Lincoln Prop. Co. v. Roche - 546 U.S. 81, 126 S. Ct. 606 (2005)

Rule:

Defendants may remove an action on the basis of diversity of citizenship if there is complete diversity between all named plaintiffs and all named defendants, and no defendant is a citizen of the forum state. It is not incumbent on the named defendants to negate the existence of a potential defendant whose presence in the action would destroy diversity.

Facts:

Respondents, Christophe and Juanita Roche, leased an apartment in a Virginia complex, Westfield Village, managed by Lincoln Property Company (Lincoln). The Roches commenced suit in state court against diverse defendants, including Lincoln, asserting serious medical ailments from their exposure to toxic mold in their apartment, and alleging loss, theft, or destruction of personal property left in the care of Lincoln and the mold treatment firm during the remediation process. The Roches identified themselves as Virginia citizens and defendant Lincoln as a Texas corporation. Defendants removed the litigation to a Federal District Court, invoking that court's diversity-of-citizenship jurisdiction. In their consolidated federal-court complaint, the Roches identified themselves and Lincoln just as they did in their state-court complaints. Lincoln, in its answer, admitted that it managed Westfield Village, and did not seek to avoid liability by asserting that some other entity was responsible for managing the property. After discovery, the District Court granted defendants' motion for summary judgment, but before judgment was entered, the Roches moved to remand the case to state court. The District Court denied the motion, but the Fourth Circuit reversed, holding the removal improper on the ground that Lincoln failed to show the nonexistence of an affiliated Virginia entity that was a real party in interest.

Issue:

Was it incumbent on the named defendants to negate the existence of a potential defendant whose presence in the action would destroy diversity? 

Answer:

No.

Conclusion:

The judgment ordering a remand of the action to the state court was reversed, and the case was remanded for further proceedings. The Court held that it was not incumbent on Lincoln to negate the existence of a potential and unidentified defendant whose presence in the action would destroy diversity. Although real estate entities, such as the manager, typically operated through a web of affiliated entities, Lincoln admitted responsibility for managing the apartments and its liability to pay any resulting judgment, and thus, Lincoln was not merely a nominal party. Further, Lincoln’s corporate citizenship outside the forum state was clearly established, and Lincoln was not deemed to have acquired the citizenship of all or any of its affiliates.