Background
FS Medical Supplies, LLC, a personal protective equipment supplier, brought breach of contract claims against TannerGAP, Inc. (a North Carolina corporation), Tanner Pharma UK Limited (a United Kingdom corporation), and affiliated individual defendants (North Carolina domiciliaries), arising from a dispute over a COVID-19 supply agreement. FS Medical filed in the Western District of North Carolina asserting diversity jurisdiction under 28 U.S.C. § 1332, alleging its members were citizens of California and Texas.
During litigation, FS Medical disclosed that one of its four members, Zhen Zhen Tong, was actually a citizen of China — not a U.S. state. In an attempt to cure the defect, FS Medical arranged for Ms. Tong to transfer her LLC interest to another member before the dispositive hearing. That maneuver failed because diversity is assessed at the time the complaint is filed, not at the time of a subsequent transfer. Defendants moved to dismiss both consolidated cases for lack of subject matter jurisdiction.
The magistrate judge recommended dismissal, finding that because FS Medical held both domestic (Texas, California) and foreign (China) citizenship through its members, it could not satisfy § 1332(a)(3)’s requirement of a suit between “citizens of different States.” The district court adopted that recommendation and dismissed. FS Medical appealed, arguing the court should consider only its domestic citizenship for the “citizens of different States” prong of (a)(3), and alternatively requesting invocation of North Carolina’s savings statute to permit refiling within one year.
The Court’s Holding
The Fourth Circuit affirmed, holding that a federal court must test diversity jurisdiction against every member’s citizenship when the plaintiff is an LLC — including foreign citizenships — and cannot selectively disregard the foreign component. Because one of FS Medical’s members was a Chinese citizen at the time of filing, FS Medical itself was a foreign citizen for jurisdictional purposes. The resulting lineup — a foreign-citizen plaintiff suing a mix of foreign and domestic defendants — is not a suit “between citizens of different States” and therefore does not satisfy § 1332(a)(3). No other subsection of § 1332(a) supplied an alternative basis for jurisdiction.
The court grounded its analysis in two prior decisions: its own ruling in General Technology Applications, Inc. v. Exro Ltda, 388 F.3d 114 (4th Cir. 2004), which held that neither the domestic nor foreign aspect of a dual-citizen entity’s citizenship may be disregarded, and the Supreme Court’s decision in Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (2004), which applied that same principle to a partnership with mixed U.S. and Mexican citizen partners. The court distinguished the Seventh Circuit’s Tango Music decision as addressing a different question (same-foreign-country parties on both sides) and noted it would be inconsistent with Grupo Dataflux in any event.
The court also rejected FS Medical’s two alternative requests for relief. First, it declined to dismiss Tanner Pharma UK to cure diversity, because the jurisdictional defect arose from FS Medical’s own dual citizenship, not from the presence of a foreign defendant. Second, it held that without subject matter jurisdiction neither it nor the district court had power to invoke North Carolina’s Rule 41(b) savings statute, because that statute affects a party’s substantive right to refile — not a collateral matter over which a court retains inherent authority after a jurisdictional dismissal.
Key Takeaways
- An LLC’s citizenship for diversity purposes is the aggregate citizenship of all its members; a court must test each member’s citizenship and cannot ignore foreign members even when domestic members would otherwise satisfy the “citizens of different States” requirement of § 1332(a)(3).
- A dual-citizen LLC plaintiff (domestic and foreign members) cannot manufacture diversity under § 1332(a)(3) by pointing only to its domestic memberships — the foreign membership destroys the predicate requirement of U.S. citizens on both sides of the caption.
- Diversity is measured at the time of filing; post-filing transfers of LLC interests to cure a jurisdictional defect are ineffective.
- A federal court that lacks subject matter jurisdiction cannot invoke a state savings statute on a party’s behalf, because such relief goes to the party’s right to sue rather than the court’s own collateral interests or procedures.
Why It Matters
This published opinion provides the Fourth Circuit’s clearest statement to date on how § 1332(a)(3) applies when an LLC plaintiff holds both domestic and foreign citizenship through its members — a situation that has produced inconsistent results across circuits. Attorneys structuring LLCs with foreign investors or members must carefully audit every member’s citizenship before filing in federal court, because a single foreign member can eliminate diversity jurisdiction entirely, regardless of how many domestic members the entity has.
The decision also reinforces the limits of judicial power following a jurisdictional dismissal: courts cannot reach out to grant equitable relief under state savings statutes when they lack subject matter jurisdiction, even where the plaintiff faces genuine statute-of-limitations consequences. Counsel who discover a diversity defect late in litigation should expect little flexibility from the courts in softening the blow.