When a plaintiff is deciding where to bring a lawsuit, or a defendant is evaluating his/her potential right to remove a lawsuit from state court to federal court, a key question is whether there is diversity between the parties such that there may diversity jurisdiction in federal court.
The concept of diversity jurisdiction is a fundamental principle in the United States legal system and is the basis for a federal court’s jurisdiction over certain civil cases that do not involve a federal question where the parties are from different states or countries. Diversity jurisdiction is codified in 28 U.S.C. § 1332, which grands federal courts jurisdiction over civil cases where the amount in controversy exceeds $75,000 and the parties are citizens of different states or countries. However, one of the key, and sometimes complicated, issues relating to diversity jurisdiction is determining which state, or country, each party is a citizen of to evaluate if the parties are actually from different states or jurisdictions.
In particular, determining the citizenship of a limited liability company may not be as straightforward as one may belief. Indeed, with respect to a limited liability company, for diversity purposes, the citizenship of a limited liability company is determined by examining the citizenship of its members. Mgmt. Nominees, Inc. v. Alderney Ins., LLC, 813 F.3d 1321, 1324-25 (10th Cir. 2016). A limited liability company is deemed to be a citizen of the same state(s) and/or countries as each of its members. Delay v. Rosenthal Collins Group, Inc., 585 F.3d 1003, 1005 (6th Cir. 2009). Thus, when determining the citizenship of a limited liability company, the citizenship of each member, and sub-member, of the limited liability company must be determined to ascertain the citizenship(s) of the limited liability company. Id. With respect to corporations, corporations are deemed to be the citizens of the state or county in which the corporation has been incorporated and the state or country where it has its principal place of business, i.e., the state or country where the corporation’s nerve center or headquarters are located. Hertz Corp. v. Friend, 559 U.S. 77, 80-81, 92-97 (2010).
As a way of example, if a plaintiff, LLC1, has two members, a California corporation and Illinois corporation, and defendant, LLC2, has one member, a Florida corporation, the parties would be of different states such that diversity jurisdiction could apply; this is the case because LLC1 is a citizen of both California and Illinois (the citizenship if its members) and LLC2 would be a citizen of Florida.
Accordingly, the determination of whether all the parties in a lawsuit are from different states or countries such that diversity jurisdiction could exist can become complex if one, or more, of the parties are limited liability companies. Excruciating detail must be taken to trace the citizenship of all the members, or if the members themselves are limited liability companies, the sub-members, to identify the citizenships of all the parties. Tishkoff PLC and its attorneys specialize in litigation and can provide legal counsel on a multitude of these and other litigation matters.
Do not hesitate to contact the attorneys at Tishkoff if you have questions regarding litigation, or business or employment law.
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