Reported / Citable
Background
Louis Henna, LLC filed this insurance-coverage action against State Farm Lloyds in Texas state court, asserting only state-law claims. State Farm removed the case on November 6, 2024, invoking diversity jurisdiction under 28 U.S.C. § 1332 and alleging that the amount in controversy exceeded $75,000.
State Farm alleged that Louis Henna was a “Texas company” and that State Farm, an unincorporated association of underwriters, had members who were all citizens of Illinois or Arizona. Although Louis Henna did not challenge jurisdiction or seek remand, the court examined subject-matter jurisdiction independently while State Farm’s motion to strike expert testimony and motion for partial summary judgment were pending.
The Court’s Holding
The court held that State Farm’s removal allegations did not establish complete diversity because State Farm had not identified and alleged the citizenship of every member of Louis Henna, LLC. An LLC is a citizen of every state in which its members are citizens, and when a member is itself an LLC or another unincorporated entity, citizenship must be traced through every layer of members and partners.
The court emphasized that identifying an LLC’s owners is not necessarily sufficient because some states permit membership without ownership. Rather than resolving the pending merits motions or finding that jurisdiction was absent, the court allowed State Farm an opportunity to cure its defective jurisdictional allegations under 28 U.S.C. § 1653. It ordered State Farm to submit additional jurisdictional briefing by May 15, 2026, and permitted Louis Henna to respond by May 22, 2026.
Key Takeaways
- A removing party must specifically allege the citizenship of every member of an LLC, even when the opposing party does not contest federal jurisdiction.
- If an LLC’s member is itself an LLC or another unincorporated entity, citizenship must be traced through all layers of members and partners; ownership information alone may not establish membership.
- Defective jurisdictional allegations may be amended, so the court ordered supplemental briefing instead of immediately remanding or dismissing the case.
Why It Matters
The order underscores that describing an entity as a “Texas company” does not establish an LLC’s citizenship for diversity purposes. Parties removing cases involving LLCs must investigate and plead the citizenship of every member as of the date of removal, including citizenship traced through any nested entities.
It also shows that federal courts must verify their own subject-matter jurisdiction before exercising judicial power, regardless of whether any party raises an objection.