Court Opinion

ID: 9478247
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:43:59.654632+00
Date Added: 2024-06-11T17:46:19.211539
License: Public Domain

ROSS, Senior Circuit Judge,
dissenting.
I respectfully dissent. The majority’s position disregards the “real parties to the controversy” test recognized long ago 1 and more recently restated in Navarro Sav. Ass’n v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980). That test clearly provides that “a federal court must disregard nominal or formal parties and rest [diversity] jurisdiction only upon the citizenship of real parties to the controversy. E.g., McNutt v. Bland, [43 U.S. (2 How.) 1, 7 (1844)]; see 6 C. Wright & A. Miller, Federal Practice and Procedure § 1556, pp. 710-711 (1971).” Navarro, supra, 446 U.S. at 461, 100 S.Ct. at 1782.
In Navarro, the Supreme Court applied the “real parties to the controversy” test to determine whether, in a business trust situation, the citizenship of the trust beneficiaries must be considered as well as that of the trustees. In that case, the Court concluded that the trustees were the real parties to the controversy. Id. at 465-66, 100 S.Ct. at 1784-85. The Court rested its conclusion upon findings that under the trust agreement (a) the trustees were authorized to have legal title to the trust assets, to manage and invest the assets for the benefit of the beneficiaries, and to sue and be sued in their capacity as trustees, and (b) the trust beneficiaries had no power to make investment decisions, to intervene in the affairs of the trust (except in the most extraordinary situations), or to control the litigation. Id. at 464-65 & n. 14, 100 S.Ct. at 1783-84 n. 14. As “real parties to the controversy,” the trustees were entitled to invoke the diversity jurisdiction of the federal court without regard to the citizenship of the trust beneficiaries. Id. at 465-66, 100 S.Ct. at 1784-85.
The clear message of Navarro is that federal courts are required to look beyond *78the superficial contours of a business entity to determine the real parties to the controversy. “[A] federal court must disregard nominal or formal parties * * *.” Navarro, supra, 446 U.S. at 461, 100 S.Ct. at 1782. Navarro also illustrates that the “real parties to the controversy” typically are those who possess the power to own and control the business assets and to control the business’ litigation. Id. at 465, 100 S.Ct. at 1784.
Applying the “real party to the controversy” test, both the Second and Fifth Circuits have held that diversity jurisdiction is not defeated by the citizenship of limited partners where the general partners have the exclusive power to manage the business assets and to control all litigation. Mesa Operating Ltd. Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238, 240 (5th Cir.1986) (exclusive power pursuant to partnership agreement); Colonial Realty Corp. v. Bache & Co., 358 F.2d 178, 183-84 (2d Cir.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966) (exclusive power to litigate pursuant to state partnership law). Similarly, in the present case diversity jurisdiction should not be defeated by the citizenship of Stouffer’s limited partners because (1) presently under Missouri law the limited partners are not proper parties to this action, see Mo.Ann.Stat. § 359.260 (Vernon 1968)2, and more importantly (2) Stouffer, as the general partner of Concourse Airport Hotel Partnership, “has the exclusive power to contract, conduct all business transactions, and is in control of all litigation” for the partnership. Stouffer Corp. v. Breckenridge, No. 86-629-C(4), slip op. 5 (E.D.Mo. June 16, 1987). By definition, Stouffer is the real party to the controversy, not the limited partners.
The majority instead chooses to follow the “bright-line” position adopted by the Third, Fourth and Seventh Circuits, which classifies limited partnerships as unincorporated associations and requires consideration of the citizenship of all members for diversity purposes. Such an approach fails to recognize the unique character of most limited partnerships — neither corporation nor association, but a hybrid between the two. See Mesa Operating Ltd. Partnership, supra, 797 F.2d at 240. Because there is a significant split among the circuit courts, this issue should at some point be resolved by the United States Supreme Court.
For the reasons set forth above, I would affirm the district court’s refusal to dismiss the complaint for want of diversity jurisdiction.

. See Coal Co. v. Blatchford, 78 U.S. (11 Wall.) 172, 177, 20 L.Ed. 179 (1871); Marshall v. Baltimore & Ohio R. Co., 57 U.S. (16 How.) 334, 349-51, 14 L.Ed. 953 (1854); and McNutt v. Bland, 43 U.S. (2 How.) 1, 7-8 (1844).

. Mo.Ann.Stat. § 359.260 (Vernon 1968), which provides that a limited partner is not a proper party to a proceeding, has been repealed effective January 1, 1989, pursuant to revisions of the state’s Uniform Limited Partnership Law. See Mo.Ann.Stat. §§ 359.010-.691 (Vernon Supp.1988). Notwithstanding the statute’s impending repeal, this section is presently effective and relevant to the issue of determining the real parties to the present controversy.