# 1SOURCE HOLDINGS, LLC v. JACKSON

> District Court, W.D. Tennessee · April 8, 2020

URL: https://www.frixlaw.com/law-library/cases/10439815

## Case

- **Court:** District Court, W.D. Tennessee
- **Decided:** April 8, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

)
1SOURCE HOLDINGS, LLC, )
)
Plaintiff, )
)
v. ) No. 2:19-cv-02639
)
LAURITA JACKSON, )
)
Defendant. )
)
ORDER
Before the Court is Defendant Laurita Jackson’s December
18, 2019 Motion to Dismiss for Lack of Subject Matter
Jurisdiction (the “Motion to Dismiss”). (ECF No. 16.) Plaintiff
1Source Holdings, LLC (“1Source”) responded on January 15, 2020.
(ECF No. 17.) Jackson has not filed a reply.
For the following reasons, the Motion to Dismiss is DENIED.
I. Background
For purposes of the Motion to Dismiss, the facts are taken
from the Complaint.
This is a dispute about the rights to membership interests
in a limited liability company (“LLC”). 3Bs Company, LLC (“3Bs”)
is a Tennessee company that distributes office supplies,
janitorial products, and furniture. (ECF No. 1 ¶¶ 7-8.) 3Bs
has Class A and Class B membership interests. (Id. ¶ 13.)
Jackson and George “Hank” Brown, III hold 3Bs’s Class A
membership interests. (Id.) 1Source holds 3Bs’s Class B
membership interest, pursuant to a July 2013 Purchase Agreement
of Membership (the “Purchase Agreement”) in which 1Source
purchased the Class B membership interests of prior 3Bs members.
(Id. ¶ 9; see also Purchase Agreement, ECF No. 1-1.) The

interests of 3Bs and the membership interests of 3Bs’s members
are governed by a July 2013 Amended Operating Agreement (the
“Operating Agreement”). (ECF No. 1 ¶ 11; see also Operating
Agreement, ECF No. 1-2.) The Operating Agreement names Jackson
as 3Bs’s President and CEO. (ECF No. 1 ¶ 14.)
Article 8.3 of the Operating Agreement allows, in certain
situations, for 3Bs’s Class B members to purchase the membership
interests of 3Bs’s Class A members. In relevant part, Article
8.3 provides:
In the event of a Class A Member’s (a “Withdrawing
Member”) death, Permanent Disability (as defined
below) or termination of employment with the Company
for any reason, the Class B Members shall have the
right and option, exercisable by written notice to
such Withdrawing Member (or his personal
representative in the event of death) within two years
of such event, to purchase all of the Withdrawing
Member’s interest for the current book value of the
Withdrawing Member’s Capital Account as of the end of
the month preceding the date on which the withdrawal
event occurred.
(ECF No. 1-2 at 13.) After the Operating Agreement was executed,
Jackson was employed by 3Bs as Managing Member and CEO. (ECF
No. 1 ¶ 16.)
On August 16, 2019, Jackson resigned as 3Bs’s Managing
Member and CEO. (Id. ¶ 17.) On August 19, 2019, 1Source informed
Jackson in a letter that it was exercising its right under

Article 8.3 of the Operating Agreement to purchase Jackson’s
Class A membership interest in 3Bs. (Id. ¶ 19.) In its letter
to Jackson, 1Source stated that, due to substantial operating
losses 3Bs had incurred, the book value of Jackson’s 3Bs capital
account was negative and the purchase price for 1Source’s
purchase of Jackson’s membership interest was $0.00. (Id. ¶ 20.)
On August 23, 2019, Jackson asserted in a response letter
that 1Source did not have the right to purchase her membership
interest in 3Bs. (Id. ¶ 23.) In her response letter, Jackson
said that “1Source never paid for its [Class B] membership
interest as required by the Purchase Agreement, and has been in

default for over four (4) years” and that, “[a]s a consequence
of 1Source’s failure to pay and being in default, the []
Operating Agreement you referenced is of no effect” and “there
is no factual or legal basis to purchase my membership interest
. . . .” (ECF No. 1-7 at 1; see also Answer, ECF No. 9 ¶ 32
(“Defendant admits that it is her position that Plaintiff has no
right to purchase her membership interest, has defaulted under
the Purchase Agreement, and has no rights pursuant to the . . .
Operating Agreement.”).) Jackson maintains that 1Source owes in
excess of $130,000 for its Class B membership interest. (ECF
No. 1 ¶ 24.)
On September 19, 2019, 1Source filed the Complaint. (ECF
No. 1.) 1Source seeks a declaratory judgment that the Operating

Agreement is in full force and effect and that 1Source has the
right to purchase Jackson’s membership interest for $0.00. (Id.
¶¶ 25-33.) 1Source also seeks a temporary injunction restraining
Jackson from interfering with the management and operation of
3Bs and a mandatory injunction requiring Jackson to transfer her
membership interest in 3Bs to 1Source. (Id. ¶¶ 34-38.)
On December 18, 2019, Jackson filed the Motion to Dismiss
under Federal Rule of Civil Procedure 12(b)(1), asserting that
the Court lacks subject matter jurisdiction over this case. (ECF
No. 16.)
II. Jurisdiction
1Source is an LLC whose members are resident citizens of

Minnesota. (ECF No. 1 ¶ 1.) Jackson is a resident citizen of
Tennessee. (Id. ¶ 2.) The parties are diverse, but they dispute
whether the amount in controversy exceeds $75,000. See 28 U.S.C.
§ 1332(a).
III. Standard of Review
Motions to dismiss for lack of subject matter jurisdiction
fall into two general categories: facial attacks and factual
attacks. O’Bryan v. Holy See, 556 F.3d 361, 375 (6th Cir. 2009).
A facial attack asserts that, even if all of the allegations in
the complaint are true, there is an insufficient basis for
subject matter jurisdiction. Gentek Bldg. Prods., Inc. v.

Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). When
reviewing a facial attack, a district court takes the allegations
of the complaint as true. Id. A factual attack “controvert[s]
the accuracy (rather than the sufficiency) of the jurisdictional
facts asserted by the plaintiff and proffer[s] materials . . .
in support of that position.” Valentin v. Hosp. Bella Vista,
254 F.3d 358, 363 (1st Cir. 2001).
In determining whether a plaintiff’s claim for declaratory
or injunctive relief meets the amount in controversy requirement,
“the amount in controversy is measured by the value of the object
of the litigation.” Hunt v. Wash. State Apple Advert. Comm’n,

432 U.S. 333, 347 (1977). In this Circuit, “the amount in
controversy is the value of the right that the plaintiff seeks
to protect or the extent of the injury to be prevented.” McIntire
v. Ford Motor Co., 142 F. Supp. 2d 911, 920 (S.D. Ohio 2001)
(citing Goldsmith v. Sutherland, 426 F.2d 1395, 1398 (6th Cir.
1970), and Lodal, Inc. v. Home Ins. Co. of Ill., No. 95-2187,
1998 WL 393766, at *3 (6th Cir. June 12, 1998)). “It is generally
agreed in this circuit that the amount in controversy should be
determined ‘from the perspective of the plaintiff . . . .’”
Woodmen of the World/Omaha Woodmen Life Ins. Soc’y v. Scarbro,
129 F. App’x 194, 195-96 (6th Cir. 2005) (quoting Buckeye
Recyclers v. CHEP USA, 228 F. Supp. 2d 818, 821 (S.D. Ohio

2002)).
Courts accept a plaintiff’s claim that the amount in
controversy requirement is satisfied “unless ‘it is apparent, to
a legal certainty,’” that the object of the litigation is worth
less than the plaintiff claims. Ozormoor v. T-Mobile USA, Inc.,
354 F. App’x 972, 973 (6th Cir. 2009) (quoting St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)). “It is
well-settled that ‘if a plaintiff brings an action in federal
court and a defendant seeks dismissal on amount-in-controversy
grounds, the case will not be dismissed unless it appears that
the plaintiff’s assertion of the amount in controversy was made

in bad faith.’” Schultz v. Gen. R.V. Ctr., 512 F.3d 754, 756
(6th Cir. 2008) (quoting Gafford v. Gen. Elec. Co., 997 F.2d
150, 157 (6th Cir. 1993)).
IV. Analysis
Jackson moves to dismiss the Complaint. (ECF No. 16.) She
raises a facial attack on subject matter jurisdiction. (Id. at
1.) Jackson asserts that “[t]he Complaint . . . facially
demonstrates the amount in controversy does not exceed the sum
or value of $75,000.” (Id.) She argues that, because the
Complaint “seeks a declaration by this Court” that 1Source “has
the right to purchase Defendant’s membership interest in [3Bs]
for the sum of $0.00,” the amount in controversy is less than
the $75,000 threshold for diversity jurisdiction. (Id. at 4.)

In response, 1Source argues that, although it seeks a
declaration that it has the right to purchase Jackson’s
membership interest for $0.00, the value of the object of the
litigation is more than $75,000. (See ECF No. 17 at 2-5.)
1Source’s argument is well-taken. A central issue in the case
is whether 1Source is in default under the Purchase Agreement
and, if so, whether it may enforce Article 8.3 of the Operating
Agreement and purchase Jackson’s membership interest. Jackson
asserts that 1Source owes $130,000 under the Purchase Agreement
and, as a result of that alleged default, “does not have the
right or authority to purchase [her] membership interest in 3Bs.”

(ECF No. 1-7 at 1; see also ECF No. 9 ¶¶ 24, 32.) 1Source
asserts that the Operating Agreement is enforceable
“notwithstanding Jackson’s contention that 1Source is indebted
to Jackson or other former members for $130,000,” and that
1Source need not pay the $130,000, or anything at all, before
obtaining Jackson’s membership interest in 3Bs. (ECF No. 17 at
4.)
1Source seeks a declaration that it has the legal right to
purchase Jackson’s membership interest for $0.00 and a mandatory
injunction requiring Jackson to transfer the membership
interest. (ECF No. 1 ¶¶ 25-38.) The “extent of the injury to
be prevented” is, from 1Source’s perspective, $130,000, the
amount it asserts it need not pay before obtaining Jackson’s

membership interest. See Goldsmith, 426 F.2d at 1398 (“[I]n
injunction actions, the amount in controversy is not the amount
that the plaintiff might recover at law, but rather the value of
the right to be protected or the extent of the injury to be
prevented.”); see also Freeland v. Liberty Mut. Fire Ins. Co.,
632 F.3d 250, 253 (6th Cir. 2011) (“‘[W]here a party seeks a
declaratory judgment, the amount in controversy is not
necessarily the money judgment sought or recovered, but rather
the value of the consequences which may result from the
litigation.’”) (quoting Lodal, 1998 WL 393766, at *2). Jackson
cites no authority to the contrary.

There is no evidence of bad faith on 1Source’s part, and it
is not apparent “to a legal certainty that the [] claim [is]
really for less than the amount-in-controversy requirement.”
Schultz, 512 F.3d at 756. The Motion to Dismiss is DENIED.
V. Conclusion
For the foregoing reasons, the Motion to Dismiss is DENIED.
So ordered this 7th day of April, 2020.

/s/ Samuel H. Mays, Jr.
Samuel H. Mays, Jr.
UNITED STATES DISTRICT JUDGE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10439815. Public record. Not legal advice.