2007 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-13-2007

Emerald Investors v. Gaunt Parsippany

Precedential or Non-Precedential: Precedential

Docket No. 05-3706

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

Nos. 05-3706 and 05-4134

 

 

EMERALD INVESTORS TRUST

v.

GAUNT PARSIPPANY PARTNERS;

119 CHERRY HILL ASSOCIATES, L.L.C.;

99 CHERRY HILL ASSOCIATES, L.P.;

HORSEHEADS COMMERCIAL DEVELOPMENT PARTNERS,

L.P.;

RECKSON OPERATING PARTNERSHIP, L.P.;

JOHN DOES 1 THROUGH 10

 Gaunt Parsippany Partners;

 119 Cherry Hill Associates, L.L.C.;

 99 Cherry Hill Associates, L.P.;

 Horseheads Commercial 

Development Partners, L.P.;

 Reckson Operating Partnership, L.P.,

Appellants in No. 05-3706

 

EMERALD INVESTORS TRUST,

Appellant in No. 05-4134

v.

GAUNT PARSIPPANY PARTNERS; 

119 CHERRY HILL ASSOCIATES, L.L.C.;

99 CHERRY HILL ASSOCIATES L.P.; 

HORSEHEADS COMMERCIAL DEVELOPMENT

PARTNERS, L.P.; RECKSON 

OPERATING PARTNERSHIP, L.P.;

JOHN DOES 1 THROUGH 10

 
2

On Appeal from the United States District Court

for the District of New Jersey 

(D.C. Civ. No. 02-1939)

Honorable William J. Martini, District Judge

 

Argued November 8, 2006

BEFORE: SLOVITER, CHAGARES, and 

GREENBERG, Circuit Judges

(Filed: June 13, 2007)

 

W. James Cousins (argued)

McGowan & Cousins

P.O. Box 391

Litchfield, CT 06759

 Attorneys for Appellants in No. 05-3706

 and Appellees in No. 05-4134

Kenneth L. Leiby, Jr. (argued)

Richard J. Shackleton

Shackleton & Hazeltine

159 Millburn Ave.

Millburn, NJ 07041

 Attorneys for Appellant in No. 05-4134

 and Appellee in No. 05-3706

 

OPINION OF THE COURT

 

GREENBERG, Circuit Judge.

I. INTRODUCTION

The parties appeal and cross-appeal from a judgment and

orders in this action that Emerald Investors Trust (“Emerald Trust”)

brought, predicated on the district court’s asserted diversity of
Clearly, we do have appellate jurisdiction. 1

3

citizenship jurisdiction, seeking recovery on two unpaid promissory

notes and foreclosure of the mortgages securing the notes. The

district court, over the defendants’ objection, held that it had diversity

of citizenship jurisdiction because the sole beneficiary of Emerald

Trust was Emerald Investors Ltd. (“Emerald Ltd.”), a corporation

incorporated in the British Virgin Islands where it had its principal

place of business, and the defendant partnerships, all of which are

undoubtedly citizens of states within the United States, are not

citizens of the British Virgin Islands. 

As always, after we are satisfied of our own jurisdiction, the 1

threshold, and, indeed, as it turns out, the only issue on this appeal is

whether the district court had subject matter jurisdiction. Inasmuch as

we cannot determine if the district court had diversity of citizenship

jurisdiction and there is no other basis for it to have exercised

jurisdiction, we do not reach the merits of the case. Rather, we will

remand the matter to the district court to resolve the jurisdictional

issue after allowing discovery and conducting any hearing that it

deems necessary.

II. FACTS AND PROCEDURAL HISTORY

Defendants, Gaunt Parsippany Partners, 119 Cherry Hill

Associates, L.L.C., 99 Cherry Hill Associates, L.P., and Horseheads

Commercial Development Partners, L.P., whose three principal

owners and partners were Newby Toms, Mitchell Wolff, and Joel

Hoffman (the “partners”), were in the business of owning and

operating office buildings. Though the three partners conducted their

business through these four entities, Horseheads was the only one

existing at the time that Emerald Trust filed the complaint in this case. 

Nevertheless, all of the four entities, along within Reckson Operating

Partnership, L.P., have been defendants in this case and all five

entities filed the first, and as it turns out, the principal appeal after

completion of the district court proceedings. 

The case may be traced back to January 1994, when the

properties the partners owned in Parsippany, New Jersey, which

consisted of two sites, the 99 Cherry Hill property and the 119 Cherry
The facts in this case are unusually complicated but we have 2

focused on what needs to be explained for purposes of this opinion. If

we were reaching the merits of the case we would have had to explain

much more. The district court set forth the facts at greater length in its

opinion in Emerald Investors Trust v. Gaunt Parsippany Partners, No.

02-CV-1939, 2005 WL 1705779 (D.N.J. July 21, 2005).

Their four entities were also parties to these agreements but we 3

need not detail which entity was a party to which agreement. Rather, as

a convenience we refer to the agreements as if only the partners signed

them.

We do not detail the entities’ roles in these agreements.

4

4

Hill property (“the NJ properties”), were performing poorly. This 2

circumstance caused the partners to refinance these properties with the

United Bank of Kuwait (“the United Bank”), an undertaking requiring

them to increase the debt on property they owned in Horseheads, New

York, by $2 million to be used by the partners for the NJ properties. 

At that time the partners entered into certain agreements relating to

the refinancing. First, they agreed to treat the $2 million as a loan 3

from them, rather than from United Bank, to the entities that owned

the NJ properties even though United Bank supplied the $2 million. 

In exchange, each of the two entities owning the NJ properties gave

each of the partners a note for $333,333.33 secured by a mortgage that

was subordinate to the United Bank’s senior mortgage. The notes

bore a 12% annual rate of interest and were due on December 31,

1999. The partners created the subordinated mortgages to protect

their equity in the properties from partnership creditors. As a result of

the subordinated mortgages, the partners appeared to be secured

creditors instead of equity owners with respect to the $2 million. The

partners also entered into parity agreements that provided that they

ranked equally among themselves with respect to payment of or

security on the loans. 

Thereafter, the relationship among Toms, Wolff, and Hoffman

deteriorated leading Toms to seek to withdraw from their business

dealings. Accordingly, in 1996 the partners began negotiating the

terms of an agreement for Hoffman and Wolff to acquire Toms’s

interests in the Horseheads and NJ properties. As a result of the

negotiations, the partners simultaneously entered into six related

agreements. First, they entered into two mortgage modification 4

agreements modifying the notes and subordinated mortgages so that
This sum included principal and interest. 5

5

the sum due on each was increased from $333,333.33 to $583,333.33

with the notes simultaneously becoming non-interest bearing. At the

same time the face value of the notes was reduced to $250,000, the

reduction being contingent on installment payments on them being

timely made. The mortgage modification agreements also provided

that repayment was to be made only to the extent that any refinancing

or sale of the properties resulted in “net proceeds.” The partners also

entered into two subordination agreements with United Bank that

provided that the partners were not entitled to any payment on their

loans until the senior United Bank mortgages were “paid in full.” 

