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Court Rules California Unincorporated Association Is A South Dakota Citizen

Diversity jurisdiction in the U.S. District courts requires complete diversity of citizenship between the parties.  28 U.S.C. § 1332.  A corporation can be a citizen of its state of incorporation, as well as the state where it has its principal place of business. 28 U.S.C. § 1332(c). 

Unincorporated associations are an entirely different kettle of fish.  Courts have "adhere[d] to our oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of `all [its] members.'" Carden v. Arkoma Associates, 494 U.S. 185, 196 (1990) (quoting Chapman v. Barney, 129 U.S. 677,682(1889)).  

This principal was brought home recently by U.S. District Court Judge Lawrence L. Piersol in McKenzie v. Farmers Insurance Exchange, Case No. CIV 17-4011 (Feb. 7, 2018).  Judge Piersol's ruling was on a motion by Farmers Insurance Exchange to set aside a default judgment obtained by a subscriber based on lack of jurisdiction.  He found that the insured subscribers of the exchange were members under Section 18015 of the California Corporations Code because they have the right to vote for the members of the exchange's board of governors.

For more on unincorporated associations, see Thinking About Joining A Club? You May Want To Consider These Corporations Code Provisions First and Court Rules Unincorporated Association Aided Director's Breach Of Fiduciary Duty

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...