Respondent Arkoma Associates, a limited partnership organized
under Arizona law, sued petitioners Carden and Limes on a contract
dispute in the District Court relying on diversity of citizenship
for federal jurisdiction. Carden and Limes, Louisiana citizens,
moved to dismiss on the ground that one of Arkoma's limited
partners was also a Louisiana citizen. The court denied the motion,
finding the requisite "complete diversity." After petitioner Magee
Drilling Co. intervened and counterclaimed against Arkoma, the
court awarded judgment to Arkoma. The Court of Appeals affirmed,
finding, with respect to the jurisdictional challenge, that
complete diversity existed because Arkoma's citizenship should be
determined by reference to the citizenship of its general, but not
its limited, partners.
Held:
1. Complete diversity is lacking with respect to Carden and
Limes. Pp.
494 U. S.
187-197.
(a) A limited partnership is not in its own right a "citizen" of
the State that created it within the meaning of the federal
diversity statute. This Court has firmly resisted extending the
well established rule treating corporations as "citizens" to other
artificial entities.
Chapman v. Barney, 129 U.
S. 677, 682;
Great Southern Fire Proof Hotel Co. v.
Jones, 177 U. S. 449,
456,
177 U. S. 457;
Steelworkers v. R.H. Bouligny, Inc., 382 U.
S. 145,
382 U. S. 151.
Puerto Rico v. Russell & Co., 288 U.
S. 476.
Navarro Savings Assn. v. Lee,
446 U. S. 458. Pp.
494 U. S.
187-192.
(b) A federal court must look to the citizenship of a
partnership's limited, as well as its general, partners to
determine whether there is complete diversity. That only the
general partners have exclusive and complete control over the
partnership's operations and the litigation is irrelevant. This
Court's decisions have never held that an artificial entity can
invoke diversity jurisdiction based on the citizenship of some but
not all of its members.
Bank of United States v.
Deveaux, 5 Cranch 61,
9 U. S. 90-91,
Marshall v. Baltimore &
Ohio R. Co., 16 How. 314,
57 U. S.
328-329,
Navarro, supra, distinguished. Pp.
494 U. S.
192-196.
(c) Whether, and which, artificial entities other than
corporations are entitled to be considered "citizens" for diversity
purposes are complex questions best left to Congress to decide. Pp.
494 U. S.
196-197.
Page 494 U. S. 186
2. The question whether complete diversity exists between Magee
and Arkoma was not considered by the Court of Appeals, and this
Court will not decide it in the first instance. P.
494 U. S.
197.
874 F.2d 226 (CA5, 1988), reversed and remanded.
SCALIA, J., delivered the opinion of the Court, in which
REHNQUIST, C.J., and WHITE, STEVENS, and KENNEDY, JJ., joined.
O'CONNOR, J., filed a dissenting opinion, in which BRENNAN,
MARSHALL, and BLACKMUN, JJ., joined,
post, p.
494 U. S.
198.
Justice SCALIA delivered the opinion of the Court.
The question presented in this case is whether, in a suit
brought by a limited partnership, the citizenship of the limited
partners must be taken into account to determine diversity of
citizenship among the parties.
I
Respondent Arkoma Associates (Arkoma), a limited partnership
organized under the laws of Arizona, brought suit on a contract
dispute in the United States District Court for the Eastern
District of Louisiana, relying upon diversity of citizenship for
federal jurisdiction. The defendants, C. Tom Carden and Leonard L.
Limes, citizens of Louisiana, moved to dismiss, contending that one
of Arkoma's limited partners was also. a citizen of Louisiana. The
District Court denied the motion, but certified the question for
interlocutory appeal, which the Fifth Circuit declined. Thereafter
Magee Drilling Company intervened in the suit and, together with
the original defendants, counterclaimed against Arkoma under Texas
law. Following a bench trial, the District Court awarded Arkoma a
money judgment plus interest and attorney's fees; it dismissed
Carden and Limes' counterclaim and as well as Magee's intervention
and counterclaim. Carden, Limes, and Magee (petitioners here)
appealed, and the Fifth Circuit affirmed.
Page 494 U. S. 187
874 F.2d 226 (CA 5 1988). With respect to petitioners'
jurisdictional challenge, the Court of Appeals found complete
diversity, reasoning that Arkoma's citizenship should be determined
by reference to the citizenship of the general, but not the
limited, partners. We granted certiorari. 490 U.S. 1045,
(1989).
II
Article III of the Constitution provides, in pertinent part,
that "The judicial Power shall extend to . . . Controversies . . .
between Citizens of different States." Congress first authorized
the federal courts to exercise diversity jurisdiction in the
Judiciary Act of 1789, ch. 20, § 11, 1 Stat. 78. In its current
form, the diversity statute provides that
"[t]he district courts shall have original jurisdiction of all
civil actions where the matter in controversy exceeds . . . $50,000
. . . , and is between . . . citizens of different States. . .
."
28 U.S. C.A. § 1332(a) (Oct. 1989 Supp.). Since its enactment,
we have interpreted the diversity statute to require "complete
diversity" of citizenship.
See Strawbridge v.
Curtiss, 3 Cranch 267, (1806). The District Court
erred in finding complete diversity in this case unless (1) a
limited partnership may be considered in its own right a "citizen"
of the State that created it, or (2) a federal court must look to
the citizenship of only its general, but not its limited, partners
to determine whether there is complete diversity of citizenship. We
consider these questions in turn.
A
We have often had to consider the status of artificial entities
created by state law insofar as that bears upon the existence of
federal diversity jurisdiction. The precise question posed under
the terms of the diversity statute is whether such an entity may be
considered a "citizen" of the State under whose laws it was
created. [
Footnote 1] A
corporation is the paradigmatic
Page 494 U. S. 188
artificial "person," and the Court has considered its proper
characterization under the diversity statute on more than one
occasion -- not always reaching the same conclusion. Initially, we
held that a corporation "is certainly not a citizen," so that to
determine the existence of diversity jurisdiction the Court must
"look to the character of the individuals who compose [it]."
