ArtIII.S2.C1.16.4 Citizenship of Natural Persons and Corporations

Article III, Section 2, Clause 1:

The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority;—to all Cases affecting Ambassadors, other public Ministers and Consuls;—to all Cases of admiralty and maritime Jurisdiction; to Controversies to which the United States shall be a Party;—to Controversies between two or more States; between a State and Citizens of another State, between Citizens of different States,—between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.

For purposes of diversity jurisdiction, state citizenship of an individual is determined by the concept of domicile1 rather than residence.2 While the Supreme Court’s definition has varied across cases,3 this generally means that a person is a citizen of the state that is his or her true, fixed, and permanent home and principal establishment, and to which he or she intends to return whenever he or she is absent from it.4 Actions may disclose this intention more clearly and decisively than statements.5 A person may change his or her domicile in an instant by taking up residence in a new place with the intention of remaining there indefinitely; he or she may obtain the benefit of diversity jurisdiction by making this change alone,6 provided the change is more than a temporary expedient.7

Whether corporations, which are not explicitly referenced in Article III, should be treated as citizens of a certain state or states for purposes of diversity jurisdiction is a question with which the Supreme Court has long wrestled. The Court first directly addressed the issue in Bank of the United States v. Deveaux,8 in which Chief Justice John Marshall declared: “That invisible, intangible, and artificial being, that mere legal entity, a corporation aggregate, is certainly not a citizen; and consequently cannot sue or be sued in the courts of the United States, unless the rights of the members, in this respect, can be exercised in their corporate name.” Nevertheless, the Court upheld diversity jurisdiction in that case because the members of the bank as a corporation were citizens of one state and the opposing party was a citizen of another. The holding that corporations were citizens of the states where their stockholders lived was reaffirmed a generation later,9 but pressures were building for change. While corporations were assuming an ever more prominent economic role, the Strawbridge rule, which required complete diversity between each plaintiff and each defendant,10 operated to close the doors of the federal courts to corporations with stockholders in many states.

The Supreme Court overruled Deveaux in 1844, when a divided Court held that “a corporation created by and doing business in a particular state, is to be deemed to all intents and purposes as a person, although an artificial person, an inhabitant of the same state . . . capable of being treated as a citizen of that state, as much as a natural person.” 11 Ten years later, the Court abandoned that rationale, but it achieved the same result by “indulg[ing] in the fiction that, although a corporation was not itself a citizen for diversity purposes, its shareholders would be conclusively presumed citizens of the incorporating State.” 12 “State of incorporation” remained the guiding rule for determining the place of corporate citizenship until Congress amended the jurisdictional statute in 1958.13 Concern over growing dockets and companies incorporating in states of convenience led to a “dual citizenship” rule, whereby “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.” 14 The right of foreign corporations to invoke diversity jurisdiction is not one that a state may require corporations to waive as a condition of doing business in that state.15

Unincorporated associations, such as partnerships, joint stock companies, labor unions, governing boards of institutions, and the like, do not enjoy the same status as corporations. The actual citizenship of each of its members must be considered in determining whether diversity exists.16

Chicago & N.W.R.R. v. Ohle, 117 U.S. 123 (1886). back
Sun Printing & Pub. Ass’n v. Edwards, 194 U.S. 377 (1904). back
Knox v. Greenleaf, 4 U.S. (4 Dall.) 360 (1802); Shelton v. Tiffin, 47 U.S. (6 How.) 163 (1848); Williamson v. Osenton, 232 U.S. 619 (1914). back
Stine v. Moore, 213 F.2d 446, 448 (5th Cir. 1954). back
Tiffin, 47 U.S. (6 How.) at 163. back
Williamson, 232 U.S. 619. back
Jones v. League, 59 U.S. (18 How.) 76 (1855). back
9 U.S. (5 Cr.) 61, 86 (1809). back
Com. & R.R. Bank v. Slocomb, 39 U.S. (14 Pet.) 60 (1840). back
Strawbridge v. Curtiss, 7 U.S. (3 Cr.) 267 (1806). back
Louisville, C. & C.R.R. v. Letson, 43 U.S. (2 How.) 497, 558 (1844). back
United Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145, 148 (1965) (citing Marshall v. Balt. & Ohio R.R., 57 U.S. (16 How.) 314 (1854)). See Muller v. Dows, 94 U.S. 444 (1877); St. Louis & S.F. Ry. v. James, 161 U.S. 545 (1896); Carden v. Arkoma Assocs., 494 U.S. 185, 189 (1990). back
See Pub. L. No. 85-552, 72 Stat. 415 (1958). back
28 U.S.C. § 1332(c)(1). In Hertz Corp. v. Friend, 559 U.S. 77, 84–86 (2010), the Court recounted the development of the rules on corporate jurisdictional citizenship in deciding that a corporation’s “principal place of business” under the statute is its “nerve center,” the place where the corporation’s officers direct, control, and coordinate the corporation’s activities. The Court concluded in Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer, 276 U.S. 518, 522–25 (1928), that diversity jurisdiction existed even though the plaintiff-corporation, a Kentucky corporation, created diversity by dissolving itself and obtaining a charter as a Tennessee corporation; the only change being the state of incorporation, while the name, officers, shareholders, and location of the business remained the same. In Hertz, the Court observed that, as a result of Black & White, a corporation could “manipulate federal-court jurisdiction” through its choice of the state of incorporation. Hertz, 559 U.S. at 85. back
In Terral v. Burke Constr. Co., 257 U.S. 529 (1922), the Court resolved two conflicting lines of cases and voided a state statute that required the cancellation of a foreign corporation’s license to do business in the state upon notice that the corporation had removed a case to a federal court. back
Chapman v. Barney, 129 U.S. 677 (1889); Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449 (1900); Thomas v. Bd. of Trs., 195 U.S. 207 (1904); United Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145 (1965); Carden v. Arkoma Assocs., 494 U.S. 185 (1990). Compare People of P.R. v. Russell & Co., 288 U.S. 476 (1933), with Carden, 494 U.S. at 189–190, and Navarro Sav. Ass’n v. Lee, 446 U.S. 458 (1980). back