Who Is a Member and Diversity Jurisdiction?

 Who Is a Member and Diversity Jurisdiction?

            It is black letter law that for purposes of Federal diversity jurisdiction (28 U.S.C. § 1332) an LLC has the citizenship of each of its members. One implication of this role is that in a suit by an LLC against one of its members there will never be diversity jurisdiction; the plaintiff LLC and the defendant member will always share the latter’s citizenship. But who is a member?, that being a question addressed in a recent decision from Texas. Edge Communications Solutions, LLC v. Werthamer, 2025 WL 3298312 (E.D. Tx. Nov. 26, 2025).

            Edge filed suit in Texas state court against its former employees Heide Werthamer and Marima Willis alleging what appear to be garden variety claims of theft of business secrets and as to Werthamer breach of a noncompete. The defendants removed the action to Federal court, and this decision addressed Edge’s motion to remand to state court on the basis that in fact diversity was not present.

            For purpose of this discussion the status of Werthamer as a member of Edge was the crux question. There was no dispute that she had been a member, and if she remained a member there would be no diversity. Werthamer alleged that upon the end of her employment by Edge she ceased to be a member. Edge maintained she remained a member notwithstanding ceasing to be an employee.

            The Court looked to the Delaware LLC Act, pursuant to which Edge was organized, and particularly the provisions addressing termination of member status, writing:

A member of a Delaware LLC may only resign “at the time or upon the happening of events specified in a limited liability company agreement and in accordance with the limited liability company agreement.” 6 Del. C. § 18-603. “[U]nless a limited liability company agreement provides otherwise, a member may not resign from a limited liability company prior to the dissolution and winding up of the limited liability company.” Id. Other than resignation, an individual can cease to be a member of an LLC upon assignment of all of the member’s limited liability company interest. 6 Del. C. § 18-702(b)(3).  2025 WL 3298312, *6.

            On the basis that Werthamer (she bearing the burden of showing diversity to exist) had not shown either on assignment of her interest in Edge or that her membership had been otherwise terminated, combined with the fact that Edge alleged she remained a member, the court found diversity to be lacking. Further, and building upon the fact that Werthamer bore the burden, it was noted by the court she could have as a member of Edge sought its membership list and avoided “any confusion.” 6 Del. Code § 18-305. For myself I’m a bit confused by this part of the opinion; Werthamer’s claim was that she is not a member and attempting to assert a member’s right would be antithetical to her petition. Still, if the LLC had responded with “you are not a member” it would have supported her position. In contrast if Edge had produced its list of members including Werthamer the situation would have been more clear.

            The decision is otherwise a useful primer on how to carry burden of showing diversity via proving the citizenship of the parties and their constituents.