Bank of United States v.
Deveaux, 5 Cranch 61,
9 U. S. 86,
9 U. S. 91-92,
(1809). We overruled
Deveaux 35 years later in
Louisville, C. & C.R. Co.
v. Letson, 2 How. 497,
43 U. S. 558
(1844), which held that a corporation is "capable of being treated
as a citizen of [the State which created it], as much as a natural
person." Ten years later, we reaffirmed the result of
Letson, though on the somewhat different theory that
"those who use the corporate name, and exercise the faculties
conferred by it," should be presumed conclusively to be citizens of
the corporation's State of incorporation.
Marshall
v. Baltimore & Ohio R. Co., 16 How. 314,
57 U. S. 329,
(1854).
Page 494 U. S. 189
While the rule regarding the treatment of corporations as
"citizens" has become firmly established, we have (with an
exception to be discussed presently) just as firmly resisted
extending that treatment to other entities. For example, in
Chapman v. Barney, 129 U. S. 677
(1889), a case involving an unincorporated "joint stock company,"
we raised the question of jurisdiction on our own motion, and found
it to be lacking:
"On locking into the record, we find no satisfactory showing as
to the citizenship of the plaintiff. The allegation of the amended
petition is that the United States Express Company is a joint stock
company organized under a law of the State of New York, and is a
citizen of that State. But the express company cannot be a
citizen of New York, within the meaning of the statutes
regulating jurisdiction, unless it be a corporation. The allegation
that the company was
organized under the laws of New York
is not an allegation that it is a corporation. In fact, the
allegation is that the company is
not a corporation, but a
joint stock company -- that is, a mere partnership."
Id. at
129 U. S. 682.
Similarly, in
Great Southern Fire Proof Hotel Co. v.
Jones, 177 U. S. 449
(1900), we held that a "limited partnership association" --
although possessing "some of the characteristics of a corporation"
and deemed a "citizen" by the law creating it -- may not be deemed
a "citizen" under the jurisdictional rule established for
corporations.
Id. at
177 U. S. 456.
"That rule must not be extended."
Id. at
177 U. S. 457.
As recently as 1965, our unanimous opinion in
Steelworkers v.
R.H. Bouligny, Inc., 382 U. S. 145,
reiterated that "the doctrinal wall of
Chapman v. Barney,"
id., 129 U.S. at
129 U. S. 151,
would not be breached.
The one exception to the admirable consistency of our
jurisprudence on this matter is
Puerto Rico v. Russell &
Co., 288 U. S. 476
(1933), which held that the entity known as a
sociedad en
comandita, created under the civil law of Puerto
Page 494 U. S. 190
Rico, could be treated as a citizen of Puerto Rico for purposes
of determining federal court jurisdiction. The
sociedad's
juridical personality, we said,
"is so complete in contemplation of the law of Puerto Rico that
we see no adequate reason for holding that the
sociedad
has a different status for purposes of federal jurisdiction than a
corporation organized under that law."
Id. at
288 U. S. 482.
Arkoma fairly argues that this language, and the outcome of the
case,
"reflec[t] the Supreme Court's willingness to look beyond the
incorporated/unincorporated dichotomy and to study the internal
organization, state law requirements, management structure, and
capacity or lack thereof to act and/or sue, to determine diversity
of citizenship."
Brief for Respondent 14. The problem with this argument lies not
in its logic, but in the fact that the approach it espouses was
proposed and specifically rejected in
Bouligny. There, in
reaffirming "the doctrinal wall of
Chapman v. Barney," we
explained
Russell as a case resolving the distinctive
problem "of fitting an exotic creation of the civil law . . . into
a federal scheme which knew it not." 382 U.S. at
382 U. S. 151.
There could be no doubt, after
Bouligny, that at least
common law entities (and likely all entities beyond the Puerto
Rican
sociedad en comandita) would be treated for purposes
of the diversity statute pursuant to what
Russell called
"[t]he tradition of the common law," which is "to treat as legal
persons only incorporated groups and to assimilate all others to
partnerships." 288 U.S. at
288 U. S. 480. [
Footnote
2]
Page 494 U. S. 191
Arkoma claims to have found another exception to our
Chapman tradition in
Navarro Savings Assn. v.
Lee, 446 U. S. 458
(1980). That case, however, did not involve the question whether a
party that is an artificial entity other than a corporation can be
considered a "citizen" of a State, but the quite separate question
whether parties that were undoubted "citizens" (
viz.,
natural persons) were the real parties to the controversy. The
plaintiffs in
Navarro were eight individual trustees of a
Massachusetts business trust, suing in their own names. The
defendant, Navarro Savings Association, disputed the existence of
complete diversity, claiming that the trust beneficiaries, rather
than the trustees, were the real parties to the controversy, and
that the citizenship of the former and not the latter should
therefore control. In the course of rejecting this claim, we did
indeed discuss the characteristics of a Massachusetts business
trust -- not at all, however, for the purpose of determining
whether the trust had attributes making it a "citizen," but only
for the purpose of establishing that the respondents were "active
trustees whose control over the assets held in their names is real
and substantial," thereby bringing them under the rule, "more than
150 years" old, which permits such trustees "to sue in their own
right, without regard to the citizenship of the trust
beneficiaries."
Id. at
446 U. S.
465-466. Navarro, in short, has nothing to do with the
Chapman question, except that it makes available to
respondent
Page 494 U. S. 192
the argument by analogy that, just as business reality is taken
into account for purposes of determining whether a trustee is the
real party to the controversy, so also it should be taken into
account for purposes of determining whether an artificial entity is
a citizen. That argument is, to put it mildly, less than
compelling.
