Entwinement Doesn’t Reach Party Identity: Eleventh Circuit Affirms District Courts May Resolve Disputed LLC Membership on a Rule 12(b)(1) Factual Attack to Determine Diversity

Introduction

In Goldstar Properties, LLC v. Justin Angel; Law Office of Kyle Felty PA (11th Cir. Sept. 19, 2025) (per curiam) (non-argument calendar) (not for publication), the Eleventh Circuit affirmed a dismissal for lack of subject-matter jurisdiction where the district court, after a seven-hour evidentiary hearing, found that the purported transfer of an LLC membership interest was sham and that the defendant, not the putative transferor, remained the LLC’s sole member. Because an LLC’s citizenship for diversity purposes tracks the citizenship of each of its members, the finding that a Florida resident remained the sole member meant the plaintiff LLC was itself a Florida citizen, destroying complete diversity with two Florida defendants.

The case squarely presents two procedural issues that recur in federal practice:

When a defendant launches a factual attack on diversity under Rule 12(b)(1), may the district court weigh evidence, make credibility determinations, and decide disputed facts such as who actually owns an LLC? The Eleventh Circuit says yes.
When do such jurisdictional disputes become “intertwined” with the merits so that they must be resolved under Rule 12(b)(6) or Rule 56 rather than Rule 12(b)(1)? The court clarifies that disputes over the identity of the plaintiff (e.g., LLC membership) are purely jurisdictional and not “entwined” with any element of a substantive claim.

The court also rejected challenges to the district court’s reliance on credibility determinations and the limited role of a handwriting expert, and it declined to impose appellate sanctions under Federal Rule of Appellate Procedure 38, notwithstanding its concern that someone attempted to “manufacture” federal jurisdiction.

Summary of the Opinion

Affirmed lack of diversity jurisdiction. After an evidentiary hearing, the district court found that the alleged sale by defendant Justin Angel of his interest in Goldstar Properties, LLC to Samuel Markovich was not legitimate. The court therefore found Angel, a Florida resident, to be Goldstar’s sole member, making Goldstar a Florida citizen and destroying complete diversity with two Florida defendants.
Rule 12(b)(1) factual attack properly resolved with evidence-weighing. Because defendants mounted a factual attack on jurisdiction, the district court was permitted to consider extrinsic evidence, weigh credibility, and resolve factual disputes bearing on jurisdiction (citing Morrison v. Amway; Lawrence v. Dunbar; Williamson v. Tucker).
Entwinement exception inapplicable. The disputed jurisdictional facts concerned “who the plaintiff is,” not any element of a claim. Thus, the “entwinement” doctrine did not require converting the dispute to a merits determination under Rules 12(b)(6) or 56.
No clear error in factual findings. Substantial evidence supported the finding that the purported sale agreement was forged or otherwise illegitimate, including violations of Florida notary rules, unreliable witness testimony, bank and official records listing Angel as sole owner, and an expert’s conclusion that Angel’s signature was illegitimate. Appellate deference to credibility findings applied (citing Owens v. Wainwright).
Any constraint on cross-examination of the handwriting expert was harmless. The district court gave limited weight to the expert’s testimony and any alleged error would not have affected the outcome (citing EEOC v. STME, LLC).
Appellate sanctions denied. Although the appellate court shared the district court’s concerns about potentially manufactured jurisdiction, it denied Rule 38 fees, emphasizing the absence of sanctions sought below and noting that Goldstar’s appellate arguments were colorable, not “utterly devoid of merit” (citing Parker v. American Traffic Solutions; Thompson v. RelationServe Media).

Detailed Analysis

Factual and Procedural Background

Goldstar Properties, LLC filed suit in the Southern District of Florida against Florida resident Justin Angel and the Law Office of Kyle Felty, PA, a Florida professional association, alleging fraudulent real estate transfers causing $2.7 million in damages. The complaint stated that Goldstar is a single-member LLC owned by Louisiana resident Samuel Markovich and alleged Angel had transferred “100%” of his membership interest to Markovich for $100. Despite this purported transfer, Angel allegedly continued to act as manager and engaged in self-dealing, with the Felty firm allegedly facilitating certain closings.

The defendants moved to dismiss for lack of subject-matter jurisdiction, mounting a factual attack: they contended the transfer document was forged, Angel remained Goldstar’s sole member, and thus Goldstar shared Florida citizenship with both defendants. The district court held a seven-hour evidentiary hearing and found the transfer “suspect in origin and illegitimate in force,” citing:

The nominal $100 consideration in light of valuable real property and assets;
Witnesses to the purported agreement were Markovich’s children; one (a lawyer who allegedly prepared the agreement) was incarcerated and did not testify; the other watched only Markovich sign;
Notarization by another Markovich child, contrary to Florida notary rules barring notarization of close family members or where the notary has a financial interest;
Angel’s unequivocal testimony that he did not sign the agreement;
A forensic document examiner’s opinion that the signature attributed to Angel was illegitimate;
Absence of any public record showing Markovich as a member; bank and official records—including one signed by Markovich 20 days after the supposed transfer—listed Angel as sole owner/member;
A demand letter from Markovich’s law firm identifying Goldstar as a potential defendant, inconsistent with owning the entity.

