Reported / Citable
Background
Lakeview Loan Servicing, LLC moved for default judgment and summary judgment. The court ordered Lakeview to show cause why subject-matter jurisdiction existed, and Lakeview responded that the court had diversity jurisdiction.
Lakeview alleged that its sole member was Bayview MSR Opportunity Corporation, a Delaware corporation with its principal place of business in Florida. It also alleged that defendant GoodLeap, LLC had a sole member, Paramount GR Holdings, LLC, whose members included Paramount Owner Holdings Company, Inc., a Delaware corporation with its principal place of business in California.
The Court’s Holding
The court held that Lakeview failed to establish complete diversity. Because an LLC has the citizenship of each of its members, Lakeview was a citizen of Delaware and Florida through its sole corporate member.
GoodLeap was also a Delaware citizen because its ownership chain included Paramount Owner Holdings Company, Inc., a Delaware corporation. The shared Delaware citizenship defeated complete diversity. Because Lakeview alleged no other basis for federal jurisdiction, the court dismissed the case without prejudice for lack of subject-matter jurisdiction.
Key Takeaways
- An LLC has the citizenship of every one of its members for diversity-jurisdiction purposes.
- When an LLC’s member is another LLC, the citizenship inquiry must continue through each layer of ownership.
- Shared Delaware citizenship between Lakeview and GoodLeap defeated complete diversity and required dismissal without prejudice.
Why It Matters
Parties invoking diversity jurisdiction must trace and specifically allege citizenship through every layer of an LLC’s ownership structure. Even one overlapping state of citizenship between opposing parties eliminates complete diversity.
The decision also illustrates that pending merits motions cannot proceed when the plaintiff fails to establish the federal court’s subject-matter jurisdiction.