B
As an alternative ground for finding complete diversity, Arkoma
asserts that the Fifth Circuit correctly determined its citizenship
solely by reference to the citizenship of its general partners,
without regard to the citizenship of its limited partners. Only the
general partners, it points out, "manage the assets, control the
litigation, and bear the risk of liability for the limited
partnership's debts," and, more broadly, "have exclusive and
complete management and control of the operations of the
partnership." Brief for Respondent 30, 36. This approach of looking
to the citizenship of only some of the members of the artificial
entity finds even less support in our precedent than looking to the
State of organization (for which one could at least point to
Russell). We have never held that an artificial entity,
suing or being sued in its own name, can invoke the diversity
jurisdiction of the federal courts based on the citizenship of some
but not all of its members. No doubt some members of the joint
stock company in
Chapman, the labor union in
Bouligny, and the limited partnership association in
Great Southern exercised greater control over their
respective entities than other members. But such considerations
have played no part in our decisions.
To support its approach, Arkoma seeks to press
Navarro
into service once again, arguing that, just as that case looked to
the trustees to determine the citizenship of the business trust, so
also here we should look to the general partners, who have the
management powers, in determining the citizenship of this
partnership. As we have already explained, however,
Navarro had nothing to do with the citizenship of
Page 494 U. S. 193
the "trust," since it was a suit by the trustees in their own
names.
The dissent supports Arkoma's argument on this point, though, as
we have described, under the rubric of determining which parties
supposedly before the Court are the real parties, rather than under
the rubric of determining the citizenship of the limited
partnership.
See n 1,
supra. The dissent asserts that "[t]he real party to the
controversy approach,"
post at
494 U. S. 201
-- by which it means an approach that looks to "control over the
conduct of the business and the ability to initiate or control the
course of litigation,"
post at
494 U. S. 204
-- "has been implemented by the Court both in its oldest and in its
most recent cases examining diversity jurisdiction with respect to
business associations."
Post at
494 U. S. 201.
Not a single case the dissent discusses, neither old nor new,
supports that assertion.
Deveaux, which was in any event
overruled by
Letson, seems to be applying not a "real
party to the controversy" test, but rather the principle that, for
jurisdictional purposes, the corporation has no substance, and
merely "represents" its shareholders,
see 5 Cranch, at
9 U. S. 90-91; but
even if it can be regarded as applying a "real party to the
controversy" test, it deems that test to be met by all the
shareholders of the corporation, without regard to their "control
over the operation of the business."
Marshall, which as we
have discussed re-rationalized
Letson's holding that a
corporation was a "citizen" in its own right, contains language
quite clearly adopting a "real party to the controversy" approach,
and arguably even adopting a "control" test for that status.
("[T]he court . . . will look behind the corporate or collective
name . . . to find the persons who
act as the representatives,
curators, or trustees. . . ." 16 How. at
57 U. S.
328-329 (emphasis added). "The presumption arising from
the habitat of a corporation in the place of its creation [is]
conclusive as to the residence or citizenship
of those who use
the corporate name and exercise the faculties conferred by it.
. . . "
Id. at
57 U. S. 329
(emphasis added).) But as we have also discussed, and as
Page 494 U. S. 194
the last quotation shows, that analysis was a complete fiction;
the real citizenship of the shareholders (or the controlling
shareholders) was not consulted at all. [
Footnote 3] From the fictional
Marshall, the
dissent must leap almost a century and a third to
Navarro
to find a "real party to the controversy" analysis that discusses
"control." That case, as we have said, is irrelevant, since it
involved not a juridical person but the distinctive common law
institution of trustees.
The dissent finds its position supported, rather than
contradicted, by the trilogy of
Chapman, Great Southern,
and
Bouligny -- cases that did involve juridical persons
but that did not apply "real party to the controversy" analysis,
much less a "control" test as the criterion for that status. In
those cases, the dissent explains, "the members of each association
held equivalent power and control over the association's assets,
business, and litigation."
Post at
494 U. S. 202.
It seeks to establish this factual matter, however, not from the
text of the opinions (where not the slightest discussion of the
point appears) but, for
Chapman, by citation of scholarly
commentary dealing with the general characteristics of joint stock
company agreements, with no reference to (because the record does
not contain) the particular agreement at issue in the case,
post at
494 U. S.
202-203; for
Great Southern, by citation of
scholarly commentary dealing with the general characteristics of
Pennsylvania limited partnership associations, and citation of
Pennsylvania statutes,
post at
494 U. S. 203;
and, for
Bouligny, by nothing more than the observation
that
"[t]here was no indication that any of the union members had any
greater power over the litigation or the union's business and
Page 494 U. S. 195
assets than any other member, and, therefore, as in
Chapman and
Great Southern, the Court was not
called upon to decide . . ."
the issue,
post at
494 U. S. 204.
This will not do. Since diversity of citizenship is a
jurisdictional requirement, the Court is always "called upon to
decide" it. As the Court said in
Great Southern
itself:
"[T]he failure of parties to urge objections [to diversity of
citizenship] cannot relieve this court from the duty of
ascertaining from the record whether the Circuit Court could
properly take jurisdiction of this suit. . . ."
"The rule . . . is inflexible and without exception, which
requires this court, of its own motion, to deny its own
jurisdiction, and, in the exercise of its appellate power, that of
all other courts of the United States, in all cases where such
jurisdiction does not affirmatively appear in the record on which,
in the exercise of that power, it is called to act."
177 U.S. at
177 U. S. 453
(quoting
Mansfield, C. & L.M.R. Co. v. Swan,
111 U. S. 379,
111 U. S. 382
(1884)). If, as the dissent contends, these three cases were
applying a "real party to the controversy" test governed by
"control" over the associations, so that the citizenship of all
members would be consulted only if all members had equivalent
control, it is inconceivable that the existence of equivalency,
or at least the absence of any reason to suspect
nonequivalency, would not have been mentioned in the opinions.
