The Stouffer Corporation, Appellee, v. Donald E. Breckenridge, Appellant, 859 F.2d 75 (8th Cir. 1988)

James D. Bass, Clayton, Mo., for appellant.

Paul J. Puricelli, St. Louis, Mo., for appellee.

Before ARNOLD, Circuit Judge, ROSS, Senior Circuit Judge, and WOLLE^* , District Judge.

WOLLE, District Judge.

This interlocutory appeal presents the question whether the state of citizenship of a limited partner must be considered in determining whether diversity jurisdiction is satisfied. The plaintiff, an Ohio corporation, brings this action as the general partner on behalf of a limited partnership which includes as limited partners several Missouri citizens. The defendant is a citizen of Missouri. The District Court,¹  faced with conflicting decisions from other circuits and no controlling decision of the United States Supreme Court, denied defendant's motion to dismiss but gave defendant permission to request interlocutory appeal. Having granted that request, we conclude the citizenship of limited partners must be considered in determining diversity jurisdiction. We therefore remand the case to the district court with directions to dismiss for lack of jurisdiction.

It is well established that diversity jurisdiction attaches only when all parties on one side of the litigation are of a different citizenship from all of those on the other. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L. Ed. 435 (1806); 28 U.S.C. § 1332(a) (1), (c). A corporate litigant has long been conclusively presumed to be a resident of its state of incorporation. See Marshall v. Baltimore & O.R.R., 57 U.S. (16 How.) 314, 325-29, 14 L. Ed. 953 (1854) (codified at 28 U.S.C. § 1332(c) (1970)). An unincorporated association, however, has traditionally been viewed as a citizen of the state of each of its constituent members. Chapman v. Barney, 129 U.S. 677, 9 S. Ct. 426, 32 L. Ed. 800 (1889) (federal jurisdiction could be invoked only if all members of unincorporated New York joint stock company were of citizenship diverse from that of all opposing parties); Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 20 S. Ct. 690, 44 L. Ed. 842 (1900) (court refused to extend jurisdiction by way of corporate analogy to Pennsylvania limited partnership association). That traditional, narrow view of federal jurisdiction over unincorporated associations was challenged but reaffirmed in United Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145, 86 S. Ct. 272, 15 L. Ed. 2d 217 (1965). The court held that an unincorporated labor union's citizenship for jurisdictional purposes must take into account the citizenship of each of its members and not just the location of its principal office.

The United States Supreme Court has not yet addressed the issue here presented, and this court has noted but not decided it. See Missouri-Indiana Inv. Group v. Shaw, 699 F.2d 952, 957 n. 6 (8th Cir. 1983). Appellate decisions in three circuits mandate consideration of the citizenship of limited partners. See New York State Teachers Retirement Sys. v. Kalkus, 764 F.2d 1015 (4th Cir. 1985); Elston Inv., Ltd. v. David Altman Leasing Corp., 731 F.2d 436 (7th Cir. 1984); Trent Realty Assocs. v. First Fed. Sav. & Loan Ass'n, 657 F.2d 29 (3d Cir. 1981); Carlsberg Resources Corp. v. Cambria Sav. & Loan Ass'n, 554 F.2d 1254 (3d Cir. 1977). Two circuits have adopted a less restrictive approach, deciding on a case-by-case basis whether the limited partner is a real party to the controversy. See Mesa Operating Ltd. Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238, 240 (5th Cir. 1986); Colonial Realty Corp. v. Bache & Co., 358 F.2d 178 (2d Cir.), cert. denied, 385 U.S. 817, 87 S. Ct. 40, 17 L. Ed. 2d 56 (1966).

In the only published opinion on the issue from this circuit, the district court referred to the cases from the several circuits, then concluded:

[T]he better reasoned rule is that citizenship of limited partners must be considered in determining diversity of citizenship.

Castlewood Dev. Co. v. Real Estate Assocs. Ltd. II, 652 F. Supp. 1582, 1583 (S.D. Iowa 1987). We too conclude the better rule requires complete diversity between the plaintiff and all partners of the defendant corporation, limited as well as general partners. We must therefore reverse the district court's refusal to dismiss the complaint for want of diversity jurisdiction.

The reasons for the rule we here adopt are well explained in the above-cited decisions from the Third, Fourth and Seventh Circuits. A limited partnership is one form of unincorporated association, and the court has long required consideration of the citizenship of all members of such associations. Therefore, this rule is "more consonant with Supreme Court precedent." Elston Inv., Ltd. v. David Altman Leasing Corp., 731 F.2d at 438. No one suggests that Congress has ever intended diversity jurisdiction to extend to partnerships whose limited partners include citizens of the same state as an opposing party. Carlsberg Resources Corp. v. Cambria Sav. & Loan Ass'n, 554 F.2d at 1262. Any change should come from Congress. New York State Teachers Retirement Sys. v. Kalkus, 764 F.2d at 1019; Elston, at 439.² 

Practical considerations also favor this rule that treats all limited partnerships alike for jurisdictional purposes. This bright-line rule will enable the parties and counsel contemplating litigation involving a limited partnership to determine readily whether a limited partner's citizenship will preclude diversity jurisdiction. The contrary rule of the Second and Fifth Circuits, requiring a case-by-case determination whether limited partners are real parties to the controversy, would often mandate an evidentiary hearing on the threshold issue of jurisdiction. Our rule thus enhances predictability of result and promotes judicial economy.

Finally, we reject the plaintiff's contention that the Court in Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 100 S. Ct. 1779, 64 L. Ed. 2d 425 (1980), changed direction and now requires a detailed determination whether nondiverse citizens are real parties to the controversy in all cases involving unincorporated associations. The court explicitly stated that the case involved "an express trust" and "neither an association nor a corporation." Id., at 462, 100 S. Ct. at 1782. The dissenting justice underlined that disclaimer from the majority opinion. Id. at 475 n. 6, 100 S. Ct. at 1789 n. 6; see Trent Realty Assocs., 657 F.2d at 32.