V & M STAR, LP v. Centimark Corp.
2010 U.S. App. LEXIS 3794, 596 F.3d 354, 2010 WL 624304 (2010)
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Rule of Law:
For federal diversity jurisdiction to exist over a limited partnership or a limited liability company, the citizenship of all members, partners, and sub-members at every level of the ownership structure must be completely diverse from all opposing parties. A court has an independent obligation to verify this jurisdiction, even if the parties do not contest it.
Facts:
- V & M Star, LP (V & M) is a limited partnership.
- Centimark Corporation is incorporated and has its principal place of business in Pennsylvania, making it a citizen of Pennsylvania.
- V & M's partners include two limited liability companies (LLCs).
- V & M's partners also include a 'French S.A.R.L.,' a type of French private company similar to an LLC.
- V & M failed to plead the citizenship of every member of its partner LLCs.
- V & M provided no information about its French S.A.R.L. partner that would allow a court to determine its citizenship.
Procedural Posture:
- V & M Star, LP filed a lawsuit against Centimark Corporation in federal district court, asserting diversity jurisdiction.
- Centimark filed a motion to dismiss V & M's first amended complaint, arguing V & M had failed to sufficiently plead the citizenship of its partners.
- In response, V & M filed a second amended complaint which named its partners but did not properly detail their citizenship.
- Centimark stopped contesting jurisdiction, and the district court denied the motion to dismiss as moot without independently verifying jurisdiction.
- The district court granted summary judgment in favor of Centimark on the underlying claims.
- V & M (Appellant) appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Sixth Circuit, where Centimark was the Appellee.
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Issue:
Is federal diversity jurisdiction properly established when a plaintiff limited partnership, which has LLCs and a foreign entity as partners, fails to affirmatively allege the citizenship of all its partners, members, and sub-members?
Opinions:
Majority - Gilman, Circuit Judge
No, federal diversity jurisdiction is not properly established. To establish diversity jurisdiction, a limited partnership is considered a citizen of every state where its general and limited partners reside. When a partner is an LLC, the court must look through to the citizenship of all its members and 'sub-members.' The plaintiff, V & M, failed to provide this necessary information for its two LLC partners and its French S.A.R.L. partner. The court noted that because a member of an LLC can itself have multiple members, the citizenship of each 'sub-member' must be known. The jurisdictional allegations were therefore 'fatally incomplete.' Critically, the court held that it has an independent obligation to ensure subject-matter jurisdiction exists and cannot ignore the defect, even if the defendant (Centimark) waives the issue. Due to the complexity and the lack of precedent on determining the citizenship of a French S.A.R.L., the case must be remanded for the district court to resolve the jurisdictional issue.
Analysis:
This case serves as a crucial reminder of the strict requirements for pleading diversity jurisdiction, particularly for complex business entities like partnerships and LLCs. It reinforces the principle that federal courts are courts of limited jurisdiction and will police their own jurisdictional boundaries sua sponte (on their own initiative). The decision underscores that the burden is squarely on the plaintiff to trace and allege the citizenship of every single member and sub-member in its ownership chain. The ruling signals to practitioners that failing to conduct this thorough jurisdictional analysis at the outset can lead to dismissal or remand at any stage of litigation, even on appeal, regardless of the parties' consent or waiver.