Given what 180 years of cases have said and done, as opposed to
what they might have said, it is difficult to understand how the
dissent can characterize as "newly formulated" the
"rule that the Court will, without analysis of the particular
entity before it, count every member of an unincorporated
association for purposes of diversity jurisdiction."
Post at
494 U. S.
199.
In sum, we reject the contention that, to determine, for
diversity purposes, the citizenship of an artificial entity, the
court may consult the citizenship of less than all of the entity's
members. We adhere to our oft-repeated rule that diversity
jurisdiction in a suit by or against the entity depends on the
citizenship of "all the members,"
Chapman, 129
Page 494 U. S. 196
U.S. at
129 U. S. 682,
"the several persons composing such association,"
Great
Southern, 177 U.S. at
177 U. S. 456, "each of its members,"
Bouligny,
382 U.S. at
382 U. S.
146.
C
The resolutions we have reached above can validly be
characterized as technical, precedent-bound, and unresponsive to
policy considerations raised by the changing realities of business
organization. But, as must be evident from our earlier discussion,
that has been the character of our jurisprudence in this field
after
Letson. See Currie, The Federal Courts and the
American Law Institute, 36 U.Chi.L.Rev. 1, 35 (1968). Arkoma is
undoubtedly correct that limited partnerships are functionally
similar to "other types of organizations that have access to
federal courts," and is perhaps correct that "[c]onsiderations of
basic fairness and substance over form require that limited
partnerships receive similar treatment." Brief for Respondent 33.
Similar arguments were made in
Bouligny. The District
Court there had upheld removal because it could divine "'no common
sense reason for treating an unincorporated national labor union
differently from a corporation,'" 382 U.S. at
382 U. S. 146,
and we recognized that that contention had "considerable merit,"
id. at
382 U. S. 150.
We concluded, however, that "[w]hether unincorporated labor unions
ought to be assimilated to the status of corporations for diversity
purposes," id, at
382 U. S. 153,
is "properly a matter for legislative consideration which cannot
adequately or appropriately be dealt with by this Court,"
id. at
382 U. S. 147.
In other words, having entered the field of diversity policy with
regard to artificial entities once (and forcefully) in
Letson, we have left further adjustments to be made by
Congress.
Congress has not been idle. In 1958 it revised the rule
established in
Letson, providing that a corporation shall
be deemed a citizen not only of its State of incorporation but also
"of the State where it has its principal place of business." 28
U.S.C.A. § 1332(c) (Oct.1989 Supp.). No provision was made for the
treatment
Page 494 U. S. 197
of artificial entities other than corporations, although the
existence of many new, post-
Letson forms of commercial
enterprises, including at least the sort of joint stock company at
issue in
Chapman, the sort of limited partnership
association at issue in
Great Southern, and the sort of
Massachusetts business trust at issue in
Navarro, must
have been obvious.
Thus, the course we take today does not so much disregard the
policy of accommodating our diversity jurisdiction to the changing
realities of commercial organization, as it honors the more
important policy of leaving that to the people's elected
representatives. Such accommodation is not only performed more
legitimately by Congress than by courts, but it is performed more
intelligently by legislation than by interpretation of the
statutory word "citizen." The fifty States have created, and will
continue to create, a wide assortment of artificial entities
possessing different powers and characteristics, and composed of
various classes of members with varying degrees of interest and
control. Which of them is entitled to be considered a "citizen" for
diversity purposes, and which of their members' citizenship is to
be consulted, are questions more readily resolved by legislative
prescription than by legal reasoning, and questions whose
complexity is particularly unwelcome at the threshold stage of
determining whether a court has jurisdiction. We have long since
decided that, having established special treatment for
corporations, we will leave the rest to Congress; we adhere to that
decision.
III
Arkoma argues that even if this Court finds complete diversity
lacking with respect to Carden and Limes, we should nonetheless
affirm the judgment with respect to Magee because complete
diversity indisputably exists between Magee and Arkoma. This
question was not considered by the Court of Appeals. We decline to
decide it in the first instance, and leave it to be resolved by the
Court of Appeals on remand.
Page 494 U. S. 198
The judgment of the Court of Appeals is reversed, and the case
is remanded for further proceedings consistent with this
opinion.
It is so ordered.
[
Footnote 1]
The dissent reaches a conclusion different from ours primarily
because it poses, and then answers, an entirely different question.
It "do[es] not consider" "whether the limited partnership is a
citizen,'" but simply "assum[es] it is a citizen," because even
if we hold that it is, "we are still required to consider which, if
any, of the other citizens before the Court as members of
Arkoma Associates are real parties to the controversy."
Post at 494 U. S. 198
(emphasis added). Furthermore, "[t]he only potentially nondiverse
party in this case is a limited partner" because "[a]ll other
parties, including the general partners and the limited
partnership itself, assuming it is a citizen, are diverse."
Ibid. (emphasis added).
That is the central fallacy from which, for the most part, the
rest of the dissent's reasoning logically follows. The question
presented today is not which of various parties before the Court
should be considered for purposes of determining whether there is
complete diversity of citizenship, a question that will generally
be answered by application of the "real party to the controversy"
test. There are
not, as the dissent assumes, multiple
respondents before the Court, but only
one: the artificial
entity called Arkoma Associates, a limited partnership. And what we
must decide is the quite different question of how the citizenship
of that single artificial entity is to be determined -- which in
turn raises the question whether it can (like a corporation) assert
its own citizenship, or rather is deemed to possess the citizenship
of its members, and, if so, which members. The dissent fails to
cite a single case in which the citizenship of an artificial
entity, the issue before us today, has been decided by application
of the "real party to the controversy" test that it describes.
