Case 2:11-cv-10118-GHK-E Document 22

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1 KELLEY DRYE & WARREN LLP Michael J. O'Connor (STATE BAR NO. 90017) 2 Andrew W. DeFrancis (STATE BAR NO. 246399) 10100 Santa Monica Boulevard, Twenty-Third Floor 3 Los Angeles, California 90067-4008 Telephone: (310) 712-6100 4 Facsimile: (310) 712-6199 moconnor@kelleydrye.com 5 adefrancis@kelleydrye.com 6 Attorneys for Plaintiffs NZK PRODUCTIONS INC. and 7 HORIZON ALTERNATIVE TELEVISION INC. 8 9 10 11 12 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION CASE NO. CV11-10118 GHK (Ex) PLAINTIFFS RESPONSE TO THE COURTS JANUARY 20, 2012, ORDER TO SHOW CAUSE RE: SUBJECT MATTER JURISDICTION [Declaration of Andrew W. DeFrancis is filed concurrently herewith]

NZK PRODUCTIONS INC., a 13 California corporation, and HORIZON ALTERNATIVE TELEVISION INC., a 14 Delaware corporation, 15 16 v. Plaintiffs,

17 STEPHEN CARBONE, an individual, REALITY STEVE, LLC, a Texas 18 limited liability corporation, and DOES 1 through 10, inclusive, 19 Defendants. 20 21 22 23 24 25 26 27 28
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CV11-10118 GHK (Ex) PLAINTIFFS RESPONSE TO THE COURTS JANUARY 20, 2012, ORDER TO SHOW CAUSE RE: SUBJECT MATTER JURISDICTION

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Plaintiffs NZK Productions Inc. (NZK Productions) and Horizon

2 Alternative Television Inc. (Horizon Television; collectively, Plaintiffs) 3 respond to the Courts January 20, 2012, Order to show cause regarding subject 4 matter jurisdiction (the OSC). See Docket Entry No. (D.E.) 15 (OSC). 5 I. 6 Federal Jurisdiction Exists in the Present Action on Diversity Grounds Plaintiffs NZK Productions (a California corporation with its principal place

7 of business in Burbank, California) and Horizon Television (a Delaware corporation 8 with its principal place of business in Burbank, California) sued Defendants Stephen 9 Carbone (Carbone, a Texas citizen) and Reality Steve, LLC (the LLC, a Texas 10 limited liability company; collectively, Defendants) for, inter alia, intentional 11 interference with contracts between Plaintiffs and participants and/or crew members 12 of The Bachelor television series. D.E. 1 (Complaint) at 1-4, 11-14. 13 Plaintiffs filed this action in federal court pursuant to the basic diversity 14 jurisdiction statute, 28 U.S.C. 1332. Section 1332 provides that [t]he district 15 courts shall have original jurisdiction of all civil actions where [1] the matter in 16 controversy exceeds the sum or value of $75,000, and [2] is between: citizens of 17 different States. 28 U.S.C. 1332. 18 As alleged in the Complaint, Plaintiffs are both citizens of California,1 19 whereas neither of the Defendants are citizens of California. See D.E. 1 (Complaint) 20 at 3-4. In addition, Plaintiffs allege that they have suffered damages in an 21 amount to be proven at trial but in any case greater than $75,000. Id. at Prayer for 22 Relief, 1. 23 25 26 27 28
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At the time they filed the Complaint, Plaintiffs only knowledge concerning

24 the membership of the LLC was that Carbone was a member of the LLC and that the
1

For diversity purposes, a corporation may have dual citizenship: a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business. 28 U.S.C. 1332(c)(1).
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1 LLC was registered in Texas. See id. at 3 (Reality Steve, LLC is a Texas limited 2 liability corporation) and 4 (Carbone is and was a member and an agent of 3 Reality Steve, LLC). On January 20, 2012, the Court Ordered Plaintiffs to show 4 cause why this matter should not be dismissed for lack of subject matter jurisdiction, 5 indicating that [t]he Complaint does not properly allege the citizenship of Reality 6 Steve, a limited liability company. D.E. 15 (OSC) at p. 1. 7 II. 8 Reality Steve, LLC Is Registered in Texas and Has No Ties to California On January 20, 2012, the same day the Court issued the OSC, Defendants

9 Carbone and the LLC filed a Motion to Dismiss for Lack of Personal Jurisdiction 10 (the Motion), in which they provided additional information about the 11 membership of the LLC and the LLCs (lack of) ties to California. See generally 12 D.E. 12 (Motion). According to Defendants Motion and Carbones sworn 13 declaration in support of the Motion (the Declaration), Carbone holds ninety-five 14 percent (95%) of the membership units in Reality Steve, [LLC] and Yea! Network, 15 LLC holds the remaining five percent (5%). D.E. 12 (Motion) at p. 7; see id. 16 (Declaration at 5, 8). In other words, there are two members of the LLC: 17 Carbone and Yea! Network, LLC. 18 As set forth above, Carbone is a citizen of Texas. According to the Motion 19 and the Declaration, Yea! Network, LLC is a Nevada limited liability company. It 20 is registered to transact business and maintains an agent for service of process in 21 Nevada, Texas and New York. Yea! Network is not registered to transact business 22 and does not maintain an agent for service of process in California. D.E. 12 23 (Motion) at p. 7; see id. (Declaration at 9). Thus, neither of the members of the 24 LLC appears to have any ties at least for the sake of citizenship to California. 25 Moreover, according to the Motion and the Declaration, Reality Steve [LLC] 26 has no offices or employees in California, is not registered to do business in 27 California, has no agent for service of process in California, neither owns or leases 28 property in California, has no bank account in California, does not pay taxes in 298258.1.doc CV11-10118 GHK (Ex) 3
PLAINTIFFS RESPONSE TO THE COURTS JANUARY 20, 2012, ORDER TO SHOW CAUSE RE: SUBJECT MATTER JURISDICTION