Finally, the partners entered into two second mortgage parity

agreements providing for them to share equally in any “net proceeds”

realized from a sale of the properties. In August 1997 Toms assigned

his notes and mortgages to Emerald Trust, an entity that he controlled.

 In August 1998 Reckson, which is completely separate from

and independent of the other four defendants, purchased the NJ

properties for $19,905,000. As far as we can ascertain this purchase

was in an arms-length transaction. At that time, even though

approximately $24,000,000 was due to United Bank on the debts its

mortgages on the NJ properties secured, it nevertheless accepted

$16,459,664.95 on the debts and mortgages and discharged the 5

mortgages, treating them as “satisfied.” App. at 201. According to

defendants, United Bank discharged its mortgages on the NJ

properties for less than was due on them because the approximately

$8 million shortfall to satisfy the obligations to United Bank in full

was added to the debt that the mortgage United Bank held on the

Horseheads property secured. 

Wolff and Hoffman also discharged their subordinated

mortgages on the NJ properties marking them as “paid and satisfied”

upon receipt of $1,202,729.44 in the form of Reckson Operating

Units. According to Wolff and Hoffman, they did so because they

had no need to retain the mortgages. Emerald Trust, however, did not

discharge the subordinated mortgages that Toms had assigned it. 

Thus, at the closing on the sale of the NJ properties to Reckson all of

the mortgages in favor of United Bank, Wolff, and Hoffman on the NJ

properties were satisfied, leaving the subordinated mortgages

previously held by Toms but since assigned to Emerald Trust as the
We are addressing only preexisting debt and are not considering 6

any new mortgage that Reckson may have placed on the properties for

if there was such a mortgage it would not be material to the issue on this

appeal.

At that point the Emerald Trust’s mortgages no longer may have 7

been subordinated to any other mortgage as the United Bank mortgages

to which the Emerald mortgages had been subordinated were discharged.

We, however, are not making any determination on that point which

could involve intricate principles of New Jersey law. See East

Rutherford Sav. Loan & Bldg. Ass’n v. Neblo, 139 A. 172 (N.J. Ch.

1927).

6

only outstanding mortgages on the properties. Inasmuch as Emerald 6

Trust’s mortgages remained outstanding, Hoffman and Wolff entered

into an indemnity agreement with Reckson’s title insurance company

for the NJ properties promising to indemnify it should Emerald Trust

make any claims on the NJ properties by reason of the liens created by

the mortgages that Toms assigned to it. On December 31, 1999, when

Emerald Trust’s notes secured by the NJ properties came due, none of

the defendants nor anyone else paid the notes, defaults that caused

Emerald Trust to file this action on April 25, 2002, to recover on the

notes and to foreclose its subordinated mortgages on the NJ

properties.7

Subsequently, Emerald Trust moved for summary judgment

seeking a judgment of foreclosure but on August 30, 2004, the district

court denied Emerald Trust’s motion and on October 29, 2004, the

court also denied a motion Emerald Trust filed seeking

reconsideration of the August 30, 2004 order. The court thereafter

conducted a bench trial on the merits of the controversy in January

2005. Prior to and during the trial the defendants did not raise any

issue regarding the court’s subject matter jurisdiction which, as we

have noted, Emerald Trust predicated on diversity of citizenship

between Emerald Trust on one hand and the defendants on the other. 

The defendants, however, did raise an issue regarding diversity of

citizenship in post-trial submissions. To resolve the jurisdictional

issue the district court directed the parties to submit affidavits

explaining their citizenship following which it heard oral argument

regarding the parties’ citizenship and the court’s diversity jurisdiction. 

At the oral argument the defendants requested an opportunity to

engage in further discovery on the jurisdictional issue but the court

rejected that request, though it did permit the parties to submit further
This conclusion was directly contrary to a dictum in General 8

Heat & Power Co. v. Diversified Mortgage Investors, 552 F.2d 556, 557

n.1 (3d Cir. 1977), in which in a case involving a business trust we said,

without limiting the type of trust to which we were referring, that “the

citizenship of a trust is generally that of the trustee.” 

A court’s accepting a party’s representation as to its citizenship 9

might be problematical as a party by a false concession seemingly could

create subject matter jurisdiction by consent, something it cannot do. In

this case, however, we are satisfied that the concession was correct as we

can discern nothing in the record suggesting that any defendant could be

a citizen of the British Virgin Islands or was a citizen anywhere other

than in the United States.

7

briefing on the issue.

Ultimately the court found that Emerald Trust was an

unincorporated business trust and it concluded that the law applied in

this circuit directs a court to look to the citizenship of the trust’s

beneficiaries when determining the citizenship of such a trust. As we 8

already have indicated, the court found that Emerald Trust’s sole

beneficiary was Emerald Ltd., a corporation incorporated in the

British Virgin Islands where it also had its principal place of business,

and thus Emerald Trust was a citizen of the British Virgin Islands for

jurisdictional purposes. It is interesting that this finding was

inconsistent with Emerald Trust’s complaint in this case as it asserted

in the complaint that it was a citizen of Florida. Inasmuch as

defendants conceded that they were not citizens of the British Virgin

Islands and undoubtedly were citizens of states within the United

States, the court concluded that it did have diversity of citizenship

subject matter jurisdiction.9

After determining that it had jurisdiction the district court

reached the merits of the case with respect to which it concluded:

At its core, this case concerns two partners’ attempt to

dispose of secured properties without the consent of

their former partner despite their former partner’s

secured interests in the properties. Unable to obtain

Toms’ consent to release his mortgages on the [NJ]

properties, Wolff and Hoffman decided to take their

chances that under the relevant agreements

(specifically, the [mortgage modification agreements])
8

they would owe nothing to Toms despite the

properties’ sale. They therefore agreed to indemnify

the title insurer on the transaction. Hoffman and

Wolff, however, miscalculated. Under the [mortgage

modification agreements] Emerald was entitled to

recover on its notes at least its share of the

$2,659,994.65 in net proceeds from the sale of the

properties. However, Defendants having breached this

and other obligations under the [mortgage modification

agreements], the [mortgage modification agreements]

ceased to place any limitation on Emerald’s rights

under the notes and mortgages after December 1999. 

Nor did the Subordination Agreements or Second

Mortgage Parity Agreements continue to place any

limitations on Emerald’s rights under the notes and

mortgages once [United Bank], Hoffman, and Wolff

released their mortgages. Thus, when the notes came

due in December 1999 and nothing was paid, Emerald

became entitled to recover on the terms stated on the

faces of its notes and mortgages. 

