MEMORANDUM OPINION
CHRISTOPHER R. COOPER, UNITED STATES DISTRICT JUDGE
It
seems simple enough: for federal diversity jurisdiction to
exist in a case, the plaintiff and defendant must be citizens
of different states. 28 U.S.C. § 1332. Flesh-and-blood
people are citizens of the state where they are domiciled;
corporations are citizens where they are incorporated and
where they are headquartered. Id. Things get
murkier, however, when a court must determine the citizenship
of entities that aren't quite people and aren't quite
corporations- namely, partnerships, limited liability
companies (LLCs), and trusts. See Carden v. Arkoma
Assocs., 494 U.S. 185 (1990) (partnerships); Shulman
v. Voyou, LLC, 305 F.Supp.2d 36 (D.D.C. 2004) (LLCs);
Americold Realty Tr. v. Conagra Foods, Inc., 136
S.Ct. 1012 (2016) (trusts). This otherwise straightforward
tort case is the rare one that requires the Court to navigate
the rules for all three of those entities at once. It is a
law professor's dream, a student's nightmare, and
this Court's reality.
Though
neither party has raised this issue, “no action [or
inaction] of the parties can confer subject-matter
jurisdiction upon a federal court.” Ins. Corp. of
Ireland v. Compagnie des Bauxites de Guinee, 456 U.S.
694, 702 (1982). Instead, federal courts can (and should)
“raise lack of subject-matter jurisdiction on [their]
own motion.” Id.
This is
a medical malpractice action involving a long-term care
facility operated by the defendant. The suit does not present
any federal law claims, so the Court has jurisdiction over it
only if the parties are diverse. Plaintiff, a citizen of
Maryland, pled that defendant “Bridgepoint Healthcare
LLC, was a corporation licensed to do business in the
District of Columbia.” Second Amended Complaint ¶
3. But Bridgepoint must be either an LLC or
a corporation; it cannot be both. And the distinction matters
a great deal in federal court, since different rules for
determining citizenship apply to each. Bridgepoint identifies
itself as an LLC, see Motion to Dismiss at 1, and
the Court takes it at its word. For purposes of diversity
jurisdiction, an LLC is deemed a “citizen of the
jurisdiction of its members.” Shulman, 305
F.Supp.2d at 40; see Hoffman v. Fairfax Cty.
Redevelopment & Hous. Auth., 276 F.Supp.2d 14, 18
(D.D.C. 2003) (“[LLCs] are treated as analogous to
partnerships, which carry the citizenship of their
members.”).
But
nowhere in Plaintiff's pleadings or in Bridgepoint's
submissions could the Court find any clue as to the
composition of Bridgepoint LLC's membership. Wanting to
assure itself of jurisdiction, the Court directed Bridgepoint
to file a certification attesting to the citizenship of its
members and to verify that no members are citizens of
Maryland-since if any of them were, diversity would be
destroyed. See 9/14/2018 Minute Order. The Court
also provided a citation to Shulman, 305 F.Supp.2d
at 40, which makes clear that the citizenship of LLCs is
determined by the citizenship of its members.
Bridgepoint's
first response was a nonstarter. It informed the Court that
Bridgepoint LLC's “sole member is a private
institution investment LLC [named SPCP] that is incorporated
in the state of Delaware, and has a principal place of
business in the state of Connecticut.” Def's
Certification of Citizenship at 1. But that was no help. An
LLC's state of “incorporation” (which is a
non-sequitur) and principal place of business are irrelevant
to its citizenship. Shulman, 305 F.Supp.2d at 40;
Hoffman, 276 F.Supp.2d at 18. That does not change
when the defendant LLC has, as its sole member, another LLC.
Instead, when an “LLC has, as one of its members,
another LLC, the citizenship of unincorporated associations
must be traced through however many layers of partners or
members there may be to determine the citizenship of the
LLC.” Zambelli Fireworks Mfg. Co. v. Wood, 592
F.3d 412, 420 (3d Cir. 2010) (quotation omitted). Said
another way, Bridgepoint needed to identify the citizenship
of the members of the LLC that was the lone member of
its LLC-and that has nothing to do with where an LLC
was “incorporated” or where its “principal
place of business” is.
So the
Court asked Bridgepoint to try again, see 9/18/2018
Minute Order, and again Bridgepoint's response was
unavailing. This time, Bridgepoint said its sole member, the
LLC named SPCP, had two members, “a Delaware
Corporation, and a Delaware Limited Partnership.”
Def's Second Certification of Citizenship at 1.
Bridgepoint apparently believed that resolved the Court's
jurisdictional dilemma, but it actually complicated it.
