479 F.Supp.3d 189
W.D. Pa.2020Background
- Plaintiff North Hills Village LLC (NHV) is an LLC whose sole member is the North Hills Village Shopping Center Trust (NHV Trust); NHV operates a Pennsylvania shopping center and sued defendants (loan servicers) over a disputed "Cash Sweep Event."
- NHV invoked federal diversity jurisdiction under 28 U.S.C. § 1332; defendants moved to dismiss under Rules 12(b)(1) and 12(b)(6), and the court treated the jurisdictional challenge as a factual attack under 12(b)(1).
- The central jurisdictional question: whether NHV Trust is a "traditional" trust (citizenship of trustee alone) or a "business" trust (citizenship of all members), because that determines NHV's citizenship for diversity.
- Further factual development revealed one beneficiary is a partnership that includes a U.S. citizen domiciled abroad, creating a potentially "stateless" party for diversity purposes.
- The court analyzed trust classification by applying GBForefront’s two-part inquiry (state-law status and the trust’s purposes) and considered indicia of corporateness, trust terms, and the trust’s tax filings.
- Holding: the court concluded NHV Trust is a business trust, one member is effectively stateless, and federal diversity jurisdiction is lacking; the case was dismissed without prejudice for want of subject matter jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NHV Trust is a traditional trust (citizenship of trustee only) or a business trust (citizenship of all members) | NHV: Pennsylvania law and trust structure treat it as traditional; trustee (Ira Gumberg) has concentrated control, so only trustee citizenship matters | Defs: trust functions as a business entity — investors contributed capital, expect pro rata returns, continuity, transferrable interests, beneficiary control; thus business trust | Court: NHV Trust is a business trust based on purposive analysis and indicia of corporateness (GBForefront test) |
| Whether a business-trust member that renders a party "stateless" defeats diversity jurisdiction | NHV: pled beneficiaries were not citizens of defendants' states; diversity would be satisfied either way | Defs: one beneficiary is a partnership including a U.S. citizen domiciled abroad (stateless), which under Swiger/GbForefront doctrine destroys diversity | Court: presence of a stateless member prevents diversity jurisdiction; federal court lacks subject matter jurisdiction; case dismissed |
| Whether state labels or tax filings control classification | NHV: Pennsylvania statutory label and deed show trust not filed as a business trust; tax returns are unimportant | Defs: labels are not dispositive; filing partnership tax returns and other indicia support business-trust characterization | Court: state labels are not determinative; purposive inquiry controls; NHV’s tax filings bolstered the court’s business-trust conclusion |
| Whether reference to 28 U.S.C. § 1348 supplies jurisdiction (national-bank citizenship) | NHV: cited § 1348 regarding national bank citizenship of defendants | Defs: § 1348 does not create an independent jurisdictional basis for plaintiff’s citizenship problem | Court: § 1348 did not cure the plaintiff’s lack of diversity; jurisdictional defect arises from plaintiff’s citizenship |
Key Cases Cited
- GBForefront, L.P. v. Forefront Mgmt. Grp., LLC, 888 F.3d 29 (3d Cir. 2018) (governs test for whether a trust is a business trust or a traditional trust for diversity purposes)
- Swiger v. Allegheny Energy, Inc., 540 F.3d 179 (3d Cir. 2008) (American citizens domiciled abroad are "stateless" for diversity jurisdiction and cannot sue or be sued in federal court on diversity grounds)
- Navarro Sav. Ass'n v. Lee, 446 U.S. 458 (1980) (trustee sued in own name; trustee citizenship controls in that context)
- Carden v. Arkoma Assocs., 494 U.S. 185 (1990) (clarifies limits of trustee-centric citizenship rules)
- Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012 (2016) (labels alone do not determine entity citizenship)
- Bynane v. Bank of New York Mellon, 866 F.3d 351 (5th Cir. 2017) (discusses trustee control when trustee sues or is sued in own name)
- Demarest v. HSBC Bank USA, N.A., 920 F.3d 1223 (9th Cir. 2019) (similar trustee-control analysis when trustee is party)