Emerald Investors Trust v. Gaunt Parsippany Partners, No. 02-CV1939, 2005 WL 1705779, at *6 (D.N.J. July 21, 2005).

Accordingly, the district court found that Emerald Trust was

due $583,333.33 on each note, plus 12% in prejudgment interest, a

rate that the parties had fixed, calculations that yielded a total

judgment of $1,193,678.52. This calculation did not allow Emerald

all of the interest it sought to recover. Of course, if defendants did not

pay this sum there would be a sale of the NJ properties to satisfy the

judgment. Defendants then appealed from the order entering

judgment and Emerald Trust cross-appealed from the order denying

its motion for summary judgment, the order denying reconsideration

of the denial of that motion, and the judgment and order partially

denying its claim for interest. 

III. JURISDICTION AND STANDARD OF REVIEW

The district court attempted to exercise diversity of citizenship

jurisdiction pursuant to 28 U.S.C. § 1332(a) and we have jurisdiction

pursuant to 28 U.S.C. § 1291. The parties raise numerous issues on
We address certain of the defendants’ arguments at this point 10

because their disposition will not be controlling and it is convenient to

consider them at the outset of the discussion section of the opinion.

Defendants argue: (1) Emerald Trust is a traditional express trust and

not, asthe district court held, an unincorporated business trust, and, thus,

we should look to the citizenship of its trustee who it asserts is a citizen

of Florida (Apparently Emerald Trust which alleged in the complaint that

it was a citizen of Florida originally also believed that citizenship of its

trustee controlled.); (2) even if Emerald Trust is a business trust and we

should look to the citizenship of its beneficiary, Emerald Ltd., to

9

this appeal and cross-appeal which we would review under various

standards if we reached them. But our disposition of this appeal

begins and ends with an examination of whether the district court had

subject matter jurisdiction. Thus, the principle that a determination of

“[w]hether the district court possessed subject matter jurisdiction is an

issue of law which this court reviews de novo” governs our review. In

re Phar-Mor, Inc. Litig., 172 F.3d 270, 273 (3d Cir. 1999). If we

determined that the district court did not have subject matter

jurisdiction we would direct it to dismiss the case even at this late

stage of the litigation. See Great S. Fire Proof Hotel Co. v. Jones, 177

U.S. 449, 453-54, 20 S.Ct. 690, 691-92 (1900). 

IV. DISCUSSION

As we have explained, the district court decided that it could

exercise diversity of citizenship jurisdiction because: (1) Emerald

Trust is an unincorporated business trust; (2) a court determines the

citizenship of an unincorporated business trust by determining the

citizenship of its beneficiary or beneficiaries; (3) the sole beneficiary

is Emerald Ltd., a corporation incorporated in the British Virgin

Islands and having its principal place of business there; and (4) none

of the defendants are citizens of the British Virgin Islands. The court

did not consider the citizenship of Michael Houlis, a citizen of

Florida, the trustee of Emerald Trust, in making this determination. 

This appeal requires us to determine whether, when ascertaining the

citizenship of a trust for diversity of citizenship purposes, we should

look to the citizenship of the trust’s beneficiary, its trustee, or both, or

use an alternative method to determine citizenship based on the

functions of the trustee and beneficiary with respect to management of

the trust in the particular case. It is 10
determine Emerald Trust’s citizenship, Emerald Ltd.’s principal place of

business is in New York. Thus, Emerald Trust is a citizen of New York

and there would not be complete diversity of citizenship between

Emerald Trust and the defendants; and (3) Emerald Trust, though the

plaintiff, is not the real party to the controversy and thus its citizenship

is not the determinative factor in a diversity of citizenship analysis.

Our research, however, has not led us to conclude that the type

of trust calls for a difference in treatment when determining a trust’s

citizenship for diversity of citizenship jurisdictional purposes. The

distinction between a traditional express trust and a business trust is that

“[i]n what are called ‘business trusts’ the object is not to hold and

conserve particular property, with incidental powers, as in the traditional

type of trusts, but to provide a medium for the conduct of a business and

sharing its gains.” Morrissey v. Comm’r of Internal Rev., 296 U.S. 344,

356-57, 56 S.Ct. 289, 294-95 (1935). The cases defendants cite do not

support its contention calling for differential treatment based on the type

of trust. Moreover, Emerald Trust may be, as the district court believed,

a business trust for the trust agreement states: “The purpose of the Trust

shall be to make, hold, liquidate, and distribute investments of any

lawful kind or character in trust for and for the benefit of Grantor,

without regard to any rule of prudent investment by fiduciaries.” App.

at 319. The reference to nonapplicability of limitations on fiduciaries

suggests that Emerald Trust may not be a traditional express trust. But

we reach no conclusion on that point.

Defendants’ second argument is also without merit as the record

now appears. The district court determined that the British Virgin

Islands was Emerald Ltd.’s principal place of business, basing its

determination on the affidavit of R. John Usher, the director of the

company, Valdex Investments Ltd., that caused the formation of Emerald

Trust. Usher stated that the Emerald Ltd.’s only office was in the British

Virgin Islands and all of its directors always have been in the British

Virgin Islands. While defendants challenge this conclusion, they have

not demonstrated that the corporation’s principal place of business was

in New York. 

Defendants’ third argument is also unpersuasive because

defendants advance it in an attempt to invoke a “real party to the

controversy” test that the Supreme Court rejected in Carden v. Arkoma

Associates, 494 U.S. 185, 187 n.1, 110 S.Ct. 1015, 1017 n.1 (1990), as

the Court observed in that case that not a single case cited by the dissent

10
supported the assertion that the “real party to the controversy” test is

relevant to the citizenship for diversity purposes of an artificial entity.

Of course, as we explain below, the test with respect to the citizenship

of an entity is distinct from the test applied with respect to the

citizenship of trustees if they sue in their own names. When trustees sue

in their own names it is critical that they be the real parties to the

controversy.

Defendants also make the argument related to their real party in

interest contention that Emerald Trust could not bring this action in its

own name as “a traditional express trust is not recognized as a separate

entity with capacity to sue or be sued in its own name.”

Appellants/cross-appellees’ br. at 24. We reject this argument. Under

Federal Rule of Civil Procedure 17(a) “[e]very action shall be prosecuted

in the name of the real party in interest.” Certainly, inasmuch as Toms

made his assignments of his notes and mortgages to Emerald Trust, in

ordinary understanding Emerald Trust would be regarded as the real

party in interest as it holds the notes and mortgages that it seeks to

enforce in this action. In short, we cannot understand why if Emerald

Trust has the capacity to hold the notes and mortgages it should not have

the capacity to enforce them. 

