Adventures in Diversity Jurisdiction – Another LLC Membership Error Destroys Diversity

One of the more simple yet frustrating requirements for establishing diversity jurisdiction is to prove that the parties are from different states. Here, a case was filed in federal court and summary judgment was granted to the defendant. Only then, when it reached the 11th Circuit, did that court determine that the parties were from the same state – Florida. How did this happen?

It happened because Thermoset, a Florida corporation, sued RGSO, an LLC. Most people don’t know this, but an LLC’s citizenship is determined by the citizenship of its members. In this case, RGSO had a Florida member. Therefore, citizens of Florida were on both sides of the litigation and there was no diversity of citizenship.

So, if you sue an LLC, make sure you know the citizenship of each member of the LLC. One way to avoid problems is to write a letter to the LLC and request that the LLC inform you of the citizenship of each member.

LLCs cause painful diversity jurisdiction issues all the time, sometimes leading to sanctions against the lawyers who fail to figure out citizenship. This is a danger area for every lawyer who practices in federal court. It is a trap for the unwary and can lead to embarrassment and sometimes worse.

Source: THERMOSET CORPORATION v. BUILDING MATERIALS CORP OF AMERICA, Court of Appeals, 11th Circuit 2017 – Google Scholar

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