LLC Admits It Cannot Prove Its Own Citizenship

LLC Admits It Cannot Prove Its Own Citizenship

      In a recent decision, an LLC had to admit that, consequent to the structure of its ownership, it could not demonstrate to the court its own citizenship. On that basis, because it could not be determined whether diversity jurisdiction existed, the case was remanded to state court. Calton v. JVM Sovereign Apartments, LLC, Case No. 17-2739-DDC-JPO, 2018 WL 3708167 (D. Kan. Aug. 3, 2018).

      It is axiomatic that, for purposes of determining the citizenship of an LLC for purposes of federal diversity jurisdiction (28 U.S.C. § 1332), there will be attributed to the LLC the citizenship of each of its members. Where, in turn, a member is another unincorporated entity such as another LLC, the citizenship must be traced through to its ultimate owners. In this case, JVM Sovereign Apartments admitted that it could not attest to its citizenship. As for its structure:

JVM asserts it has two members. Those two members are LLC’s themselves. The members of the first LLC consist of 63 individual investors, 55 trusts, 25 individual retirement accounts (IRAs), and two more entities (which includes one LLC). The second member of JVM is an LLC comprised of 22 individual investors, 18 trusts, three IRAs, and seven additional entity (which includes three LLCs and two limited partnerships).

      JVM, in a filing with the court, admitted it did not have information with respect to the beneficiaries of the sub-member trusts or the membership of the sub LLCs. The court wrote that “to its credit, JVM’s concedes, without this information, that it cannot determine the citizenship of its members. Thus, the court cannot determine if plaintiff and JVM are a completely diverse - as it must to exercise diversity jurisdiction over the action.”