Limited Liability Company Citizenship: Reconsidering An Illogical and Inconsistent Choice

The trend in diversity actions in Federal Court is to rigidly apply the formalistic rules for determining citizenship (aggregate or entity) to deem limited liability companies (LLCs) to have aggregate or partnership citizenship. While the approach is designed to reduce the federal docket; there is no evidence that it works. More importantly, this result-oriented approach is not based on well-reasoned analysis. This approach creates several illogical and inconsistent results. It bears no reflection on modern business realities, it undermines well established principles of law, and it undercuts the purpose for which diversity jurisdiction was established, This article suggests that, just as our ever evolving society forced the formalistic rules of Pennoyer to give way to the more functional approach in International Shoe, it is time for the formalistic rules for determining citizenship to evolve to reflect the modern realities of business organizations like the LLC