LLCs and the Class Action Fairness Act

LLCs and the Class Action Fairness Act

      In a recent decision from the Southern District of New York, there was applied the rules for diversity jurisdiction under the Class Action Fairness Act. Claridge v. North American Power & Gas, LLC, No. 15-cv-1261 (PKC), 15 WL 5155934 (S.D. N.Y. Sept. 2, 2015).

      This purported class action was brought alleging that North American Power & Gas LLC engaged in deceptive billing practices that unlawfully overcharged customers for electricity. The plaintiffs, Claridge and Marsh, are both citizens of New York. Departing from the usual rules for determining the citizenship of an LLC for purposes of diversity jurisdiction, which looks to the citizenship of each of the constituent member, the Class Action Fairness Act (28 U.S.C. § 1332(d) directs that an “unincorporated association” shall be deemed the citizen of the state in which it is organized and in which it maintains its principal place of business.  North American Power & Gas was organized in Delaware with its principal place of business in Connecticut.

      While noting that the Second Circuit Court of Appeals has not yet addressed the question, this court determined, as have those of the Fifth and Fourth circuits, that an LLC qualifies as an “unincorporated association” within the scope of 28 U.S.C. § 1332(d)(10). In that the minimal diversity requirement of the Class Action Fairness Act, namely that at least one plaintiff and one defendant be citizens of different states, was satisfied, the case was allowed to otherwise proceed.