Diversity of citizenship is one of the most important avenues to federal court. A recent U.S. Supreme Court decision, Americold Realty Trust v. ConAgra Foods, 138 S. Ct. 1012 (U.S. 2016), made it a lot harder for unincorporated business entities—such as Delaware limited liability companies (LLCs) and partnerships—to use diversity jurisdiction to access the federal courts, either as a plaintiff or as a defendant removing a case from state court. The court in Americold ruled that the citizenship for diversity purposes of a real estate investment trust (REIT) under Maryland law is the citizenship of all its members, including its shareholders—a standard that will likely keep many cases involving not only REITs but other unincorporated entities out of federal court. It is important to Delaware practitioners who handle business disputes involving LLCs, partnerships and other unincorporated Delaware business entities.
There are two main ways for federal courts to get jurisdiction over a civil lawsuit: subject matter or “federal question” jurisdiction and diversity jurisdiction. Subject matter jurisdiction exists in cases in which the United States is a party or one or more of the claims is brought under the U.S. Constitution or federal laws such as securities, antitrust, copyright, patent or maritime laws. These cases can be brought in federal court regardless of the “citizenship” of the litigants, and some such suits are restricted to federal court. Jurisdiction also exists over some national or securities class actions, if they meet the standards in the Class Action Fairness Act or the Securities Litigation Uniform Standards Act.
