Additional Notes on Diversity of Parties



The party asserting diversity jurisdiction has the burden of proving it exists.


Under §§ 1332, a corporation unlike a natural person, can be a citizen of more than one state. A corporation is a citizen of:

  1. The state in which it is incorporated, and
  2. The state in which it has its principal place of business. (NOTE: it is widely accepted that a corporation only has one principal place of business for purposes of diversity jurisdiction). T


There were three tests used by courts to determine principal place of business. The district court discussed the three in White v. Halstead Industries, Inc., 750 F. Supp. 395, 397 (E.D. Ark. 1990):

  • The “nerve center” test looks to “the locus of corporate decision-making authority and overall control.”
  • The “corporate activities” or “operating assets” test looks to the location of a corporation’s production or service activities.
  • The “total activity” test is a hybrid of the other two tests and considers all of the circumstances of a corporation’s activities. It attempts to provide “a flexible and nonformalistic approach to determining a corporation’s principal place of business through a balancing of all relevant factors.”


The Supreme Court unanimously endorsed the “nerve center” test as the means for determining a corporation’s principal place of business in 2010. See Hertz Corp. v. Friend, 559 U.S. 77 (2010). The Court held that the principal place of business “refer[s] to the place where the corporation's officers direct, control, and coordinate the corporation's activities,” usually centered at the corporation’s headquarters. Id. at 92-93.


To determine the citizenship of an unincorporated association for diversity purposes, courts looks to the citizenship of each individual association member. Note that the Supreme Court has held that a limited partnership (for example, a law firm) is not a citizen of the state under whose laws it is created, but rather its citizenship is determined by the citizenship of each of its partners. See Carden v. Arkoma Assocs., 494 U.S. 185 (1990).


A legal representative of an estate of a decedent or of an infant is considered a citizen only of the State in which the decedent or infant was/is a citizen.


Citizens of a Foreign State


§§ 1332 confers jurisdiction to controversies between citizens of a state and citizens of a foreign state – also known as ‘alienage jurisdiction.’ The Court has explained that alienage jurisdiction is intended to deal with the “penchant of the state courts to disrupt international relations and discourage foreign investment.” JP Morgan Chase Bank v. Traffic Stream (BVI) Infrastructure Ltd, 536 U.S. 88 (2002)(holding that citizens of the UK’s overseas territories, specifically, the British Virgin Islands, are citizens of a foreign state).


What about an individual that is stateless? In Blair Holdings Corp v. Rubinstein, 133 F. Supp. 496 (S.D.N.Y. 1955), the District Court interpreted §§ 1332 as requiring a showing that the defendant was a citizen of a foreign state, and where the defendant was a ‘stateless’ individual, such a showing could not be made, and thus, diversity jurisdiction was improper.


NOTE: In 1988, Congress enacted a statute that provided that for purposes of §§ 1332 “an alien admitted to the United States for purposes of permanent residence shall be deemed a citizen of the State in which such alien is domiciled.” Pub.L.No. 100-702, 102 Stat. 4642 (1988).


Compare Singh v. Daimler-Benz AG, 9 F.3d 303 (3d Cir 1993) (finding jurisdiction available to a permanent resident alien domiciled in Virginia who brought suit against a nonresident alien and citizen of a state other than Virginia) with Saadeh v. Farouki, 107 F.3d 52 (D.C. Cir. 1997) (finding that Congress did not intend the law to overrule the longstanding rule that complete diversity is destroy in suits between aliens). Other circuits have come down on both sides of this dispute.


Sometimes plaintiffs will attempt to create diversity to be able to bring suit in federal court. In Kramer v. Caribbean Mills, Inc., 394 U.S. 823 (1969), the Supreme Court affirmed a lower court finding that jurisdiction was improper where a Haitian corporation assigned 95% of any recovery on its cause of action to its Texas attorney for $1. When the attorney attempted to sue a Panamanian corporation in federal court on the basis of diversity jurisdiction, the court found the assignment, and thus jurisdiction, improper.

Sometimes plaintiffs will attempt to destroy diversity of citizenship where they prefer to litigate in state court. In Rose v. Giamatti, 721 F. Supp 906 (S.D. Ohio 1989), plaintiff, Pete Rose, manager of the Cincinnati Reds, sought a temporary restraining order against the Commissioner of Baseball to halt his investigation into allegations that Rose had improperly wagered on the outcome of major league baseball games. Rose alleged that he was being denied a fair hearing because Giamatti was a biased decision-maker. He named Giamatti, the Reds, and Major League Baseball as defendants. The District Court found that the only “real party in interest” was Giamatti and that the additional parties were “formal or nominal part[ies]” whose citizenship could be disregarded for purposes of diversity. Id. at 914. Why do you think Rose wanted to keep the case in state court? Were Major League Baseball and the Reds actually nominal parties?