The uncertain citizenship of LLCs means counsel frequently must allege subject matter jurisdiction based on information and belief, an approach that meets with mixed success in the District of Minnesota. In the interests of equity and efficiency, opposing parties should be required to respond to such allegations by confirming or denying their citizenship.
For more than 50 years, federal courts have questioned whether subject matter jurisdiction can be alleged on information and belief.1 This question has become even more important recently with the expanded use of limited liability entities (all of which are referred to here generically as LLCs), which are often deemed citizens of multiple states, yet whose ownership (and resulting citizenship) is rarely a matter of public record.
Pleading on information and belief intersects with questions of subject matter jurisdiction in ways that elicit differing responses from the courts, as evidenced by three recent decisions from the District of Minnesota, each of which addresses the information and belief issue in a different way.
Federal Rule of Civil Procedure 11(b) expressly permits pleadings to be based an attorney’s “information and belief,” so long as that belief is “formed after an inquiry reasonable under the circumstances.” Despite the plain language of Rule 11(b), the federal courts remain divided on the question of whether the threshold elements of the court’s subject matter jurisdiction can ever be alleged on information and belief.
Many federal courts have held that jurisdictional allegations cannot be made on information and belief.2 Other courts have accepted jurisdictional claims made on information and belief without question.3 A third approach allows subject matter jurisdiction to be alleged on information and belief, provided that the record includes “other indicia” that the court has jurisdiction, or where the opposing parties do not dispute the jurisdictional allegations.4 Like the federal courts, commentators are divided in their approach to this issue.5
Alleging Diversity Jurisdiction
Three decisions from the District of Minnesota over the 15 months address allegations made on information and belief and relating to diversity jurisdiction in markedly different ways.
In Eckert/Wordell Architects, Inc. v. FJM Properties of Willmar, LLC,6 Judge Kyle, acting sua sponte, criticized the plaintiffs for filing an amended complaint that alleged the citizenship of an LLC’s members on information and belief, even where the plaintiffs stated that their jurisdictional allegations were based in part on “the representations of counsel for [defendant].” Relying on many of the cases cited in footnote 2, infra, Judge Kyle held that the allegations made on information and belief did not meet plaintiffs’ “burden of pleading, with specificity, the facts establishing the existence of diversity jurisdiction.”7 Judge Kyle allowed plaintiffs “one final opportunity” to correct their diversity allegations, while reminding them that “an allegation based upon information and belief” would lead to the dismissal of their action.8
There can be little doubt: Eckert/Wordell Architects, Inc. establishes an absolute prohibition on jurisdictional allegations made on information and belief.
In Key Enterprises, LLC v. Morgan,9 an action was removed to the District of Minnesota on the basis of diversity jurisdiction, with the removing defendant alleging the citizenship of the plaintiff LLC “upon information and belief.” The LLC subsequently represented to the court that the parties were diverse. Several months later, and after motions to dissolve a TRO and to remand for lack of the required amount in controversy had been briefed and argued, Judge Schiltz ordered the parties to submit evidence identifying each of the LLC’s members. It was only at that point that the LLC learned that all parties were not diverse.
In his order remanding the action to the Minnesota courts, Judge Schiltz criticized all of the parties for the diversity debacle. Judge Schiltz also singled out the attorneys responsible for the removal for having alleged diversity on information and belief where those attorneys did “not know the identity of—much less the citizenship of—a single member of that LLC,”10 and held that “[u]ntil an attorney acquires some information about the identity and citizenship of an LLC’s members, that attorney should not represent to a court—even ‘upon information and belief”—that the (unidentified) members of the LLC are or are not citizens of a particular state.”11 While declining to impose sanctions, Judge Schiltz did note that “there is no ‘information and belief’ exception to Rule 11.”12
In contrast to Eckert/Wordell Architects, Inc., Key Enterprises, LLC seems to recognize the possibility that parties can allege diversity jurisdiction on information and belief. But the mandate that litigants have “some information” regarding opposing parties’ citizenship appears to require something akin to actual knowledge rather than mere information and belief, and establishes a factual burden that few litigants are likely to be able to meet.
