Lincoln Property Co. v. Roche (04-712)

November 29, 2005 Supreme Court Update

Greetings, Court fans!
The Court is off to a quick start this year, issuing its tenth opinion today (as compared to three as of this date last year). In Lincoln Property Co. v. Roche (04-712), Justice Ginsburg, writing for a unanimous Court, resolved the issue of whether an entity not named or joined as a defendant can nonetheless be deemed a real party in interest and destroy diversity jurisdiction. Simply put: it cannot.
Roche filed suit against Lincoln Property and others in Virginia state court. The defendants removed the case to federal court on the basis of diversity of citizenship under 28 U.S.C. 1441. Roche made no objection – until the federal court granted the defendants' motion for summary judgment. Then Roche moved to remand, claiming that Lincoln Property was actually a partnership and that one of its partners was a citizen of Virginia. The District Court denied the motion based on evidence that Lincoln Property was a Texas corporation with its principle place of business in Texas. The Fourth Circuit reversed, finding that while Lincoln Property was a Texas corporation, it appeared likely that an unidentified Virginia subsidiary of the company was the "real and substantial party in interest," and Lincoln Property, as the party invoking federal jurisdiction, failed to demonstrate the non-existence of this entity. In arriving at its conclusion that courts need to look at the real parties in interest to determine whether diversity jurisdiction exists, the Fourth Circuit relied on FRCP 17(a), which provides that "[e]very action shall be prosecuted in the name of the real party in interest," and on case law holding that the joinder of a sham party with no real interest in the litigation cannot create diversity jurisdiction. The Supreme Court reversed, finding that "the Fourth Circuit had no warrant . . . to inquire whether some other person might have been joined as an additional or substitute defendant" (emphasis added). Further, Congress has specifically provided that corporations are citizens only of their states of incorporation and of their principle place of business -- not of any state in which they have an affiliate. So the case stays in federal court and the judgment for the defendants will stand.
That's it for today. As always, thanks for reading!
Kim & Ken
From the Appellate Practice Group at Wiggin and Dana. For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400.