Facts
- Christophe and Juanita Roche, Virginia citizens, leased an apartment in the Westfield Village complex in Fairfax County, Virginia, managed by Lincoln Property Company.
- The Roches alleged exposure to toxic mold caused serious medical problems and that personal property was lost, stolen, or destroyed during remediation and storage.
- The Roches sued in Virginia state court, naming Lincoln Property Company (identified as a Texas corporation) and other defendants, including the property owner, the State of Wisconsin Investment Board (a Wisconsin citizen).
- Defendants removed the case to federal court on the basis of diversity jurisdiction under 28 U.S.C. §§ 1332 and 1441.
- After discovery, the district court granted summary judgment for defendants.
- Before final judgment, the Roches moved to remand, asserting Lincoln was actually a partnership whose membership included a Virginia citizen and claiming the defense had litigated under the name of a different Lincoln-related entity.
Issues
- Whether a defendant may remove a case based on diversity when complete diversity exists among all named plaintiffs and named defendants, without negating the citizenship of unnamed affiliated entities that might be considered real parties in interest.
- Whether a court may defeat removal by treating an unnamed affiliate as a real party in interest and requiring proof of that entity’s citizenship.
- Whether an unincorporated entity’s citizenship for diversity purposes may be determined by a functional “very close nexus” to a state rather than by the citizenship of its members or partners.
Decision
- The Supreme Court unanimously reversed the Fourth Circuit.
- Removal was proper because complete diversity existed between the named plaintiffs and the named defendants, and no properly joined and served defendant was a citizen of the forum state.
- A removing defendant has no obligation to identify or disprove the citizenship of unnamed affiliates whose hypothetical presence could destroy diversity.
- The Court rejected the Fourth Circuit’s approach that effectively required a defendant to negate the existence of an in-state affiliated entity not named as a party.
Legal Principles
- Diversity jurisdiction and diversity-based removal are determined by the citizenship of the parties actually named in the pleadings and properly joined and served.
- Under 28 U.S.C. § 1441(b), the forum-defendant limitation applies only to defendants who are parties of record and properly joined and served, not to unnamed affiliates.
- The “real party in interest” inquiry for diversity focuses on the actual parties before the court; it does not authorize courts to treat nonparties as jurisdictionally relevant because they could have been sued.
- Citizenship of unincorporated entities is tied to the citizenship of their members or partners; courts should not replace that rule with a functional “nexus” test.
- Plaintiffs control whom they sue; if plaintiffs want an affiliate’s citizenship to affect diversity, they must name that affiliate as a defendant.
Conclusion
The Court held that diversity removal turns on the citizenship of named, properly joined and served parties, and that defendants need not negate the possible existence or citizenship of unnamed affiliated entities that plaintiffs chose not to sue.