See infra at
494 U. S.
192-195.
[
Footnote 2]
The dissent correctly observes that "
Russell tells us
nothing about whether the citizenship of the
sociedad's
members, unlimited or limited, should be considered for purposes of
diversity jurisdiction."
Post at
494 U. S. 207.
Rather, as is evident from our discussing the case here instead of
in Part B below,
Russell (according to respondent) tells
us something about whether an artificial entity other than a
corporation can be considered a "citizen" in its own right.
That
"[t]he issue in
Russell was not diversity, but whether
the suit against the
sociedad en comandita could be
removed from the Insular Court to the United States District Court
for Puerto Rico . . ."
post at
494 U. S. 207,
does not affect
Russell's arguable relevance to that
question because the operative word in both the diversity statute
and the removal statute at issue in
Russell is
"citizens."
The dissent goes on to criticize as "seriously flawed,"
post at
494 U. S. 208,
our attempt to distinguish
Russell in connection with the
issue we do address, whether a partnership can be considered a
"citizen." We point out, not by way of complaint but to prevent
confusion, that the criticism is gratuitous, inasmuch as the
dissent itself takes no position on this issue, announcing at the
very outset that it "do[es] not consider" the question "whether the
limited partnership is a
citizen.'" Post at
494 U. S. 198.
In any event, the dissent's evidence bearing on the historical
pedigree of partnerships comes to our attention at least 25 years
too late. For the reasons stated in the text, Bouligny
considered and rejected applying Russell beyond its
facts.
[
Footnote 3]
Marshall's fictional approach appears to have been
abandoned. Later cases revert to the formulation of
Louisville, C. & C.R. Co.
v. Letson, 2 How. 497 (1844), that the corporation
has its own citizenship.
See Great Southern Fire Proof Hotel v.
Jones, 177 U. S. 449,
177 U. S. 456
(1900) ("for purposes of jurisdiction . . . a corporation was to be
deemed a citizen of the State creating it") (citing
Letson);
Chapman v. Barney, 129 U.
S. 677,
129 U. S. 682
(1889) ("express company cannot be a citizen of New York, within
the meaning of the statutes regulating jurisdiction, unless it be a
corporation").
Justice O'CONNOR, with whom Justice BRENNAN, Justice MARSHALL,
and Justice BLACKMUN join, dissenting.
The only potentially nondiverse party in this case is a limited
partner. All other parties, including the general partners and the
limited partnership itself, assuming it is a citizen, are diverse.
Thus, the Court has before it a single question -- whether the
citizenship of a limited partner must be counted for purposes of
diversity jurisdiction. The Court first addresses whether the
limited partnership is a "citizen." I do not consider that issue,
because even if we were to hold that a limited partnership is a
citizen, we are still required to consider which, if any, of the
other citizens before the Court as members of Arkoma Associates are
real parties to the controversy,
i.e., which parties have
control over the subject of and litigation over the controversy.
See Marshall v. Baltimore &
Ohio R. Co., 16 How. 314,
57 U. S. 328,
(1854). Application of that test leads me to conclude that limited
partners are not real parties to the controversy and, therefore,
should not be counted for purposes of diversity jurisdiction.
I
The Court asserts that "[w]e have long since decided" to leave
to Congress the issue of the proper treatment of unincorporated
associations for diversity purposes, because the issue of which
business association
"is entitled to be considered a
citizen' for diversity
purposes, and which of their members' citizenship is to be
consulted, are questions more readily resolved by legislative
prescription than by legal reasoning."
Ante at
494 U. S. 197.
That assertion is insupportable in light of
Navarro Savings
Assn. v. Lee, 446 U. S. 458
(1980) (determination of which members of unincorporated business
trust must be considered for purposes of diversity
jurisdiction)
Page 494 U. S. 199
and even
Steelworkers v. R.H. Bouligny, Inc.,
382 U. S. 145
(1965) (determination of proper treatment of union for diversity
jurisdiction purposes according to settled law; Congress has power
to change result), on which the Court relies.
Ante at
494 U. S. 196.
Indeed, the Court in this case does not leave the issue to
Congress, but rather decides the issue and then invokes deference
to Congress to justify its newly formulated rule that the Court
will, without analysis of the particular entity before it, count
every member of an unincorporated association for purposes of
diversity jurisdiction. In my view, the Court properly tackles the
issue, because "application of statutes to situations not
anticipated by the legislature is a pre-eminently judicial
function." Currie, Federal Courts and the American Law Institute,
36 U.Chi.L.Rev. 1, 35 (1968);
See also
Bank of United States v.
Deveaux, 5 Cranch 61,
9 U. S. 87 (1809)
("The duties of this [C]ourt, to exercise jurisdiction where it is
conferred, and not to usurp it where it is not conferred, are of
equal obligation. The constitution, therefore, and the law, are to
be expounded, without a leaning the one way or the other, according
to those general principles which usually govern in the
construction of fundamental or other laws").
II
The starting point for any analysis of who must be counted for
purposes of diversity jurisdiction is
Strawbridge
v. Curtiss, 3 Cranch 267 (1806), in which the Court
held that "complete diversity" is required among "citizens" of
different States. Complete diversity, however, is not
constitutionally mandated.
See State Farm Fire & Casualty
Co. v. Tashire, 386 U. S. 523,
386 U. S.
530-531 (1967) (statutory interpleader need not satisfy
complete diversity requirement as long as there is diversity
between two or more claimants);
see also American Law
Institute, Study of the Division of Jurisdiction Between State and
Federal Courts § 1301(b)(2), Supporting Memorandum A, pp. 426-436
(1969). For example, in a class action
Page 494 U. S. 200
authorized pursuant to Federal Rule of Civil Procedure 23, only
the citizenship of the named representatives of the class is
considered, without regard to whether the citizenship of other
members of the class would destroy complete diversity or to the
class members' particular stake in the controversy.
