Citizenship of Limited Liability Companies for Diversity Jurisdiction
42 Pages Posted: 3 May 2010 Last revised: 27 Jun 2010
Date Written: September 1, 2002
The limited liability company is an increasingly popular form of business organization. Due to its hybrid nature, however, the citizenship of a LLC for purposes of diversity jurisdiction is difficult to determine. Should the citizenship of a LLC be determined as if it were a corporation, in which case it has "entity" citizenship, or as if it were a partnership, in which case its citizenship is determined by the citizenship of "persons composing" the LLC?
This Article examines the history of the evolution of hybrid organizations like the LLC, and the rules for determining the citizenship of business organizations in light of the dichotomy between corporations and all other business organizations. This Article argues that the current framework – determining the citizenship of a business organization by focusing solely on whether the organization was incorporated – is technical, precedent-bound, and does not reflect the reality of modern business organization law. In its place, I advocate for a new framework that would focus on the citizenship of persons or entities that have a direct interest in the pending litigation. Such a framework would better serve the policies of federal diversity jurisdiction.
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