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Lincoln Benefit Life Co. v. AEI Life, LLC

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

Civil ProcedureDiversity JurisdictionSubject-Matter JurisdictionPleadingRule 12(b)(1)facial challengefactual challengediversity jurisdiction

Facts

Lincoln Benefit alleged diversity jurisdiction in a federal complaint against two LLCs and a corporation, stating that it was a Nebraska citizen and, upon information and belief, the LLC defendants were connected to New York and Delaware. The defendants moved to dismiss, arguing that because LLC citizenship depends on the citizenship of each member, Lincoln Benefit had inadequately pleaded diversity by failing to identify and plead each member's citizenship. Lincoln Benefit responded that it had searched public databases, court dockets, and business records but could not determine the identity or citizenship of the LLC members, and that nothing it found suggested any connection to Nebraska. It alternatively requested limited jurisdictional discovery.

Issue

When diversity jurisdiction is asserted against defendant LLCs whose membership is not reasonably ascertainable before filing, must the plaintiff affirmatively allege the citizenship of each LLC member to survive a facial challenge to subject-matter jurisdiction? If not, what allegations are sufficient and what process follows if the defendant factually contests jurisdiction?

Rule

Under Rule 8(a)(1), a plaintiff asserting diversity against an unincorporated association need not affirmatively allege the citizenship of each member to survive a facial Rule 12(b)(1) challenge. If, after a reasonable pre-filing inquiry and in good faith consistent with Rule 11, the plaintiff alleges that none of the association's members is a citizen of the plaintiff's state, the complaint is sufficient at the pleading stage; if the defendant then mounts a factual challenge, the plaintiff must be allowed limited jurisdictional discovery to establish complete diversity.

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Prairie Shield Insurance, a Nebraska corporation with its principal place of business in Omaha, files a state-law contract action in federal court in New Jersey against Harbor Elm Ventures, LLC. Before filing, Prairie Shield searches business registries, court dockets, and property records in New York and New Jersey, cannot identify the LLC's members, and alleges in good faith that none of Harbor Elm Ventures's members is a Nebraska citizen.

Harbor Elm Ventures files a Rule 12(b)(1) motion arguing that the complaint is jurisdictionally defective because it does not identify each LLC member and each member's citizenship. If the motion is a facial attack only, how should the court rule?

Explanation. Under the majority rule, a plaintiff suing a defendant LLC on diversity grounds need not affirmatively allege the citizenship of each member to survive a facial Rule 12(b)(1) challenge. If, after a reasonable pre-filing inquiry consistent with Rule 11, the plaintiff alleges in good faith that none of the LLC's members is a citizen of the plaintiff's state, that short and plain statement is sufficient at the pleading stage.