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1 California, and has never done business with any California residents. D.E. 12 2 (Motion) at p. 7; see id. (Declaration at 10). 3 In short, the LLC is registered in Texas, neither of its two members appears to 4 have any ties for citizenship purposes to California, and the LLC itself has no ties 5 whatsoever to California. See D.E. 12 (Motion) at p. 7; id. (Declaration at 9-10). 6 III. 7 8 There is Evidence of Only One Member of Yea! Network, LLC, and She Does Not Appear to Be a Citizen of California Plaintiffs understand that, like a partnership, an LLC is a citizen of every

9 state of which its owners/members are citizens. Johnson v. Columbia Props. 10 Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006). Accordingly, after receiving the 11 Courts OSC and reviewing Defendants Motion, counsel for Plaintiffs contacted the 12 Nevada Secretary of State to determine the citizenship Yea! Network, LLC. See 13 Declaration of Andrew W. DeFrancis ISO Plaintiffs Response to OSC at 2-4. 14 However, according to the Nevada Secretary of State, Yea Network LLC 15 never became a limited liability company rather, that name was merely reserved 16 on February 20, 2007, and that reservation expired on May 20, 2007. Id. at 2, Ex. 17 A. Yea Networks, LLC, on the other hand, is presently registered in Nevada. Id. at 18 3, Ex. B. Given the fact that Yea Network LLC was never registered and that Yea 19 Networks, LLC is so registered, Plaintiffs believe that the reference to Yea 20 Network (as opposed to Yea Networks) in Defendants Motion is a 21 typographical error and that Yea Networks, LLC is the 5% owner of Reality Steve, 22 LLC. Id. 23 After visiting the Nevada Secretary of States website, emailing the Secretary 24 of State, and speaking on the telephone with a representative of the Secretary of 25 State, counsel for Plaintiffs learned that the Nevada Secretary of State does not 26 maintain a list of the members of Yea Networks, LLC. Id. at 4. However, the 27 Secretary of State does have a record of the managing member of Yea Networks, 28 / / /
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1 LLC Carolyn A. Marks who can be contacted at 220 E. Las Colinas Boulevard, 2 Suite C120, Irving, Texas 75039. Id. at 3, Ex. B. 3 Thus, the only known member of Yea Networks, LLC is an individual who 4 resides in Texas. While a person residing in a given state is not necessarily 5 domiciled there, and thus is not necessarily a citizen of that state (D.E. 15 (OSC) at 6 p. 2 (citation omitted)), the only available evidence suggests that Yea Networks, 7 LLC is a citizen of Nevada and/or Texas, but not California. 8 IV. 9 Complete Diversity Exists, and the Complaint Should Not Be Dismissed Plaintiffs NZK Productions and Horizon Television allege that they are

10 citizens of California. Plaintiffs further allege that Defendant Carbone is a citizen of 11 Texas. Finally, Plaintiffs allege that Defendant Reality Steve, LLC is a Texas 12 limited liability company that has two members: Defendant Carbone, a Texas 13 citizen, and Yea Networks, LLC, likely a citizen of Nevada and/or Texas. 14 Accordingly, there is complete diversity, and Plaintiffs Complaint should not be 15 dismissed.2 16 / / / 17 / / / 18 / / / 19 20 21 22 23 24 25 26 27 28
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As the Court is aware, diversity for purposes of subject matter jurisdiction differs from minimum contacts for purposes of personal jurisdiction. While Plaintiffs allege that neither Carbone nor Reality Steve, LLC are citizens of California, Plaintiffs allege that they both have minimum contacts with California such that they are subject to personal jurisdiction in the state. Thus, nothing stated herein contradicts Plaintiffs January 25, 2012, ex parte Application to Continue the Hearing Date on Defendants Motion by 60 days to Permit Jurisdictional Discovery and for an Order Permitting Plaintiffs to Conduct Such Discovery (the Ex Parte Application), which the Court granted on January 31, 2012. See D.E. 18 (Ex Parte Application) and D.E. 21 (Order granting Ex Parte Application).
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If the Court is dissatisfied by this showing, Plaintiffs respectfully request that

2 the Court permit them to conduct jurisdictional discovery on this issue pursuant to 3 the Courts January 31, 2012, Order granting Plaintiffs Ex Parte Application before 4 the Court dismisses this action. 5 6 DATED: February 1, 2012 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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KELLEY DRYE & WARREN LLP Michael J. OConnor Andrew W. DeFrancis By /s/ Michael J. OConnor Michael J. OConnor Attorneys for Plaintiffs NZK Productions Inc. and Horizon Alternative Television Inc.

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