Third Circuit Rules That Traditional Trusts Are Citizens of the States of Its Trustees and Business Trusts Are Citizens of the States of Its Owners for Diversity Purposes
The United States Court of Appeals for the Third Circuit recently determined that, for purposes of determining diversity of citizenship, the citizenship of a traditional trust is only that of its trustees, while the citizenship of a business trust is that of each of its constituent owners. GBForefront, L.P. v. Forefront Mgmt., LLC, No. 16-3905 (3d Cir. Apr. 19, 2018).
The case involved claims brought by GBForefront, a limited partnership whose membership included various trusts, against Forefront Management Group, LLC (“FMG”) and others, alleging that the defendants had defaulted on the terms of a settlement agreement. FMG moved to dismiss, arguing that complete diversity, the basis for subject matter jurisdiction in this case, was lacking. Between the filing of the motion and the District Court’s decision, the United States Supreme Court decided Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct. 1012 (2016), in which it held that the citizenship of a business trust includes the citizenship of all its members. The District Court ultimately granted the motion to dismiss because GBForefront’s membership included three trusts whose beneficiaries were citizens of New Jersey and FMG also had a member who was a citizen of New Jersey. The District Court reasoned that Americold Realty required it to look at the citizenship of all members and beneficiaries of GBForefront. GBForefront appealed.
To read the full blog article, please click here.