134 Coventry LLC v. U.S. Bank Trust, N.A.

Background

134 Coventry, LLC filed an amended complaint asserting diversity of citizenship as the sole basis for federal subject-matter jurisdiction. The complaint alleged that 134 Coventry’s members were citizens of New York and that U.S. Bank Trust, N.A. was a citizen of Minnesota under the rule that a national bank is a citizen of the state where its main office is located.

134 Coventry sued U.S. Bank Trust only in its capacity as trustee for the LSF9 Master Participation Trust. The court explained that, for diversity purposes, a trustee may be treated as the real party to the dispute if it has customary powers to hold, manage, and dispose of trust assets for others. If the trustee does not have those powers, the trust may instead have the citizenship of its members or beneficiaries.

Court’s Action

The court raised the subject-matter-jurisdiction issue because federal courts must independently determine whether they have jurisdiction. Although neither party had addressed the trustee-and-beneficiary citizenship issue in briefing on the pending motion to dismiss, the court found that the issue could affect whether diversity jurisdiction exists.

The court directed U.S. Bank Trust to file a sworn declaration by September 11, 2023. The declaration had to answer two questions:

1. What powers does U.S. Bank Trust hold as trustee? The bank had to provide documents allowing the court to independently evaluate those powers under the governing legal standard. 2. Who are the trust’s beneficiaries, and what is each beneficiary’s citizenship? The bank had to identify the distinct bases for its factual statements on these potentially decisive issues.

The court recognized that 134 Coventry had the burden of establishing diversity jurisdiction, but stated that the requested information was uniquely known to U.S. Bank Trust. Rather than immediately invite 134 Coventry to seek jurisdictional discovery, the court ordered the bank to produce the information for efficiency. The court stated that it would consider ordering additional jurisdictional discovery if the declaration left the facts unclear.

Disposition

The order required U.S. Bank Trust to submit the sworn declaration and supporting documentation. It did not determine whether diversity jurisdiction exists, rule on the pending motion to dismiss, or decide the underlying dispute. Judge Paul A. Engelmayer signed the order.