Thursday, March 17, 2016
There’s a lot of attention right now on President Obama’s nomination of Merrick Garland to the U.S. Supreme Court. But I wanted to quickly flag last week’s unanimous decision on diversity jurisdiction. Justice Sotomayor’s opinion in Americold Realty Trust v. ConAgra Foods, Inc. begins:
This case asks how to determine the citizenship of a “real estate investment trust,” an inanimate creature of Maryland law. We answer: While humans and corporations can assert their own citizenship, other entities take the citizenship of their members.
The Court reaffirmed the “oft-repeated rule” that unincorporated entities take on the citizenship of all of their members (citing Carden v. Arkoma Associates, 494 U. S. 185 (1990)), and held that the “members” of this sort of Maryland-law entity included all of its shareholders:
In Maryland, a real estate investment trust is an “unincorporated business trust or association” in which property is held and managed “for the benefit and profit of any person who may become a shareholder.” Md. Corp. & Assns. Code Ann. §§8–101(c), 8–102 (2014). As with joint-stock companies or partnerships, shareholders have “ownership interests” and votes in the trust by virtue of their “shares of beneficial interest.” §§8–704(b)(5), 8–101(d). These shareholders appear to be in the same position as the shareholders of a joint-stock company or the partners of a limited partnership—both of whom we viewed as members of their relevant entities. See Carden, 494 U. S., at 192–196; see also §8–705(a) (linking the term “beneficial interests” with “membership interests” and “partnership interests”). We therefore conclude that for purposes of diversity jurisdiction, Americold’s members include its shareholders.
Justice Sotomayor concluded by recognizing—but rejecting—the argument that the citizenship of an unincorporated entity should be determined the same way as a corporation:
We also decline an amicus’ invitation to apply the same rule to an unincorporated entity that applies to a corporation—namely, to consider it a citizen only of its State of establishment and its principal place of business. See Brief for National Association of Real Estate Investment Trusts 11–21. When we last examined the “doctrinal wall” between corporate and unincorporated entities in 1990, we saw no reason to tear it down. Carden, 494 U. S., at 190. Then as now we reaffirm that it is up to Congress if it wishes to incorporate other entities into 28 U. S. C. §1332(c)’s special jurisdictional rule.