In this regard we point out that a determination that a trust itself

is the real party in interest with the capacity to sue or be sued can exist

side by side with a rule requiring that the citizenship of the trustee or

beneficiary or both determines the trust’s citizenship for diversity of

citizenship purposes. On this point, however, as we shall explain later,

we are not precluding defendants from making an alter ego argument

with respect to Emerald Trust on the remand that we are ordering.

See infra note 21. While it is true that Rule 17(a) indicates that a trustee

of an express trust “may” sue in its own name without joining the trust

as a plaintiff, the rule does not require that he do so and does not provide

that an express trust cannot sue in its own name.

11

surprising that at this date after so many years of litigation involving

trusts that the method for determination of a trust’s citizenship rather

than being settled is a subject of great differences of opinion.

1. The Supreme Court: Navarro Savings and Carden.

In 1978, we looked to the citizenship of both the trustees and

the investors (beneficiaries) in determining the citizenship of a trust

for diversity purposes. Riverside Mem’l Mausoleum, Inc. v. UMET
Actually our holding in Riverside was not completely clear as 11

there we were focusing on the effect on a citizenship determination of

the citizenship of the investors in an action against a trust. Riverside,

581 F.2d at 65. But we are confident that in Riverside we intended to

hold that a court should examine the citizenship of the trustees and the

beneficiaries to determine the citizenship of the trust as we completed

our discussion on the jurisdictional point by indicating that “we

conclude, as did the district court, that we must look to the citizenship

of the [trust] investors and not simply that ofthe trustees.” Id. (emphasis

added). Though we acknowledge that in reaching our conclusion we are

relying on our use of the word “simply” in Riverside and that we

therefore are placing our reliance on an arguable point, still we think our

reading of Riverside is correct, though we acknowledge that there may

be a contrary view. See Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 466

n.1, 100 S.Ct. 1779, 1784 n.1 (1980) (Blackmun, J., dissenting). In this

regard we point out that only 15 months before we decided Riverside, in

General Heat & Power Co. v. Diversified Mortgage Investors, 552 F.2d

556, 557 n.1 (3d Cir. 1977), in a dictum in a case involving, as the

district court held was true of Emerald Trust, a business trust, we

indicated that “the citizenship of a trust is generally that of the trustee.”

Thus, it was perfectly logical in Riverside to use the word “simply” to

harmonize Riverside with General Heat as we presume that when we

decided Riverside we were aware of General Heat. But even if our

reading of Riverside is not correct and in Riverside we intended to say

that only the citizenship of the investors mattered, and thereby jettison

the General Heat dictum, we would reach the result we do in this case.

We emphasize that in Riverside we had no need to use “simply”

if the citizenship of the trustees was not to be examined. Rather, we

could have omitted “simply” and said “look to the citizenship of the

[trust] investors and not that of the trustees.” But if we do not look at

both then “simply” has no meaning. We believe that the district court in

Riverside spoke only of the beneficiaries as diversity jurisdiction in that

case turned on their citizenship. In this regard we point out that the

district court decided Riverside less than four months after we decided

General Heat, see Riverside Mem’l Mausoleum, Inc. v. UMET Trust,

434 F. Supp. 58 (E.D. Pa. 1977), and we doubt that, dictum or not, the

district court would have declined to follow General Heat. On appeal,

we agreed with the district court with respect to looking to the

beneficiaries but it was at least implicit in our opinion that the trustees

should be considered as well. 

12

Trust, 581 F.2d 62, 65 (3d Cir. 1978). But since Riverside, the 11
13

Supreme Court has decided Navarro Savings Association v. Lee, 446

U.S. 458, 100 S.Ct. 1779 (1980), and Carden v. Arkoma Associates,

494 U.S. 185, 110 S.Ct. 1015 (1990), which require us to reconsider

Riverside as we have not considered the place of a trust’s citizenship

since these Supreme Court decisions.

In Navarro, eight individual trustees of a business trust, suing

in their own names, brought an action for breach of contract. 446

U.S. at 459-60, 100 S.Ct. at 1781. The plaintiffs premised federal

jurisdiction on diversity of citizenship, an allegation that the

defendants disputed, as they claimed that the trust beneficiaries, and

not the trustees, were the real parties to the controversy and the

citizenship of the beneficiaries from whom they were not diverse

should control. Thus, the question before the Court was whether

“trustees of a business trust may invoke the diversity jurisdiction of

the federal courts on the basis of their own citizenship, rather than that

of the trust’s beneficial shareholders.” Id. at 458, 100 S.Ct. at 1780-

81.

The Court looked at the role of the trustees and the

shareholders with respect to the trust. Under the trust, the trustees had

exclusive authority over the property. Id. at 459, 100 S.Ct. at 1781. 

Moreover, the declaration of trust “authorized the trustees to take

legal title to trust assets, to invest those assets for the benefit of the

shareholders, and to sue and be sued in their capacity as trustees.” Id.

at 464, 100 S.Ct. at 1784. In contrast, the shareholders did not have

such authority. Id. 

The Court found that “a trustee is a real party to the

controversy for purposes of diversity jurisdiction when he possesses

certain customary powers to hold, manage, and dispose of assets for

the benefit of others,” and “[t]he trustees in this case have such

powers.” Id. at 464, 100 S.Ct. at 1783-84. The Court concluded that

“trustees who meet this standard [may] sue in their own right, without

regard to the citizenship of the trust beneficiaries.” Id. at 465-66, 100

S.Ct. at 1784. 

Ten years later in Carden, the plaintiff, a limited partnership,

brought a complaint concerning a contract dispute in a district court

relying on diversity of citizenship for federal jurisdiction. 494 U.S. at

186, 110 S.Ct. at 1016. The Court rejected the limited partnership’s

attempt to extend a corporation’s artificial-person treatment to the

partnership for the purposes of determining citizenship, id. at 189, 110
We express the tests in the singular with respect to the trustee 12

and beneficiary because we are treating this case as we find it with

respect to Emerald Trust, i.e., one trustee and one beneficiary.

Obviously if there are more trustees or beneficiaries then the test is

applied to all the trustees and beneficiaries.

14

S.Ct. at 1018, and further rejected the limited partnership’s attempt to

have the Court determine citizenship of the partnership “solely by

reference to the citizenship of its general partners, without regard to

the citizenship of its limited partners.” Id. at 192, 110 S.Ct at 1019. 

The Court concluded that in a suit by or against an artificial entity,

diversity of citizenship “depends on the citizenship of ‘all the

members.’” Id. at 195, 110 S.Ct. at 1021 (citation omitted). Carden

distinguished Navarro, remarking that “Navarro had nothing to do

with the citizenship of the ‘trust,’ since it was a suit by the trustees in

their own names.” Id. at 192-93, 110 S.Ct. at 1020. 

