RTP LLC v. ORIX Real Estate Capital, Inc., s. 14-3671 & 15-1153

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Writing for the Court: Easterbrook, Circuit Judge.
• Citation: 827 F.3d 689
• Parties: RTP LLC and RSCD Opportunity Fund I, LLC (formerly known as Inheritance Capital Group, LLC ), Plaintiffs–Appellants, v. ORIX Real Estate Capital, Inc., Defendant–Appellee.
• Docket Number: Nos. 14-3671 & 15-1153,s. 14-3671 & 15-1153
• Decision Date: 01 July 2016

827 F.3d 689

RTP LLC and RSCD Opportunity Fund I, LLC (formerly known as Inheritance Capital Group, LLC ), Plaintiffs–Appellants
v.
ORIX Real Estate Capital, Inc., Defendant–Appellee.

Nos. 14-3671 & 15-1153

United States Court of Appeals, Seventh Circuit.

Argued September 29, 2015
Decided July 1, 2016
Rehearing and Rehearing En Banc Denied July 29, 2016.

Paula K. Jacobi, Attorney, Barnes & Thornburg LLP, Chicago, IL, for Plaintiffs–Appellants.

David T. Audley, Michael T. Benz, Attorneys, Chapman & Cutler LLP, Chicago, IL, Defendant–Appellee.

Before Wood, Chief Judge, and Easterbrook and Ripple, Circuit Judges.

Easterbrook, Circuit Judge.

ORIX Real Estate Capital made a loan of about $41 million to RTP, enabling it to buy a commercial building in North Carolina. The loan is nonrecourse, but both RTP and Inheritance Capital Group signed conditional guarantees that take effect if the borrower commits a default. (Inheritance has a new name, but we use the original, which appears throughout the litigation and the underlying documents.) The loan papers specify in detail what defaults activate the guarantees.

When the real estate market turned down, the building's sole tenant decided not to renew its lease. RTP did not find a new tenant willing to pay as much. Contending that several events of default had occurred, ORIX accelerated the loan and demanded that RTP and Inheritance make good the outstanding debt. They replied with this suit, which seeks a declaration that they do not owe ORIX anything beyond what can be paid out of the building's assets. Ruling in ORIX's favor, the district court ordered RTP and Inheritance

827 F.3d 691

to pay about $30 million. 2014 WL 4414512, 2014 U.S. Dist. LEXIS 124654 (N.D. Ill. Sept. 8, 2014). RTP, a special-purpose vehicle formed for this transaction, does not have any assets beyond the building. But Inheritance does. It is a subsidiary of Detroit's retirement plans (both general civil-service employees and the police and fire departments), which contain billions of dollars.

This suit began in a state court of Illinois. ORIX removed it under the diversity jurisdiction of 28 U.S.C. § 1332(a)(1). See 28 U.S.C. § 1441(a). ORIX, a corporation, has two citizenships: Delaware (where it is incorporated) and Texas (where it has its principal place of business). 28 U.S.C. § 1332(c)(1) ; Hertz Corp. v. Friend , 559 U.S. 77, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010). Both RTP and Inheritance are limited liability companies, which have the citizenships of their members. See Cosgrove v. Bartolotta , 150 F.3d 729 (7th Cir. 1998) ; see also Carden v. Arkoma Associates , 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). Inheritance has two members: the General Retirement System of the City of Detroit, and the Police and Fire Retirement System of the City of Detroit. RTP has multiple members, all of them undoubtedly citizens of Michigan or New York except for ICG Ellis Road, LLC, which has the retirement funds as members. So whether this suit was removable depends on the citizenships of these two funds.

Both retirement funds are organized as trusts under Michigan law but can sue and be sued in their own names. ORIX relies on May Department Stores Co. v. Federal Insurance Co. , 305 F.3d 597, 599 (7th Cir. 2002), and Hicklin Engineering, L.C. v. Bartell , 439 F.3d 346, 348 (7th Cir. 2006), both of which understood Navarro Savings Ass'n v. Lee , 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980), to stand for the proposition that the citizenship of every trust is the citizenship of its trustees. ORIX represented that all members of the funds' boards of trustees are citizens of Michigan. RTP and Inheritance did not dispute this assertion (even though the record does not contain information about the citizenship of Edsel Jenkins, who was among the trustees on the date the suit was removed). The district judge decided the merits of the controversy without discussing subject-matter jurisdiction.

After the case was argued in this court, we deferred its resolution pending the Supreme Court's decision in Americold Realty Trust v. ConAgra Foods, Inc. , ––– U.S. ––––, 136 S.Ct. 1012, 194 L.Ed.2d 71 (2016), which posed the question whether Navarro establishes a rule applicable to all kinds of trusts. After Americold was released, we asked the parties for their views about its effect on this case. With those views in hand, we are ready to decide this appeal.

Americold holds that Navarro does...