Rotenberg v. Politico LLC Dismissed on Jurisdictional Grounds

More than a year and a half after the briefing on the motion to dismiss in this case was complete, a decision has arrived: Judge Tanya Chutkan has held that the federal court lacks jurisdiction, because both plaintiff and some of the indirect members of the LLC defendant are D.C. citizens. To refresh readers' recollection, let me reprise my April 4, 2021 article on the subject, where I suggested this would happen:

As I've suggested in my earlier posts (on the disclosure of private facts claim and the libel and false light claims), the lawsuit by Marc Rotenberg—former head of the Electronic Privacy Information Center—against Politico and Protocol is likely to be an uphill battle. This of course raises the question: Will Politico and Protocol be able to take advantage of D.C.'s anti-SLAPP statute? 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.

Anti-SLAPP statutes are bad news for plaintiffs with iffy legal claims.

But wait: Though many federal courts have held that state anti-SLAPP statutes apply in federal lawsuits based on state tort claims, others have disagreed. And the D.C. Circuit, in an opinion by then-Judge Kavanaugh, held that the D.C. anti-SLAPP statute is a procedural rule that doesn't apply in D.C. federal district court. Rotenberg sued in that federal court, so he needn't fear the anti-SLAPP statute, right?

Not so fast! The lawsuit is in federal court on a "diversity of citizenship" theory—the claim is that plaintiff Rotenberg is domiciled in D.C. and defendants Politico LLC and Protocol Media, LLC are headquartered and "incorporated" in Virginia. But there are also two other defendants, Robert L. Allbritton and Tim Grieve, who run Politico and Protocol. And while their addresses are listed on the Complaint as being the same as the Virginia address of Politico and Protocol Media, my quick research suggests that they might be domiciled in D.C.

And if at least one of the defendants is a D.C. domiciliary, that means that there isn't complete diversity of citizenship between plaintiff and defendants, and thus no federal jurisdiction. The federal court would have to dismiss the case, and while Rotenberg could refile in D.C. Superior Court, the anti-SLAPP statute would apply there.

Nor can Rotenberg avoid this by refiling the lawsuit in federal court without the two individual defendants (who aren't really necessary defendants in any event). "For diversity jurisdiction to exist, no plaintiff may share state citizenship with any defendant," and "Unincorporated associations, including LLCs, have the citizenship of each of their members."

Contrary to what the Complaint says, Politico LLC and Protocol Media, LLC appear not to have been "incorporated," but to instead be, true to their names, LLCs; I checked on the Virginia State Corporation Commission's site, which showed each as a "Limited Liability Company." So if Allbritton, Grieve, or both are members of the LLCs, and if the member or members are D.C. residents, then the case would still be kicked out of federal court, and would have to be refiled in D.C. Superior Court.

I expect that, if my tentative research about Allbritton's and Grieve's D.C. residence is correct, the defendants will promptly move to dismiss on this jurisdictional ground; we should learn within a few weeks whether that indeed happens.

The two individual defendants were indeed dropped, but this was indeed insufficient; here's the court's decision yesterday:

On April 2, 2021, Plaintiff filed this action asserting diversity jurisdiction and naming four defendants: Politico, Protocol, Politico's and Protocol's Publisher Robert Allbritton, and Protocol's Executive Editor Tim Grieve.

On April 29, 2021, the court sua sponte ordered Plaintiff to "file an Amended Complaint that contains the facts necessary for this court to establish jurisdiction." On May 5, 2021, Plaintiff voluntarily dismissed Allbritton and Grieve from this action, and filed an Amended Complaint. Alleging the same five claims, Plaintiff again asserted diversity jurisdiction pursuant to 28 U.S.C. § 1332, claiming that he is a resident of D.C. and that Politico and Protocol are both incorporated in Delaware and have their principal places of business in Arlington County, Virginia.

When considering a motion to dismiss under Rule 12(b)(1) the court must "accept all of the factual allegations in the complaint as true," but it "may consider materials outside the pleadings."

Federal courts have limited jurisdiction and "may not exercise jurisdiction absent a statutory basis." A district court has subject-matter jurisdiction when the parties are diverse in citizenship and the amount in controversy exceeds $75,000 per plaintiff, exclusive of interest and costs. For diversity jurisdiction to exist, no plaintiff may share state citizenship with any defendant. The plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence.

It is well established that corporate citizenship is limited to corporations, and the citizenship of other entities, including limited liability corporations ("LLCs"), "depends on the citizenship of 'all the members.'" C.T. Carden v. Arkoma Assocs. (1990); CostCommand, LLC v. WH Administrators, Inc. (D.C. Cir. 2016) ("Unincorporated associations, including LLCs, have the citizenship of each of their members." When the sole member of an LLC is another LLC, "'the citizenship of unincorporated associations must be traced through however many layers of partners or members there may be' to determine the citizenship of the LLC" in question. Zambelli Fireworks Mfg. Co. v. Wood (3d Cir. 2010) (quoting Hart v. Terminex Int'l (7th Cir. 2003)); LaRoach v. Bridgepoint Healthcare, LLC (D.D.C. 2018).

Defendants argue that the court lacks subject matter jurisdiction because Plaintiff "fails to establish complete diversity among the parties to this case." They proffer that Politico and Protocol are LLCs, and the sole member of each is Allbritton LLC. As of May 5, 2021 [the filing date of the Amended Complaint, which was intended to cure the lack of diversity of citizenship in the original Complaint], six members of Allbritton LLC were D.C. residents.

Because Plaintiff and Defendants are both citizens of D.C., complete diversity does not exist among the parties, and this action cannot proceed under 28 U.S.C. § 1332.

Plaintiff'sargumentstothecontraryareunavailing.First,Plaintiffisincorrectinsofaras he claims that the rule for determining the citizenship of a corporation also applies to LLCs, or that the court can look "only to the membership of the "named party."As the court has explained, the determination of an LLC's citizenship is based on the "citizenship of each of their members."

Second, every case upon which Plaintiff relies to support the proposition that the court need not consider the citizenship of all members of an LLC to determine the citizenship of the LLC, actually agrees that the appropriate rule for determining the citizenship of an LLC is exactly as the court has stated it. Third, Plaintiff's reliance on Judge Ambro's concurrence in Lincoln Benefit Life Co. v. AEI Life, LLC (3rd Cir. 2015) and Justice O'Connor's dissent in Carden—cases in which both jurists expressed a preference for applying the corporation citizenship rule to other entities—does not provide this court leeway to contravene established precedent.

In an effort to salvage jurisdiction, Plaintiff requests that the court permit jurisdictional discovery, contending that "the leadership of Protocol were added as members of Allbritton LLC, after the initiation of the case," and "Allbritton LLC was formed at the time of the events that gave rise to this litigation." Plaintiff asks the court to continue exercising jurisdiction so Plaintiff may investigate "whether the timing of the addition of these members and the incorporation of Allbritton LLC was intended to frustrate jurisdiction in this matter." But even if the membership of the LLCs was changed to negate federal jurisdiction in this case, Plaintiff has not cited any authority demonstrating why that fact would allow the court to then exercise jurisdiction. Accordingly, the court will not grant Plaintiff's request for jurisdictional discovery.

You can see Rotenberg's side of the story in the opposition to the motion to dismiss.