Swiger v. Allegheny Energy, Inc.

OPINION

TASHIMA, Circuit Judge:

We must decide whether a federal district court has diversity jurisdiction over a lawsuit involving a partnership where one of its partners is a dual American-British citizen domiciled in a foreign state. The district court held that it lacked diversity jurisdiction over such an entity, and we affirm.

I. APPELLATE JURISDICTION & STANDARD OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 1291 over a dismissal for lack of subject matter jurisdiction, and our review for lack of subject matter jurisdiction is plenary. See Frett-Smith v. Vanterpool, 511 F.3d 396, 399 (3d Cir.2008).

II. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Clifton G. Swiger sued Allegheny Energy, Inc., Allegheny Energy Supply Co., LLC, Allegheny Energy Services Corp., and Morgan, Lewis & Boekius LLP (“Morgan Lewis”), (collectively “Defendants”), on several state law claims, including abuse of process, wrongful use of civil proceedings, invasion of privacy, and wrongful discharge, in the Eastern District of Pennsylvania based upon diversity jurisdiction.

Morgan Lewis, joined by the other Defendants, moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1), on the ground that complete diversity between the parties was lacking. Morgan Lewis is a partnership that, at the time of the filing of the lawsuit, had among its partners, Charles Lubar, a dual United States and United Kingdom citizen domiciled in the United Kingdom. The district court dismissed the case for lack of jurisdiction, concluding that “[gjiven that for diversity purposes, the court must consult the citizenship of all of the members of an artificial entity such as a general or limited partnership and because a United States citizen who is not domiciled in one of the United States cannot invoke diversity jurisdiction in one particular state, we must conclude that we are without jurisdiction to act in this matter.” Swiger v. Allegheny Energy, Inc., No. 05-CV-5725, 2007 WL 442383, at *5 (E.D.Pa. Feb.7, 2007) (emphasis in the original) (citations omitted). Swiger timely appealed.

III. ANALYSIS

Swiger argues that the district court erred in holding that it lacked diversity jurisdiction because, according to Swiger, a single partner who is not a citizen of a state does not render the entire partnership stateless for diversity purposes.¹ Whether a federal district court has diversity jurisdiction over a lawsuit involving a partnership that has among its partners an American citizen domiciled in a foreign state is an issue of first impression in this Circuit. To our knowledge, however, all courts that have addressed this issue have held that such an entity does not qualify for diversity jurisdiction. For the reasons set forth below, we agree with those other courts and hold that if a partner of a partnership is a United States citizen permanently living abroad, there can be no diversity of jurisdiction over the partnership because the partner is neither a citizen of a state nor a citizen of a foreign country.

Swiger also argues that even if the stateless partner destroys diversity, the district court nevertheless had alienage jurisdiction because Lubar, as a dual citizen of the United States and the United Kingdom, is a citizen or subject of a foreign state. This argument, however, is foreclosed by our recent decision in FrettSmith, 511 F.3d at 400, in which we held that, for purposes of diversity jurisdiction, we consider only the American citizenship of a dual American-foreign national. We consider each of Swiger’s arguments in turn.

A. Diversity Jurisdiction and the “Stateless” Partner

Under 28 U.S.C. § 1332(a):

district courts ... have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between — (1) citizens of different States; (2) citizens of a State and citizens or subjects of a foreign state; (3) citizens of different States and in which citizens or subjects of a foreign state are additional parties; and (4) a foreign state, defined in section 1603(a) of this title, as plaintiff and citizens of a State or of different States.

A natural person is deemed to be a citizen of the state where she is domiciled. See Gilbert v. David, 235 U.S. 561, 569, 35 S.Ct. 164, 59 L.Ed. 360 (1915). A corporation is a citizen both of the state where it is incorporated and of the state where it has its principal place of business. 28 U.S.C. § 1332(c).