Thus, in light of Navarro and Carden, the Supreme Court has

established the following rules. In a suit by or against the individual

trustees of a trust, where the trustees “possess[ ] certain customary

powers to hold, manage and dispose of assets,” their citizenship, and

not that of the trust beneficiaries, is controlling for diversity of

citizenship purposes. Navarro, 446 U.S. at 464-66, 100 S.Ct. at 1783-

84. The rule, however, is different when an artificial entity sues or is

sued in its own name. In that situation, because artificial entities,

unlike corporations, are not “citizens” under 28 U.S.C. § 1332,

diversity jurisdiction by or against an artificial entity depends on the

citizenship of “all the members.” Carden, 494 U.S. at 195, 110 S.Ct.

at 1021.

2. The four alternatives.

In the light of Navarro and Carden and other cases that we

have examined we conclude that a court might determine the

citizenship of a trust by selecting among four possible tests: (a) look

to the citizenship of the trustee only; (b) look to the citizenship of the

beneficiary only; (c) look to the citizenship of either the trustee or the

beneficiary depending on who is in control of the trust in the

particular case; or (d) look to the citizenship of both the trustee and

the beneficiary.12

(a) look to the citizenship of the trustee
In Hicklin and Johnson trusts were among the owners of the 13

entities involved, either a limited liability company in Hicklin, 439 F.3d

at 347, or a limited partnership in Johnson, 437 F.3d at 896-97.

15

Navarro, though involving an action that the trustees

themselves brought, could be understood as suggesting that a court

should look to the citizenship of the trustee in determining the

citizenship of a trust without regard to the citizenship of the

beneficiary, so long as the trustee “possesses certain customary

powers to hold, manage, and dispose of assets for the benefit of

others.” Navarro, 446 U.S. at 464, 100 S.Ct. at 1783. In the

circumstances, it is not surprising that some courts of appeals, with

citation to Navarro, have held that the “citizenship of a trust is that of

the trustee.” Hicklin Eng’g, L.C. v. Bartell, 439 F.3d 346, 348 (7th

Cir. 2006); see also Johnson v. Columbia Props. Anchorage, LP, 437

F.3d 894, 899 (9th Cir. 2006) (“A trust has the citizenship of its

trustee or trustees.”); Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314,

318 (7th Cir. 1998). Indeed, before Navarro, in a dictum in General

Heat & Power Co. v. Diversified Mortgage Investors, 552 F.2d 556,

557 n.1 (3d Cir. 1977), we said “the citizenship of a trust is generally

that of the trustee.” 

We are reluctant, however, to agree with those courts, or for

that matter regard ourselves as confined by General Heat, as we do not

join in those courts’ reading of Navarro in creating this bright-line

rule, and surely their opinions are inconsistent with Riverside. 

Moreover, we decided General Heat before Riverside and before the

Supreme Court decided Navarro and Carden. Navarro simply does

not say that the citizenship of a trustee determines the citizenship of a

trust. After all, as the Court emphasized in Carden, in Navarro the

trustees were suing in their own names and, as we already have

recognized, “[t]he question before the Court . . . was whether ‘trustees

of a business trust may invoke the diversity jurisdiction of the federal

courts on the basis of their own citizenship, rather than that of the

trust’s beneficial shareholders.’” Trent Realty Assocs. v. First Fed.

Sav. & Loan Ass’n of Philadelphia, 657 F.2d 29, 32 (3d Cir. 1981)

(quoting Navarro, 446 U.S. at 458, 100 S.Ct. at 1780-81). 

In contrast to Navarro, in the above cases, as well as in this

case, the question is what is the citizenship of an entity when the

entity itself is a party to the action. Navarro simply does not address 13

that question as Carden made clear when it said that “Navarro had

nothing to do with the citizenship of the ‘trust,’ since it was a suit by
Actually Riley arguably may not be inconsistent with Hicklin

14

and Johnson as Riley involved a business trust and the trusts involved in

Hicklin and Johnson appear to have been traditional express trusts.

Though we do not distinguish between business trusts and traditional

express trusts when determining citizenship, an argument can be made

that there should be such a distinction. Yet we note that it might be

thought that inasmuch as Navarro involved trustees of a business trust

if there is a distinction between express and business trusts for

citizenship purposes the results of the three cases would have been

reversed. This anomaly only can reinforce our unwillingness to

distinguish between business trusts and express trusts for citizenship

purposes.

16

the trustees in their own names.” Carden, 494 U.S. at 192-93, 110

S.Ct at 1020. We are not at liberty to disregard this observation. 

Additionally, the trustee-only rule in an action by the trust

itself seems to contradict Carden because that case held that an

“artificial entity,” a term that we will treat as including a trust, should

assume the citizenship of all of its “members.” Id. at 195, 110 S.Ct. at

1026. The trustee-only rule may contravene Carden because it

disregards the citizenship of the trust’s beneficiary who may be in a

position similar to that of the limited partners in a limited partnership.

(b) look to the citizenship of the beneficiary

The Court of Appeals for the Eleventh Circuit took the

different approach that Carden made clear that the citizenship of the

“members,” who it believed were only the beneficiaries, determines

the citizenship of a business trust. See Riley v. Merrill Lynch, Pierce,

Fenner & Smith, Inc. 292 F.3d 1334, 1338 (11th Cir. 2002). This 14

alternative, though not inconsistent with Carden unless, of course, a

trustee is a member of the trust, is not the best rule because in many

cases the beneficiary-only rule may lead to an untoward result, as for

example, would be the situation if a trust in which the beneficiary has

delegated all control of the trust to the trustee brings the action. It

seems to us that reliance only on the citizenship of the beneficiary in

these circumstances would be inconsistent with the reasons justifying

the existence of diversity of citizenship jurisdiction because in that

situation it is logical to think that if the trust had a local advantage or

faced a local prejudice it would be on the basis of the identification of
It long has been recognized that the need for both the reality

15

and the perception of impartial administration of justice is the reason

justifying the existence of diversity of citizenship jurisdiction. See Bank

of the U.S. v. Deveaux, 9 U.S. (5 Cranch) 61, 87, 3 L. Ed. 38 (1809).

In fact, inasmuch, as the parties cannot by consent invest a 16

federal court with subject matter jurisdiction, the Wright & Miller rule

in a particular case in which the court’s suspicions were aroused might

require the same type of process in a case in which no party questioned

the court’s subject matter jurisdiction.

17

the trustee not the beneficiary.15

(c) look to the citizenship of either the

trustee or the beneficiary depending on

who is in control of the trust in the

particular case

The third alternative is a less definite, case-by-case rule. In

this regard Wright & Miller in their well known treatise suggest that

“[t]he citizenship of an active trustee, rather than that of the

beneficiaries of the grantor, is decisive, but again a different result is

reached with regard to a passive trustee who has only a naked legal

title to the property.” 13B Charles Alan Wright & Arthur R. Miller,

Federal Practice and Procedure § 3606 (2d ed. 1984) (footnote

omitted). The problem with this rule is that it places a great and

unnecessary burden on both the litigants and the courts themselves. 

