Wednesday, April 11, 2007

E.D. Pennsylvania Holds District Courts Lack Diversity Jurisdiction Over Law Partnerships with Partners Domiciled Outside the U.S.

BNA’s United States Law Week reported in Vol. 75, No. 33 (Mar. 6, 2007) on the case Swiger v. Allegheny Energy, Inc., 2007 WL 442383 (E.D. Pa. Feb. 7, 2007). Here is an excerpt from the case:

Plaintiff instituted this action on October 28, 2005 against the defendants under the state common law theories of abuse of process, wrongful use of civil proceedings, invasion of privacy and wrongful discharge. Jurisdiction was based on diversity of citizenship. Morgan Lewis moved to dismiss (and the Allegheny Energy defendants joined in that motion) on the grounds that because it had four partners [FN1] resident in the United Kingdom and Japan, it is not a citizen of any domestic or foreign state and thus is not subject to diversity jurisdiction under 28 U.S.C. § 1332(a). We stayed that motion and directed the parties to take jurisdictional discovery into the citizenship, residency and domicile of all of the Morgan Lewis partners who reside in foreign countries.

. . .

Given that for diversity purposes, the court must consult the citizenship of all of the members of an artificial entity such as a general or limited partnership and because a United States citizen who is not domiciled in one of the United States cannot invoke diversity jurisdiction in one particular state, we must conclude that we are without jurisdiction to act in this matter. See, Carden v. Arkoma Associates, 494 U.S. 185, 196-196, 110 S.Ct. 1015, 1021, 108 L.Ed.2d 157 (1990); Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989); Herrick Co., Inc. v. SCS Communications, Inc., 251 F.2d 315, 322 (2d Cir.2001); Creswell v. Sullivan & Cromwell, 922 F.2d 60, 69 (2d Cir.1990); Brooks v. Girois, Civ. A. No. 03-3260, 2003 U.S. Dist. LEXIS 14051 (E.D.Pa. August 11, 2003); Gefen v. Upjohn Co., 893 F.Supp. 471 (E.D.Pa.1995). In so holding, we echo the observation made by the Honorable Berle M. Schiller of this Court in the Brooks, supra, case:

Although adopting this rationale would leave Defendant--as well as all similarly situated parties--unable to be sued in federal court under § 1332(a)(1) as [it] is a United States citizen domiciled abroad, ... (citation omitted) or under § 1332(a)(2), as [its] United States citizenship controls, ... (citation omitted) and there is no complete diversity between the parties as Plaintiff is also a United States citizen, (citation omitted), this anomaly must be rectified by Congress, not by the Court. Brooks, 2003 U.S. Dist. LEXIS at *9.
We shall therefore grant the defendants' motion to dismiss this matter for lack of jurisdiction and dismiss this matter without prejudice to the Plaintiff's right to re-file his claims in the appropriate court.

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