Partnerships and other unincorporated associations, however, unlike corporations, are not considered “citizens” as that term is used in the diversity statute. See Carden v. Arkoma Assocs., 494 U.S. 185, 187-92, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) (holding that a limited partnership is not a citizen under the jurisdictional statute); see also Lincoln Prop. Co. v. Roche, 546 U.S. 81, 84 n. 1, 126 S.Ct. 606, 163 L.Ed.2d 415 (2005) (“[F]or diversity purposes, a partnership entity, unlike a corporation, does not rank as a citizen[.]”); United Steelworkers of Am. v. Bouligny, 382 U.S. 145, 149-50, 86 S.Ct. 272, 15 L.Ed.2d 217 (1965) (holding that a labor union is not a citizen for purposes of the jurisdictional statute); Great S. Fire Proof Hotel Co. v. Jones, 111 U.S. 449, 454-55, 20 S.Ct. 690, 44 L.Ed. 842 (1900) (holding that a limited partnership association, even though it was called a quasi-corporation and declared to be a citizen of the state under the applicable state law, is not a citizen of that state within the meaning of the jurisdictional statute); Chapman v. Barney, 129 U.S. 677, 682, 9 S.Ct. 426, 32 L.Ed. 800 (1889) (holding that although the plaintiff-stock company was endowed by New York law with the capacity to sue, it could not be considered a “citizen” for diversity purposes); 15 James Wm. Moore, Moore’s Federal Practice § 102.57[1] (3d ed.2006) [hereinafter Moore’s Federal Practice] (“[A] partnership is not a ‘citizen’ of any state within the meaning of the statutes regulating jurisdiction^]”).

Given that partnerships are not citizens for diversity purposes, the Supreme Court has long applied the rule of Chapman v. Barney: that courts are to look to the citizenship of all the partners (or members of other unincorporated associations) to determine whether the federal district court has diversity jurisdiction. See Lincoln Prop. Co., 546 U.S. at 84 n. 1, 126 S.Ct. 606; Carden, 494 U.S. at 196-97, 110 S.Ct. 1015; Bouligny, 382 U.S. at 151, 86 S.Ct. 272; Great S. Fire Proof Hotel, 111 U.S. at 456, 20 S.Ct. 690; Chapman, 129 U.S. at 682, 9 S.Ct. 426; see also 13B Charles Alan Wright et al., Federal Practice & Procedure § 3630 (2d ed. 1984) (“[W]henever a partnership, a limited partnership ..., a joint venture, a joint stock company, a labor union, a religious or charitable organization, a governing board of an unincorporated institution, or a similar association brings suit or is sued in a federal court, the actual citizenship of each of its members must be considered in determining whether diversity jurisdiction exists.”). In Chapman, the Supreme Court, on its own motion, reversed a judgment on the grounds that the federal court did not have jurisdiction over a stock company because the record did not demonstrate that all the partners of the stock company were citizens of a state different than that of the defendant:

On looking into the record, we find no satisfactory showing as to the citizenship of the plaintiff. The allegation of the amended petition is that the United States Express Company is a joint-stock company organized under a law of the state of New York, and is a citizen of that state. But the express company cannot be a citizen of New York, unthin the meaning of the statutes regulating jurisdiction, unless it be a corporation. [T]he company ... is, a mere partnership ....

.... The company may been organized under the laws of the State of New York, and may be doing business in that State, and yet all the members of it may not be citizens of that State. The record does not show the citizenship of Barney, or of any of the members of the company-

129 U.S. at 682, 9 S.Ct. 426 (emphasis added). In a nearly unbroken chain,² the Supreme Court has consistently applied the Chapman rule, holding that a partnership is not a citizen, but that the court “must look in the case of a suit by or against a partnership association to the citizenship of the several persons composing such association.” Great S. Fire Proof Hotel, 177 U.S. at 456, 20 S.Ct. 690; see also Carden, 494 U.S. at 189, 110 S.Ct. 1015; Bouligny, 382 U.S. at 151, 86 S.Ct. 272.

