Friday, January 2, 2015

Nerve Center Test Not Applicable to Determine Citizenship of LLC

Nerve Center Test Not Applicable to Determine Citizenship of LLC

In a recent decision from Missouri, although the statement is likely dicta, there was rejected the suggestion that an LLC would have the citizenship of the jurisdiction in which it has its principal place of business as determined under the nerve center test.  West v. Missouri Metals, LLC, No. 4:14CV01296 AGF, 2014 WL 5605617 (E.D. Mo. Nov. 4, 2014).

This action was filed alleging claims based upon environmental contamination of the plaintiff’s property.  One of the defendants, an individual, was resident in Missouri, as was the plaintiff.  Missouri Metals, LLC, another defendant, is a Delaware limited liability company (sic -  the opinion refers to it as a "limited liability corporation") whose sole member is an Indiana corporation.  The principle place of business of that corporation is not set forth in the opinion.

The defendants removed the action to federal court on the basis of diversity, maintaining that the individual was fraudulently named as a party in order to defeat diversity jurisdiction.  In response the plaintiff maintained that the individual was not fraudulently joined.  In addition, the plaintiff argued that Missouri Metals should be deemed a citizen of Missouri as that is its principal place of business.

Most of the opinion is devoted to the question of fraudulent joinder of the individual defendant, the court ultimately determining that fraudulent Joinder was not apparent, and on that basis determining the diversity did not exist.  Before closing the opinion, the court noted that the principal place of business of an LLC does not determine its citizenship for purposes of diversity, writing:

Although the court need not address Plaintiff’s alternative argument for remand, namely, that Missouri Metals should be considered a citizen of Missouri, this argument is without merit.  Defendants are correct that for diversity purposes a limited liability company does not have its own citizenship; rather, its citizenship is the citizenship of all of its members, in this case, Indiana.

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