"Nowhere Man": Treat LLCs Like Corporations To Ensure Diversity Jurisdiction Remains Viable

• Published date: 08 March 2024
• Law Firm: Wiley Rein
• Author: Mr Lukman S. Azeez, Krystal B. Swendsboe and Nicole C. Hager Fingeroot

In speaking for the U.S. Supreme Court, Justice Frankfurter explained that "[d]iversity jurisdiction is founded on assurance to nonresident litigants of courts free from susceptibility to potential local bias." Guar. Tr. Co. v. York, 326 U.S. 99, 111 (1945). As limited liability corporations (LLCs) have surpassed corporations as the predominant business entity in the United States, federal courts have declined to treat them the same for diversity purposes, depriving litigants of access to federal courts and burdening them with onerous requirements before they can file a complaint or seek removal. To ensure that diversity jurisdiction remains a viable way to access federal courts, LLCs and corporations should be treated the same for diversity purposes.

Under 28 U.S.C. ' 1322(c), a corporation is "deemed" to be a citizen of the state in which it is incorporated and the state in which it has its principal place of business. Unlike a corporation's citizenship, however, the citizenship of an LLC is determined by the citizenship of each of its members. See, e.g., Wise v. Wachovia Sec., LLC, 450 F.3d 265, 267 (7th Cir. 2006); Harvey v. Grey Wolf Drilling Co., 542 F. 3d 1077, 1080 (5th Cir. 2008).

Accordingly, pleading requirements differ for suits...