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UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

Little Otters of Love, LLC, et al., Plaintiffs,

Civ. No. 16-1142 (RHK/SER) ORDER

v. Kailen Rosenberg, et al., Defendants.

This matter is before the Court sua sponte. Invoking diversity jurisdiction under 28 U.S.C. § 1332, Plaintiffs Little Otters of Love, LLC (“LOL”) and E. Hammond Meredith commenced this action against Defendants Kailen Rosenberg, Global Love Mergers, Inc., d/b/a Kailen Love and Life Architects (“KLLA”), and The Lodge, LLC (“The Lodge”), alleging claims for fraud, breach of fiduciary duty, misrepresentation, and similar causes of action. The Amended Complaint alleges that LOL is a Nevada limited liability company with its principal place of business in Las Vegas, Nevada, with Florida-resident Meredith as its majority member. (Am. Compl. ¶¶ 5-6.) It further alleges that Rosenberg is a Minnesota resident and that KLLA is a Minnesota corporation with its principal place of business in Eden Prairie, Minnesota. (Id. ¶¶ 7-8.) And, the Amended Complaint alleges that The Lodge is “a Minnesota limited liability company,” that Rosenberg is The Lodge’s majority member, and, “[u]pon information and belief, [that] all of The Lodge’s members are residents of Minnesota.” (Id. ¶¶ 7, 9.)

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Defendants responded to the Amended Complaint by moving to dismiss and/or compel arbitration of Plaintiffs’ claims. When reviewing that Motion, however, the Court noted several jurisdictional issues for which it directed further briefing. That briefing has now clarified that Meredith is domiciled in Florida, see, e.g., Yeldell v. Tutt, 913 F.2d 533, 537 (8th Cir. 1990) (citizenship determined by domicile, not residence), and that he is LOL’s only member, see, e.g., OnePoint Solutions, LLC v. Borchert, 486 F.3d 342, 346 (8th Cir. 2007); GMAC Commercial Credit LLC v. Dillard Dep’t Stores, Inc., 357 F.3d 827, 829 (8th Cir. 2004). But a continued sticking point is the citizenship of The Lodge. As previously noted, the parties have submitted a document styled as an “Amended and Restated Operating Agreement” (the “Agreement”) for The Lodge. (Rosenberg Aff. Ex. B.) Pursuant to that Agreement, LOL was to become one of several members of The Lodge in exchange for an investment of $500,000. (Id. at 10, 52.) The Agreement was signed by LOL via Meredith, its “manager” (id. at 50, 52), thereby suggesting that LOL is on each side of this case – as a Plaintiff and also as a member of The Lodge. This would defeat diversity jurisdiction. E.g., Lincoln Prop. Co. v. Roche, 546 U.S. 81, 89 (2005) (§ 1332 “require[s] complete diversity between all plaintiffs and all defendants”). Plaintiffs, however, contend that LOL never actually became a member of The Lodge. While acknowledging that LOL signed the Agreement, they note that when the Agreement was forwarded to The Lodge’s attorneys, it was sent with the following cover by e-mail: “Attached hereto please find the signature pages [on the Agreement] executed by [Meredith] on behalf of [LOL]. Please hold these in trust until you have gathered the -2-

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remainder of the signature pages from your side.” (Doc. No. 27-1 at 3 (emphasis added).) 1 This proviso, Plaintiffs argue, shows that LOL did not intend to be bound to the Agreement until after the remaining signatures had been gathered. (See Doc. No. 31 at 12-15.) And a short time later, LOL “withdrew” its signature before these other signatures had in fact been obtained. (Id.) According to Plaintiffs, this means LOL never entered into the Agreement and, hence, never became a member of the Lodge, and thus diversity exists. To be sure, courts have recognized that a party may condition its assent to an agreement on the occurrence of a future event. Indeed, the Minnesota Supreme Court recognized this principle nearly 100 years ago. See Massee v. Gibbs, 210 N .W. 872, 874 (Minn. 1926) (“One may condition his entry into contract relations as he sees fit, resorting even to absurdity if he chooses. . . . Until [the condition] is fulfilled, the matter remains in negotiation, and either party may withdraw.”). Hence, there is superficial appeal to Plaintiffs’ argument. But upon closer scrutiny, the argument collapses. It is undisputed that in exchange for becoming a member of the Lodge, LOL was to invest $500,000. LOL argues that it did not assent to be bound despite signing the Agreement because it asked that its signature be held in trust pending the collection of all additional signatures. But it is undisputed that after LOL executed the Agreement, it tendered more than $20,000 of its investment set forth in the Agreement. (Wassgren

1

The remaining signatures were from persons who appear to be Rosenberg’s family members and friends, who were also to become members of The Lodge. -3-

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Decl. Ex. D.) This undermines the argument that LOL did not intend to be bound at the time it executed the Agreement. As Defendants correctly note, a contract is formed when parties “exchange bargained-for promises, manifest mutual assent to the exchange, and support their promises with consideration.” In re Disciplinary Action Against Riehm, 883 N.W.2d 223, 230 (Minn. 2016) (emphasis added) (citing Restatement (Second) of Contracts § 17 (1981)). Assent to a contract can come in many forms; it is not limited to a signature. Id. (“Generally, neither a signature nor a writing is required to make a contract binding.”). This is because Minnesota 2 follows the “objective theory of contract formation, under which an outward manifestation of assent is determinative, rather than a party’s subjective intent.” TNT Props., Ltd. v. Tri-Star Developers LLC, 677 N.W.2d 94, 102 (Minn. Ct. App. 2004). Thus, when parties have assented to the material terms of a contract and then proceed to perform under the contract, a valid agreement has been formed. In re Riehm, 883 N.W.2d at 230. That is precisely the case here. And perhaps most notably, Plaintiffs do not really argue otherwise. Indeed, Defendants raised this argument in their Reply in support of their Motion to Dismiss, but when the Court subsequently asked the parties for additional briefing on jurisdiction, Plaintiffs nowhere addressed the argument concerning LOL’s after-the-fact investment. That absence is telling and, in the Court’s view, suggests Plaintiffs recognize that LOL’s post-execution investment under the Agreement

2

The Agreement is governed by Minnesota law (see Rosenberg Aff. Ex. B at 46), and the parties rely on Minnesota law in their briefs, see, e.g., BBSerCo, Inc. v. Metrix Co., 324 F.3d 955, 960 n.3 (8th Cir. 2003) (forum law applies where neither party raises a conflict-of-law issue). -4-

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belies its contention that it never intended to be bound. Federal courts are of limited jurisdiction, and hence the diversity statute must be strictly construed. E.g., Janzen v. Goos, 302 F.2d 421, 424 (8th Cir. 1962). A party invoking the Court’s jurisdiction bears the burden of demonstrating jurisdiction exists, and where, as here, jurisdiction has been challenged, it bears the burden of doing so by a preponderance of the evidence. See Moore v. Kan. City Pub. Sch., 828 F.3d 687, 691 (8th Cir. 2016); Yeldell, 913 F.2d at 537; Janzen, 302 F.2d at 424. For the reasons set forth above, the Court concludes Plaintiffs have not satisfied that burden here. As a result, diversity jurisdiction is lacking and this action must be dismissed. Based on the foregoing, and all the files, records, and proceedings herein, IT IS ORDERED that this action is DISMISSED WITHOUT PREJUDICE for lack of subject-matter jurisdiction. All pending Motions are DENIED AS MOOT. LET JUDGMENT BE ENTERED ACCORDINGLY.

Dated: October 7, 2016

s/Richard H. Kyle RICHARD H. KYLE United States District Judge

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