Unreported / Non-Citable
Background
On October 25, 2026, Defendant Conversica, Inc. removed this case to the Northern District of California, relying on diversity jurisdiction under 28 U.S.C. § 1332. As the magistrate judge described it, the notice of removal alleged that Plaintiff RateShepherd, LLC is a Nevada corporation with its principal place of business in Las Vegas, Nevada, and that Conversica is a Delaware corporation with its principal place of business in San Mateo, California. Two days later, the court issued this order on its own initiative.
The order begins from the premise that federal courts have limited jurisdiction and a continuing, independent obligation to confirm it, an obligation that cannot be forfeited or waived. The court found no federal question jurisdiction because the claims all arise under state law, which left diversity as the only possible basis. The party invoking diversity jurisdiction, here the removing defendant, bears the burden of proving that it exists. The court then explained that a limited liability company takes the citizenship of each of its owners or members, not the state where it was formed or does business. It also noted that Civil Local Rule 3-15(b)(3) requires disclosure of an LLC's members and their citizenship. Because the notice of removal said nothing about the citizenship of RateShepherd's members and owners, the removal papers did not show whether the parties are citizens of different states.
The Court’s Holding
The court did not decide that jurisdiction is lacking and did not remand the case. It issued an order to show cause directing Defendant to address the citizenship of any members and owners of RateShepherd, LLC, and to file a written response by November 10, 2026. The court cautioned that failure to respond will likely result in remand for lack of subject matter jurisdiction. It cited Ninth Circuit authority that a district court without diversity among the real parties in interest lacks jurisdiction and should have dismissed the action.
The order is an interim, procedural directive from a magistrate judge. It identifies a gap in the jurisdictional allegations rather than finding any member's actual citizenship, and it says nothing about the merits of the underlying dispute. What remains open is whether Defendant can allege and establish the citizenship of each RateShepherd member. Because the order describes Conversica as a Delaware corporation based in California, the general rule for corporations would make it a citizen of both states. A member of the LLC who is a citizen of either state would therefore defeat complete diversity. The order does not itself reach that question, and no remand or dismissal has been entered.
Key Takeaways
- A notice of removal based on diversity must allege the citizenship of each member of an LLC party, not merely the LLC's state of organization or principal place of business.
- The removing party carries the burden of proving that diversity jurisdiction exists.
- Federal courts must examine subject matter jurisdiction on their own, and parties cannot waive that obligation.
- This order is a show-cause directive and not a remand: Defendant has until November 10, 2026 to respond, and the court says failure to do so will likely lead to remand.
- Civil Local Rule 3-15(b)(3) of the Northern District separately requires an LLC party to disclose the identity and citizenship of its members.
Why It Matters
This short order illustrates a common pitfall in removal practice: pleading an LLC's jurisdictional facts as if it were a corporation. The notice of removal described RateShepherd as a Nevada corporation with a Las Vegas principal place of business. The court treated those facts as insufficient because an LLC's citizenship follows that of its members.
As an unpublished, interim order from a magistrate judge, it carries no precedential weight and breaks no new ground, since it applies settled Ninth Circuit rules. Its practical value is as a reminder to investigate and plead member citizenship before removing, and to expect early scrutiny from the court. Whether the case stays in federal court or returns to state court depends on Defendant's response.