Nelson & Small, Inc. v. POLARIS INDUSTRIES PARTNERS

• Decision Date: 17 April 1989
• Docket Number: Civ. No. 89-0077-P.
• Citation: 768 F. Supp. 382
• Court: U.S. District Court — District of Maine
• Parties: NELSON & SMALL, INC., a Maine corporation, Plaintiff, v. POLARIS INDUSTRIES PARTNERS, L.P., a Limited Partnership, Polaris Industries, L.P., a Limited Partnership, Polaris Industries Associates, L.P., a Limited Partnership, and Polaris Industries Capital Corporation, Defendants.

768 F. Supp. 382

NELSON & SMALL, INC., a Maine corporation, Plaintiff, v. POLARIS INDUSTRIES PARTNERS, L.P., a Limited Partnership, Polaris Industries, L.P., a Limited Partnership, Polaris Industries Associates, L.P., a Limited Partnership, and Polaris Industries Capital Corporation, Defendants.

Civ. No. 89-0077-P.

United States District Court, D. Maine.

April 17, 1989.

Peter W. Culley, Pierce Atwood Scribner, Portland, Me., for plaintiff.

Ernest J. Babcock, Gregory W. Powell, Friedman & Babcock, Portland, Me., Elliott S. Kaplan, Minneapolis, Minn., for defendants.

MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF'S MOTION TO REMAND

GENE CARTER, Chief Judge.

This matter is before the Court for decision on the Plaintiff's Motion to Remand, filed on March 30, 1989 (Docket No. 5). The motion was responded to by Defendants' filing on March 31, 1989 of their Memorandum in Opposition to Plaintiff's Motion to Remand (Docket No. 4M). The matter comes originally to the Court on a Verified Petition for Removal from Cumberland County Superior Court, State of Maine, filed on March 29, 1989 (Docket No. 1). On March 30, 1989, the Court entered its Memorandum of Decision and Temporary Restraining Order herein (Docket No. 6). The Motion for Remand having now been responded to, it is in order for decision on the papers, no request for oral argument having been made. Local Rule 19(f).

The motion is generated by the fact that one named Defendant herein is Polaris Industries Parnters, L.P. The record presently made before the Court is sufficient to permit the Court to find that Plaintiff Nelson & Small, Inc. is a limited partner in that defendant entity.¹ The "venerable doctrine," see Colonial Realty Corp. v. Bache and Co., 358 F.2d 178, 183 (2d Cir.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966), of Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806), requires complete diversity, that is, diversity of citizenship must exist between the plaintiff and each of the defendants. Thus, the narrow issue posed by the Motion to Remand is whether Nelson & Small, Inc.'s status as a limited partner in Polaris Industries Partners, L.P. destroys complete diversity.

The parties herein rely on competing lines of authority from the various circuits. Plaintiff places principal reliance upon Stouffer Corp. v. Breckenridge, 859 F.2d 75 (8th Cir.1988). The court there held that "the better rule requires complete diversity between the plaintiff and all partners of the defendant corporation, limited as well as general partners." Id. at 76. Defendants, on the other hand, rely upon a line of cases best represented by Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238 (5th Cir. 1986), and Judge Friendly's opinion in Colonial Realty Corp. v. Bache and Co., supra. Mesa holds: "where it is possible to identify clearly a class of members as the real party to a controversy, the citizenship of that class alone is relevant for diversity purposes." Id. at 240. The opinion concludes that on the facts of that case, the general partners having, under the partnership agreement, exclusive control over the management of partnership affairs, they are the real parties to the controversy and that the citizenship of the limited partners is not to be considered in assessing whether complete diversity exists. Id. at 242-43.

Both parties have asserted that neither the United States Supreme Court nor the Court of Appeals for the First Circuit has decided the issue posed. This Court finds that not to be the state of the authorities.² In Great Southern Fireproof Hotel Co. v. Jones, 177 U.S. 449, 20 S.Ct. 690, 44 L.Ed. 842 (1900), two members of a limited partnership organized under state law sued the defendant corporation and various partnerships, all alleged to be "doing business" in the State of Ohio. Id. at 450-51, 20 S.Ct. at 690-91. The complaint identified the plaintiffs as "members of the limited partnership association doing business under the name and style of Jones & Laughlins, Limited, which said association is a limited partnership association, organized under an act...." of the Pennsylvania Legislature. Id. at 450, 20 S.Ct. at 690. The complaint contained no allegation in respect to the citizenship of the partners in Jones & Laughlins, Limited, nor in respect to the citizenry of the partners in the various defendant partnerships. Jurisdiction was based on diversity of citizenship. The lower courts had decided the case on the merits.

