The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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:
KENSHOO, INC., :
: MEMORANDUM DECISION
Plaintiff, : AND ORDER
:
- against - : 22-cv-764 (BMC)
:
ARAGON ADVERTISING, LLC, :
:
Defendants. :
:
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COGAN, District Judge.
This Court issued an Order requiring plaintiff to show cause why this action should not
be dismissed for lack of subject matter jurisdiction. Plaintiff had purported to invoke diversity
jurisdiction, but as to the citizenship of defendant limited liability company, plaintiff had only
alleged defendant's state of formation and principal place of business. As the Order to Show
Cause pointed out, those facts are irrelevant as to the citizenship of a limited liability company.
See Bayerische Landesbank, New York Branch v. Aladdin Capital Management LLC, 692 F.3d
42, 49 (2d Cir. 2012); Barnes v. Fort Hamilton Fam. Homes, No. 21-cv-1044, 2021 WL 861801,
at *1 (E.D.N.Y. March 8, 2021) (“For diversity purposes, LLCs have the imputed citizenship of
each of their members.”); 136-61 Roosevelt LLC v. Starbucks Corp., No. 21-cv-3560, 2021 WL
2779287, at *1 (E.D.N.Y. July 2, 2021); The Order to Show Cause also advised plaintiff that it
“must identify each member of the LLC and properly plead each member’s citizenship.”
Plaintiff responded to the Order to Show Cause with an amended complaint alleging:
Upon information and belief, Aragon has two shareholders: Todd Stearn and
another individual whose name is not yet known to Plaintiff . . . Upon information
and belief, the second member of Aragon, whose name is not yet known to
Plaintiff, is a citizen of the State of New York. Upon information and belief, no
member of Aragon is domiciled in the State of California for purposes of diversity
jurisdiction.
In addition, plaintiff submitted an affidavit from its counsel averring that she had
contacted defendant’s counsel, who “informed [her] that Aragon had two members: Todd Stearn
and one additional member whose name she did not know. [Defendant’s counsel also] stated
that both members of Aragon are citizens of New York.”
This showing is still insufficient. As the Second Circuit observed in Carter v. HealthPort
Technologies, LLC, 822 F.3d 47, 60 (2d Cir. 2016), an allegation that an LLC “is a citizen of a
different state” than the plaintiff “is insufficient to show that the diversity requirement is met
because, standing alone, it is entirely conclusory.” District courts in this Circuit regularly hold
that allegations that a party is a citizen of a different state, or that none of the members of a
defendant limited liability company are citizens of the same state as the plaintiff, are insufficient
to invoke diversity jurisdiction. See Go Farm Hemp, LLC v. Canopy Growth USA, LLC, No.
19-cv-1370, 2019 WL 5842908, at *2 (W.D.N.Y. Nov. 7, 2019); Axalta Coating Sys., LLC v.
Atl. Auto Body of Freeport, LLC, No. 18-cv-3521, 2019 WL 1491959, at *2 (E.D.N.Y. Apr. 4,
2019); see also Tutor Perini Bldg. Corp. v. N.Y.C. Reg'l Ctr., LLC, No. 20-cv-731, 2020 WL
7711629, at *2 (S.D.N.Y. Dec. 29, 2020) (collecting cases). Allegations like these do not meet
the plausibility standard for substantive allegations under Ashcroft v. Iqbal, 556 U.S. 662 (2009),
and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and there is no reason why
jurisdictional allegations – the fundamental building blocks on which the power of the federal
courts rests – should be treated more casually.
We are approaching 200 years since the Supreme Court made it clear that a plaintiff
cannot guess at a defendant's citizenship in bringing an action in federal court. A plaintiff’s
lawyer must do the research first and if she cannot find a definitive basis for alleging the
citizenship of each defendant, then the case belongs in state court. Chief Justice Marshall thus
stated that “the averment of jurisdiction shall be positive – that the declaration shall state
expressly the fact upon which jurisdiction depends. It is not sufficient, that jurisdiction may be
inferred, argumentatively, from its averments.” Brown v. Keene, 8 Pet. (33 U.S.) 112, 144
(1834) (Marshall, C.J.). More recently, as the Seventh Circuit held in Belleville Catering Co. v.
Champaign Market Place, L.L.C., 350 F.3d 691, 692–93 (7th Cir. 2003):
Once again litigants’ insouciance toward the requirements of federal jurisdiction
has caused a waste of time and money. . . . Counsel tells us that, because the lease
between Belleville Catering and Champaign Market Place refers to Belleville
Catering as “a Missouri corporation,” he assumed that it must be one. That
confesses a violation of Fed. R. Civ. P. 11. . . . [C]ounsel must secure
jurisdictional details from original sources before making formal allegations.
No doubt, the combination of the statutory requirements for diversity jurisdiction and the
lack of public information about ownership of unincorporated associations often makes it
difficult to proceed in federal court when a case involves a limited liability company. States
generally do not require disclosure of ownership interests in a limited liability company or a
limited partnership, unlike their treatment of a corporation's state of incorporation or its principal
place of business. Indeed, one reason that individuals entering a business may choose an
unincorporated form is to avoid disclosure of ownership interests. See generally “The Opaque
World of Ownership by L.L.C., N.Y. Times, May 1, 2018, at B1.1
But at least when it comes to citizenship for diversity purposes, that is the way Congress
wants it. Congress granted a special citizenship status to corporations that could be ascertained
from public records and observation of their principal place of business, and despite the
1 A version of this article appears online. See Emily Badger, Anonymous Owner, L.L.C.: Why It Has Become So
Easy to Hide in the Housing Market, N.Y. Times, Apr. 30, 2018,
https://www.nytimes.com/2018/04/30/upshot/anonymous-owner-llc-why-it-has-become-so-easy-to-hide-in-the-
housing-market.html.
increasing use of unincorporated entities as business vehicles over the last 30 years, Congress
has not amended the diversity statute to treat such entities the same way as corporations for
diversity purposes.2 It is not up to the courts to amend the statute to increase the reach of federal
jurisdiction where Congress has not.
The claims in plaintiff’s complaint are all common law causes of action sounding in
contract or tort, the kind of claims that the New York state courts hear every day. There is no
reason to stretch the requirements for subject matter jurisdiction when plaintiff can walk across
the street (literally) and have the same law applied to its claims that would be applied here. The
case is dismissed for failure to properly plead subject matter jurisdiction.
Digitally signed by
SO ORDERED.
Brian M. Cogan
______________________________________
U.S.D.J.
Dated: Brooklyn, New York
February 18, 2022
2 In fact, Congress has determined to treat limited liability companies like corporations for diversity purposes in one
instance – under the Class Action Fairness Act. See Pub. L. No. 109-2, § 4(a), 119 Stat. 4, 9 (2005) (adding a new §
1332(d) and stating that, for purposes of that section, “an unincorporated association shall be deemed to be a citizen
of the State where it has its principal place of business and the State under whose laws it is organized”). The fact that
Congress has done it there but has not chosen to do it generally emphasizes the point that courts should not interject
their own preference.