According to Internal Revenue Service (IRS) statistics, since 2004, the limited liability company (LLC) has steadily become America's favorite business entity. As the number of LLCs grow, so do the number of LLC litigants in our courts. Recently, several district courts around the country have, upon the filing of a new complaint (or removal action), been issuing sua sponte orders requiring diversity plaintiffs (or removal defendants) to amend their complaints to specifically identify the citizenship of each member of any limited liability company named in their pleading. Moreover, if a member of an LLC is another LLC or partnership, the citizenship of those members or partners must also be identified. Whether this is an intentional maneuver to deal with case backlogs, without the need for Congressional action, or just simply the innocent and unintended byproduct of an attempt to strictly police its jurisdictional borders, it has in effect, thrown an almost insurmountable hurdle in the path of many of the litigants who would prefer their cases heard in federal court.

Chip Away Until It Is Gone?

Federal courts have the power to adjudicate matters "arising under the Constitution, laws or treaties of the United States." On top of that, they are vested with subject matter jurisdiction over cases where the amount in controversy exceeds $75,000 and is between the citizens of different states (or between citizens of a state and subjects of a foreign state). See, 28 U.S.C. Sections 1331, 1332(a)(1)-(2). This is called "diversity jurisdiction." Diversity jurisdiction's roots can be traced back to our Founding Fathers' fears that nonresident litigants may potentially suffer bias when prosecuting or defending claims in state courts against resident opponents. Diversity jurisdiction was first codified in the Judiciary Act of 1789 and it is—and always has been—part of the fabric of our federal judicial system.