A Corporation May Not Pick And Choose Its Citizenship To Create Diversity Under CAFA

by Bradley Arant Boult Cummings LLP
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The Sixth Circuit became the third court of appeals to reject the “alternative citizenship” theory of diversity under the Class Action Fairness Act (CAFA).  In Roberts v. Mars Petcare US, Inc., a putative class of Tennessee citizens sued Mars Petcare in Tennessee state court.  Mars Petcare removed the case to federal court, relying on diversity jurisdiction under CAFA, 28 U.S.C. § 1332(d), which provides for federal jurisdiction over class actions involving at least 100 class members, with $5 million or more at stake, and in which “any member of a class of plaintiffs is a citizen of a State different from any defendant.”  Unlike diversity jurisdiction in most other contexts, CAFA allows minimal diversity—as long as one plaintiff maintains citizenship in a state different from one defendant’s citizenship, diversity is satisfied, regardless of where all other parties reside.

As a corporation, Mars Petcare is a citizen of both its state of incorporation, Delaware, and the state where it maintains its principal place of business, Tennessee.  A class of Tennessee plaintiffs facing a Tennessee defendant cannot satisfy even minimum diversity.  Yet Mars Petcare argued that diversity nevertheless existed under CAFA based on the company’s Delaware citizenship.  Under Mars Petcare’s argument, the company could pick between its Delaware and Tennessee citizenship to either satisfy or defeat diversity.  The Sixth Circuit easily rejected the company’s argument, relying on § 1332’s plain meaning, historical context, and constitutional avoidance.  For purposes of CAFA’s diversity calculus, Mars Petcare is a citizen of Delaware and Tennessee, not Delaware or Tennessee.

The court apparently had no trouble arriving at this decision; it published an opinion just two days after oral argument.  In doing so, the Sixth Circuit joined the Fourth and Eleventh Circuits in rejecting various class-action defendants’ alternative-citizenship theory of diversity, leaving the theory with unanimous rejection in the courts of appeals to have addressed it so far.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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