On these findings, the district court concluded there was no complete diversity and dismissed without prejudice. The Eleventh Circuit affirmed.

Precedents Cited and How They Shaped the Decision

Thermoset Corp. v. Building Materials Corp. of America, 849 F.3d 1313 (11th Cir. 2017): The court reaffirmed that federal courts are of limited jurisdiction and that diversity jurisdiction requires citizens of different states with an amount in controversy exceeding $75,000. In this circuit, an LLC’s citizenship follows each of its members. By crediting evidence that Angel remained the sole member of Goldstar and was a Florida resident, the court applied Thermoset’s framework to find no complete diversity.
Morrison v. Amway Corp., 323 F.3d 920 (11th Cir. 2003); Lawrence v. Dunbar, 919 F.2d 1525 (11th Cir. 1990); Williamson v. Tucker, 645 F.2d 404 (5th Cir. May 1981): These cases distinguish “facial” from “factual” attacks under Rule 12(b)(1). On a factual attack, the district court may consider extrinsic evidence and weigh credibility to satisfy itself of jurisdiction. The court also drew from Morrison’s “entwinement” principle: if jurisdictional facts overlap with the merits (as in Morrison’s “eligible employee” element under the FMLA), the dispute must be resolved under Rule 12(b)(6) or Rule 56. Here, by contrast, the identity of Goldstar’s member(s) was purely jurisdictional and not an element of any claim, so the district court properly resolved the issue through fact-finding.
McElmurray v. Consolidated Government of Augusta-Richmond County, 501 F.3d 1244 (11th Cir. 2007); Scarfo v. Ginsberg, 175 F.3d 957 (11th Cir. 1999): These cases set the appellate standards: legal conclusions are reviewed de novo; jurisdictional factual findings are reviewed for clear error. Applying those standards, the panel found no clear error in the district court’s credibility determinations and factual findings regarding the alleged transfer.
Owens v. Wainwright, 698 F.2d 1111 (11th Cir. 1983): The appellate court gives particular deference to a trial court’s credibility findings after live testimony. The panel relied on this principle in upholding the district court’s decision to credit Angel’s testimony and discount the notary’s.
EEOC v. STME, LLC, 938 F.3d 1305 (11th Cir. 2019): Establishes harmless-error review: an evidentiary misstep is non-reversible if there is no reasonable likelihood it affected the outcome. The panel applied this to reject the argument that the district court should have forced the handwriting expert to analyze new exemplars during cross-examination.
Parker v. American Traffic Solutions, Inc., 835 F.3d 1363 (11th Cir. 2016); Thompson v. RelationServe Media, Inc., 610 F.3d 628 (11th Cir. 2010): These cases inform Rule 38 sanctions analysis. Appeals are sanctionable if “utterly devoid of merit,” and district courts are better positioned to decide Rule 11 issues. The panel denied Rule 38 fees, noting no sanctions motion had been made below and Goldstar’s arguments, while unsuccessful, were colorable.
28 U.S.C. § 1332(a)(1): The diversity jurisdiction statute requiring complete diversity among “citizens of different States” and an amount in controversy exceeding $75,000. The statutory backdrop underscores that shared Florida citizenship between the plaintiff LLC (through its sole Florida member) and two Florida defendants destroys jurisdiction.

The Court’s Legal Reasoning

Rule 12(b)(1) factual attack permits evidence and credibility determinations. The defendants mounted a factual attack on subject-matter jurisdiction, asserting that the supposed transfer of the LLC membership was forged and that Angel remained the sole member. Under Morrison/Lawrence/Williamson, the district court could—and did—consider evidence beyond the pleadings, evaluate witness credibility, and resolve factual disputes. The appellate court endorsed this approach.
Entwinement exception does not apply to disputes over the identity of the plaintiff. The panel rejected Goldstar’s argument that the jurisdictional issue was “intertwined” with the merits. Unlike Morrison, where the jurisdictional fact (“eligible employee”) was an element of the underlying claim, the dispute here—who owns the LLC—is a threshold identity/citizenship question that is purely jurisdictional. As such, the court need not defer the issue to summary judgment or trial on the merits.
No clear error in finding the sale agreement illegitimate. The district court’s findings rested on multiple, mutually reinforcing evidentiary points: the nominal consideration; familial witnessing and notarization in contravention of Florida notary laws; Angel’s emphatic denial; the forensic conclusion that the signature was illegitimate; lack of any public filing reflecting Markovich’s membership; and bank/official records listing Angel as sole owner, including a record signed by Markovich post-dating the alleged transfer. Given deference to credibility assessments, the appellate court found no clear error.
Harmless error regarding the handwriting expert. Goldstar argued the expert should have been compelled to respond to additional exemplars on cross-examination. The panel concluded that, because the district court explicitly gave limited weight to the expert’s testimony and the balance of evidence was overwhelming, any limitation would have been harmless under EEOC v. STME.
Sanctions under Rule 38 were unwarranted. Although the panel acknowledged concerns that someone attempted to manufacture federal jurisdiction, it declined to award fees on appeal. Two considerations were decisive: (a) no sanctions were sought in the district court, which is “better situated” to assess sanctionable conduct under Rule 11 (Thompson); and (b) Goldstar’s appellate arguments were “colorable,” not “utterly devoid of merit” (Parker).

