Belleville Catering Co. v. Champaign Market Place, LLC
350 F.3d 691 (2003)
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Rule of Law:
For purposes of federal diversity jurisdiction, a limited liability company (LLC) is a citizen of every state of which its members are citizens, and it is the duty of counsel to affirmatively and correctly investigate and plead the citizenship of all parties.
Facts:
- Belleville Catering Co., an Illinois corporation, and five individual guarantors from Missouri, entered into a lease with Champaign Market Place, L.L.C.
- The lease agreement between the parties mistakenly referred to Belleville Catering Co. as 'a Missouri corporation'.
- In reality, Belleville Catering Co. was incorporated in, and therefore a citizen of, Illinois.
- Champaign Market Place, L.L.C. is a limited liability company with several members who are citizens of Illinois.
- One of the members of Champaign Market Place L.L.C. is another LLC which asserted confidentiality and refused to disclose the citizenship of its own members.
Procedural Posture:
- Belleville Catering Co. and five individual guarantors filed a lawsuit against Champaign Market Place, L.L.C. in the U.S. District Court, invoking diversity jurisdiction.
- The complaint incorrectly alleged that Belleville Catering Co. was a citizen of Missouri.
- Champaign Market Place, L.L.C. filed a counterclaim against the plaintiffs.
- The parties consented to have a magistrate judge preside over a jury trial.
- The jury returned a verdict of $220,000 in favor of the defendant, Champaign Market Place, on its counterclaim.
- The plaintiffs, Belleville Catering Co. et al., appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does federal diversity jurisdiction exist over a dispute where a corporate plaintiff and members of a defendant limited liability company are citizens of the same state?
Opinions:
Majority - Easterbrook, Circuit Judge
No. Federal diversity jurisdiction does not exist because for an LLC, the citizenship of all its members must be considered, and here, citizens of Illinois exist on both sides of the litigation, destroying the complete diversity required under 28 U.S.C. § 1332. The court reasoned that unincorporated enterprises like LLCs are treated as partnerships for jurisdictional purposes, taking on the citizenship of all their members, both general and limited. This rule comes from the Supreme Court's decision in Carden v. Arkoma Associates. Unlike a corporation, an LLC's citizenship is not determined by its state of formation or principal place of business. Because the plaintiff, Belleville Catering, is an Illinois citizen and several members of the defendant, Champaign Market Place LLC, are also Illinois citizens, complete diversity is absent. The court emphatically stated that subject-matter jurisdiction is a fundamental requirement that cannot be waived or overlooked, and it has no discretion to decide a case on the merits where jurisdiction is lacking. The court also severely criticized counsel for both parties for failing their professional duty to investigate and correctly plead the basis for jurisdiction.
Analysis:
This decision reinforces the fundamental and non-waivable nature of subject matter jurisdiction in federal courts. It firmly establishes for practitioners in the Seventh Circuit that LLCs are treated as partnerships, not corporations, for diversity purposes, requiring a thorough inquiry into the citizenship of every member. The case serves as a stark warning to legal counsel about their affirmative duty under Federal Rule of Civil Procedure 11 to investigate jurisdictional facts, rather than relying on assumptions or information from secondary documents like leases. The court's disposition, which placed the financial burden of the wasted litigation on the attorneys rather than the clients, underscores the serious consequences of jurisdictional oversight and the court's inherent authority to manage the conduct of lawyers appearing before it.