The Wright & Miller rule would require that in each case where a

trust is a party and the plaintiff relies on the court’s diversity of

citizenship jurisdiction, the court would have to monitor jurisdictional

discovery to the same extent that it monitors any discovery in the case,

and make findings with respect to the roles of the trustee and

beneficiary in the affairs of the trust, all in a case that might be

dismissed, or, if removed from a state court, remanded to it. 

16

Considering the burdens created by a case-by-case approach, it

is not surprising that some courts of appeals have “resisted efforts to

base determinations of citizenship on functional considerations.” May

Dep’t Stores Co. v. Fed. Ins. Co., 305 F.3d 597, 599 (7th Cir. 2002);

see also Kuntz v. Lamar Corp., 385 F.3d 1177, 1183 (9th Cir. 2004)

(“[J]urisdictional rules should be as simple as possible, so that the

time of litigants and judges is not wasted deciding where a case

should be brought and so that fully litigated cases are not set at
18

naught.”) (quoting Cote v. Wadel, 796 F.2d 981, 983 (7th Cir. 1986));

Saadeh v. Farouki, 107 F.3d 52, 57 (D.C. Cir. 1997); SHR Ltd. P’ship

v. Braun, 888 F.2d 455, 458-59 (6th Cir. 1989). Though we recognize

that, as this case demonstrates, rejection of the Wright & Miller rule

will not ensure that a diversity of citizenship determination will not

require discovery and a hearing, we nevertheless would be reluctant to

adopt a case-by-case test and thereby aggravate the burden on the

litigants and the courts that we have identified. 

(d) look to the citizenship of both the 

trustee and the beneficiary 

 The final alternative is to look to the citizenship of both the

trustee and the beneficiary in all cases in which a trust is a party. We

consider that approach to be best for several reasons. First and

foremost, this rule does not contradict the Supreme Court precedent in

either Navarro and Carden, which, of course, we cannot do. Navarro

is not implicated because it dealt with a situation in which the trustees

brought the action in their own names, a situation different from that

here in which the trust is the plaintiff. Moreover, the dual trusteebeneficiary rule does not offend Carden, a case we discuss at greater

length below, because the dual approach asks a court to look at the

citizenship of all of the “members,” at least the beneficiary of the

“artificial entity,” and merely directs a court to look at the citizenship

of the trustee as well. 

The concern with respect to Carden is raised by treating that

case as applying to a trust. In this regard we point out that, so far as

we are aware, historically the term “members” has not been applied in

the context of a trust. Nevertheless, applying Carden to a trust, as we

shall explain below we do not see why a trust’s “members” include

only its beneficiary and not its trustee. Of course, if a trustee is a

member of a trust then when Carden is applied to a trust, a court in

determining its citizenship must consider the trustee’s citizenship.

A second reason for adopting the dual trustee-beneficiary rule

is that it obviates the possibility of an illogical outcome under a

trustee or beneficiary-only approach in a case in which the trustee

controls the trust and the beneficiary is merely passive, or vice versa. 

A third reason is that a bright-line rule is preferable to a case-by-case

functional rule as it is the most efficient rule to utilize in determining

whether a district court has subject matter jurisdiction.
19

Moreover, the dual rule approach best accommodates our

“concerns of judicial economy and of due respect for the principles of

federalism” when “matters of diversity jurisdiction are implicated.” 

Carlsberg Res. Corp. v. Cambria Sav. & Loan Ass’n, 554 F.2d 1254,

1256 (3d Cir. 1977). In Carlsberg, we recognized that the extension

of diversity jurisdiction 

would impose additional burdens on a federal judicial

system which already strains to process cases that are

necessarily lodged with it. Relaxation of diversity

requirements, intentional or otherwise, inevitably will

increase access to the federal courts by litigants now

confined to state courts, thereby augmenting the

volume of business of the federal tribunals. Such an

occurrence also may postpone or even forestall the

vindication of the rights of litigants–criminal and

civil–who are properly in the federal courts. 

Even more serious would be the disservice rendered to

the cardinal precepts of federalism . . . . By its very

nature, the diversity jurisdiction of the federal courts

interferes with the autonomy of state tribunals by

diverting litigation, ordinarily handled by such courts,

to federal forums. Although the rule of Erie R.R. v.

Tompkins, [304 U.S. 64, 55 S.Ct. 817 (1938)]

requiring that state law be applied in diversity cases,

operates to ameliorate the dislocative impact of such

diversion, the fact remains that diversity jurisdiction

prevents the states from adjudicating and resolving

important matters that they otherwise would handle. 

Since conflict resolution constitutes one of the core

public functions of state government, the exercise of

diversity jurisdiction necessarily encroaches, in some

fashion, on the ability of the states to engage in this

traditional activity. 

Id. at 1256-57 (footnote omitted); see also City of Indianapolis v.

Chase Nat’l Bank of N.Y., 314 U.S. 63, 76, 62 S.Ct. 15, 20 (1941)

(“The dominant note in the successive enactments of Congress

relating to diversity jurisdiction is one of jealous restriction, of

avoiding offense to state sensitiveness, and of relieving the federal

courts of the overwhelming burden of business that intrinsically

belongs to the state courts in order to keep them from for their
We realize that in cases dealing with a claim that a federal court

17

should abstain from adjudicating a matter the Supreme Court has

indicated that the district courts have a “virtually unflagging obligation

. . . to exercise the jurisdiction given them.” Colorado River Water

Conservation Dist. v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236,

1246 (1976). Moreover, Thermtron Products, Inc. v. Hermansdorfer,

423 U.S. 336, 96 S.Ct. 584 (1976), makes it clear that a district court

may not remand a case properly removed to it from a state court to

reduce its docket as that motivation is not a reason statutorily authorized

for a remand. But these cases are not instructive on the very different

question here which deals with determining whether the court has

jurisdiction rather than whether it should exercise jurisdiction that it does

have.

Obviously, in view of our internal operating procedures, see

18

Third Circuit IOP 9.1, if possible we should reach the result we do.

Nevertheless, Navarro and Carden, which the Supreme Court decided

after Riverside, have compelled us to reconsider the result we reached in

that opinion. We hasten to add, however, that even in the absence of

Riverside we would reach the result we do and, in the light of Navarro

and Carden, would do so even if in Riverside we intended to hold that

a court should look only to the beneficiary in determining a trust’s

citizenship. 

