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.
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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 analysis
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?
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.
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…
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.