Opinion ID: 788028
Heading Depth: 3
Heading Rank: 1

Heading: Complete Diversity

Text: 14 For a case to qualify for federal jurisdiction under 28 U.S.C. § 1332(a), there must be complete diversity of citizenship between the parties opposed in interest. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267, 2 L.Ed. 435 (1806). On the face of this record, the requirement appears to be met. Kuntz is a citizen of Washington. The Cooperative is an Idaho corporation with its principal place of business in Idaho. Lamar is a Louisiana corporation with its principal place of business in that state. For the purposes of diversity jurisdiction, a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business. 28 U.S.C. § 1332(c)(1). 15 The Cooperative, however, argues that its non-stock, non-profit, equal voting, membership structure makes it an unconventional corporation that is more analogous to a partnership or unincorporated association than to a corporation. Therefore, the Cooperative contends that diversity jurisdiction must be determined by the citizenship of its members, rather than by that of the corporate entity pursuant to § 1332(c)(1). Because some of the Cooperative's members are citizens of Washington, the Cooperative asserts that diversity is not complete. 16 Whether, for purposes of diversity jurisdiction, an unconventional corporation is to be treated like any other corporation or like a partnership is a question of first impression in this circuit. The Seventh and Second Circuits, however, have confronted this issue with regard to professional corporations. See Saxe, Bacon & Bolan, P.C. v. Martindale-Hubbell, Inc., 710 F.2d 87, 89 (2d Cir.1983) ; Cote v. Wadel, 796 F.2d 981, 983 (7th Cir.1986); Saecker v. Thorie, 234 F.3d 1010, 1012 (7th Cir.2000). A professional corporation is primarily a device for enabling a partnership of professionals to enjoy the tax advantages of a corporation. Cote, 796 F.2d at 983. Professional corporations differ from traditional business corporations in that they do not exist in perpetuity and do not necessarily shield their shareholders from liability. Despite lacking these two defining characteristics of a conventional corporation, both circuits held that professional corporations are corporations within the meaning of 28 U.S.C. § 1332. See Saxe, Bacon & Bolan, 710 F.2d at 89; Cote, 796 F.2d at 983. In holding that professional corporations should be treated like other corporations for purposes of determining the presence or absence of diversity jurisdiction, Cote focused on the obvious benefits of a bright line rule, stating that [j]urisdictional rules should be as simple as possible. Cote, 796 F.2d at 983. 17 This bright line rule comports with the decisions of the United States Supreme Court in cases involving situations converse to the present one, where various unincorporated associations sought to be treated as corporations for diversity jurisdiction purposes. In Carden v. Arkoma Assocs., 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990), the Court held that, despite the functional similarity between limited partnerships and corporations, a limited partnership's citizenship for diversity purposes can be determined only by reference to all of the entity's members. Id. at 196-97, 110 S.Ct. 1015. The Court stated: 18 [T]he course we take today does not so much disregard the policy of accommodating our diversity jurisdiction to the changing realities of commercial organization, as it honors the more important policy of leaving that to the people's elected representatives.... The 50 States have created, and will continue to create, a wide assortment of artificial entities possessing different powers and characteristics, and composed of various classes of members with varying degrees of interest and control. Which of them is entitled to be considered a citizen for diversity purposes, and which of their members' citizenship is to be consulted, are questions more readily resolved by legislative prescription than by legal reasoning, and questions whose complexity is particularly unwelcome at the threshold stage of determining whether a court has jurisdiction. We have long since decided that, having established special treatment for corporations, we will leave the rest to Congress; we adhere to that decision. 19 Id. at 197, 110 S.Ct. 1015. Similarly, in deciding that an unincorporated labor union was not to be treated as a corporation for purposes of diversity jurisdiction, the Court said: 20 Whether unincorporated labor unions ought to be assimilated to the status of corporations for diversity purposes, how such citizenship is to be determined, and what if any related rules ought to apply, are decisions which we believe suited to the legislative and not the judicial branch, regardless of our views as to the intrinsic merits of [the] argument. 21 United Steelworkers of Am. v. R.H. Bouligny, Inc., 382 U.S. 145, 153, 86 S.Ct. 272, 15 L.Ed.2d 217 (1965). Thus, the Supreme Court has consistently maintained for purposes of diversity jurisdiction a strict dichotomy between entities incorporated under state law and those enjoying some other status. 22 We agree that [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. Cote, 796 F.2d at 983. We therefore conclude that, for purposes of diversity jurisdiction, the Cooperative is to be treated as a corporation simply because it has been incorporated under Idaho law, regardless of the Cooperative's individual structure, purpose, operations, or name. As Judge Posner put it, paraphrasing Gertrude Stein, for purposes of diversity jurisdiction, a corporation is a corporation is a corporation. Id. The Cooperative is accordingly a citizen of Idaho, its State of incorporation and principal place of business, and diversity of citizenship was complete in this case. The district court had jurisdiction pursuant to 28 U.S.C. § 1332(a) and (c)(1).