20

distinctive federal business.”) (internal quotation marks omitted). The

comments that we made 30 years ago in Carlsberg with respect to the

burdens on the federal courts now are true to an enhanced degree as it

is a matter of common knowledge that there has been a massive

increase in the quantity of litigation in the federal courts for the last 30

years, far outpacing the growth in the size of the federal judiciary.17

For the foregoing reasons, after considering Navarro and

Carden, we reaffirm the rule that we adopted almost 30 years ago in

Riverside that the citizenship of both the trustee and the beneficiary

should control in determining the citizenship of a trust.18

 In reaching our result we discuss Carden further because we

recognize that that case might be understood as pointing to a

beneficiary-only rule. Thus, it is important to emphasize that the

issue before the Court in Carden was very different than the issue now

before us. In Carden the issue was whether a court can look to the

citizenship of less than all of the partners of a limited partnership to

determine the partnership’s citizenship. See Carden, 494 U.S. at 186,
21

110 S.Ct. at 1016 (“The question presented in this case is whether, in

a suit brought by a limited partnership, the citizenship of the limited

partners must be taken into account to determine diversity of

citizenship among the parties.”). In its holding, the Court “reject[ed]

the contention that to determine, for diversity purposes, the citizenship

of an artificial entity, the court may consult the citizenship of less than

all of the entity’s members.” Id. at 195, 110 S.Ct. at 1021 (emphasis

added). 

Thus, it is clear that Carden tells us that a court must take into

account not “less than all of the entity’s members” when determining

the citizenship of an artificial entity. Obviously, because the Court

was looking at a partnership, which is owned by all the partners who

under any theory are its only members, there could not be a need to

look to any persons other than the partners and other than the partners

there could be no one else to look to. But because Carden was dealing

with a partnership, the Court did not deal with the entirely separate

question of whether citizenship treatment may extend to individuals in

addition to “members” with respect to other entities, and in any event,

the Court did not consider the critical question of who is a “member”

of such entities. 

Our decision cannot be inconsistent with the holding in

Carden as we are not concluding that a court may “consult the

citizenship of less than all of the entity’s members” in a citizenship

determination. Rather, our opinion does not offend Carden no matter

how one decides to define “member” in the context of a trust. If a

trustee is not a “member,” then rather than looking to “less than all of

the entity’s members,” we are looking beyond that criterion because

of the unique characteristics of a trustee, a situation that Carden does

not address. On the other hand, if a trustee is a “member,” then

clearly we must look to his citizenship under Carden. In either

circumstance, our holding is not inconsistent with Carden. 

Moreover, assuming that Carden governs trusts and that a

court should look only to the citizenship of a trust’s “members” for

the purposes of diversity of citizenship, we believe that a “member,” a

term left undefined by Carden which thus can be applied to different

artificial entities in various ways, includes a trust’s trustee as well as

its beneficiary. We reach this conclusion in recognition of the law

that a trustee is more than a mere manager of a trust inasmuch as title

to a trust’s assets is fragmented with its legal title being vested in the

trustee and its equitable title being vested in the beneficiary. See In re
We point out that while our treatment of a trustee as a member 19

of a trust is categorical and thus is not fact specific, a trustee is likely to

be compensated from the assets of the trust, though in this case the trust

agreement provided that the compensation of the trustee was to be an

expense of Emerald Ltd., the beneficiary of the trust. Indeed, Florida

law, pursuant to which Emerald Trust was established, provides that “[i]f

the terms of a trust do not specify the trustee’s compensation, a trustee

is entitled to compensation that is reasonable under the circumstances.”

Fla. Stat. Ann. § 736.0708 (West 2007). New York law, the state of

which defendants claim Emerald Ltd. and thus Emerald Trust are

citizens, provides among numerous provisions dealing with a trustee’s

compensation, that “[a] trustee of an express trust shall be entitled to

commissions and the allowance of his expenses and compensation . . .

.” N.Y.C.P.L.R. § 8005 (McKinney1981). Byreason of a trustee’s right

to compensation for his services his legal interest in a trust is likely to be

a beneficial interest and thus supports a conclusion that he is a member

of the trust.

22

Columbia Gas Sys. Inc., 997 F.2d 1039, 1059 (3d Cir. 1993);

Restatement (Second) of Trusts § 2 cmt. f (1959). A court should not

ignore the legal interest held by the trustee as Congress itself has

treated it as important as the equitable interest held by a beneficiary. 

Thus, in requiring that a judge must recuse himself in cases in which

he has a “financial interest,” Congress defines that term as including a

legal or equitable ownership interest. See 28 U.S.C. §

455(b)(4),(d)(4). Overall, we see no reason why a trustee, who, in

fact, has a significant ownership interest in the title to the assets of the

trust in addition to management responsibilities, should not be

deemed a “member” of a trust for purposes of determining the trust’s

citizenship in a diversity of citizenship case. See also 11 U.S.C. § 19

541(a)(1) (with exceptions “all legal or equitable interests of the

debtor” become property of the bankruptcy estate).

 Finally in adopting the dual approach to determining

citizenship of a trust we point out that our result is not inconsistent

with Chapman v. Barney, 129 U.S. 677, 682, 9 S.Ct. 426, 428 (1889). 

That case concluded in a result that still is followed that corporations

but not unincorporated business entities are citizens for purposes of

diversity of citizenship. We are in no way acting inconsistently with

that principle as we do not suggest that a trust should be assimilated to

the status of a corporation for diversity purposes, a task that if it is to

be done at all is for Congress and not for us. See Carden, 494 U.S. at

196-97, 110 S.Ct. at 1022. 
We base our statements relating to the parties’ citizenship on 20

the record as it now exists. Therefore we do not preclude the district

court from coming to contrary conclusions after full discovery and, if

necessary, a hearing on the jurisdictional issue. We do observe,

however, that inasmuch as Gaunt Parsippany Partners, 119 Cherry Hill

Associates L.L.C., and 99 Cherry Hill Associates, L.P., did not exist at

the time that Emerald Trust filed the complaint in this case, their

citizenship might not be relevant for diversity purposes. See Midlantic

Nat’l Bank v. Hansen, 48 F.3d 693, 696 (3d Cir. 1995) (“Whether

diversity jurisdiction exists is determined by examining the citizenship

of the parties at the time the complaint was filed.”). We, however, do

not decide this point but note that on the remand if the district court

decides that without these three entities it has subject matter jurisdiction

then it should do so. Moreover, we do not find it necessary in this

opinion to explain the history of the four entities. We also point out that

even though our references to the parties’ citizenship are in the present

tense, as Midlantic makes clear, the inquiry on remand should be on

citizenship when the complaint was filed.

As we explained above, defendants dispute that the British

21

Virgin Islands is Emerald Ltd.’s principal place of business as they

contend that New York is its principal place of business. Defendants

raised this point in the district court, but the court denied their request for

“jurisdictional discovery” as it believed that there was incontrovertible

evidence demonstrating that Emerald Ltd.’s principal place of business

was in the British Virgin Islands. Thus, defendants could not uncover

facts to support their New York claim. In considering the question of

Emerald Ltd.’s citizenship we note that defendants contend that it may

be the alter ego of Toms and his, wife, Laurie Kraus. If necessary, the

district court should consider this argument on remand.

