In Americold Realty Trust v. ConAgra Foods, Inc., et al. (No. 14-1382, decided 3/7/16), the Supreme Court of the United States applied its “oft-repeated rule” regarding the citizenship of unincorporated entities to a Maryland real estate investment trust, finding its citizenship for purposes of diversity jurisdiction was based on the citizenship of its members and not its place of organization.
The underlying action began as a contract dispute in Kansas state court brought by a group of corporations whose food perished in a warehouse fire against Americold, a real estate investment trust. Americold removed to Federal District Court for the District of Kansas based on diversity jurisdiction due to its organization under Maryland state law. After a District Court judgment in favor of Americold, the Tenth Circuit heard the matter on appeal and reexamined the issue of diversity jurisdiction. It found Americold had not demonstrated diversity from the other parties because it was not a corporation and therefore could not base its citizenship on its state of organization.
The Supreme Court of the United States granted certiorari, acknowledging widespread confusion among appellate courts regarding the citizenship of unincorporated entities. The Court reiterated that although a corporation is considered to be a citizen of the state of its incorporation and its principal place of business, this grant of citizenship does not extend to unincorporated entities. The citizenship of such entities for diversity purposes depends on the jurisdiction of all members rather than the state of organization. The Court proceeded to apply the established law to the structure of Americold as a real estate investment trust, statutorily defined as an unincorporated business trust held and managed for the benefit of shareholders. The Court determined the shareholders of a real estate investment trust appeared to act as members of the entity, much like the shareholders of a joint-stock company or the partners of a limited partnership. Thus, Americold was not akin to a corporation for purposes of citizenship. Further, because its members’ citizenship was not on record, it had not appropriately established diversity jurisdiction and the Tenth Circuit’s decision was affirmed. The Court concluded it would be up to Congress to tear down the doctrinal wall between such entities.
Overall, the Americold opinion reflects the Court’s steadfast position regarding the division of corporations and unincorporated entities for purposes of diversity jurisdiction, and expressly put the ball in the congressional court for any amendment to this rule.
