Over the years, significant confusion has existed—among both litigants and the courts—regarding how to determine the citizenship of an unincorporated entity, such as a joint-stock company, a limited partnership, or a trust, for purposes of diversity jurisdiction. Although clear rules have long existed for individuals and corporations, the same cannot be said for unincorporated entities. The issue has been particularly murky when it comes to trusts.

In MSR Trust v. Nationstar Mortgage, 2021 WL 4200720 (S.D.N.Y. Sept. 15, 2021), Southern District Magistrate Judge Robert W. Lehrburger recently addressed whether a trust's citizenship depends on the citizenship of its trustee(s), its beneficial owner(s), or both. Plaintiff MSR Trust (MSR Trust or the Trust) filed suit in New York state court, and defendant Nationstar Mortgage (Nationstar) removed the action to the Southern District of New York based on alleged diversity between the parties. MSR Trust sought remand, and the issue turned on whether MSR Trust is considered a citizen of the jurisdiction where its trustee is a citizen, where its beneficial owner is a citizen, or both. Judge Lehrburger found that MSR Trust is a citizen only of the jurisdiction where its beneficial owner is a citizen. On that basis, he denied the motion to remand, finding that complete diversity existed.

'MSR Trust v. Nationstar'

MSR Trust is a Delaware statutory trust that owned the right to service residential mortgage loans. MSR Trust's trustee is US Bank Trust National Association (the Trustee), a national bank whose main office is in Delaware and who thus is a citizen of Delaware. MSR Trust's ultimate beneficial owner is Natixis S.A. (Natixis), a French company.