Limited partnerships are subject to the same citizenship test
as limited liability companies; they are deemed citizens of
wherever their members are domiciled. Carden, 494
U.S. at 192. A so-called “Delaware” partnership
that has even a single Maryland partner would destroy
diversity. But alas, Bridgepoint did not identify the
membership of that partnership. So all the Court knew at that
point was that Bridgepoint was an LLC, that its sole member
was an LLC (SPCP), and that SPCP had a partnership as one of
its members.
The
Court tried to clarify this problem with Bridgepoint at a
hearing. Analogizing to Russian nesting dolls, it told
Bridgepoint that it needed to ascertain the citizenship of
the partners in the Delaware limited partnership, and
specifically whether any of them are citizens of Maryland.
10/02/2018 Hr'g Tr. at 2-3. Bridgepoint's counsel
acknowledged the problem, id. at 3, and a few weeks
later followed up with a third certification of citizenship.
Bridgepoint informed the Court that “at least one
partner in the Delaware Limited Partnership is a trust entity
incorporated in the State of Maryland.” Def's Third
Certification of Citizenship at 1. Learning that a trust
factored into Bridgepoint's lineage-on top of an LLC and
a partnership-added still more wrinkles to the Court's
jurisdictional quandary.
Questions
abound. For starters, when Bridgepoint asserted that the
“trust entity” was “incorporated, ”
did it mean that the trust entity is actually a corporation?
The Court could not assume that is what Bridgepoint intended
to say, since in the same certification it said that SPCP
(Bridgepoint's sole LLC member) was
“incorporated” in the state of Delaware-and LLCs
by definition are unincorporated associations. But
if in fact this trust entity is a legal corporation,
it would be a citizen in the state of its incorporation
(Maryland), and the certification would have verified that
diversity is destroyed.
Alternatively,
if Bridgepoint meant to say that the trust entity was merely
established in Maryland, but never technically incorporated,
that wouldn't help. Knowing where a trust is established
is about as relevant to determining citizenship for diversity
jurisdiction purposes as where a partnership or LLC is
established-which is to say not at all. Rather, if this is
what Bridgepoint intended to convey in its certification, it
raised more questions than it answered. The Court would then
need to know if this Maryland trust is a business trust or a
“traditional” trust. The former is a
“distinct legal entity” that “can be haled
into court” or do the haling itself.
Americold, 136 S.Ct. at 1016. Legal proceedings
involving the latter, meanwhile, are “brought by or
against the trustees in their own name.”
Id. (emphasis added). The distinction matters for
diversity jurisdiction. The citizenship of a business trust
is coextensive with the citizenship of its members (sometimes
called beneficiaries or shareholders), while the citizenship
of a traditional trust is coextensive with the citizenship of
the trustees. Wang by & through Wong v. New Mighty
U.S. Tr., 843 F.3d 487, 494 (D.C. Cir. 2016), cert.
denied sub nom. New Mighty U.S. Tr. v. Wang ex rel.
Wong, 137 S.Ct. 2266 (2017).
So the
Court put these questions to Bridgepoint. See
11/07/2018 Minute Order. Bridgepoint responded-and we have
finally reached the bottom of this jurisdictional rabbit
hole. Bridgepoint clarified that the Maryland trust entity it
described was a traditional trust whose trustee is a citizen
of Maryland. Def's Fourth Certification of Citizenship at
1. That means, as strange as it may seem, that Bridgepoint
LLC-comprised of an LLC that has as a member an LP, which has
as a member a trust, whose trustee is from Maryland-is a
citizen of Maryland for diversity jurisdiction purposes. As a
result, because Plaintiff is also a citizen of Maryland,
diversity is defeated and the Court lacks subject-matter
jurisdiction over the case. Plaintiff may, of course, seek to
refile the case in a proper forum.
It may
seem an odd exercise to dig this deeply to determine
diversity jurisdiction, but that is what is required when an
LLC or partnership or trust is party to a suit. The problem
only deepens where, as here, an LLC's
“members” are still more LLCs, partnerships, and
trusts. But the difficulty must be confronted, and better
sooner than later. Failing to check jurisdiction could have
allowed this suit to progress well beyond a final judgment
and into the court of appeals before recognizing the fatal
flaw, wasting the clients' money and everyone's time.
And though here the Court raised the jurisdictional concern
itself, it feels constrained to remind the lawyers here-and
everywhere-that they have a duty to do so themselves.
Especially confounding in this instance is that the Court not
only flagged the jurisdictional issue, but had to explain
three times over why the defendant's citizenship
certifications were incomplete. “Lawyers for
defendants, as well as plaintiffs, must investigate rather
than assume jurisdiction; to do this, they first must learn
the legal rules that determine whose citizenship matters (as
defendant's lawyers failed to do).” Belleville
Catering Co. v. Champaign Mkt. Place, LLC, 350 F.3d 691,
693-94 (7th Cir. 2003).
Lacking
subject-matter jurisdiction, the Court will dismiss the case.
A separate Order ...