Tuesday, January 8, 2019
Non-Equity Partner is Still a Partner For Purposes of Diversity Jurisdiction
In a recent decision, the court was called upon to assess whether or not a non-equity partner in a law firm would be treated as a “partner” in the firm when assessing its citizenship for purposes of diversity jurisdiction. EQT Production Co. v. Vorys, Sater, Seymour & Pase, LLP, 2018 WL 6790486 (E.D. Ky. Dec. 26, 2018).
In this case, there was no dispute that an LLP has the citizenship of each of its partners. The question turned upon whether a particular “non-equity partner”, he resident in Pennsylvania, would be attributed to the partnership. The court held that it would be.
It bears noting that there is not consistency across all of the courts with respect to this question. For example, in Morson v. Kreindler & Kreindler, LLP, 616 F.Supp.2d 171 (D. Mass. 2009), a “contract partner” who had no voting rights in the firm, was compensated on the basis of a Form W-2 and did not share in the profits and losses was a classified as a mere employee whose citizenship would not be attributed to the partnership. Likewise, in Passavant Memorial Area Hospital Ass’n v. Lancaster Pollard & Co., No. 11-CV-3116 (C.D. Ill. (Springfield Div.) April 2, 2012), the citizenship of certain “contract partners” who had no equity interest in the partnership, did not share in the firm’s profits and losses, who did not have voting rights in the partnership, and were paid fixed amount by contract, were not “partners” whose citizenship would be attributed to the partnership.