France v. Thermo Funding Co.
989 F. Supp. 2d 287
S.D.N.Y.2013Background
- Plaintiff Thales Alenia Space France (French company) sued Thermo Funding Co., LLC (Colorado LLC) for breach of contract; amount in controversy > $75,000.
- Thermo is an LLC whose sole membership interest is held by the James Monroe Revocable Trust (an inter vivos testamentary-style trust governed by Colorado law).
- James Monroe III is the grantor and sole trustee and is domiciled in Colorado; one named beneficiary, Vicky Monroe Harris, is domiciled in Australia (also holds U.S./UK citizenship).
- Thales alleges alienage diversity (U.S. citizen defendant v. foreign plaintiff); Thermo contends the trust beneficiary’s foreign domicile defeats diversity.
- The dispositive question: for diversity purposes, does the trust (and thus Thermo) take the citizenship of its trustee only, or of its beneficiaries as well?
- The district court resolved the jurisdictional challenge on a Rule 12(b)(1) motion, considering extrinsic evidence about the trust’s nature.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Thermo (an LLC) is a citizen of Colorado or also of Australia because its sole membership interest is held by the Monroe Trust | Thales argued the trust’s beneficiaries determine citizenship (or at least that beneficiary citizenship is relevant), which would defeat alienage diversity | Thermo argued the trust is a traditional trust whose citizenship is that of its trustee (Monroe, Colorado), preserving diversity | Court held the Monroe Revocable Trust is a traditional (estate-planning) trust and for diversity purposes the trust’s citizenship is that of its trustee only; complete diversity exists |
Key Cases Cited
- Carden v. Arkoma Associates, 494 U.S. 185 (unincorporated entities take the citizenship of all members)
- Navarro Savings Ass'n v. Lee, 446 U.S. 458 (trustees with real control are real parties in interest; trustee citizenship may be determinative)
- Bullard v. City of Cisco, 290 U.S. 179 (trustees suing are real parties; beneficiaries’ citizenship immaterial)
- Emerald Investors Trust v. Gaunt Parsippany Partners, 492 F.3d 192 (3d Cir.) (advocated looking to both trustees and beneficiaries)
- Riley v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 292 F.3d 1334 (11th Cir.) (business/Massachusetts trusts treated as citizens of states of their shareholders/beneficiaries)