Diversity Jurisdiction and Unincorporated Businesses: Collapsing the Doctrinal Wall
Christine M. Kailus | 2007 U. Ill. L. Rev. 1543
Federal courts have diversity jurisdiction over controversies that satisfy an amount in controversy requirement and are between citizens of different states. Although corporations are artificial beings, courts must determine their citizenship to decide whether diversity jurisdiction is proper. For jurisdictional purposes, Congress has stated that a corpora-tion is a citizen of its state of incorporation as well as the state of its principal place of business. In the past two decades, unincorporated business associations have risen in popularity for a variety of reasons, including the increasing willingness of states to treat hybrid entities such as limited liability companies as partnerships for tax purposes. Current jurisdictional law equates the citizenship of an unincorporated association with the citizenship of each of its members, making it difficult for unincorporated businesses to bring controversies before federal courts. The “doctrinal wall” articulated by the Supreme Court mandates that a corporation is treated as a citizen in its own right, but an unincorporated association is not. Commentators have expressed widespread dissatisfaction with this rule. This note argues that the doctrinal wall should be abolished and that courts should treat unincorporated associations similarly to corporations for purposes of diversity jurisdiction. Because judicial action is unlikely, the author proposes an amendment to the federal diversity-jurisdiction statute adopting a uniform citizenship test for all business associations.