The case of Americold Realty Trust v. ConAgra Foods arose, as Chief Justice John Roberts suggested, from a “standard run-of-the-mill commercial dispute about a commercial accident” – specifically, a 1991 fire in a food-storage warehouse that led to the destruction of millions of tons of food. The question before the Court, however, centered on a concept known as “diversity jurisdiction”: the requirement that, to bring certain kinds of cases in, or remove them to, federal court, the two opposing sides must be citizens of different states. That’s a simple question when you are dealing with individuals or even corporations, which are regarded as citizens of both the state in which they are incorporated and the state in which they have their principal place of business. But it gets murkier when you are dealing with other artificial entities, such as Americold, the real estate investment trust that owns the warehouse. The Supreme Court has said that, for purposes of unincorporated entities like Americold, citizenship is determined by the citizenship of their members. But who exactly are their members?
ConAgra and the other corporations whose property was destroyed in the fire argued that Americold’s members include all that owned the warehouse, should be regarded as a citizen of all of the states in which its shareholders lived. Americold countered that, as a trust, only the citizenship of its trustees should count for diversity jurisdiction. With over a hundred shareholders but only five trustees, Americold would be much more likely to guarantee that its case stayed in federal court if it could convince the Court to adopt its rule.
It could not.
In an opinion by Justice Sonia Sotomayor that only barely made it on to a sixth page, the Court sided with ConAgra and affirmed the Tenth Circuit’s ruling in its favor. The Court looked to the law of Maryland, where Americold was established, to shed some light on the question of who exactly are Americold’s “members.” And under Maryland law, the Court noted, “shareholders have ‘ownership interests’ and votes in the trust by virtue of their ‘shares of beneficial interest’” – just like shareholders in a joint-stock company and the partners of a limited partnership, both of whom the Court had previously deemed “members” of those entities.
The Court acknowledged that Americold’s “confusion regarding the citizenship of a trust is understandable and widely shared.” But it explained that the citizenship of the trustees had mattered in cases involving traditional trusts precisely because those trusts could not be sued; “legal proceedings involving a trust were brought by or against the trustees in their own name.” But a REIT like Americold, it reasoned, is not a traditional trust, but a “separate legal entity” that can sue or be sued under Maryland law. And that, the Court concluded, means that its “oft-repeated rule” that an unincorporated entity has the citizenship of its members applies here.
Today’s ruling means that REITs like Americold will have a much harder time getting (or keeping) their cases in federal court. At oral argument, the Justices were well aware of this possibility: the Chief Justice remarked, for example, that adopting ConAgra’s position “would limit the number of times that such disputes would be brought in Federal court.” But they were apparently unmoved, suggesting that it is for Congress, rather than the Court, to implement the rule that Americold seeks.