RTP LLC v. ORIX Real Estate Capital, Inc., No. 14-3671 (7th Cir. 2016)
Annotate this CaseORIX made a $41 million loan for the purchase of a North Carolina commercial building. Inheritance (a subsidiary of Detroit’s civil service retirement plans) guaranteed the loan. The building’s sole tenant did not renew its lease. No new tenant was willing to pay as much. ORIX accelerated the loan and demanded that Inheritance assume the outstanding debt. Inheritance sought a declaratory judgment. ORIX, which has citizenship in Delaware and Texas, removed the case to federal court, based on diversity of citizenship. The district court ordered Inheritance to pay $30 million. The Seventh Circuit vacated for lack of jurisdiction, citing the Supreme Court’s 2016 decision in Americold Realty Trust v. ConAgra, that when a trustee sues (or is sued), the trustee’s citizenship matters for purposes of diversity jurisdiction. When the beneficiary is a party, or a trust litigates in its own name, it takes the citizenship of each of its members. It does not matter that Detroit’s pension funds call some people “members” and others (often the same people at different times) “beneficiaries.” People in their active work lives, retirees, and family members entitled to payments on their accounts, all have financial interests in the pension trusts, raising “grave doubt about the existence of complete diversity of citizenship.” If ORIX does not seek an adjudication of the domicile of 59 persons who, in 2013, lived in Texas or Delaware, the district court must remand to state court.
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