Diversity Jurisdiction and Corporations

Diversity Jurisdiction and Corporations

      In a recent decision from South Carolina, it was reiterated that the test for the citizenship of a corporation is its jurisdiction of incorporation and of its principal place of business; where its shareholders are located does not matter. Meisner v. Zymogenetics, Inc., Case No. 3:15-3523-CMC-PJG, 2019 WL 2358968 (D. S.C. June 4, 2013).

      In this case, after removal to federal court, the pro se plaintiff alleged that the defendants’ alleged “extrinsic fraud perpetuated ... by [the] defendant” with respect to citizenship. In fact, that pro se plaintiff was incorrect. Specifically, she alleged that an LLC has the citizenship of the shareholders of a corporate member. This assertion was described by the court as “flawed.”

      In this instance, a defendant LLC had, as an upstream member, a publicly traded corporation with presumably shareholders in every state. On this basis, it was asserted that the LLC defendant likewise would have the citizenship of all of those shareholders. This was rejected on the basis of the test set forth in 28 U.S.C.A. § 1332(c), which provides that a corporation is a citizen of the state in which it is incorporated and in which it has its principal place of business. On this basis, the plaintiff’s assertion that the LLC would have citizenship of all of its corporate member’s shareholders was rejected as “it fails the statutory test for determining citizenship of a corporation.”