See Snyder
v. Harris, 394 U. S. 332,
394 U. S. 340
(1969); C. Wright, Law of Federal Courts 314-315 (2d ed.1970);
see also Owen Equipment & Erection Co. v. Kroger,
437 U. S. 365,
437 U. S. 375,
and n. 18 (1978) (citizenship of parties joined under ancillary
jurisdiction not taken into account for purposes of determining
diversity jurisdiction); Wright,
supra, at 19 (same).
Since the early 19th century, one of the benchmarks for
determining whether a particular party among those involved in the
litigation must be counted for purposes of diversity jurisdiction
has been whether the party has a "real interest" in the suit or, in
other words, is a "real party" to the controversy.
See 6
C. Wright & A. Miller, Federal Practice and Procedure § 1556,
p. 711 (1971) (well settled "citizenship rule testing diversity in
terms of the real party in interest is grounded in notions of
federalism").
See generally Note, Diversity Jurisdiction
over Unincorporated Business Entities: The Real Party in Interest
as a Jurisdictional Rule, 56 Texas L.Rev. 243, 247-250 (1978). In
Wormley v.
Wormley, 8 Wheat. 421, (1823), for example, the
Court stated:
"This Court will not suffer its jurisdiction to be ousted by the
mere joinder or nonjoinder of formal parties; but will rather
proceed without them, and decide upon the merits of the case
between the parties, who have the real interests before it,
whenever it can be done without prejudice to the rights of
others."
Id. at
21 U. S. 451
(footnote omitted).
See also Wood v. Davis,
18 How. 467,
59 U. S. 469
(1856) ("It has been repeatedly decided by this [C]ourt, that
formal parties, or nominal parties, or parties without interest,
united with the real parties to the litigation, cannot oust the
federal courts of jurisdiction . . . ").
Page 494 U. S. 201
The real party to the controversy approach has been implemented
by the Court both in its oldest and in its most recent cases
examining diversity jurisdiction with respect to business
associations. In the Court's first examination of the corporate
form to determine who must be counted for purposes of diversity
jurisdiction, the Court invoked the real party to the controversy
test and concluded that the citizenship of each shareholder must be
counted for purposes of diversity jurisdiction.
Bank of United
States v. Deveaux, 5 Cranch at
9 U. S. 91-92. In
Deveaux, the Court recognized that corporations had been
considered as possessing "corporeal qualities,"
id., at
9 U. S. 89, but
concluded that the actual parties to the controversy were "the
members of the corporation . . . who come into court, in this case,
under their corporate name."
Id. at
9 U. S. 91. By
1854, the Court no longer characterized the corporation as merely
possessing "corporeal qualities," but rather as a "juridical
person," which made an even stronger case for recognizing a
corporation as a proper party in its own right before the Court.
See Marshall v. Baltimore & Ohio R. Co., 16 How. at
57 U. S. 328;
See also Louisville, Cincinnati &
Charleston R. Co. v. Letson, 2 How. 497,
43 U. S.
558-559 (1844) (corporation is a person; shareholders'
citizenship will not be counted).
In
Marshall, as in
Deveaux, however, the
determination whether the corporation was a citizen did not signal
the end of the diversity jurisdiction inquiry. 16 How. at
57 U. S. 328.
Rather, the Court engaged in a two-part inquiry: (1) is the
corporation a "juridical person" which can serve as a real party to
the controversy,
see id., at
57 U. S.
327-329; and (2) are the shareholders real parties to
the controversy.
See id., at
57 U. S. 328.
To determine whether the corporation or the shareholders were real
parties to the controversy, the Court considered which citizens
held control over the business decisions and assets of the
corporation and over the initiation and course of litigation
involving the corporation. The corporation,
Page 494 U. S. 202
as the representative body of the shareholders, itself had such
power. The shareholders did not.
"[F]or all the purposes of acting, contracting, and judicial
remedy, [shareholders] can speak, act, and plead, only through
their representatives or curators. For the purposes of a suit or
controversy, the persons represented by a corporate name can appear
only by attorney, appointed by its constitutional organs. . . .
[T]hey are not really parties to the suit or controversy."
Ibid. Having concluded that the shareholders were not
the real parties to the controversy, the Court held that only the
state of incorporation of the corporate entity need be counted for
purposes of diversity jurisdiction and that the citizenship of the
shareholders would be presumed to be that of the state of
incorporation.
Id. at
57 U. S.
328-329. As the Court makes plain in
Marshall,
consideration of whether the shareholders were real parties to the
controversy was a necessary prerequisite to the creation of the
legal fiction that their citizenship would be deemed that of the
corporation.
In a series of three cases considering the citizenship of
business associations following
Marshall, the Court was
not called upon to determine which of the citizens before it were
the real parties to the controversy because the business
associations were not citizens themselves and the members of each
association held equivalent power and control over the
association's assets, business, and litigation. In
Chapman v.
Barney, 129 U. S. 677
(1889), the Court addressed the issue whether a joint stock company
was a citizen for purposes of diversity jurisdiction. A joint stock
company, now a historical anomaly,
see A. Bromberg, Crane
and Bromberg on Partnership 178, and n. 16 (1968), had several
features of the corporate form,
e.g., centralized
management and transferability of shares, but was more like a
general partnership in that each partner was personally liable and
there was only one class of partners.
See Comment, Limited
Partnerships and Federal Diversity Jurisdiction, 45 U.Chi.L.Rev.
384,
Page 494 U. S. 203
389, and n. 32 (1978). Each "partner" had equal power over the
conduct of the business by virtue of his power to elect and control
the company's managers. Bromberg,
supra, at 179, n. 19.
