Citizenship of Corporations.

In Bank of the United States v. Deveaux,1129 Chief Justice 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 the case because the members of the bank as a corporation were citizens of one state and Deveaux was a citizen of another. The holding that corporations were citizens of the states where their stockholders lived was reaffirmed a generation later,1130 but pressures were building for change. While corporations were assuming an ever more prominent economic role, the Strawbridge rule, which foreclosed diversity suits if any plaintiff had common citizenship with any defendant,1131 was working to close the doors of the federal courts to corporations with stockholders in many states.

Deveaux was overruled in 1844, when, after elaborate argument, 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, for the purposes of its incorporation, capable of being treated as a citizen of that state, as much as a natural person.”1132 Ten years later, the Court abandoned this 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.”1133 “State of incorporation” remained the guiding rule for determining the place of corporate citizenship until Congress amended the jurisdictional statute in 1958. Concern over growing dockets and companies incorporating in states of convenience then 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.”1134 The right of foreign corporations to resort to federal courts in diversity is not one that the states may condition as a qualification for doing business in the state.1135

Unincorporated associations, such as partnerships, joint stock companies, labor unions, governing boards of institutions, and the like, do not enjoy the same privilege as a corporation; the actual citizenship of each of its members must be considered in determining whether diversity exists.1136

Footnotes

1129
9 U.S. (5 Cr.) 61, 86 (1809). [Back to text]
1130
Commercial & Railroad Bank v. Slocomb, 39 U.S. (14 Pet.) 60 (1840). [Back to text]
1131
Strawbridge v. Curtiss, 7 U.S. (3 Cr.) 267 (1806). [Back to text]
1132
Louisville, C. & C.R.R. v. Letson, 43 U.S. (2 How.) 497, 558 (1844). [Back to text]
1133
United Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145, 148 (1965), citing Marshall v. Baltimore & 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 Associates, 494 U.S. 185, 189 (1990). [Back to text]
1134
28 U.S.C. § 1332(c)(1). In Hertz Corp. v. Friend, 559 U.S. ___, No. 08–1107, slip op. (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 jurisdictional statute additionally deems the place of an insured’s citizenship as an additional place of citizenship of an insurer being sued in a direct action case. [Back to text]
1135
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 the license of a foreign corporation to do business in the state upon notice that the corporation had removed a case to a federal court. [Back to text]
1136
Chapman v. Barney, 129 U.S. 677 (1889); Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449 (1900); Thomas v. Board of Trustees, 195 U.S. 207 (1904); United Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145 (1965); Carden v. Arkoma Associates, 494 U.S. 185 (1990). But compare People of Puerto Rico v. Russell & Co., 288 U.S. 476 (1933), distinguished in Carden, 494 U.S. at 189–190, and Navarro Savings Ass’n v. Lee, 446 U.S. 458 (1980), distinguished in Carden, 494 U.S. at 191–192. [Back to text]