In contrast to Judges Kyle and Schiltz, Judge Ericksen appears far less hostile to jurisdictional allegations made on information and belief. In Life Share Collateral Holdings, LLC v. Albers,13 the plaintiff LLC commenced its action in federal court and one defendant brought a motion to dismiss arguing, inter alia, that the court lacked subject matter jurisdiction because the plaintiff had made its jurisdictional allegations on information and belief.14 Judge Ericksen acknowledged that some decisions have established a “bright-line rule” barring information and belief pleading of jurisdictional allegations, but then denied the motion to dismiss, finding that she was “satisfied” that diversity jurisdiction existed, particularly where the movant’s counsel had “candidly admitted” that the parties were diverse.”15
Judge Ericksen’s treatment of jurisdictional allegations made on information and belief differs from Judge Schiltz’s approach in two respects. First, unlike Judge Schiltz, Judge Ericksen never mentioned Rule 11 in her analysis of the information and belief question. Moreover, again unlike Judge Schiltz, Judge Ericksen seemed far more willing to consider representations by counsel as part of her jurisdictional analysis.
To summarize, Judge Kyle prohibits jurisdictional allegations made on information and belief under all circumstances. In contrast, Judge Schiltz will permit such allegations, so long as the attorneys have made a “reasonable” inquiry which may require actual knowledge. Finally, Judge Ericksen will allow jurisdictional allegations made on information and belief, so long as evidence emerges in the record to support the jurisdictional claim.
A Proposed Solution
If the federal courts are eager to clear their dockets, the complete ban on information and belief pleading of jurisdictional allegations advocated by Judge Kyle will go a long way toward accomplishing that goal. But while the federal courts are courts of limited jurisdiction, it is not their obligation to erect insurmountable barriers to establishing diversity jurisdiction in cases involving LLCs.
All of the District of Minnesota decisions discussed above acknowledge the problem litigants face when commencing a diversity action or removing a pending state court action where LLCs are involved. And absent a total ban on pleading jurisdiction on information and belief, Judge Ericksen’s approach to the problem, which is similar to the position recently adopted by the 7th Circuit in Medical Assurance Co. v. Hellman,16 seems to offer a more reasonable outcome.
If litigants commence or remove a diversity action and allege the citizenship of the parties on information and belief, it should be incumbent on the opposing parties to promptly confirm or deny the existence of diversity jurisdiction. In most cases, a telephone call or letter from opposing counsel that establishes the citizenship of his or her clients should be sufficient for the litigants to resolve any jurisdictional dispute without ever involving the court.
If the letter or telephone call does not resolve the matter, a requirement that any parties disputing diversity jurisdiction formally disclose their citizenship prior to bringing any motion to dismiss should, in most of the remaining cases, resolve the issue. Finally, if a party is bound and determined to involve the court in a dispute involving diversity jurisdiction, the court can require the parties to disclose their citizenship as part of any motion process.17 If these procedures are followed, the district courts are not likely to face any additional burden resolving disputes relating to subject matter jurisdiction.
In summary, allowing parties to allege subject matter jurisdiction on information and belief is a virtual necessity when LLCs are involved, and procedures already exist that can accommodate this type of pleading without imposing any additional burden on our already busy federal courts.
Josh Jacobson is a commercial litigator with The Law Office of Josh Jacobson, P.A. in Minneapolis, Minnesota, and an adjunct professor teaching Appellate Advocacy at the William Mitchell College of Law.
1 See Bradford v. Mitchell Bros. Truck Lines, 217 F. Supp. 525, 527 (N.D. Cal. 1963) (“A petition alleging diversity of citizenship upon information and belief is insufficient”); Gillespie v. Schomaker, 191 F. Supp. 8, 10 (E.D. Ky. 1961) (jurisdictional allegations made on information and belief are insufficient).
