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Diversity Pleadings Requirements under 28 U.S.C § 1332

Connor Cafferty

Diversity Pleadings Requirements under 28 U.S.C § 1332
Bedrin-Alexander via Getty Images

“Diversity jurisdiction” in federal court under 28 U.S.C. § 1332 exists when two conditions are met. First, the amount in controversy must exceed $75,000. Second, all plaintiffs must be of different citizenship than all defendants.

When diversity jurisdiction exists, a defendant may remove an action from state court to federal court by filing a notice of removal. However, federal courts are of limited jurisdiction. Bender v. Williamsport Area School Dist., 475 U.S. 534, 541 (1986). A strong presumption against federal-court jurisdiction requires clear evidence to the contrary. Boghozian v. Jaguar Land Rover N. Am., LLC, Case No. CV 19-2729-JFW(PLAx), 2019 WL 1925491, at *1 (C.D. Cal. Apr. 29, 2019).

In Boghozian, the plaintiff sued Jaguar Land Rover North America in Los Angeles Superior Court. 2019 WL 1925491, at *1. Jaguar filed a notice of removal in the U.S. District Court for the Central District of California, claiming diversity jurisdiction. In its notice, Jaguar alleged that it was a “single-member limited liability company and . . . a subsidiary of Jaguar Land Rover Limited, a British company, which is in turn a subsidiary of Tata Motors Limited, and Indian company.” The district court held that this provided insufficient evidence of diversity jurisdiction and remanded the action back to state court.

The issue was that Jaguar failed to adequately allege the citizenship of each of its members—a common error for limited-liability companies invoking diversity jurisdiction. Unlike corporations, which are citizens of the jurisdictions where they are incorporated and have their principal place of business, limited-liability companies are deemed to be citizens of every state of which its members are citizens. Although this is a potentially difficult task for limited-liability companies with multiple members, a defendant is presumed to know its own citizenship. And to sufficiently establish citizenship for diversity jurisdiction, the district court noted that a removing defendant must do three things:

First, a removing defendant must clearly establish its entity type.

Second, a defendant must clearly identify its members.

Third, a defendant must clearly establish each member’s citizenship.

Id. at *1.

Failure to establish these three basic elements leaves the court unable to determine the removing defendant’s citizenship. And without confirmation of the removing defendant’s citizenship, complete diversity cannot be confirmed, and an action will be remanded to state court. When preparing a notice of removal, defendants are thus cautioned to fully investigate and allege citizenship to meet the requirements of 28 U.S.C. § 1332. To do otherwise is to waste time and money on removal only to end up back in state court.