Summary
The Fourth Circuit affirmed dismissal of FS Medical Supplies, LLC’s consolidated contract actions for lack of subject-matter jurisdiction. The court held that an LLC has the citizenship of all its members, including a foreign member, and that the LLC’s foreign citizenship prevented jurisdiction under 28 U.S.C. § 1332(a)(3) because there was no U.S. citizen on the plaintiff side. The court also held that it lacked jurisdiction to grant relief under North Carolina’s savings statute.
Topics
Practice areas
Questions Presented
- Whether an LLC with both domestic and foreign members can satisfy 28 U.S.C. § 1332(a)(3)'s requirement that the action be between citizens of different States when foreign citizens appear on both sides.
- Whether the court could preserve diversity jurisdiction by dismissing the foreign defendant, Tanner Pharma UK Limited.
- Whether a federal court lacking subject matter jurisdiction could grant relief under North Carolina's savings statute, N.C. Gen. Stat. § 1A-1, Rule 41(b), permitting refiling within one year.
Holdings
- For diversity purposes, an LLC has the citizenship of each of its members, and a court must test each member's citizenship without disregarding the LLC's foreign citizenship. Section 1332(a)(3) requires a U.S. citizen on each side of the dispute; because FS Medical had a Chinese member and Tanner Pharma UK was also foreign, the action was not between citizens of different States.
- Dismissing the foreign defendant would not cure the jurisdictional defect because the defect stemmed from FS Medical's own dual citizenship, including its foreign member.
- A federal court without subject matter jurisdiction cannot grant relief under North Carolina's savings statute because the statute affects a party's right to bring suit rather than a collateral issue concerning the court's inherent authority or judicial procedures.
Key quotations
“When we do so, we’re left with a dispute between a foreign citizen plaintiff and a mix of domestic and foreign citizen defendants.” (at 3)
“We must “test” diversity for each LLC member to determine whether there is subject matter jurisdiction.” (at 8)
“To satisfy diversity jurisdiction under 28 U.S.C. § 1332(a)(3), there must be a U.S. citizen on each side of the dispute.” (at 12)
“Because that’s not a collateral issue, we (and the district court) have no jurisdiction.” (at 14)
Factual background
During the early COVID-19 pandemic, FS Medical agreed to supply TannerGAP and Tanner Pharma UK with personal protective equipment and other COVID-related products. FS Medical sued after learning that the Tanner defendants had entered a direct contract with one of its suppliers. When the actions were filed, FS Medical was an LLC whose members included citizens of Texas, California, and China; the defendants included a North Carolina corporation, North Carolina-domiciled individuals, and a United Kingdom corporation.
Procedural history
FS Medical first sued the Tanner defendants in California state court, where the action was removed and dismissed for lack of personal jurisdiction. It then filed two actions in the Western District of North Carolina alleging diversity jurisdiction. After limited jurisdictional discovery revealed that one LLC member was a Chinese citizen, the district court accepted the magistrate judge's recommendation and dismissed both actions for lack of subject matter jurisdiction. The Fourth Circuit affirmed.