Further, in the context of partnerships, the complete diversity requirement demands that all partners be diverse from all parties on the opposing side. See Lincoln Prop. Co., 546 U.S. at 84 n. 1, 126 S.Ct. 606; accord Carden, 494 U.S. at 195, 110 S.Ct. 1015 (accepting the “rule that the Court will ... count every member of an unincorporated association for purposes of diversity jurisdiction” and “rejecting] the contention that to determine, for diversity purposes, the citizenship of an artificial entity, the court may consult the citizenship of less than all of the entity’s members”); Carlsberg Res. Corp. v. Cambria Sav. & Loan Ass’n, 554 F.2d 1254, 1259 (3d Cir.1977) (“When the rule of complete diversity is read in conjunction with the principle that the citizenship of a partnership depends upon that of its members, it becomes clear that diversity jurisdiction may not obtain here, unless all of the members of the plaintiff partnership are of distinct citizenship from all of the defendants.”); Underwood v. Maloney, 256 F.2d 334, 338 (3d Cir.1958) (“[WJhere jurisdiction is sought to be founded on diversity of citizenship, the action being by or against an unincorporated association ... the citizenship of the individual members must be shown to be wholly diverse from that of the opposing party or those of the opposing parties.”); cf. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806) (“[WJhere the interest is joint, each of the persons concerned in that interest must be competent to sue, or liable to be sued in [the federal] courts.”).

Partnerships which have American partners living abroad pose a special problem. “In order to be a citizen of a State within the meaning of the diversity statute, a natural person must be both a citizen of the United States and be domiciled within the State.” Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989). An American citizen domiciled abroad, while being a citizen of the United States is, of course, not domiciled in a particular state, and therefore such a person is “stateless” for purposes of diversity jurisdiction. See id. Thus, American citizens living abroad cannot be sued (or sue) in federal court based on diversity jurisdiction as they are neither “citizens of a State,” see 28 U.S.C. § 1332(a)(1), nor “citizens or subjects of a foreign state,” see id. § 1332(a)(2). See Newman-Green, 490 U.S. at 826, 109 S.Ct. 2218.

Putting these principles together, that is, that the citizenship of the individual partners must be shown to be wholly diverse from that of the opposing party (or those of the opposing parties) and that American citizens living abroad cannot sue (or be sued) in federal court based on diversity jurisdiction, our sister circuits and other federal courts have concluded that if a partnership has among its partners any American citizen who is domiciled abroad, the partnership cannot sue (or be sued) in federal court based upon diversity jurisdiction. See Herrick Co. v. SCS Commc’ns, Inc., 251 F.3d 315, 322 (2d Cir.2001); accord ISI Int’l, Inc. v. Borden Ladner Gervais LLP, 316 F.3d 731, 733 (7th Cir.2003) (“One of [the partnership’s] partners is a U.S. citizen domiciled in Canada; she has no state citizenship, so the diversity jurisdiction is unavailable.”); Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 69 (2d Cir.1990) (“If in fact any of S & C’s foreign-residing United States citizen partners are domiciled abroad, a diversity suit could not be brought against them individually; in that circumstance, since for diversity purposes a partnership is deemed to take on the citizenship of each of its partners, a suit against S & C could not be premised on diversity.” (internal citations omitted)); see also 15 Moore’s Federal Practice § 102.37[16] (“If a member of a partnership is a United States citizen permanently living abroad, there can be no diversity of jurisdiction because the member is neither a citizen of a state nor a citizen of a foreign country.”).

Swiger, however, asks us to disregard these cases and create an exception to the Chapman tradition. He argues that we should ignore Lubar’s lack of state citizenship and focus only on the partners who are citizens of a state. Morgan Lewis has American partners domiciled in, among other states, Pennsylvania, New York, and California; therefore, Morgan Lewis, according to Swiger, is a citizen of Pennsylvania, New York, California, and so on. Although Morgan Lewis has a stateless partner, Swiger contends that the partnership can hardly be characterized as “stateless”; indeed, under this view, Morgan Lewis is quite “stateful.” That is, according to Swiger, one party, Morgan Lewis, is a citizen of Pennsylvania, New York, and California, and so on, and the other party, Swiger, is a citizen of West Virginia, ipso facto, the parties are “citizens of different States.”

We cannot agree. First, the Supreme Court has explicitly held, and consistently stated, as we have already noted, that a partnership is not a “citizen” for purpose of diversity jurisdiction. Instead, for purposes of diversity jurisdiction, a partnership’s citizenship as a party is determined by reference to all partners, and all partners must be diverse from all parties on the opposing side.³ Lincoln Prop. Co., 546 U.S. at 84 n. 1, 126 S.Ct. 606; see also Carden, 494 U.S. at 195, 110 S.Ct. 1015 (“[W]e reject the contention that to determine, for diversity purposes, the citizenship of an artificial entity, the court may consult the citizenship of less than all of the entity’s members.”). Second, Morgan Lewis, as an entity, is just as “stateless” as it is “stateful”: Morgan Lewis is not an American citizen, and it “has no domicile in any state.” But rather than treating partnerships as stateless, the Chapman rule determines the partnership’s citizenship for purposes of diversity by referring to the citizenship of each partner. The rule of Chapman is a legal construct that allows a real legal entity, though a non-citizen, to sue and be sued in federal court based upon diversity by looking through the partnership to the citizenship of each partner.

