In re Citibank August 11, 2020 Wire Transfers
- Jesse Furman
- 1:20-cv-06539
- U.S. District Court · Southern District of New York
- 2
In re Citibank August 11, 2020 Wire Transfers: Judge Furman flagged an unresolved citizenship problem that could prevent the court from exercising jurisdiction.
Citibank, N.A. and the defendants whose citizenship was not adequately alleged. The unresolved jurisdiction issue could affect whether the case proceeds to trial.
What happened
In re Citibank August 11, 2020 Wire Transfers concerns Citibank, N.A.’s claim that the court could hear the case because the parties are citizens of different states. The opinion says Citibank’s complaints described several defendants as corporations, while a later complaint described defendants as limited liability companies or limited partnerships.
The court explained that limited liability companies have the citizenship of all their members, and limited partnerships have the citizenship of all their general and limited partners. The complaints did not identify the citizenship of those members or partners, so Citibank had not yet established the court’s authority to hear the case.
Judge Furman did not dismiss the case or decide the merits. He directed counsel to address the jurisdiction problem at a scheduled telephone conference and said the case would have to be dismissed without prejudice if the parties were not completely diverse.
The detailed version
- In re Citibank August 11, 2020 Wire Transfers · No. 1:20-cv-06539
- Jesse Furman
- Dec. 2, 2020
Background
Citibank, N.A. alleged that the federal court had diversity jurisdiction under 28 U.S.C. § 1332. Diversity jurisdiction allows a federal court to hear certain disputes between citizens of different states when complete diversity exists, meaning no plaintiff shares state citizenship with any defendant. Citibank alleged that it was a citizen of South Dakota and that the defendants were citizens of other states.
The court identified inconsistent descriptions of the defendants in Citibank’s complaints. The first and second complaints alleged that Brigade Capital Management, LP, HPS Investment Partners, LLC, and Symphony Asset Management LLC were corporations. The third complaint alleged that the named defendants were limited liability companies or limited partnerships. The parties admitted these allegations.
Jurisdictional Problem
The court explained that a limited liability company is a citizen of every state in which any of its members is a citizen. A limited partnership is a citizen of every state in which any of its general or limited partners is a citizen. Therefore, a complaint relying on diversity jurisdiction must identify the citizenship of the members of an LLC and the partners of an LP, including the citizenship of members or partners that are themselves business entities.
The third complaint did not allege the citizenship of the defendants’ members or partners. The court also concluded that the defendants described as corporations in the first and second complaints appeared to be LLCs despite their names. As a result, Citibank had not established subject-matter jurisdiction, meaning the court’s legal authority to hear the case.
Ruling and Effect
Judge Furman stated that the parties might be able to quickly confirm that they were completely diverse and that the problem was only one of incomplete pleading. He emphasized that the court has an independent duty to verify its jurisdiction and that subject-matter jurisdiction cannot be waived. The court was therefore unwilling to begin trial while jurisdiction remained uncertain.
The order directed counsel to be prepared to address the issue at the telephone conference scheduled for the following day. It did not dismiss the case or decide the underlying dispute. The court stated that if the parties were not diverse, it would have to dismiss the case without prejudice, but the order itself did not impose that dismissal.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.