Lincoln Benefit Life Co. v. AEI Life, LLC
2015 U.S. App. LEXIS 15576
| 3rd Cir. | 2015Background
- Lincoln Benefit Life Co. filed a federal declaratory judgment action seeking to void two STOLI life insurance policies.
- Subject-matter jurisdiction was premised on diversity; defendants include Innovative Brokers and two LLCs (AEI Life, LLC and ALS Capital Ventures, LLC).
- Lincoln Benefit alleged diversity by claiming the LLCs were citizens of New York and Delaware, but did not allege each LLC member’s citizenship.
- The district court dismissed for lack of subject-matter jurisdiction, applying a rule requiring listing all LLC members’ citizenships.
- Lincoln Benefit argued for limited jurisdictional discovery after a facial challenge to jurisdiction, and sought to proceed on information-and-belief.
- On appeal, the Third Circuit vacated and remanded, clarifying pleading standards for diversity involving unincorporated associations and permitting limited discovery if facial allegations survive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Must a plaintiff allege each member’s citizenship to plead diversity? | Lincoln Benefit should not be forced to identify every member; information is often not publicly available. | Proper pleading requires knowing the members’ citizenship to establish complete diversity. | Not required at pleading; facial challenge allowed; may allege noncitizens of plaintiff’s state to show diversity. |
| What pleading standard governs diversity challenges—facial or factual? | Challenge is facial; information available supports good-faith diversity allegations. | Challenge is factual; discovery should be capped or denied. | Facial challenge governs at this stage; discovery may follow if facial allegations survive. |
| Is limited jurisdictional discovery available to establish complete diversity for unincorporated associations? | Discovery should be permitted to determine membership when information is in defendants’ control. | Discovery is inappropriate absent a firm jurisdictional showing. | Jurisdictional discovery may be permitted if the complaint plausibly alleges diversity on its face. |
| Are the Lincoln Benefit allegations of diversity sufficient under Rule 8(a)(1)? | Allegations of connections to NY/DE and absence of Nebraska ties show plausible diversity. | Allegations are insufficient without identifying members or their citizenship. | Allegations are sufficient to survive a facial challenge; remand for possible jurisdictional discovery. |
| What is the proper framework for determining citizenship of unincorporated associations like LLCs? | Rely on flexibility in Form 7 and inverse or negative allegations where appropriate; cases like Lewis support this. | Strictly identify members’ citizenships to ensure complete diversity. | Adopts Lewis-inspired approach: can plead diversity by noncitizens of state of plaintiff and allow discovery if challenged. |
Key Cases Cited
- Carden v. Arkoma Assocs., 494 U.S. 185 (1990) (unincorporated associations’ citizenship traced to members)
- Lewis v. Rego Co., 757 F.2d 66 (3d Cir. 1985) (negative allegations of citizenship can establish diversity)
- Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412 (3d Cir. 2010) (citizenship of LLCs may be complex when multiple layers exist)
- Swiger v. Allegheny Energy, Inc., 540 F.3d 179 (3d Cir. 2008) (federal subject-matter jurisdiction challenges and discovery standards)
- Lombardi, Inc. v. Smithfield, 11 A.3d 1180 (Del. 1989) (example of case-style citation format (note: placeholder in schema))
- Carlina Casualty Ins. Co. v. Team Equip., Inc., 741 F.3d 1082 (9th Cir. 2014) (jurisdictional allegations where information is under defendant’s control)
- Carolina Cas. Ins. Co. v. Team Equipment, Inc., 741 F.3d 1082 (9th Cir. 2014) (jurisdictional discovery and information in defendant’s control)
- Russell v. Puerto Rico, 288 U.S. 476 (1933) (sociedad en comandita as juridical person for purposes of citizenship)