Carolina Cas. Ins. Co. v. Team Equip., Inc.

A district court should not dismiss an original complaint without leave to amend when it does not find that an attempt to amend would be futile; when a plaintiff needs additional information to establish diversity of citizenship for federal jurisdiction diversity, the plaintiff is allowed to plead jurisdictional allegations based on information and belief.

This action arose out of Carolina-Casualty Insurance Co. (“Carolina”) asserting federal diversity jurisdiction. Carolina’s initial complaint was dismissed by the district court before the complaint was even served because: (1) Carolina failed to allege diversity of citizenship of the members of the limited liability companies being sued, and (2) Carolina had “alleged that certain individual defendants were residents rather than citizens of a state, and had made its jurisdictional allegations on information and belief.” Carolina modified its complaint and subsequently filed a proposed amended complaint. The district court did not accept the proposed amended complaint either because “Carolina still pled its jurisdictional allegations on information and belief and still failed to establish the citizenship of some defendants….” The Ninth Circuit held that the district court erred in dismissing the complaint because “it did not conclude that any amendment would be futile.” The district court should have allowed Carolina a chance to amend the initial complaint to address “the defective jurisdictional allegations.” Additionally, the panel held that the district court was unreasonable in dismissing the complaint “for failure to plead allegations of citizenship affirmatively and on knowledge, rather than on information and belief” because the information necessary to plead on knowledge was “not reasonably available to Carolina.” It is unreasonable for a court to expect a plaintiff at such an early stage in the proceeding to “plead jurisdiction affirmatively based on actual knowledge.” A plaintiff should be allowed to “plead jurisdictional allegations as to those defendants on information and belief and without affirmatively asserting specific details regarding the citizenship of those defendants.” Diversity issues are better addressed after there has been an opportunity to respond to the initial complaint. Thus, Carolina should be able to amend their complaint sufficiently if and when the LLCs respond. REVERSED and REMANDED.