2 Robichaux v. Fidelity Nat’l Ins. Co., 2013 WL 356902 at *2 (D. Ariz. 01/29/2013) (jurisdiction “may not be pled on information and belief”) (brackets omitted); Fifth Third Bank v. Flatrock 3, LLC, 2010 WL 2998305 at *3 (D.N.J. 07/21/2010) (allegation made upon “information and belief” that members of defendant limited liability company were citizens of New York was insufficient to establish existence of diversity jurisdiction); See, Virtual Worlds, LLC v. Seaboard Int’l Energy Corp., 2010 WL 2553468 at *2 (C.D. Cal. 06/18/2010) (“Because Removing Defendant has alleged Plaintiff’s citizenship on ‘information and belief,’ the Notice of Removal’s allegations are insufficient to establish Plaintiff’s citizenship”); Monmouth Investors, LLC v. Saker, 2009 WL 1687569 at *1 (D.N.J. 06/16/2009) (rejecting jurisdictional allegations made “upon information and belief”); Baker v. Murphy, 495 F. Supp. 462, 465 (D.P.R. 1980) (rejecting allegations of citizenship made “upon information and belief”); Carroll v. Gen. Med. Co., 53 F.R.D. 349, 350 (D. Neb. 1971) (jurisdictional allegation made “upon information and belief” was “clearly improper”).
3 Volentine v. Bechtel, Inc., 2000 WL 284022 at *2 (5th Cir. 02/09/2000) (“unrebutted allegations of citizenship in a removal petition based on information and belief [are] sufficient to satisfy the removal statute”), cert. denied, 531 U.S. 813 (2000); Kolesar ex rel. Kolesar v. Evangelical Lutheran Good Samaritan Society, 2012 WL 1520283 at *2 (E.D. Ark. 04/30/2012) (notice of removal properly alleged citizenship of parties “upon information and belief”); SunTrust Bank v. Vill. at Fair Oaks Owner, LLC, 766 F. Supp. 2d 686, 693 (E.D. Va. 2011) (“The Fourth Circuit appears to have recognized … that a removal petition containing an allegation regarding citizenship made upon information and belief was ‘sufficient as a matter of law to allege subject matter jurisdiction’”), citing Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 199 (4th Cir. 2008); MBRO Capital, LLC v. Stolzar, 2011 WL 65913 at *1 n.1 (D. Conn. 01/05/2011) (amended complaint “adequately allege[d] diversity of citizenship” despite allegations of citizenship made “on information and belief”); Wymer v. Lessin, 109 F.R.D. 114, 115 (D.D.C. 1985) (because citizenship is “a matter peculiarly within [a defendant’s] knowledge … it was permissible and appropriate for the plaintiffs to plead diversity on information and belief”).
4 Medical Assurance Co. v. Hellman, 610 F.3d 371, 376 (7th Cir. 2010) (a plaintiff’s jurisdictional allegations made on “information and belief” are sufficient when not challenged by the defendants); Tile Unlimited, Inc. v. Blanke Corp., 788 F. Supp. 2d 734, 743 (N.D. Ill. 2011) (“the Seventh Circuit has made clear that diversity jurisdiction is not defeated simply because the party invoking jurisdiction alleges an opposing party’s citizenship ‘on information and belief’ so long as the record has other indicia of that party’s citizenship”).
5 Compare Carter G. Bishop and Daniel S. Kleinberger, “Diversity Jurisdiction for LLCs? Basically, Forget About It,” 14 Business Law Today 31, 35 (ABA Sept./Oct. 2004) (“because LLC membership is rarely a matter of public record, a third party that invokes diversity jurisdiction against an LLC may have to proceed first ‘on information and belief’ and then promptly obtain the court’s assistance to determine the citizenship of each LLC member”); Wright, et al., Federal Practice & Procedure, §1206 (prohibition on alleging jurisdiction on information and belief “seems to be an unduly restrictive attitude”); Debra R. Cohen, “Limited Liability Company Citizenship: Reconsidering An Illogical and Inconsistent Choice,” 90 Marquette L. Rev. 269, 303 (Winter 2006) (noting the impracticalities that result from alleging an LLC’s diversity on information and belief).
6 Civ. No. 12-968 (RHK/JJG) (D. Minn. 05/15/2012) (available on PACER).
7 Id. at 2 (emphasis in original).
8 Id. at 5.
9 2013 WL 353911 (D. Minn. 01/29/2013).
10 Id. at *2 (emphasis in original).
12 Id. at *1.
13 2012 WL 5471878 (D. Minn. 11/09/2012).
14 Id. at *1.
16 Medical Assurance Co. v. Hellman, supra n. 4.
17 Bishop & Kleinberger, “Diversity Jurisdiction for LLCs?” supra, at 35 (“an LLC that invokes or challenges federal jurisdiction must be prepared to disclose—at a minimum to the court in camera—the identity and citizenship of each of the LLC’s members”).