LLCs Are Treated Like Corporations When Determining Jurisdiction Under CAFA

• Published date: 26 October 2022
• Subject Matter: Litigation, Mediation & Arbitration, Class Actions, Trials & Appeals & Compensation
• Law Firm: Taft Stettinius & Hollister
• Author: Mr Daniel H. Bryan

A recent Sixth Circuit opinion reiterated that, for purposes of evaluating diversity jurisdiction, the citizenship of a limited liability company is determined by the citizenship of its members. E.g., Akno 1010 Mkt. Street St. Louis Missouri LLC v. Pourtaghi, 43 F.4th 624, 626 (6th Cir. 2022). An LLC's state of organization and principal place of business are irrelevant to that analysis because 28 U.S.C. ' 1332(c) refers specifically to "corporation[s]," while LLCs, like partnerships, are treated as unincorporated associations. Id.; Delay v. Rosenthal Collins Grp., LLC, 585 F.3d 1003, 1005 (6th Cir. 2009) ("The general rule is that all unincorporated entities ' of which a limited liability company is one ' have the citizenship of each partner or member."). But a different jurisdictional test applies when a plaintiff's complaint falls within the Class Action Fairness Act (CAFA).

Akno involved a business dispute between the plaintiff LLC and one of its former employees. The parties litigated the case for three years and the district court entered summary judgment. On appeal, the Sixth Circuit, on its own, asked for supplemental briefing regarding the parties' citizenship. That briefing "deepened [the court's] doubts" about federal jurisdiction, so the court vacated the judgment and remanded the case to the district court for a more complete evaluation of subject-matter jurisdiction. In doing so, the court discussed the full chain of the plaintiff LLC's members and sub-members, which is necessary for determining an LLC's citizenship under traditional diversity jurisdiction.

But when federal jurisdiction is based upon CAFA, the LLC's constituent members are irrelevant to establishing jurisdiction. That is because...