Unreported / Non-Citable
Background
Dennis Sisson filed a putative class action in Texas state court against five limited liability companies, alleging that they systematically deprived him and similarly situated employees of commission-based earnings. He asserted claims for breach of contract, unjust enrichment, fraudulent misrepresentation, and negligent misrepresentation.
The defendants removed the action under the Class Action Fairness Act. Sisson moved to remand for lack of subject-matter jurisdiction. He did not dispute that the proposed class had at least 100 members or that more than $5 million was in controversy; the dispute concerned whether the defendants had established CAFA’s minimal-diversity requirement.
The Court’s Holding
The court held that, for purposes of CAFA, an LLC is an “unincorporated association” whose citizenship is determined under 28 U.S.C. § 1332(d)(10) by its principal place of business and the state under whose laws it is organized. The court rejected Sisson’s argument that the defendants’ citizenship instead depended on the citizenship of each LLC’s members, explaining that Fifth Circuit precedent applies the statutory CAFA rule to LLCs.
Each defendant was organized under Delaware law and maintained its principal place of business in Texas, making each a citizen of Delaware and Texas for CAFA purposes. Because Sisson was a Mississippi citizen, minimal diversity existed. With the class-size and amount-in-controversy requirements also satisfied, the court concluded that it had subject-matter jurisdiction under CAFA and denied the motion to remand.
Key Takeaways
- Under CAFA, an LLC’s citizenship is based on its state of organization and principal place of business, not the citizenship of all its members.
- CAFA’s minimal-diversity requirement is satisfied when any class member is a citizen of a different state from any defendant.
- The ordinary presumption against removal does not apply in cases invoking CAFA.
Why It Matters
The decision underscores that CAFA supplies a distinct citizenship rule for LLCs and other unincorporated associations. In class-action removal disputes within the Fifth Circuit, parties should evaluate an LLC’s state of organization and principal place of business rather than tracing the citizenship of every member.
The ruling also illustrates CAFA’s comparatively broad route to federal jurisdiction: once the class-size and amount thresholds are met, citizenship differences between a single class member and a single defendant can establish minimal diversity.