Class Actions Brief Blog

As we’ve discussed on the blog before, the Class Action Fairness Act (CAFA) expands federal subject matter jurisdiction over large-scale class actions. Federal courts have jurisdiction under CAFA if (1) the amount in controversy exceeds $5 million, (2) there are more than 100 putative class members, and (3) any member of the putative class is a citizen of a state different from any defendant. 28 U.S.C. § 1332(d)(2).

The third requirement for CAFA jurisdiction—that any class member is a citizen of a different state from any defendant—is known as “minimal diversity.” Traditional diversity jurisdiction requires “complete diversity,” or that “the citizenship of every plaintiff must be different from the citizenship of every defendant.” Central W. Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101, 103 (4th Cir. 2011). CAFA’s minimal diversity standard sets a much lower bar, opening the federal courthouse doors for many class actions that otherwise would have to be litigated in state court.   

Minimal diversity isn’t the only way that CAFA significantly alters the typical rules regarding citizenship and jurisdiction. Those familiar with the traditional diversity analysis know that a limited liability company is a citizen of every state in which its members are citizens. See id. Depending on how many members it has and where they reside, an LLC could be a citizen of dozens of states. But under CAFA, an “unincorporated association” is a citizen of no more than two states: the state where it maintains its principal place of business and the state under whose laws it is organized. 28 U.S.C. § 1332(d)(10).

The careful reader will note that CAFA does not speak directly to the citizenship of LLCs. Section 1332(d)(10) applies to “unincorporated association[s],” a term that is not defined in CAFA itself. Several federal appellate courts have now confirmed, however, that § 1332(d)(10) applies to LLCs. Not every federal Circuit Court has spoken directly to this issue. See, e.g., Carter v. HealthPort Tech., LLC, 822 F.3d 47, 60 (2d Cir. 2016) (“[T]his Court has not addressed the question of whether [§ 1332(d)(10)] encompasses limited liability companies.”). But those that have support treating an LLC as an “unincorporated association.” See City of East St. Louis, Ill. v. Netflix, Inc., 83 F.4th 1066, 1071 (7th Cir. 2023); Siloam Springs Hotel, L.L.C. v. Century Surety Co., 781 F.3d 1233, 1237 n.1 (10th Cir. 2015); Ferrell v. Express Check Advance of SC LLC, 591 F.3d 698, 700 (4th Cir. 2010).

CAFA’s alteration of the citizenship rules can be easy to overlook. Business litigators probably know by heart that an LLC’s citizenship turns on the citizenship of its members. This rule is such a routine feature of federal civil practice that many courts’ local rules now require the parties to list the citizenship of all LLC members at the outset of the case in a Rule 7.1 disclosure. E.g., Rules of Practice and Procedure of the United States District Court for the Middle District of North Carolina, LR 7.7(a)(2). Section 1332(d)(10) is also buried deep within the statute, between the dense provisions addressing the CAFA exceptions and “mass actions.”

The next time you’re analyzing whether your class action belongs in federal court, read all of CAFA’s provisions carefully. And if there is an LLC involved, don’t skip over § 1332(d)(10).