The second amendment to Rule 7.1 broadens the citizenship disclosure requirements in actions proceeding under diversity jurisdiction. The rule aims to discover diversity issues early in the litigation and prevent waste of resources. Under new Rule 7.1(a)(2), parties and intervenors in diversity jurisdiction actions must now disclose to the court all states they are deemed a citizen of. This citizenship disclosure can occur (1) at the time the diversity action is filed, (2) when the action is removed to federal court, or (3) at the time any event occurs that might disrupt the court’s diversity jurisdiction. Litigators in federal court actions based on diversity jurisdiction must now be continuously cognizant of any client citizenship changes during the pendency of a diversity jurisdiction action or risk violating the rule.
This amendment presents a particular challenge for alternative entities, and particularly alternative entities that are part of large corporate families. A partnership, for example, is deemed to be a citizen of each state in which any of its partners is a citizen. In Hart v. Terminex Int’l, 336 F.3d 541, 541 (7th Cir. 2003), the Seventh Circuit determined that diversity jurisdiction did not exist because one of Terminex’s lower-tier partners was a citizen of the same state as the plaintiff. The amendments to Rule 7.1 are intended to prevent the late discovery of issues such as this.
