First Circuit: Citizenship of Trustee Without Description of Nature of the Trust Is Insufficient to Establish Diversity Jurisdiction Emphasizing that

First Circuit: Citizenship of Trustee Without Description of Nature of the Trust Is Insufficient to Establish Diversity Jurisdiction Emphasizing that

special attention is warranted when invoking diversity jurisdiction and a party is not a natural person or a corporation, the U.S. Court of Appeals for the First Circuit vacated a judgment for the defendants which awarded over ten million dollars on their

counterclaims, including attorneys' fees after six years of litigation and a nine-day bench trial. Although the issue of subject matter jurisdiction was initially raised by the district court, a “stipulation regarding diversity jurisdiction” purporting to “stipulate that there exists complete diversity of citizenship” apparently was sufficient to alleviate the lower court’s jurisdictional concerns. However, the stipulation did not identify the citizenship of all of the members of defendants’ members.

On appeal, the First Circuit ordered the parties to file affidavits of jurisdictional facts since, in its view, the record as it existed at that time was not sufficient to demonstrate subject matter jurisdiction.

Specifically, the court of appeals was concerned with the lack of information concerning the members of one of the defendants, an LLC. Defendants eventually filed a corrected affidavit of jurisdictional facts which identified the ultimate owners of defendants' members as individuals, corporations, and trusts. They identified the citizenship of the individuals by their domiciles, of the corporations by their principal places of business and states of incorporation, and the trusts by the domiciles of their trustees.

The First Circuit concluded that defendants’ filing was still insufficient to establish subject matter jurisdiction. Specifically, the intermediate appellate court noted that a traditional trust, one that exists as a fiduciary relationship and not as a distinct legal entity, takes the citizenship of its trustee, while a trust which does exist as a separate legal entity takes the citizenship of all its members.

In this case, defendants did not provide sufficient information related to the nature of each trust. Thus, the Court could not determine how to treat them for purposes of diversity jurisdiction. They also failed to submit information about the trusts' beneficiaries or members that might have mooted any need to determine whether it was necessary to look beyond the citizenship of the trust or its trustees.

As a result, the First Circuit remanded the case to the district court to determine whether it has subject matter jurisdiction. The Court also added that, in circumstances such as the present where the information necessary to establish jurisdiction may be uniquely in the possession of the would-be defendant, limited jurisdictional discovery may be appropriate.