Thursday, August 18, 2016

Necessity of Classification of Italian Srl For Purposes of Diversity Jurisdiction Avoided; Regardless of Whether Incorporated or Unincorporated, Diversity Existed


Necessity of Classification of Italian Srl For Purposes of Diversity Jurisdiction Avoided; Regardless of Whether Incorporated or Unincorporated, Diversity Existed

In order to access the federal courts on the basis of diversity jurisdiction, none of the plaintiffs may have the same citizenship as that of any of the defendants. A corporation is a citizen of its jurisdiction of organization and the jurisdiction in which it maintains its principal place of business. In turn, all other organizational forms including limited liability companies redeem citizens of each jurisdiction in which any of its members/owners are citizens. A persistent question is how to classify certain non-US business organizations is either being corporations or unincorporated. In a recent decision from Louisiana, a court analyzed and Italian Societ√† a Responsibilit√† Limitata (“Srl”) under both of analytic formats. Regardless of which was applied, diversity existed. PGS USA, LLC v, Popi Trading, Inc., Civ. Act. No: 16-6669, 2016 WL 4261726 (E.D. LA August 12, 2016).
In this breach of contract action, the defendant was a New York corporation with its principal place of business in New York. As such, Popi Trading, Inc. was a citizen of New York for purposes of diversity jurisdiction. It complained, however, that PGS USA LLC had failed in the complaint to fully detail its citizenship in a manner sufficient to confirm that diversity existed.
With respect to analysis of the Srl as a corporation, it was found to be organized in Italy, and likewise that its executive officers were in Italy. On that basis, be treated exclusively as a citizen of Italy.
Alternatively, when the Srl was treated as being unincorporated, analysis was undertaken of all of its members. One of those members was in turn another Srl, and its members needed to be investigated. Regardless, ultimately all were natural person citizens of Italy. And on that basis the Srl was treated as an Italian citizen.
Either way, diversity jurisdiction existed.
While this case is a useful reminder of the rules to be applied in assessing the citizenship of incorporated versus unincorporated entities, it unfortunately does not move forward the question of the analytic paradigm to be applied to non-US organized business organizations.
 
 

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