The Court held that a joint stock company was a "mere partnership,"
and therefore not sufficiently similar to a corporation to justify
designating it as a citizen. 129 U.S. at
129 U. S. 682.
Hence, the Citizenship of each owner had to be counted for purposes
of diversity jurisdiction. Because the joint stock company owners
were similarly situated in terms of power and control over the
company, possessed all of the power that could be exercised over
the company's business and litigation, and the company itself was
not a citizen, the Court was not called upon to determine which of
the citizens before it were the real parties to the
controversy.
The Court applied a similar approach in
Great Southern Fire
Proof Hotel Co. v. Jones, 177 U. S. 449
(1900), when it examined a limited partnership association. Quite
unlike the modern limited partnership, the limited partnership
association at issue in
Great Southern, recognized by very
few states, Comment, 45 U.Chi.L.Rev.,
supra, at 389, n.
36, was a species of business association involving a single class
of partners with limited liability who exercised control over the
operation of the business by annually electing the managers of the
association.
See, e.g., 1874 Pa.Laws, Act. No. 153, §§ 2,
5; Comment, 45 U.Chi.L.Rev.,
supra, at 389, n. 36. Not
surprisingly, the Court viewed such an organization as more like a
partnership than a corporation.
See F. Burdick, Law of
Partnership 361-362 (1899) (limited partnership association like
corporation in some respects, but generally treated by the courts
as a general partnership). As in the case of the joint stock
company, because all partners were similarly situated in terms of
power and control over the company, there was no reason for the
Court to inquire who, among the partners, were the real parties to
the controversy.
Page 494 U. S. 204
In
Steelworkers v. R.H. Bouligny, Inc., 382 U.
S. 145 (1965), the Court addressed whether a labor union
could be treated as an entity for purposes of diversity
jurisdiction. The Court held that a labor union is not a juridical
person, and therefore, not a citizen for purposes of diversity
jurisdiction.
See Mesa Operating Limited Partnership v.
Louisiana Intrastate Gas Corp., 797 F.2d 238, 240-241 (CA5
1986) (union in
Bouligny failed to meet party to
controversy test). There was no indication that any of the union
members had any greater power over the litigation or the union's
business and assets than any other member, and, therefore, as in
Chapman and
Great Southern, the Court was not
called upon to decide which of the citizens before it were real
parties to the controversy.
In the next case, in which application of the real party to the
controversy test was appropriate, the Court unanimously applied it.
See Navarro Savings Assn. v. Lee, 446 U.S. at
446 U. S. 460,
446 U. S.
464-465;
id. at
446 U. S. 469,
446 U. S. 475,
(BLACKMUN, J., dissenting). In that case, the Court addressed the
question whether the beneficiaries' citizenship must be counted
when the trustees brought suit involving the assets of the trust.
See id. at
446 U. S. 458.
Because the trust beneficiaries lacked both control over the
conduct of the business and the ability to initiate or control the
course of litigation, the Court held that the citizenship of the
trust beneficiaries should not be counted.
Id. at
446 U. S.
464-465.
As
Navarro makes clear, the nature of the named party
does not settle the question of who are the real parties to the
controversy. In fact, if the Court's characterization of the issue
before us were correct,
ante at
494 U. S.
187-188, n. 1., then we seriously erred in
Navarro
Savings Assn. v. Lee, supra, at
446 U. S.
464-466, when we considered whether the trust
beneficiaries were the real parties to the controversy, in light of
the fact that they were not named parties to the litigation.
The Court attempts to distinguish
Navarro on the ground
that it involved not a juridical person, but rather the
"distinctive
Page 494 U. S. 205
common law institution of trustees."
Ante at
494 U. S. 194.
Such a view is consonant with the Court's new diversity
jurisdiction analysis announced in this case, but fails to take
into account the actual language and analysis in
Navarro.
If the nature of the institution of trustees was sufficient to
answer the question of which parties to count for diversity
jurisdiction purposes in that case, the Court's discussion of
whether the trust beneficiaries were real parties to the
controversy would have been wholly superfluous. Given that the
Court granted certiorari in that case on the very issue whether the
citizenship of trust beneficiaries must be counted, and then
unanimously applied the real parties to the controversy test, the
discussion clearly was not superfluous.
Application of the parties to the controversy test to the
limited partnership yields the conclusion that limited partners
should not be considered for purposes of diversity jurisdiction.
Like the trust beneficiary in
Navarro, the limited partner
"can neither control the disposition of this action nor intervene
in the affairs of the trust except in the most extraordinary
situations."
Navarro, supra, at
446 U. S.
464-465.
See Uniform Limited Partnership Act §
26, 6 U.L.A. 614 (1969) (limited partner "is not a proper party to
proceedings by or against a partnership, except where the object is
to enforce a limited partner's right against or liability to the
partnership"); Uniform Limited Partnership Act § 1001, 6 U.L.A. 371
(Supp.1989) (derivative actions); Ariz.Rev.Stat.Ann. § 29-324
(1989) (general partners of limited partnership have duties and
obligations of partners to general partnership); § 29-209 (general
partner is agent of partnership); § 29-356 (limited partners
limited to derivative actions); Arkoma Associates Partnership
Agreement, Art. VI, § 6.1 (general partners have "exclusive and
complete control of the operations");
id. § 7.1 (limited
partners "shall not take any part in the control or management of .
. . Partnership"). And like the shareholder in
Marshall,
"for all the purposes of acting, contracting, and judicial remedy,
[limited partners] can
Page 494 U. S. 206
speak, act, and plead, only through [others]."
Marshall, 16 How. at
57 U. S. 328.
In fact, the limited partner has even less power in the limited
partnership than the shareholder does in a corporation.
"[T]he shareholder . . . retain[s] some measure of control over
management through his voting power, while the more restricted role
of the limited partner permits restraint [of management] only by
his refusal to concur in certain acts for which his consent is
required by law."