23

3. Application of the dual approach to this case

We now apply the trustee-beneficiary rule we have adopted to

the facts here. The facts relating to the citizenship of the parties

follows. The plaintiff is Emerald Trust, the beneficiary of which is 20

Emerald Ltd., a corporation incorporated in the British Virgin Islands

with its principal place of business there as well. Michael Houlis, a 21

Florida citizen, is the trustee of Emerald Trust.

Defendant Reckson Operating Partnership, L.P., is a Delaware

limited partnership whose sole general partner is Reckson Associates

Realty Corp., a Maryland corporation with its principal place of
It appears that Reckson attempts to keep the identity of its 22

limited partners confidential insofar as possible. Obviously, however,

the district court must know who they are and where they are citizens

and its need for that information will trump Reckson’s policies.

The citizenship of a partnership is determined by the citizenship 23

of “all of the entity’s members,” i.e., the citizenship of both the general

and limited partners. Carden, 494 U.S. at 195, 110 S.Ct. at 1021.

Domicile is what matters for the purposes of determining 24

citizenship; residence is different:

A difference between the concepts of

residence and domicile has long been

recognized. A person is generally a

resident of any state with which he has a

well-settled connection . . . . ‘Intent to

remain indefinitely’ in the State need not

be shown in order to be considered a

24

business in New York. According to an affidavit filed in the post-trial

jurisdictional inquiry proceedings, “among” its limited partners are

“individuals residing in New York, Florida, Connecticut, Virginia,

New Jersey, Maryland, Arizona, and Illinois.” App. at 285 (emphasis

added).

22

Defendant Horseheads Commercial Development Partners,

L.P., is a limited partnership whose sole general partner is Horseheads

Commercial Development, Inc., a New York corporation. Its sole

limited partner is Stratford Business Associates, L.P., a limited

partnership with its general partner Cannon Street Properties, L.L.C.

(itself a limited liability company with New Jersey citizens Wolff and

Hoffman as its sole members), and with limited partners Wolff and

Hoffman. 

Thus, as the record now stands, plaintiff Emerald Trust

appears to be a citizen of the British Virgin Islands (the citizenship of

the beneficiary corporation) and Florida (the citizenship of its trustee). 

Defendant Reckson, a limited partnership, has a limited partner or

partners that “resides or reside” in Florida but we do not know the 23

state or states of Reckson’s citizenship inasmuch as the district court

did not make a determination as to the domicile and thus the

citizenship of its limited partners. It does appear that defendant 24
resident of a state.

Martinez v. Bynum, 461 U.S. 321, 338-39, 103 S.Ct. 1839, 1847-48

(1983) (citations omitted). On the other hand,

[c]itizenship is synonymous with

domicile, and the domicile of an

individual is his true, fixed and

permanent home and place of habitation.

It is the place to which, whenever he is

absent, he has the intention of returning .

. . . An individual can change domicile

instantly. To do so, two things are

required: [h]e must take up residence at

the new domicile and he must intend to

remain there. 

McCann v. Newman IrrevocableTrust, 458 F.3d 281, 286 (3d Cir. 2006)

(citations and internal quotation marks omitted).

There could be a further complication here if, as now appears

25

to be the case, Emerald Ltd. is the beneficiary of Emerald Trust and

Emerald Ltd. is a citizen of the British Virgin Islands. In that case

Emerald Trust would be a citizen of the British Virgin Islands. The

complication would arise if any of the defendants are citizens or subjects

of a foreign state in which event there would be citizens or subjects of

a foreign state on both sides of the controversy. See Dresser Indus., Inc.

v. Underwriters at Lloyd’s of London, 106 F.3d 494 (3d Cir. 1997); Field

v. Volkswagenwerk AG, 626 F.2d 293 (3d Cir. 1980). We, however, are

not addressing that possibility because, as we said above, we can discern

25

Horseheads is not a citizen of the British Virgin Islands. 

Clearly our uncertainty as to the citizenship of the parties

requires us to remand this case to the district court to determine if it

has diversity of citizenship jurisdiction. In this regard the citizenship

of Reckson’s limited partners may be pivotal as the trustee of Emerald

Trust apparently is a citizen of Florida and Reckson also may be a

citizen of Florida because more often than not an individual who

resides in a state is a citizen of that state and Reckson has a limited

partner or partners who reside in Florida. Therefore we have grave

doubts as to whether the district court had subject matter jurisdiction

in this case. 

25
nothing in the record that suggests that a defendant could be a citizen

anywhere other than in the United States. See supra note 9.

Nevertheless we are aware of that possibility and if it arises the district

court may have to deal with it on remand. 

We have no reason at this time to consider whether Emerald 26

Trust could appeal the order denying it summary judgment and the order

denying reargument of the order denying summary judgment. We do

state, however, that these orders might be moot in view of the outcome

of the trial and the entry of the July 21, 2005 judgment. We mention this

26

V. CONCLUSION

For the foregoing reasons we will vacate the judgment and

orders from which the parties have appealed and cross-appealed,

namely the order entering judgment of July 21, 2005, in favor of

Emerald Trust, the order of August 30, 2004, denying Emerald Trust’s

motion for summary judgment, the order of October 29, 2004,

denying Emerald Trust’s motion for reargument and reconsideration

with respect to the August 30, 2004 order, and the judgment and order

of August 31, 2005, partially denying Emerald Trust’s request for

prejudgment interest. We will remand the matter to the district court

which should allow full discovery on the issue of the parties’

citizenship. Nothing that we have stated with respect to the facts

relating to the parties’ citizenship will bind the district court on the

remand from making contrary factual findings predicated on the more

complete record that will be developed on the remand. 

At the conclusion of discovery the district court, at its

discretion, may hold such hearing or hearings, if any, as it regards

necessary to determine its jurisdiction, and shall make findings as to

whether it has subject matter jurisdiction in this case. In making those

findings it will apply the principles that we have set forth. It then

either will reinstate the judgment and orders we have vacated or

dismiss the action, depending upon whether it determines that it does

or does not have jurisdiction. But nothing herein shall preclude the

district court from modifying its judgment or orders in accordance

with any procedure applicable under the Federal Rules of Civil

Procedure. See Fed. R. Civ. P. 60. We do not retain jurisdiction so

that any further appeals in this matter shall be from the reinstated

judgment and orders, the order for dismissal to be entered on the

remand, or such other judgments or orders as may be entered on the

remand. The parties will bear their own costs on this appeal. 26
point because we do not want to imply that the summary judgment

orders are not moot and are appealable. Rather, we state no opinion on

that point.

27