Court Rules California Unincorporated Association Is A South Dakota Citizen

Allen Matkins

Diversity jurisdiction in the U.S. District courts requires complete diversity of citizenship between the parties.  28 U.S.C. § 1332.  A corporation can be a citizen of its state of incorporation, as well as the state where it has its principal place of business. 28 U.S.C. § 1332(c). 

Unincorporated associations are an entirely different kettle of fish.  Courts have "adhere[d] to our oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of all [its] members.'" Carden v. Arkoma Associates, 494 U.S. 185, 196 (1990) (quoting Chapman v. Barney, 129 U.S. 677,682(1889)).  

This principal was brought home recently by U.S. District Court Judge Lawrence L. Piersol in McKenzie v. Farmers Insurance Exchange, Case No. CIV 17-4011 (Feb. 7, 2018).  Judge Piersol's ruling was on a motion by Farmers Insurance Exchange to set aside a default judgment obtained by a subscriber based on lack of jurisdiction.  He found that the insured subscribers of the exchange were members under Section 18015 of the California Corporations Code because they have the right to vote for the members of the exchange's board of governors.

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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