See Note, Standing of Limited Partners to Sue
Derivatively, 65 Colum.L.Rev. 1463, 1478 (1965). Without the power
to "control . . . the assets" or to initiate or "control the
litigation,"
Navarro, supra, 446 U.S. at
446 U. S. 465,
the limited partner is not a real party to the controversy and,
therefore, should not be counted for purposes of diversity
jurisdiction. Because the majority of States has adopted the
Uniform Limited Partnership Act, this rule would result in uniform
treatment of limited partners for purposes of diversity
jurisdiction.
See Uniform Limited Partnership Act, 6
U.L.A. 172, 220 (Supp.1989).
The commentators are in agreement that the party to the
controversy test is the appropriate test to be applied to determine
diversity jurisdiction with respect to limited partnerships and
that the citizenship of limited partners should not be counted.
See, e.g., Comment, 45 U.Chi.L.Rev. at 418 (citizenship of
limited partners should not be counted for purposes of diversity
jurisdiction); Note, Who Are the Real Parties In Interest for
Purposes of Determining Diversity Jurisdiction for Limited
Partnerships?, 61 Wash.U.L.Q. 1051, 1066-1067 (1984) (same); Note,
56 Texas L.Rev. at 250-251 (real party in interest test should be
applied to unincorporated business associations to determine whom
to count for diversity);
see also Colonial Realty Corp. v.
Bache & Co., 358 F.2d 178, 183 (1966) (Friendly, J.)
(citizenship of limited partner should not be counted where state
law declares partner is not "proper party to proceedings by or
against a partnership").
Page 494 U. S. 207
The concern perhaps implicit in the Court's holding today is
that failure to, consider the citizenship of all the members of an
unincorporated business association will expand diversity
jurisdiction at a time when our federal courts are already
seriously overburdened. This concern is more illusory than real in
the context of unincorporated business associations. For, despite
the Court's holding today, unincorporated associations may gain
access to the federal courts by bringing or defending suit as a
Rule 23 class action, in which case the citizenship of the members
of the class would not be considered.
See Federal
Diversity Jurisdiction -- Citizenship for Unincorporated
Associations, 19 Vand.L.Rev. 984, 991-992 (1966). Thus, I see
little reason to depart in this case from our long settled practice
of applying the real parties to the controversy test.
Because there is complete diversity between petitioners and the
limited partnership (assuming that it should be considered a
citizen) and each of the general partners, the issue presented by
this case is fully resolved by application of the parties to the
controversy test.
III
Even though the case does not directly relate to the issue
before us, the Court takes pains to address and distinguish
Puerto Rico v. Russell & Co., 288 U.
S. 476 (1933).
See ante at
494 U. S.
189-190. The issue in
Russell was not
diversity, but whether the suit against the
sociedad en
comandita could be removed from the Insular Court to the
United States District Court for Puerto Rico on the ground that no
party on one side was a citizen of or domiciled in Puerto Rico.
See 288 U.S. at
288 U. S. 478.
None of the partners were citizens of Puerto Rico, but the Court
determined that the
sociedad was and, therefore, removal
was precluded. Thus,
Russell tells us nothing about
whether the citizenship of the
sociedad's members,
unlimited or limited, should be considered for purposes of
diversity jurisdiction.
Page 494 U. S. 208
In any event, the Court's attempts to distinguish
Russell are seriously flawed. In
Russell, the
Court examined the Puerto Rican
sociedad en comandita,
which is the civil law version of the modern limited partnership.
The Court delineated a series of factors and concluded that, under
civil law, the
sociedad was a "juridical person."
Id. at
288 U. S. 481.
Ironically, the Court in this case endorses the holding of
Russell, despite the fact that virtually all of the
factors listed are equally applicable to the modern limited
partnership. The Court fails to acknowledge that our modern limited
partnership, like the
sociedad, finds its origins in the
civil law. The limited partnership originated in Europe in the
middle ages, first appearing in France
"[u]nder the name of la
Societe en comandite, . . .
mention being made of it in the most ancient commercial records,
and in the early mercantile regulations of Marseilles and
Montpelier."
Ames v. Downing, 1 Bradf. Surr. 321, 329 (N.Y.1850).
The limited partnership did not find acceptance in the United
Kingdom and was not a creature of the common law. F. Burdick, Law
of Partnership 384-385 (2d ed. 1906). It was first introduced into
this country in Louisiana and then New York.
See Note, 65
Colum.L.Rev., at 1464. Although a "
creation of the civil law,'"
the Puerto Rican sociedad was hardly "`exotic.'"
Ante at 494 U. S. 190
(quoting Bouligny, 382 U.S. at 382 U. S.
151). Rather, it is yet one of many forms of the limited
partnership descended from the ancient French Societe as is the
modern limited partnership adopted in this country. See Ames,
supra, at 329-330 (American limited "partnership is, in fact,
no novelty, but an institution of considerable antiquity, well
known, understood and regulated"). It is hardly an answer to the
history of the limited partnership in this country and abroad to
assert that it appears 25 years after Steelworkers v. R.H.
Bouligny, Inc., 382 U. S. 145
(1965). See ante at 494 U. S.
190-191, no. 2. The "admirable consistency of our
jurisprudence," ante at 494 U. S. 189,
is not blemished by distinguishing between unions and limited
partnerships. It is, however, severely marred by holding
Page 494 U. S. 209
that an association within the continental United States is not
afforded the same treatment as its virtually identical Puerto Rican
counterpart.
See also ante at
494 U. S. 191,
n. 2 ("operative word in both the diversity statute and the removal
statute at issue in
Russell is `citizens'"). The Court's
decision today, endorsing treatment of a Puerto Rican business
association as an entity while refusing to treat as an entity its
virtually identical stateside counterpart, is justified neither by
our precedents nor by historical and commercial realities.
For the foregoing reasons, I respectfully dissent.