Diversity Jurisdiction and LLCs

Diversity Jurisdiction and LLCs

            In a recent decision, the Eastern District of Kentucky has again addressed diversity jurisdiction with respect to LLCs.  Citizens Bank v. Plasticwear, LLC, 2011 WL 5598883 (E.D. Ky. Nov. 17, 2011). 

            Most of this decision deals with the proper alignment of parties in a lawsuit as either defendants or plaintiffs in determining whether diversity jurisdiction exits.  Before moving on to that point of analysis, the Court addressed how the citizenship of a limited liability company should be assessed.  The plaintiff sought to ascribed to Plasticwear citizenship in (and apparently only in) Kentucky on the basis that its principal place of business, determined utilizing the “nerve center” of Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010), is in Kentucky.  “Citizens Bank contends that Plasticwear LLC’s principal place of business is determinative of citizenship as it is for corporations,” citing 28 U.S.C. § 1332(c)(1).  It bears noting that this recitation of the test utilized for the corporation is incomplete.  In fact, a corporation has potentially two citizenships, that of its principal place of business and that of its jurisdiction of organization.  Based upon the Secretary of State’s website, Plasticwear is a Delaware LLC.

             The Court (correctly) noted that the principal place of business of an LLC “is not relevant to its citizenship determination.”  2011 WL 5598883, *3.  An LLC is not subject to the citizenship test that applies to a corporation, rather having the citizenship of each of its members.  Id., citing Homfeld II, LLC v. Comair Holdings, Inc., 53 F. App’x 731, 732 (6^th Cir. 2002) and JMTR Enterprises, LLC v. Duchin, 42 F. Supp.2d. 87, 93 & n. 2 (D. Mass. 1999).