Law School Case Brief
Americold Realty Tr. v. ConAgra Foods, Inc. - 136 S. Ct. 1012 (2016)
Traditionally, a trust is not considered a distinct legal entity, but a fiduciary relationship between multiple people. Such a relationship was not a thing that could be haled into court; legal proceedings involving a trust were brought by or against the trustees in their own name. And when a trustee files a lawsuit or is sued in her own name, her citizenship is all that matters for diversity purposes. For a traditional trust, therefore, there is no need to determine its membership, as would be true if the trust, as an entity, were sued.
Resondents, who were corporate citizens of Delaware, Nebraska, and Illinois, sued petitioner Americold Realty Trust, a “real estate investment trust” organized under Maryland law, in a Kansas court because of a contract dispute and an underground food-storage warehouse fire. Americold removed the suit to Federal District Court based on diversity-of-citizenship jurisdiction. The District Court accepted jurisdiction and ruled in Americold's favor. On appeal, however, the Tenth Circuit held that the District Court lacked jurisdiction to hear the suit. Since Americold was not a corporation, the court reasoned, its citizenship for diversity jurisdiction purposes should be based on the citizenship of its members, which included its shareholders. Because no record of those shareholders' citizenship existed, diversity was not proved. Americold sought further review.
Did the federal appellate court err in holding that the citizenship of a Maryland real estate investment trust was based on its shareholders' citizenship?
The Supreme Court of the United States granted certiorari to resolve confusion among the Courts of Appeals regarding the citizenship of unincorporated entities. The Court was asked how to determine the citizenship of a “real estate investment trust,” an inanimate creature of Maryland law. The Court answered: While humans and corporations can assert their own citizenship, other entities take the citizenship of their members. A unanimous court concluded that for purposes of diversity jurisdiction, appellant Americold's members include its shareholders. The Court held that for purposes of diversity jurisdiction, a real estate investment trust organized under Maryland law possessed the citizenship of its shareholders where, under Maryland law, it was an unincorporated business trust in which property was held and managed for the benefit of anyone who became a shareholder. The same rule that applied to an unincorporated entity sued in its organizational name did not apply to a human trustee sued in her personal name. The same rule also did not apply to an unincorporated entity that applied to a corporation, namely, to consider it a citizen only of its State of establishment and its principal place of business. Therefore, the Court affirmed the judgment of the Tenth Circuit.
Access the full text case
Not a Lexis Advance subscriber? Try it out for free.
Be Sure You're Prepared for Class