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Alper v. Marsh USA, Inc.

United States District Court, E.D. Missouri, Eastern Division

April 10, 2018

MARSH, USA, INC., Defendant.



         On March 6, 2018, plaintiff Marc Alper, in his capacity as Trustee Emeritus of the American Council of Engineering Companies Business Insurance Trust, filed this suit for injunctive relief, breach of contract, and tortious interference against Marsh USA, Inc. That same day, Alper filed a Motion for Temporary Restraining Order and Preliminary Injunction. At the hearing the following day I expressed concern about whether this Court has subject-matter jurisdiction to decide this case. I denied the Temporary Restraining Order at that time but ordered that the parties file briefs on the threshold jurisdictional issue.

         Plaintiff alleges that this Court has diversity jurisdiction because the named plaintiff, Trustee Alper, is a citizen of Missouri and defendant Marsh is a New York corporation with its principal place of business in New York. I conclude, however, that the citizenship of the Trust must be determined based on the citizenship of all the trustees. Because at least one trustee is a citizen of New York, complete diversity does not exist and the case must be dismissed for lack of subject-matter jurisdiction.[1]


         The American Council of Engineering Companies Business Insurance Trust is a trust established and created under the laws of Missouri. The Trust's main purpose is administering insurance programs operated for the benefit of the American Council of Engineering Companies (ACEC), an association whose members include thousands of engineering and consulting companies across the United States.[2]

         Starting in 1983, the Trust contracted with defendant Marsh to be the exclusive broker of certain insurance coverage and related programs offered on an exclusive basis to ACEC members. At the conclusion of the most recent agreement, the Trust decided not to renew the contract with Marsh. Instead, it contracted with one of Marsh's competitors to take over the administration and brokerage of its insurance offerings to ACEC members. The Marsh agreement contained clauses restricting Marsh's post-termination ability to continue to sell insurance to ACEC members, although the meaning and scope of these clauses is disputed. When the Trust learned that Marsh had developed a competing program and continued to solicit ACEC members in competition with the Trust's newly-designated insurer, the Trustees delegated to Trustee Emeritus Alper the power to bring this suit against Marsh; the complaint alleges Marsh is breaching the contract and seeks injunctive relief.


         Federal courts are courts of limited jurisdiction, and jurisdictional statutes must be strictly construed. Sheehan v. Gustafson, 967 F.2d 1214, 1215 (8th Cir. 1992). When jurisdiction is challenged, the party seeking the federal forum bears the burden of proving by a preponderance of the evidence that the prerequisites to jurisdiction are satisfied. Id. The Eighth Circuit has admonished district courts “to be attentive to a satisfaction of jurisdictional requirements in all cases.” Sanders v. Clemco Indus., 823 F.2d 214, 216 (8th Cir. 1987).

         To determine the citizenship of an unincorporated association for diversity jurisdiction, the courts must consider the citizenship of “all the members” of the association. See Carden v. Arkoma Assocs., 494 U.S. 185, 195-96 (1990) (quoting Chapman v. Barney, 129 U.S. 677, 682 (1889)). In Carden the Supreme Court held that the citizenship of limited as well as general partners must be considered in determining citizenship of a limited partnership. Carden specifically rejected the argument that it was appropriate to “consult the citizenship of less than all of the entity's members” when considering the citizenship of an unincorporated association. 494 U.S. at 195.

         In a 1980 business trust case where the trustees brought suit in their own names, the Supreme Court rejected an argument that the real parties in interest were all of the shareholders of the business trust. Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 465 (1980). Navarro held that the “real parties to the controversy” were the trustees who held legal title, managed the assets, and controlled the litigation, and thus the trustees could invoke diversity jurisdiction based on their own citizenship, like any natural person. Id.

         Most recently, in 2016, the Supreme Court referred back to its “oft-repeated rule” that the citizenship of all members must be considered in the context of determining the members of a “trust” for purposes of jurisdiction. Americold Realty Trust v. Conagra Foods, Inc. 136 S.Ct. 1012 (2016). Americold clarified that not every entity that “happens to call itself a trust” possesses the citizenship of its trustees alone. Id. at 1016. The Court found that a real-estate investment trust created under state law was not a traditional trust but a “separate legal entity, ” and held that its members were its shareholders for purposes of diversity jurisdiction. Id. Americold pointed out that Navarro did not deal with citizenship of the trust itself, and did not contradict the rule that “when an artificial entity is sued in its name, it takes the citizenship of each of its members.” Id. at 1016 (emphasis in the original).

         Alper does not dispute that the diversity jurisdiction analysis of the Trust turns on trustee citizenship. Instead he argues that because the other Trustees designated him to bring this suit, only his citizenship should be considered.

         Under Federal Rule 17(a), a trustee of an express trust may bring an action in his own name as the “real party in interest” without joining the people for whose benefit the action is brought. Fed.R.Civ.P. 17(a)(1)(E). However, as noted by the Supreme Court in Navarro, although a party may be a “real party in interest” under Rule 17(a), to establish diversity it may be necessary to rely upon the citizenship of that party's members. 446 U.S. at 462 n.9. Such is the case here. The court must consider the citizenship of all of the trustees for diversity purposes. To do otherwise would be in direct violation of the Supreme Court's “oft-repeated rule” that “diversity jurisdiction in a suit by or against [an] entity depends on the citizenship of ‘all the members.' ” Carden, 494 U.S. at 195-96. For a trust in the traditional sense - like we have here - the members are the trustees. Americold, 136 S.Ct. at 1015-16. Because one trustee is a New York citizen and therefore nondiverse from the defendant, this case must be dismissed for lack of subject-matter jurisdiction.

         Alper's argument that because all the trustees delegated their power to him[3]only his citizenship should be considered ignores long-established rules regarding diversity jurisdiction. Complete diversity of citizenship “is tested by the citizenship of the real parties to the controversy, and the citizenship of an agent who merely sues on behalf of the real parties must be ignored.” Associated Ins. Mgmt. Corp. v. Arkansas General Agency, Inc., 149 F.3d 794, 796 (8th Cir. 1998). In the Associated Ins. case the Eighth Circuit looked at the underlying agreements between the parties and the applicable state law in order to determine the “real and substantial parties to the dispute.” Id. at 798. An agent who merely sues on behalf of the real parties is ignored for citizenship purposes. Id. at 796. Even though the delegation to Alper here was proper both under the Trust Agreement and under Missouri law, [4] that delegation does not change the real and substantial parties to the dispute. The real power to control the Trust - including ‚Äúcertain customary powers to hold, ...

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