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Fellowes, Inc. v. Changzhou Xinrui Fellowes Office Equipment Co. Ltd.

United States Court of Appeals, Seventh Circuit

July 22, 2014

FELLOWES, INC., Plaintiff-Appellee,

Argued April 2, 2014

Appeal fro the United States District Court for the Northern District of Illinois, Eastern Division. No. 11 C 6289 -- Ronald A. Guzmán, Judge.

For FELLOWES INCORPORATED, Plaintiff - Appellee: Richard M. Franklin, Attorney, Michael A. Pollard, Attorney, Shima S. Roy, Attorney, BAKER & MCKENZIE LLP, Chicago, IL.

For CHANGZHOU XINRUI FELLOWES OFFICE EQUIPMENT COMPANY LTD, also known as FELLOWES MANUFACTURING (Changzhou) Company LTD, Defendant - Appellant: George W. Jackson, III, Attorney, POLSINELLI PC, Chicago, IL.

Before EASTERBROOK, MANION, and SYKES, Circuit Judges.


Easterbrook, Circuit Judge.

This suit presents a claim that defendant (Changzhou Fellowes for short), a business established under the law of China, broke a promise to plaintiff (Fellowes for short). As the names suggest, the businesses are related. One investor-member of Changzhou Fellowes is Hong Kong Fellowes, which despite its name has its principal place of business in Illinois. Fellowes filed this breach-of-contract suit under the international diversity jurisdiction, 28 U.S.C. § 1332(a)(2), a step that is proper only if Changzhou Fellowes has its own citizenship, independent of its investors or members. If it is a limited liability company, by contrast, then it has the citizenship of each member, see Cosgrove v. Bartolotta, 150 F.3d 729 (7th Cir. 1998), and the Illinois citizenship of its member Hong Kong Fellowes prevents the complete diversity

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necessary to the use of § 1332, for Fellowes also is a citizen of Illinois.

Corporations are persons with two citizenships, which 28 U.S.C. § 1332(c)(1) specifies as the jurisdiction of incorporation plus the principal place of business. (Section 1332(c) was amended in 2012; we apply the prior version, see Mas Capital, Inc. v. Biodelivery Sciences International, Inc., 524 F.3d 831 (7th Cir. 2008), because the amended text applies only to suits begun after January 5, 2012. Nothing turns on the difference, for both versions impute Illinois citizenship to both Fellowes and Hong Kong Fellowes.)

Other collective entities have the citizenship of each member or equity investor. See, e.g., Carden v. Arkoma Associates, 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). That norm was established in Chapman v. Barney, 129 U.S. 677, 9 S.Ct. 426, 32 L.Ed. 800 (1889) (a joint stock company has the citizenship of every investor), and reiterated in Steelworkers v. R.H. Bouligny, Inc., 382 U.S. 145, 86 S.Ct. 272, 15 L.Ed.2d 217 (1965) (a labor union has the citizenship of every member). This approach is often stated as the rule that only a corporation has citizenship determined independently of the investors' citizenship.

Without discussing subject-matter jurisdiction, the district court entered a preliminary injunction in favor of Fellowes--and this despite the court's assumption that Changzhou Fellowes has yet to be served with process. (N.D.Ill. Aug. 16, 2012). Changzhou Fellowes contends that the district court lacks both subjectmatter jurisdiction over the case and personal jurisdiction over it. We start and end with subject-matter jurisdiction.

Deciding whether a business enterprise based in a foreign nation should be treated as a corporation for the purpose of § 1332 can be difficult. See, e.g., White Pearl Inversiones S.A. (Uruguay) v. Cemusa, Inc., 647 F.3d 684 (7th Cir. 2011). Businesses in other nations may have attributes that match only a subset of those that in the United States distinguish a " corporation" --a business with indefinite existence, personhood (the right to contract and litigate in its own name), limited liability for equity investors, and alienable shares, among other features--from forms such as the limited liability company, the limited partnership, and the business trust.

Fellowes's complaint calls Changzhou Fellowes a " limited liability company" . Changzhou Fellowes describes itself that way too. The parties agree that it has " members" (like an LLC or partnership in the United States) rather than " shareholders," and that memberships are not alienable. It is like a general partnership in the latter respect. It is unnecessary to consider its other attributes, because Fellowes has greatly simplified the task by pinning its entire argument on a single proposition: That every " juridical person" --that is, every entity that can own property, make contracts, transact business, and litigate in its own name--is a corporation for the purpose of ยง 1332 no matter ...

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