Because Morgan Lewis has a stateless partner, and thus, all partners of Morgan Lewis are not diverse from all parties on the opposing side, the district court correctly held that it lacked diversity jurisdiction over this action.

B. Alienage Jurisdiction

Swiger argues that even if jurisdiction based on diversity of state citizenship is lacking, the district court nevertheless had diversity jurisdiction under 28 U.S.C. § 1332(a)(2), because Lubar, as a dual citizen of the United States and the United Kingdom would still be a “citizen[ ] or subject[ ] of a foreign state,” and as such, Lubar would be diverse from Swiger within the meaning of § 1332(a)(2). That is, complete diversity would exist because Swiger is a citizen of West Virginia and Lubar is a citizen of the United Kingdom. After this appeal was briefed, but before oral argument, we decided this question in Frett-Smith, in which we held “that for purposes of diversity jurisdiction, only the American nationality of a dual national is recognized.” See Frett-Smith, 511 F.3d at 400. Because Lubar is a United States citizen, any reliance on § 1332(a)(2)’s alien-age jurisdiction would be in error. Id. at 400. Thus, “[ojnly if [Lubar] was domiciled in a particular state of the United States at the time the suit was filed, and that state was diverse from that of [Swig-er], would subject matter jurisdiction be present” as against Morgan Lewis. Id.

IV. CONCLUSION

Whenever a partnership (or other unincorporated association) brings suit or is sued in a federal court, the citizenship of each of its partners (or members) must be considered in determining whether diversity jurisdiction exists, and all partners (or members) must be diverse from all parties on the opposing side. Lubar, a Morgan Lewis partner and American citizen domiciled abroad, is “stateless” for purposes of diversity jurisdiction. Because Lubar, as a stateless person, cannot sue or be sued in federal court based upon diversity jurisdiction, neither can Morgan Lewis. The judgment of the district court is AFFIRMED.

1 . Swiger "assumes” that Lubar is in fact stateless, thus accepting the factual basis of the district court’s ruling, that Lubar is an American-British dual citizen domiciled in the United Kingdom.

2 . As the Supreme Court put it in Carden:

The one exception to the admirable consistency of our jurisprudence [regarding the Chapman rule] is Puerto Rico v. Russell & Co., 288 U.S. 476, 53 S.Ct. 447, 77 L.Ed. 903 (1933), which held that the entity known as a soceidad en comandita, created under the civil law of Puerto Rico, could be treated as a citizen of Puerto Rico for purposes of determining federal-court jurisdiction. ... [However,] [t]here could be no doubt, after Bouligny, that at least common-law entities (and likely all entities beyond the Puerto Rican sociedad en comandita) would be treated for purposes of the diversity statute pursuant to what Russell called “[t]he tradition of the common law,” which is “to treat as legal persons only incorporated groups and to assimilate all others to partnerships.”

494 U.S. at 189-90, 110 S.Ct. 1015.

3 . Despite this, Swiger contends that the Supreme Court's recent decision in Grupo Dataflux v. Atlas Global Group, L.P., supports his view that the partnership takes on the state citizenship of its partners. See 541 U.S. 567, 569, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) ("[A]s a partnership, [it] is a citizen of each State or foreign country of which any of its partners is a citizen.”). Grupo Dataflux, however, does not change the basic principles as to how an unincorporated association's citizenship is determined for purposes of diversity jurisdiction. Indeed, in a postGrupo Dataflux opinion, the Supreme Court again reiterated that "for diversity purposes, a partnership entity, unlike a corporation, does not rank as a citizen; to meet the complete diversity requirement, all partners, limited as well as general, must be diverse from all parties on the opposing side.” Lincoln Prop. Co., 546 U.S. at 84 n. 1, 126 S.Ct. 606 (citing Carden, 494 U.S. at 189, 192-97, 110 S.Ct. 1015).