Federal diversity jurisdiction where a party is a limited liability company

For a federal court to exercise subject matter jurisdiction based on diversity of citizenship under 28 U.S.C. §1441(a), there must be “complete diversity.”  No plaintiff can share citizenship with any defendant.  Where a litigant is an individual or even a corporation, the analysis of whether there is “complete diversity” is simple.  The analysis, however, could become complicated where a party is a limited liability company, because a limited liability company takes on the citizenship of each of its members for diversity purposes.  See Bayerische Landesbank v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 49 (2d Cir. 2012). 

No LLC member may share citizenship with any opposing party.  This applies down the ownership chain.  For instance, if a member of the LLC is a limited partnership, the citizenship of each general and limited partner must be considered, because a limited partnership, like an LLC, takes on the citizenship of each of its general and limited partners (see Handelsman v. Bedford Village Associates Ltd. Partnership, 213 F.3d 48, 52 (2d Cir. 2000)).

We encountered this issue, and the necessary analysis of a complicated business structure, in a recent effort to remand a lawsuit back to state court (after our adversary removed the case to federal court).  Our motion to remand was successful because after we unraveled our client’s business structure, we were able to show that at least one partner of one of the limited partnerships that was a member of our client LLC shared citizenship with the defendant.