Basically, two residents of Virginia sued a Texas-based property management corporation for illness caused by toxic mold in their Virginia apartment. They initially filed in state court; the corporation removed it to federal court, citing diversity jurisdiction. The Fourth Circuit, on appeal, held that removal was improper because the corporation had not proven that there was no other nondiverse real party in interest that was really responsible.1 Thus, if the "really responsible" party was a Virginia resident, this would destroy diversity (and, therefore, federal jurisdiction).
In a unanimous decision by Justice Ginsburg, the Supreme Court reversed, holding that
Defendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum State. It is not incumbent on the named defendants to negate the existence of a potential defendant whose presence in the action would destroy diversity.
Id., slip op. at 2. But what this case really comes down to is, again, lawyering.
The Roches sued the entity they thought responsible for managing their apartment. Lincoln affirmed that it was so responsible. Complete diversity existed. The potential liability of other parties was a matter plaintiffs' counsel might have assiduously explored through discovery devices. It was not incumbent on Lincoln to propose as additional defendants persons the Roches, as masters of their complaint, permissively might have joined.
Id., slip op. at 1213. The Court thus affirmed the Ninth Circuit at the expense of the Fourth.2 Just like in Cheney, though, the real reason that the plaintiffs lost this case is that their attorneys didn't do a good job of discerning and explaining the "real" structure of the defendant organization.
- On the other hand, a partnership is a citizen of each state in which a partner resides. Carden v. Arkoma Associates, 494 U.S. 185, 189, 19297 (1990).
- Interestingly, Justice Kennedy wrote the opinion in question when he was on the Ninth Circuit. The Court's citation notes that (ordinarily, the Court does not identify the author of a majority opinion). See slip op. at 6.