan noted this problem, and ruled:

Plaintiff brings this diversity action against two corporate entities and two individuals. However, the venue, jurisdiction and parties sections of the Complaint do not set forth the facts necessary to establish that this court has jurisdiction pursuant to 29 U.S.C. Section 1332. Plaintiff has not alleged the states where the individual defendants are citizens. Additionally, Defendant has not alleged where Politico LLC has its principal places of business, nor where Protocol Media, LLC is incorporated or has its principal place of business. Accordingly, by May 5, 2021 Plaintiff shall file an Amended Complaint that contains the facts necessary for this court to establish jurisdiction.

Yesterday, Rotenberg's lawyer responded by voluntary dismissing the individuals, and refiling an Amended Complaint asserting that each LLC defendant is "a Delaware corporation." But as best I can tell, that was in error: They are indeed registered on the Delaware Department of State Division of Corporations site, but as LLCs, not as corporations.

"Unincorporated associations, including LLCs, have the citizenship of each of their members," which defeats diversity jurisdiction if any of them have the same citizenship as the opposing party. And the Notice of Removal in a different case against Politico—Patel v. Politico, LLC (E.D. Va. Nov. 26, 2019—notes that Politico LLC is indeed an LLC, and its members include several D.C. citizens. (That case was indeed eventually remanded to state court, precisely because it later turned out that plaintiff there was a D.C. citizen, as were some of Politico's members.) I'm pretty sure that defendants' lawyers will move to dismiss on jurisdictional grounds, and I don't see what Rotenberg's lawyer will be able to say in response.

Of course, Rotenberg's lawyer can re-file in D.C. Superior Court, but that would be mighty perilous: As I've suggested in my earlier posts (on the disclosure of private facts claim and the libel and false light claims), the lawsuit is likely to be an uphill battle. And D.C.'s anti-SLAPP statute makes matters perilous for plaintiffs with weak libel and privacy claims; that statute, like others in various states,

• allows early dismissal of lawsuits based on speech "in connection with an issue of public interest," if the court concludes that plaintiff's claim is legally unfounded;
• generally suspends discovery until the motion is resolved;
• requires expedited hearings and rulings in such cases;
• provides for immediate appellate review; and
• presumptively requires a losing plaintiff to pay the prevailing defendant's attorney fees.

I'm skeptical that Rotenberg will want to risk that, but I might be wrong.

Comments

[Dr. Ed 2]

""Unincorporated associations, including LLCs, have the citizenship of each of their members,"

Would that that then eliminate the benefits of being organized in Delaware? Or what would it do?

[kkoshkin]

"Would that that then eliminate the benefits of being organized in Delaware? Or what would it do?"

No, the LLC would retain the benefits of being organized in Delaware. Its internal affairs would still be governed by Delaware law, and it would have all of the flexibility and protection of Delaware law.

This quirk of LLC citizenship is for jurisdictional purposes only. It's purely procedural.

In fact, I think it gives LLCs (organized in any state, not just Delaware) a nice advantage. To get diversity-of-citizenship jurisdiction against an LLC, a plaintiff will need to know the LLC's members. (And if the members of an LLC include an LLC or a partnership, then the plaintiff would need to know the members or partners of those organizations. And so on and so on, until you get down to only corporations and individuals. It can get quite labyrinthine quite quickly.) The plaintiff will often not know these details.

This makes it very difficult to allege diversity of citizenship adequately. On the other hand, an LLC that wants to bring a diversity lawsuit in federal court will, of course, know its own organizational makeup. It can then plead the adequate jurisdictional allegations and sue in state court.

Sometimes a federal judge will allow jurisdictional discovery for the plaintiff to learn the LLC's members, but often judges take the position that the plaintiff comes to court bearing the burden to make jurisdictional allegations. And if the plaintiff can't carry their burden, then the case gets dismissed.

[mydisplayname]

Somewhere -- and I wish I could locate it -- there is an academic paper comparing LLCs to sharp knives, complete with many advantages and disadvantages. I've remembered the metaphor (but not the author) over the years: the comment by kkoshkin above is yet another excellent reminder.

[John F. Carr]

Does Virginia have an anti-SLAPP law? With defendants likely mixed between D.C. and Virginia that would be the other plausible venue.

[David Nieporent]

Not a very good one. If they did, Steven Biss's face would be bright red.

[Noscitur a sociis]

The complete diversity rule is among the most obviously incorrect holdings the Supreme Court has ever made, and it's a scandal that neither Congress nor the court has gotten around to fixing it.

[tkamenick]

Agreed, an LLC is an incorporated entity, period.

[Sidney r finkel]

Is it just me or is this an example of incompetent lawyering at its most incompetent?

[arch1]

NAL but I’m pretty sure the answer is: No.

[Eugene Volokh]

"At its most incompetent" is a pretty demanding standard. There's just so much competition, the bar is set very high.

[John F. Carr]

I would say merely bad lawyering. All that is on the table is dismissal for lack of jurisdiction. A truly incompetent bit of lawyering would earn a sanction.