By Jen Dlugosz on March 14, 2018
When deciding whether to remove a case when an LLC is a party it is necessary to look at the citizenship of the LLC’s members to determine whether there is diversity for subject matter jurisdiction. However, citizenship of LLC members is not a key component of personal jurisdiction. The tests for subject matter jurisdiction and personal jurisdiction, while sometimes muddled, are in fact distinct. Simply put, just because an LLC is a citizen in the jurisdiction, does not equate to personal jurisdiction over the LLC in that jurisdiction.
In two seminal decisions, Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2847, 2853-54 (2011), and Daimler AG v. Bauman, 134 S. Ct. 746, 757 (2014), the United States Supreme Court confirmed that only a limited set of circumstances will typically justify the exercise of general in personam jurisdiction over a corporation—when the corporation is incorporated in the forum state or has its principal place of business there. The decisions in Daimler and Goodyear apply equally to limited liability corporations. In fact, one of the entities at issue in Daimler was an LLC – Mercedes-Benz USA, LLC (“MBUSA”). Even though MBUSA was an LLC, the court looked to MBUSA’s place of incorporation and principal place of business to determine whether or not general jurisdiction existed. The Court did not look to the citizenship of all of MBUSA’s members: “Neither Daimler nor MBUSA is incorporated in California, nor does either entity have its principal place of business there.”
A handful of district courts have examined this issue and come to the same conclusion – that the test for personal jurisdiction over an LLC does not require an analysis of its citizenship. In Carruth v. Michot, 2015 WL 6506550 (W.D. Tex. Oct. 26, 2015), the LLC defendants moved to dismiss for lack of personal jurisdiction. Plaintiff argued that because a Texas citizen was a member of both defendant LLCs, the LLCs must be “at home” in Texas for purposes of personal jurisdiction. The District Court disagreed, finding that plaintiff’s argument lacked merit and blurred the principles of diversity jurisdiction and minimum contacts. The court held that it could not exercise personal jurisdiction over the LLC based solely on the citizenship of one of its members. See also Finn v. Great Plains Lending LLC, 2016 WL 705242 (E.D. Pa. Feb. 23, 2016) (holding that general personal jurisdiction did not exist over Great Plains Lending LLC in Pennsylvania because it was neither incorporated nor has its principal place of business in Pennsylvania, and further noting that even though Great Plains is an LLC and not a corporation, Daimler “applies with equal force.”); see also Mountain Funding, LLC v. Blackwater Crossing, LLC, 2006 WL 1582403 (W.D.N.C. June 5, 2006) (“[T]he practice of disregarding a limited liability company as an entity and looking to the citizenship of its members is only used to determine whether a court has diversity for subject matter jurisdiction. This principal has not been applied to personal jurisdiction, which presents distinct due process issues.”).
While the tests for subject matter jurisdiction and personal jurisdiction are easy to confuse, it is important to remember that subject matter jurisdiction and personal jurisdiction are distinct. Citizenship of an LLC member in the jurisdiction alone generally will not be sufficient to establish personal jurisdiction.