Tuesday, January 12, 2010, 12:03 PM

4th Circuit: LLCs Unincorporated Associations, Citizens of States Where They're Organized and Where They Have Principal Place of Business under CAFA

Last Friday, the 4th Circuit held that, in determining subject matter jurisdiction under the Class Action Fairness Act (CAFA), an LLC is an unincorporated association, and its citizenship is determined by its place of organization and its principal place of business. The case was Ferrell v. Express Check Advance of SC.

In Ferrell, plaintiff filed a class action against Express Check, alleging, among other things, violations of South Carolina's consumer protection laws in the context of payday lending. The defendant removed to federal court under CAFA, which broadened federal jurisdiction to include class actions where $5+ million is on the line and where any plaintiff is a citizen of a different state than any defendant. The District Court remanded back to state court, and the 4th Circuit affirmed.

The 4th Circuit held that an LLC, and all other non-corporate business entities, are unincorporated associations under CAFA. And an unincorporated association's home states are those under whose laws they're organized and where they have their principal place of business. The principal place of business is determined not merely by looking at an LLC's members, as the defendant in Ferrell argued. But rather, where, as here, an LLC does all of its business within a state and simply has a couple of top officers in another, the 'place of operations' test for citizenship is used, and, in Ferrell, it defeated diversity and, with that, federal jurisdiction .


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