Seventh Circuit Rules A Partnership Made Up Of At Least One Stateless Citizen Is Itself Stateless And Cannot Be Sued In Federal Court Based Upon Diversity Jurisdiction

By Melinda S. Kollross

In Page v. Democratic National Committee, 2 F.4th 630 (7th Cir. 2021), the Seventh Circuit issued a subject matter jurisdiction ruling regarding diversity jurisdiction that could affect cases being currently prosecuted/defended in federal court, especially within the courts of the Seventh Circuit, and additionally within the First, Second, Third, and Fifth Circuits. This case also illustrates the need for appellate lawyers to be vigilant in preparing complete and correct jurisdictional statements at the beginning of each appeal. 

Facts

Page served as a foreign policy advisor to the 2016 Trump campaign. Page sued the Democratic National Committee, the law firm of Perkins Coie, and two Perkins Coie partners for defamation based on news stories published in 2016. Page sued in Illinois federal district court alleging diversity jurisdiction. The district court dismissed the suit upon personal jurisdiction grounds finding insufficient contacts to show jurisdiction in Illinois. Page appealed to the United States Court of Appeals for the Seventh Circuit, but as is the practice of the Seventh Circuit, the court meticulously reviewed the grounds for both district court and appellate jurisdiction. The Court of Appeals found there was no diversity subject matter jurisdiction in the district court and ordered that Page’s lawsuit be dismissed from federal court. 

Ruling

The court based its jurisdictional ruling upon the status of the law firm Perkins Coie, and the partners of that firm. The determination whether a law firm destroys diversity jurisdiction involves analyzing the citizenship of every partner to that law firm. Partnerships—be they law firm, accounting, consulting, or other entities—are citizens of every state in which individual partners are citizens. Further, if partners are just domiciled abroad, and not established foreign citizens, then such partners are not citizens for diversity purposes because they are not domiciled in any state, nor would they be considered foreign citizens. They are considered “stateless”.

In Page, Perkins Coie had three partners who were U.S. citizens domiciled in China. They were not defendants in the Page matter, but nonetheless, because of their “stateless” status, the Seventh Circuit questioned whether those three partners who were stateless rendered the law firm Perkins Coie stateless, destroying diversity jurisdiction. The Seventh Circuit determined that Perkins Coie (as a named defendant) took on the stateless status of its individual partners in China destroying diversity jurisdiction and depriving the federal district court of the power to hear the case. 

The Seventh Circuit found that while the Supreme Court has not squarely confronted the question it decided, prior cases indicated that it would agree with the Seventh Circuit. The Seventh Circuit further found that the First, Second, Third, and Fifth Circuits have confronted the precise question and have all held that a partnership made up of at least one stateless citizen is itself stateless and cannot be sued in diversity. 

Learning Points: Two points are plain from the Seventh Circuit’s decision.

First, everyone who is presently prosecuting/defending any trial or appellate proceeding involving a partnership based on diversity jurisdiction should double check where the individual partners are located to make sure that diversity does indeed exist under the analysis set forth in the Page decision as well as the decisions from the First, Second, Third and Fifth Circuits relied upon by the Page court.

Second, Page illustrates the reason why the Federal Rules of Appellate Procedure (FRAP) require appellate lawyers to provide a Court of Appeals with a full jurisdictional statement describing both district court and appellate jurisdiction. FRAP requires this statement at the latest when the initial appellant’s brief is filed. Some federal circuits, like the Seventh Circuit, want this jurisdictional statement much earlier, in the initial stages of an appeal, and then again when the appellant’s brief is filed. Federal appellate jurists expect appellate attorneys to verify that there was in fact district court subject matter jurisdiction over the case. If there was no such district court subject matter jurisdiction, then there is no reason to proceed with the time and expense of an appeal. It would be waste of resources for the court, as well as for counsel and the counsel’s client to fully brief and argue the matter when, at the end of the day, the case will have to be dismissed for lack of subject matter jurisdiction, as happened in Page.