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Civil Procedure sample analysis

MBE Civil Procedure Diversity Jurisdiction Complete Diversity Trap

Review a diversity-jurisdiction problem with examiner-style analysis on complete diversity, citizenship, LLCs, and amount in controversy.

Last reviewed April 22, 2026
Study format MBE sample analysis

Fact pattern

Paula, a citizen of Florida, sues Orbit Freight LLC and Delta Motors Inc. in federal court, invoking diversity jurisdiction and alleging $200,000 in damages from a highway collision. Delta Motors is incorporated in Delaware and has its principal place of business in Michigan. Orbit Freight is an LLC with two members: one is a citizen of Georgia and the other is Paula herself, a Florida citizen who kept a 10% passive ownership stake after selling her trucking route to the LLC. Paula argues that complete diversity exists because Orbit Freight does business primarily in Georgia and its headquarters are in Atlanta.

Quick answer

No diversity jurisdiction exists because Paula shares Florida citizenship with defendant Orbit Freight LLC through one of the LLC's members, destroying complete diversity. Federal diversity jurisdiction under 28 U.S.C. Section 1332 requires complete diversity between all plaintiffs and all defendants, along with an amount in controversy exceeding $75,000. A corporation is a citizen of both its state of incorporation and its principal place of business. An unincorporated association, including an LLC, takes the citizenship of each of its members, not merely its headquarters or principal operations. If any plaintiff shares citizenship with any defendant, complete diversity is destroyed and the federal court lacks diversity jurisdiction.

IRAC model answer

Issue

Does the federal court have diversity jurisdiction when the plaintiff shares citizenship with one member of a defendant LLC, even though the LLC's headquarters and principal operations are elsewhere?

Rule

Federal diversity jurisdiction under 28 U.S.C. Section 1332 requires complete diversity between all plaintiffs and all defendants, along with an amount in controversy exceeding $75,000. A corporation is a citizen of both its state of incorporation and its principal place of business. An unincorporated association, including an LLC, takes the citizenship of each of its members, not merely its headquarters or principal operations. If any plaintiff shares citizenship with any defendant, complete diversity is destroyed and the federal court lacks diversity jurisdiction.

Application

The amount-in-controversy requirement is satisfied because Paula alleges $200,000 in damages. Delta Motors is completely diverse from Paula because Paula is a Florida citizen while Delta is a citizen of Delaware and Michigan. Orbit Freight, however, is fatal to diversity. Paula shares Florida citizenship with one of Orbit Freight's members because Paula herself still owns a 10% membership stake in the LLC. For diversity purposes, an LLC is a citizen of every state in which any member is a citizen. The location of Orbit Freight's headquarters in Atlanta and its Georgia-centered operations do not change that rule. Students often import the corporate citizenship test into LLC questions, but that is exactly the trap here. Because Paula and Orbit Freight are both citizens of Florida through Paula's membership stake, complete diversity is missing. The federal court therefore lacks diversity jurisdiction even though one defendant corporation is fully diverse and the amount in controversy is well above $75,000.

Conclusion

No diversity jurisdiction exists because Paula shares Florida citizenship with defendant Orbit Freight LLC through one of the LLC's members, destroying complete diversity.

Numbered reasoning steps

  1. Check amount in controversy first, but do not stop there.
  2. Classify each party type separately: corporation or unincorporated entity.
  3. Apply the corporation test to Delta Motors and the member-citizenship test to Orbit Freight LLC.
  4. Ask whether any plaintiff shares citizenship with any defendant.
  5. Reject headquarters-based citizenship for LLCs as the classic exam trap.

Why wrong answers fail

Diversity exists because Orbit Freight's principal place of business is in Georgia.

Principal place of business is the corporate rule, not the LLC rule. LLCs take the citizenship of each member.

Diversity exists because Paula owns only 10% of the LLC.

Member citizenship does not depend on the size of the ownership stake. Any member's citizenship counts.

The case belongs in federal court because one defendant is completely diverse and the amount exceeds $75,000.

Complete diversity requires every plaintiff to be diverse from every defendant, not just some defendants.

The LLC is a citizen only of the state where it was formed.

That is not the rule for LLCs. An LLC is a citizen of every state of every member.

Issue-spotting checklist

  • State complete diversity and amount in controversy separately.
  • Classify entity citizenship before comparing parties.
  • Use the member-citizenship rule for LLCs and other unincorporated entities.
  • Look for any overlap between any plaintiff and any defendant.
  • Do not use principal place of business for LLCs.

Primary law and source anchors

  • 28 U.S.C. Section 1332 Federal diversity jurisdiction requires complete diversity and an amount in controversy exceeding $75,000.
  • Hertz Corp. v. Friend, 559 U.S. 77 (2010) A corporation's principal place of business is its nerve center, but that rule applies to corporations, not LLCs.
  • Carden v. Arkoma Associates, 494 U.S. 185 (1990) Unincorporated entities take the citizenship of their members or partners for diversity purposes.
  • Rolling Greens MHP, L.P. v. Comcast SCH Holdings L.L.C., 374 F.3d 1020 (11th Cir. 2004) An LLC is a citizen of every state of which each member is a citizen.