diversity jurisdiction

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In 1992, ConAgra Foods, Inc. (“ConAgra”) sued Americold Logistics, LLC and its parent company, Americold Realty Trust (collectively, “Americold”), in Kansas state court to recover damages for goods destroyed by fire in an Americold storage facility. See ConAgra Foods, Inc. v. Americold Logistics, LLC, No. 13-2064-JWL, 2013 WL 5530274, *3 (D. Kan. Oct. 4, 2013). Americold removed the action to federal court on the basis of diversity jurisdiction, and received summary judgment. ConAgra appealed. Although the parties did not raise the question, the U.S. Court of Appeals for the Tenth Circuit determined Americold Realty Trust—a real estate investment trust (“REIT”) with potential beneficiaries in many states—had not shown it was completely diverse from ConAgra. Accordingly, the court did not have jurisdiction to hear the case. See ConAgra Foods, Inc. v. Americold Logistics, LLC, 776 F. 3d 1175, 1175–80 (10th Cir. 2015). The Supreme Court will decide how to determine the citizenship of a trust for purposes of diversity jurisdiction. Americold maintains that the citizenship of a trust should be based on the citizenship of its trustees, not its beneficiaries. See Brief for Petitioners, Americold Logistics, LLC, et al. at 12. ConAgra contends that a court should consider a trust to be a citizen of every state in which any of the trust’s members, shareholders, or beneficiaries is a citizen. See Brief for Respondents at 18. The Court’s resolution of this case will impact the jurisdictional status of REITs and how courts determine the citizenship of trusts. See Brief of Amicus Curiae National Association of Real Estate Investment Trusts (“NAREIT”), in Support of Reversal at 5; Brief of Amicus Curiae Winston Wen-Young Wong, in Support of Petitioner at 34

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Though federal courts are generally only able to hear claims arising under federal law, Congress gives them the power to exercise so-called “diversity jurisdiction” over any state law civil claim between citizens of different states. When a multistate corporation seeks relief in federal court on the basis of a diversity action, courts wrestle with exactly what factors they should look to in determining the corporation’s citizenship. Here, a group of California citizens sued Hertz Corporation in California state court alleging violations of California’s state labor laws. Hertz sought to remove the case to federal court. The Ninth Circuit concluded Hertz was a California citizen and denied removal jurisdiction. This case presents the Supreme Court with the opportunity to lay out a specific test for determining corporate citizenship for the purposes of diversity jurisdiction.

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Although plaintiffs initially decide whether to sue in state or federal courts, per Article III, Section 2 of the Constitution, 28 U.S.C. § 1441(b) allows defendants to remove cases to federal court if opposing parties are citizens of different states. Christophe and Juanita Roche discovered toxic mold in the apartment they were leasing. The Roches filed a complaint in Virginia state court, naming property owners State of Wisconsin Investment Board (“SWIB”) and managers Lincoln Property Company (“Lincoln”) as defendants. SWIB and Lincoln later removed the case to federal district court based on diversity jurisdiction, claiming Wisconsin and Texas citizenship, respectively. After the district court granted Lincoln summary judgment, Roche challenged the court's jurisdiction on the grounds that Lincoln was a partnership with one of its partners residing in Virginia, claiming that Lincoln manipulated federal diversity jurisdiction by litigating the case in the name of another one of the companies in the Lincoln group. The district court ruled in favor of Lincoln, but the Fourth Circuit Court of Appeals reversed, finding that Lincoln had failed to prove its diversity from Roche. In deciding whether the Fourth Circuit erred in its holding, the Supreme Court will determine when Federal Courts can require proof of the diversity of parties not named in the complaint. The Court will also decide whether the Fourth Circuit announced a new and valid rule for determining the citizenship of a limited partnership for diversity jurisdiction purposes.

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This case asks the Court to determine whether an appellate court must vacate a district court’s final judgment if it determines the district court erred in dismissing a non-diverse party when the case was removed. The Hain Celestial Group (“Hain”), as Petitioner, argues that the district court had jurisdiction to enter final judgment because the parties before it were completely diverse after Whole Foods, Inc. (“Whole Foods”) was dismissed. Alternatively, Hain argues Whole Foods could be dismissed under Federal Rule of Civil Procedure 21 as a dispensable party. Sarah Palmquist, Grant Palmquist, and E.P. (the “Palmquists”), as Respondents, argue that Whole Foods remained a part of the litigation until the final judgment, destroying the district court’s subject matter jurisdiction. Alternatively, the Palmquists argue that Hain’s Rule 21 argument is improper and would result in prejudice to them. The outcome of this case could impact forum shopping strategies and increase the resources parties must expend if they must relitigate claims after a final judgment is vacated.

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After suffering property damage in a 2010 hailstorm, Greg Knowles filed a class action lawsuit in Miller County, Arkansas, against the Standard Fire Insurance Company ("Standard Fire") for failure to pay a contractor's retention fee. Standard Fire tried to remove the case to federal court under the Class Action Fairness Act of 2005 (“CAFA”), alleging that the amount in controversy exceeded $5,000,000. Pursuant to CAFA, a federal court has jurisdiction over a class action only if the amount in controversy exceeds $5,000,000. The district court remanded the case to state court because Knowles's complaint stipulated that he would not seek more than $5,000,000 in damages for the class. Standard Fire argues that Knowles cannot defeat removal under CAFA by using a stipulation because it would bind absent class members before class certification and before Knowles could be declared an adequate class representative. Knowles argues that as master of his complaint, he is free to limit his claims, and that class members are not adversely affected by the stipulation. The Supreme Court will determine whether a named plaintiff in a class action, before being declared an adequate class representative, can limit the entire class's claims to $5,000,000 in damages in order to defeat an attempt to remove the case to federal court.

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Daniel Schmidt, a former Wachovia customer, sued the bank in state court after the IRS determined that the investment strategy Wachovia had recommended was illegal. Wachovia, which is headquartered in Charlotte, NC, successfully sought to remove the case to federal court because of the diversity of citizenship of the parties. After an adverse decision on the merits, Wachovia appealed to the Fourth Circuit Court of Appeals. Rather than address the decision on the merits, however, the Fourth Circuit dismissed the case altogether. It determined that the federal system never had jurisdiction to hear the case because Wachovia had branches in South Carolina, and therefore there was no diversity of citizenship between the parties. Wachovia appealed to the Supreme Court because it hopes to keep the case from being retried in state court.

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