Impact and Practical Significance

Early jurisdictional hearings are appropriate where LLC citizenship is disputed. Defendants can and should mount factual attacks on diversity when LLC membership is contested. District courts in the Eleventh Circuit may hold evidentiary hearings, take testimony, and resolve disputes over ownership and citizenship before any merits adjudication.
Entwinement is narrow. Litigants often argue that jurisdictional disputes bleed into merits issues. This decision narrows that argument: who the parties are (and where they are citizens) is distinct from what claims require to be proven. Where the jurisdictional fact is party identity, courts may resolve it under Rule 12(b)(1) without converting to Rule 12(b)(6)/Rule 56.
Documentary rigor matters in LLC ownership disputes. Bank records, public filings, operating agreements, and third-party records will carry significant weight in resolving citizenship. Attempted retroactive papering—especially with irregular notarizations or familial involvement—will invite skepticism and could lead to adverse credibility findings.
Pleading citizenship correctly is essential. Although not the basis for the decision, the court noted the complaint’s lack of clarity (including the omission of any explicit cause of action). Counsel should plead each LLC member’s citizenship (not just “residence”) and ensure the complaint states recognized causes of action, particularly when federal jurisdiction is contested.
Sanctions strategy: start in the district court. Parties suspecting manufactured diversity should consider timely Rule 11 motions. Waiting to seek Rule 38 sanctions only on appeal is disfavored, particularly where the argument on appeal is not frivolous.
Non-precedential but persuasive. The opinion is marked “Not for publication,” so it is not binding precedent in the Eleventh Circuit. Still, its application of settled principles will be persuasive to district courts confronting similar jurisdictional disputes over LLC membership.

Complex Concepts Simplified

Subject-matter jurisdiction: A federal court’s power to hear a case. It cannot be waived, and the court must dismiss if jurisdiction is lacking.
Diversity jurisdiction (28 U.S.C. § 1332): Allows federal courts to hear cases between citizens of different states with more than $75,000 in dispute. “Complete diversity” means no plaintiff shares citizenship with any defendant.
LLC citizenship: An LLC is a citizen of every state where any of its members is a citizen. Identifying and proving each member’s citizenship is crucial.
Residence vs. citizenship: Courts often use “resident” colloquially, but legal “citizenship” (domicile) is what matters for diversity (permanent home with intent to remain).
Rule 12(b)(1) facial vs. factual attack: A facial attack challenges jurisdiction based on the complaint’s allegations, taken as true. A factual attack introduces evidence to dispute jurisdictional facts; the court may weigh evidence and assess credibility.
Entwinement (Morrison v. Amway): If jurisdictional facts are “intertwined” with elements of a claim (e.g., an eligibility element that is also a merits element), the court treats the issue under Rule 12(b)(6)/Rule 56 rather than Rule 12(b)(1). Disputes over party identity or citizenship generally are not intertwined.
Standards of review: Appellate courts review legal conclusions de novo (fresh look) and jurisdictional factual findings for clear error (significant deference, especially on credibility).
Harmless error: Even if the district court erred in an evidentiary ruling, reversal is not warranted unless the error likely affected the outcome.
Rule 38 (appellate sanctions): The court of appeals may impose damages and costs for frivolous appeals—those “utterly devoid of merit.”
Rule 11 (district court sanctions): Addresses filings made for improper purposes or without evidentiary support. Sanctions usually should be pursued in the district court, which is better positioned to find relevant facts.
Manufactured diversity: Attempts to manipulate party composition or citizenship to create federal jurisdiction. Courts scrutinize such efforts and may dismiss or sanction if misconduct is shown.
Notary irregularities: Violations of notarial rules (e.g., notarizing for close relatives or where one has a financial interest) may undermine the reliability and probative value of documents in court.

Conclusion

Goldstar Properties reinforces bedrock but critical procedural rules. When diversity jurisdiction is challenged on factual grounds, district courts in the Eleventh Circuit may promptly and decisively resolve disputed facts—taking testimony, weighing credibility, and examining documents—to determine an LLC’s citizenship. The “entwinement” exception remains narrow and does not shield identity-of-party disputes from Rule 12(b)(1) adjudication. Credibility determinations arising from live testimony receive strong appellate deference, and harmless-error principles minimize reversal for peripheral evidentiary issues.

For practitioners, the opinion underscores: (1) plead and prove citizenship carefully, particularly for unincorporated entities; (2) expect rigorous early testing of jurisdictional facts where ownership or membership is contested; (3) maintain impeccable documentary and notarial practices; and (4) pursue sanctions, if warranted, in the district court in the first instance. Though non-precedential, the decision offers a clear, practical roadmap for handling contested LLC citizenship and the appropriate use of Rule 12(b)(1) factual attacks in diversity cases.