GMAC v. Dillard's ( 2004 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 03-2514/2850
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GMAC Commercial Credit LLC, *
*
Plaintiff, *
*
GMAC Commercial Finance LLC, *
*
Plaintiff/Appellant, *
* Appeals from the United States
v. * District Court for the
* Eastern District of Arkansas.
Dillard Department Stores, Inc., *
*
Defendant, *
*
Dillard’s, Inc., *
*
Defendant/Appellee. *
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Submitted: October 24, 2003
Filed: February 6, 2004
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Before RILEY, BOWMAN, and SMITH, Circuit Judges.
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RILEY, Circuit Judge.
Invoking federal diversity jurisdiction, GMAC Commercial Credit LLC
(GMAC), a New York limited liability company (LLC) with its principal place of
business in New York, brought a breach of contract action against Dillard’s, Inc.
(Dillard’s), a Delaware corporation with its principal place of business in Arkansas.
Following entry of partial summary judgment for Dillard’s, and a jury verdict for
Dillard’s, the district court entered judgment for Dillard’s. The district court also
awarded Dillard’s costs and attorney fees as permitted under Arkansas law. GMAC
appealed on grounds unrelated to the issue we address today.
After obtaining new counsel, GMAC moved to vacate the district court’s
judgment and attorney fees award, claiming diversity of citizenship does not exist and
the federal court lacks subject matter jurisdiction. Any party or the court may, at any
time, raise the issue of subject matter jurisdiction. S.D. Farm Bureau, Inc. v.
Hazeltine, 340 F.3d 583, 591 (8th Cir. 2003); see also Chapman v. Barney, 129 U.S.
677, 681 (1889). Dillard’s resists GMAC’s motion, arguing the federal court has
jurisdiction. Alternatively, Dillard’s requests attorney fees for GMAC’s failure to
raise the jurisdictional issue earlier. Because we conclude GMAC’s citizenship as an
LLC is defined by the citizenship of its members, we remand these cases to the
district court for further proceedings to determine (1) the parties’ citizenship, and (2)
whether diversity exists.
I. DISCUSSION
A. Jurisdiction
The citizenship of an LLC for purposes of diversity jurisdiction is an issue of
first impression in our circuit. Congress limits a federal district court’s diversity
jurisdiction to “all civil actions where the matter in controversy exceeds . . . $75,000
. . . and is between . . . citizens of different States.” 28 U.S.C. § 1332(a)(1) (2000).
Generally, a district court’s “diversity jurisdiction in a suit by or against [an
unincorporated] entity depends on the citizenship of ‘all the members.’” Carden v.
Arkoma Assocs., 494 U.S. 185, 195-96 (1990) (quoting Chapman, 129 U.S. at 682).
The only exception to this rule is a corporation’s citizenship, which is (1) the state of
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incorporation, and (2) the state where the corporation’s principal place of business
is located. 28 U.S.C. § 1332(c)(1).
The corporation exception coincides with the common law’s tradition of
treating only incorporated groups as legal persons and accounting for all other groups
as partnerships. Puerto Rico v. Russell & Co., 288 U.S. 476, 480 (1933). The
Supreme Court has repeatedly resisted extending the corporation exception to other
entities. See, e.g., Carden, 494 U.S. at 186, 189, 195-96 (declining to extend the
corporation exception to a limited partnership); United Steelworkers of Am. v. R.H.
Bouligny, Inc., 382 U.S. 145, 146-47, 153 (1965) (declining to extend the corporation
exception to an unincorporated labor union); Great Southern Fire Proof Hotel Co. v.
Jones, 177 U.S. 449, 456-57 (1900) (declining to extend the corporation exception
to a limited partnership association); Chapman, 129 U.S. at 682 (declining to extend
the corporation exception to a joint-stock company).
We recognize numerous similarities exist between a corporation and an LLC,
but Congress is the appropriate forum to consider and, if it desires, to apply the same
“citizenship” rule for LLCs as corporations for diversity jurisdiction purposes. This
issue appears resolved by Justice Antonin Scalia’s analysis in Carden:
[T]he course we take today does not so much disregard the policy of
accommodating our diversity jurisdiction to the changing realities of
commercial organization, as it honors the more important policy of
leaving that to the people’s elected representatives. Such
accommodation is not only performed more legitimately by Congress
than by courts, but it is performed more intelligently by legislation than
by interpretation of the statutory word “citizen.” . . . We have long since
decided that, having established special treatment for corporations, we
will leave the rest to Congress; we adhere to that decision.
Carden, 494 U.S. at 197; see Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.
1998) (concluding that, because an LLC resembled a limited partnership and
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“members of associations are citizens for diversity purposes unless Congress provides
otherwise,” an LLC’s citizenship “for purposes of diversity jurisdiction is the
citizenship of its members”). We dutifully adhere to the same principle.
Holding an LLC’s citizenship is that of its members for diversity jurisdiction
purposes, we are unable, from this record, to determine the citizenship of GMAC’s
members. We remand these cases to the district court for discovery and a hearing to
ascertain whether any of GMAC’s members are citizens of Arkansas or Delaware.
B. Attorney Fees
Dillard’s contends this court should award it attorney fees because GMAC did
not raise the issue of jurisdiction until this appeal. We decline to address this issue
and leave the decision regarding attorney fees to the district court.
II. CONCLUSION
For the foregoing reasons, we remand these cases to the district court for
jurisdictional discovery and a hearing, and for a ruling on Dillard’s request for
attorney fees.
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