May v. Texas Lobo Trucking Company
2:17-cv-00889
D.N.M.Feb 26, 2018Background
- Plaintiff May sued Texas Lobo Trucking LLC and Joshua Walling in federal court alleging diversity jurisdiction.
- Complaint alleged May is an Oklahoma citizen, Walling is a New Mexico citizen, and Texas Lobo Trucking is a Texas corporation with principal place of business in Texas.
- Defendants later disclosed Texas Lobo Trucking is an LLC owned by Sunland Capital LLC, and provided a list of purported members (individuals and trusts).
- Defendants’ submissions described members by residency, not citizenship, and identified trustees for several trusts rather than beneficiaries or trust membership.
- The Court, sua sponte, found these allegations insufficient to establish complete diversity because: (1) residency does not substitute for citizenship; and (2) a trust’s citizenship may depend on beneficiaries if the trust itself is a party.
- The Court ordered the parties to show cause by March 19, 2018 why the case should not be dismissed for lack of subject-matter jurisdiction and directed them to supply citizenship facts for individuals and for all members/beneficiaries of the trusts or justify relying on trustees’ citizenship by reference to trust documents.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the pleadings adequately allege diversity citizenship for Texas Lobo Trucking LLC | May contends the complaint pleads diversity (Oklahoma v. New Mexico/Texas) | Defendants identified membership but gave only residencies and trustee names; argued Sunland Capital is sole member and listed trustees/individuals | Court held pleadings are insufficient; residency is inadequate and trustee citizenship may not control for trusts—ordered show cause and factual supplementation |
| What citizenship to attribute to an LLC owned by a trust | N/A (issue arises from defendants’ filings) | Defendants effectively treated trustees’ or residents’ states as determinative | Court explained an LLC has citizenship of each member; if a member is a trust, the trust’s citizenship may derive from its beneficiaries unless trustees are the real parties in interest |
| Whether trustees’ citizenship alone can establish diversity for a trust-member LLC | N/A | Defendants implicitly relied on trustees’ citizenship | Court required proof via trust documents that trustees are real parties in interest (i.e., possess customary powers) before treating trustees’ citizenship as controlling |
| Sufficiency of using residency statements to establish citizenship | N/A | Defendants provided residency statements for individuals | Court held residency allegations are insufficient to establish citizenship for diversity purposes |
Key Cases Cited
- Siloam Springs Hotel, LLC v. Century Sur. Co., 781 F.3d 1233 (10th Cir. 2015) (an LLC’s citizenship is the citizenship of all its members)
- Conagra Foods, Inc. v. Americold Logistics, LLC, 776 F.3d 1175 (10th Cir. 2015) (distinguishing when trustee’s citizenship controls versus when a trust’s beneficiaries determine citizenship)
- Navarro v. Lee, 446 U.S. 458 (U.S. 1980) (trustees can be real parties in interest where trust instruments give trustees exclusive control over trust assets and authority to sue and be sued)
- Tuck v. United Servs. Auto. Ass’n, 859 F.2d 842 (10th Cir. 1988) (court has duty to sua sponte determine subject-matter jurisdiction)