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Belleville Catering Co. v. Champaign Market Place

United States Court of Appeals for the Seventh Circuit · Civil Procedure

Civil ProcedureSubject-Matter JurisdictionDiversity Jurisdictiondiversity jurisdictionLLC citizenshipcomplete diversitysubject-matter jurisdictionfederal courts

Facts

The complaint invoked diversity jurisdiction and alleged that the corporate plaintiff was incorporated in Missouri with its principal place of business there, that the individual plaintiffs were citizens of Missouri, and that the defendant was a Delaware limited liability company with its principal place of business in Illinois. The defendant admitted those allegations and filed a counterclaim, and the magistrate judge accepted them without further inquiry. On appeal, supplemental filings revealed that Belleville Catering was actually incorporated in Illinois and that several members of Champaign Market Place LLC were also citizens of Illinois. The defendant also disclosed that one member was another LLC whose members' identities were being kept confidential.

Issue

Whether the federal courts had diversity jurisdiction under 28 U.S.C. § 1332 when the parties incorrectly treated an LLC like a corporation and the record showed Illinois citizens on both sides of the case. Also, whether the court of appeals could decide the merits despite the absence of subject-matter jurisdiction.

Rule

A limited liability company is treated as an unincorporated entity and is therefore a citizen of every state of which any member is a citizen, not merely its state of organization or principal place of business. Complete diversity is required under § 1332, and a federal court may not decide the merits of a case over which it lacks subject-matter jurisdiction. Jurisdictional allegations must be based on proper investigation rather than assumption, and confidentiality cannot excuse failure to disclose citizenship facts necessary to establish diversity.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nadia Flores, a citizen of Arizona, sued Red Mesa Storage LLC in federal court in Phoenix. Her complaint alleged that the LLC was organized in Nevada and had its principal place of business in New Mexico, but it did not identify any of the LLC’s members or their citizenship.

Is Nadia’s pleading sufficient to establish diversity jurisdiction under § 1332?

Explanation. The majority opinion states that a limited liability company is treated as an unincorporated entity, not as a corporation. Its citizenship is that of each of its members, so alleging only the LLC’s state of organization and principal place of business is inadequate. Diversity is not established unless the record shows the citizenship of all relevant members and complete diversity exists. (Derived from Belleville Catering Co. v. Champaign Market Place (n.d.).)