A recent case has considered the
question of whether one should ascribe to an LLC the citizenship of a
now-deceased member whose estate has brought suit against the LLC and the
remaining member. In this instance, the
court determined that the citizenship of the deceased member is not relevant
for purposes of diversity jurisdiction. Tormey v. Mourning Dove, LLC, No.
CIV-12-1328-D (W.D. Okla. April 9, 2013).
Tormey was a member of
Bridgewater Office Park, LLC (“Bridgewater”) in which Mourning Dove, LLC
(“Mourning Dove”) was the other member.
Subsequent to Tormey’s death, his personal representative initiated suit
against both Bridgewater and Mourning Dove alleging breach of the operating
agreement as well as fiduciary duties existing thereunder. The basis for bringing the suit in federal
court was diversity jurisdiction.
Seeking to have the suit
dismissed, the defendants argued that diversity was lacking in that Bridgewater
would have the citizenship of Tormey, and on that basis complete diversity
would be lacking. In response, Tormey’s
representative argued that diversity jurisdiction is determined as of the time
the suit is filed. She, as his personal
representative, would be attributed with his citizenship. Conversely, the operating agreement of
Bridgewater provided that his status as a member terminated upon his death,
whereupon he became a creditor of the LLC.
No other member of the LLC having the same citizenship as Tormey/his
personal representative, “because the lawsuit was not filed until after his
death,” she argued “complete diversity of citizenship existed when the lawsuit
was filed.”
The operating agreement described
death as an “event of dissociation” triggering a series of call rights in the
remaining members to acquire the membership interests of the deceased. The agreement provided also “[f]rom and after
the Event of Dissociation, the Dissociated Member shall be considered a
creditor of the Company . . . and all other statutory and contractual rights
associated with the former Member’s interest shall cease.”
Confirming that complete
diversity existed, the Court wrote:
Thus, under the clear terms of the
operating agreement, Mr. Tormey was no longer a member of Bridgewater following
his death, and his estate holds the status of a creditor of Bridgewater. The only remaining member of Bridgewater is
Mourning Dove, and Mourning Dove is a citizen of Oklahoma for diversity
purposes. As Mr. Tormey’s personal
representative, Plaintiff is deemed to be a citizen of Utah. Because Mr. Tormey was no longer a member of
Bridgewater at the time this lawsuit was filed, his Utah citizenship would not
be attributed to Bridgewater, and diversity of citizenship existed when this
lawsuit was filed on November 29, 2012.
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