On appeal, the United States Supreme Court noticed, sua sponte,³ an issue as to whether the complaints alleged a sufficient showing of diversity jurisdiction. Plaintiffs there apparently argued that since they were suing on behalf of the partnership entity which was organized in Pennsylvania and was entitled to be treated as a corporation under Pennsylvania law, diversity of citizenship existed (e.g., plaintiff, as a citizen of Pennsylvania, against defendant citizens of Ohio). The Court rejected both propositions and noted an added difficulty.⁴ The Court held that the plaintiff was not a corporation under Pennsylvania law for purposes "within the jurisdictional rule" that a corporation is a citizen of its place of incorporation. Id. at 457, 20 S.Ct. at 693. Thus, it held, the plaintiffs could not be considered citizens of Pennsylvania on the basis of the status of the limited partnership as an entity. Id. at 456, 20 S.Ct. at 693. Rather, it said that the citizenship of the partners in the entity controlled the determination of the existence of diversity of citizenship, noting:

the rule that for purposes of jurisdiction and within the meaning of the clause of the Constitution extending the judicial powers of the United States to controversies between citizens of different States, a corporation was to be deemed a citizen of the State creating it, has been so long recognized and applied that it is not now to be questioned. No such rule however has been applied to partnership associations although such associations may have some of the characteristics of a corporation. When the question relates to the jurisdiction of a Circuit Court of the United States as resting on the diverse citizenship of the parties we must look in the case of a suit by or against a partnership association to the citizenship of the several persons composing such association.

Great Southern Fireproof Hotel Co., 177 U.S. at 456, 20 S.Ct. at 693 (emphasis added). The Court invoked the time-honored rule in respect to unincorporated associations. The Court made no distinction between general partners and limited partners in making such a determination, even though it had clearly noticed that the plaintiffs sued on behalf of the limited partnership. The general rule relied upon by the Court is widely accepted. Stockman v. LaCroix, 790 F.2d 584 (7th Cir.1986); Village Fair Shopping Center Co. v. Sam Broadhead Trust, 588 F.2d 431 (5th Cir. 1979); Woodward v. D.H. Overmyer Co., 428 F.2d 880 (2d Cir.1970), cert. denied 400 U.S. 993, 91 S.Ct. 460, 27 L.Ed.2d 441 (1971); Sutherland v. United States, 74 F.2d 89 (8th Cir.1934); Goico v. Russell & Co., 4 F.2d at 8; Porto Rico v. Fortuna Estates, 279 F. 500 (dictum); A.B. Andrews v. Puncture Proof Footwear Co., 168 F. 762 (E.D.Pa.1909); Eastern Corporate Federal Credit Union v. Peat, Marwick, Mitchell & Co., 639 F.Supp. 1532, 1537 (D.Mass.1986); Murphy v. Gutfreund, 624 F.Supp. 444 (S.D.N.Y.1985); Consumer Savings Bank v. Touche Ross & Co., 613 F.Supp. 249 (D.Mass.1985); Camden Securities Co. v. Lupowitz, 500 F.Supp. 653 (E.D.Pa.1980); Simpson v. De Vault, 177 F.Supp. 914 (W.D.Va.1959).

This rule has repeatedly been applied specifically to limited partnerships. Puerto Rico v. Russell & Co., 288 U.S. 476, 53 S.Ct. 447, 77 L.Ed. 903 (dictum) (in determining existence of diversity of citizenship in suit to which joint stock company or limited partnership is a party, domicile to be looked to is that of individuals composing joint stock company or partnership); New York State Teachers Retirement System v. Kalkus, 764 F.2d 1015 (4th Cir.1985) (for purposes of diversity jurisdiction, citizenship of limited partnership is determined by considering citizenship of all of its partners, both general and limited); Elston Investments Limited v. David Altman Leasing Corp., 731 F.2d 436 (7th Cir. 1984) (citizenship of all partners including limited partners is to be looked at for purposes of determining existence of diversity of citizenship); Carlsberg Resources Corp. v. Cambria Savings and Loan Association, 554 F.2d 1254 (3d Cir.1977) (citizenship of all partners including limited partners is to be looked to to determine existence of diversity of citizenship); Unifirst Bank for Savings, F.A. v. Broadmoor Apartments of Tupelo, 615 F.Supp. 85 (S.D.Miss.1985) (district court lacks jurisdiction of action under 28 U.S.C. § 1332 where defendant partnership has limited partners who are citizens of same state as plaintiff); Windward City Center v. Transamerica Occidental Life Insurance Co., 613 F.Supp. 1216 (D.Haw.1985) (in case of two-tiered limited partnership, district court must consider citizenship of both general and limited partners in determining existence of diversity jurisdiction); Gore v. Stenson, 616 F.Supp. 895 (S.D.Tex.1984) (where plaintiff limited partner and defendant general partner are only members of limited partnership, diversity jurisdiction exists over suit for breach of partnership agreement brought by limited partner, who is a citizen of Texas, against general partner, who is domiciled in Georgia, notwithstanding that limited partnership is alleged to be a citizen of Texas); Conroy v. Winn, 581 F.Supp. 1280 (D.D.C.1984) (limited partners are the parties to actions involving limited partnerships, for purposes of 28 U.S.C. § 1332); Hereth v. Jones, 544 F.Supp. 111 (E.D.Va.1982) (there is no complete diversity of citizenship where there is identity of...