Opinion ID: 1447172
Heading Depth: 1
Heading Rank: 5

Heading: look to the citizenship of the beneficiary

Text: 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). [14] This 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 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 & Edward H. Cooper, 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 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.