Siloam Springs Hotel, L.L.C. v. Century Surety Co.
2015 U.S. App. LEXIS 5146
10th Cir.2015Background
- Siloam Springs Hotel, LLC (an Oklahoma LLC) bought a general liability policy from Century Surety covering a Hampton Inn in Arkansas; a carbon monoxide leak injured guests.
- Century denied coverage relying on an "Indoor Air Exclusion" in the policy; Siloam Springs sued in Oklahoma state court for a declaration of coverage.
- Century removed to federal court asserting diversity jurisdiction, alleging Century was an Ohio corporation with principal place in Michigan and (incorrectly) that Siloam Springs was an Oklahoma corporation with principal place in Arkansas.
- After removal, the district court granted summary judgment for Century, concluding the exclusion unambiguously barred coverage; Siloam Springs appealed.
- On appeal the Tenth Circuit questioned whether removal adequately pleaded diversity because Siloam Springs is an LLC, and ordered briefing on how to determine an LLC’s citizenship and the LLC’s members’ citizenship.
- The Tenth Circuit held an LLC’s citizenship is determined by the citizenship of each of its members, found the record insufficient to establish diversity at the time the complaint was filed, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| How to determine an LLC's citizenship for diversity jurisdiction | LLC is an unincorporated association whose members' citizenship controls | Treat LLCs like corporations; determine citizenship by state of organization and principal place of business | LLCs are unincorporated associations; citizenship is determined by the citizenship of all members |
| Whether Century's notice of removal adequately pleaded diversity | (implied) removal defective because it misidentified entity type and failed to list members | Removal sufficient; relied on Shell Rocky Mountain reference treating LLC as citizen of state of organization and principal place | Notice did not properly allege diversity because it misidentified Siloam Springs and omitted members' citizenship |
| Whether the member information submitted later establishes diversity at filing | Siloam Springs submitted a post-removal list of members and residences | Century relied on that list to claim diverse citizenship across several states | Residence list was prepared after removal; residence ≠ domicile; record insufficient to show citizenship at time of filing |
| Proper remedy when jurisdictional record is incomplete | Plaintiff sought adjudication on merits (coverage) | Defendant argued diversity existed and case could proceed in federal court | Remand to district court for further fact development on citizenship; consider state-law certification if jurisdiction is later established |
Key Cases Cited
- Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412 (3d Cir. 2010) (LLC treated like partnership; citizenship determined by members)
- ConAgra Foods, Inc. v. Americold Logistics, LLC, 776 F.3d 1175 (10th Cir. 2015) (Supreme Court precedent requires non-corporate entity citizenship be determined by members)
- Carden v. Arkoma Assocs., 494 U.S. 185 (1990) (unincorporated associations’ citizenship determined by members; courts should not expand corporate rule)
- Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (2004) (relevant time for diversity is the time of filing)
- Shell Rocky Mountain Production, LLC v. Ultra Resources, Inc., 415 F.3d 1158 (10th Cir. 2005) (earlier statement treating an LLC as citizen of state of organization and principal place, but not a definitive holding)
- Penteco Corp. Ltd. P’ship v. Union Gas Sys., Inc., 929 F.2d 1519 (10th Cir. 1991) (remand appropriate when jurisdictional record is inadequate)
- Whitelock v. Leatherman, 460 F.2d 507 (10th Cir. 1972) (residence allegation not equivalent to citizenship; proof/finding required to cure pleading defects)