Ravenswood Investment Co. v. Avalon Correctional Svcs.

Avalon Correctional Services, Inc., a Nevada corporation with its principal place of business in Oklahoma, operates for-profit correctional facilities. Ravenswood Investment Company (RIC) and Ravenswood Investments III (RIII), shareholders of Avalon, are both New York limited partnerships. In 2005, RIC and RIIII alleged that Avalon deregistered with the Securities and Exchange Commission and ceased filing financial reports. In 2008, RIC and RIII demanded inspection of Avalon's books and records, asserting a right provided to shareholders under Oklahoma law. Rather than supply the requested information, Avalon sued RIC and RIII in federal court to seek a declaration that Avalon was not subject to Oklahoma law with respect to the records. Avalon alleged diversity of citizenship as basis for jurisdiction. After the district court entered interim orders dismissing many claims, entering summary judgment on another, and resolving various discovery disputes, the parties discovered that complete diversity never existed and the court lacked subject matter jurisdiction. Rather than dismiss the case in its entirety, the court severed some previously decided claims between diverse parties and made their final dispositions. The court then dismissed the remainder of the claims. Upon review, the Tenth Circuit found that although dismissing a nondiverse party is an available procedure for curing a lack of complete diversity in some circumstances, the district court's order in this case failed to create complete diversity. Therefore, the court lacked subject matter jurisdiction over the case. The Court reversed the district court's decision and remanded the case to be dismissed in its entirety. View "Ravenswood Investment Co. v. Avalon Correctional Svcs." on Justia Law