'Nowhere Man': Treat LLCs Like Coporations

• Author: Lukman Azeez, Krystal Swendsboe, and Nicole Hager Fingeroot
• Pages: 7-8

Published in Litigation, Volume 50, Number 2, Winter 2024. © 2024 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not

be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. 7

brie f a nd found i t t o be surpri singly

credible.

I’m not the first to point out that the

lesson of the Ma ta case is that the util-

ity of these tools for the legal profession

has been overestimated and that ChatGPT

and similar products are not going to re-

place you at your law firm anytime soon.

But let me offer a sightly nuanced answer.

The problems of accuracy with ChatGPT

and other large language models are well-

documented. I would never rely on one

of these products in my practice without

checking every word for accuracy. Even

Allen & Overy, which has been piloting

a specialized AI-driven legal tool called

Harvey since November 2022, concedes

that Harvey’s answers need to be reviewed

by a lawyer. But most of the proponents

of the use of AI in law talk about how it

will bring additional efficiencies to a law-

yer’s practice, something likely to lead to a

small reduction of head count in the short

term. And there is th e open questi on of

how the legal industry will be affected if

and (more likely) when an AI vendor man-

ages to create a highly accurate genera-

tive AI tool aimed at lawyering. Certainly,

Allen & O very is now pursu ing that with

Harvey.

On the other hand, many litigators are

likely to experience a boon of work related

to AI—ranging from copyright infringe-

ment litigation to disparate impact law-

suits under Title VII. For example, in my

field, we are watching litigation against

Workday, Inc., a company that offers hu-

man resource information systems. The

suit, which was filed in the Northern

District of California earlier this year, al-

leges that the company’s AI hiring soft-

ware is discriminatory. Moreover, AI-

focused statutes and regulations at the

federal, state, and local levels are com-

ing, bringing more work for litigators, at

least for now. Though legislators have

been proposi ng AI bills for several years

to no avail, Congress finally seems to be

paying close attention to the issue collec-

tively, as is evident in the recent Senate

hearing featuring Sam Altman, the chief

executive officer of OpenAI, and Christina

Montgomery, the chief privacy and trust

officer of IBM. In addition, several states

are considering legislation to regulate the

use of AI. Beginning July 5, New York City

is enforcing its Local Law 144, which will

regulate the use of some AI technology in

hiring and promotions.

I think the effect of AI on the sheer

number of lawyers gainfully employed,

at least in the near future, will be a bit

of a wash. I don’t worry about remaining

relevant today or tomorrow or even next

year. But I will be paying close attention

to this technology over the next decade to

determine how I can continue to add val-

ue for my clients and remain vital. I would

advise others to do the same. q

CORPORATE LAW

“Nowhere Man”:

Tr ea t L LC s L i ke

Corporations to

Ensure Diversity

Jurisdiction

Remains Viable

LUKMAN AZEEZ, KRYSTAL SWENDSBOE,

AND NICOLE HAGER FINGEROOT

Lukman Azeez is a partner and Krystal Swends-

boe is an associate at Wiley Rein in Washington,

D.C. Nicole Hager Fingeroot is a judicial law clerk

with the U.S. Court Of Appeals for the Fifth

Circuit.

In speaking for the U.S. Supreme Court,

Justice Frankfurter explained that

“[d]iversity jurisdiction is founded on

assurance to nonresident litigants of

courts free from susceptibility to potential

local bias.” Guar. Tr. Co. v. York, 326 U.S. 99,

111 (1945). As limited liability corporations

(LLCs) have surpassed corporations as

the predominant business entity in the

United States, federal courts have de-

clined to treat them the same for diversity

purposes, depriving litigants of access to

federal courts and burdening them with

onerous requirements before they can file

a complaint or seek removal. To ensure

that diversity jurisdiction remains a vi-

able way to access federal courts, LLCs

and corporations should be treated the

same for diversity purposes.

Under 28 U.S.C. § 1322(c), a corpora-

tion is “deemed” to be a citizen of the state

in which it is incorporated and the state

in which it has its principal place of busi-

ness. Unlike a corporation’s citizenship,

however, the citizenship of an LLC is de-

termined by the citizenship of each of its

members. See, e.g., Wise v. Wachovia Sec.,

LLC, 450 F.3d 265, 267 (7th Cir. 2006);

Harvey v. Grey Wolf Drilling Co., 542 F. 3d

1077, 1080 (5th Cir. 2008).

Accordingly, pleading requirements

differ for suits that involve corporations

and those that involve LLCs. While com-

plaints invoking diversity jurisdiction

where the defendant is a corporation must

allege only the company’s state of incor-

poration and principal place of business,

plaintiffs who wish to sue LLCs must al-

lege the citizenship of the natural persons

who are members of the LLC.

Determining the ultimate membership

of an LLC, and the citizenship of those

members, is often burdensome if not

impossible. Most states do not require

that LLCs report their members, nor is

an LLC’s membership otherwise made

public. This information is frequent-

ly only obtainable from the LLC itself,

which has little incentive to voluntarily

provide it. For that reason, even if there

is complete diversity among an LLC’s

member ship and prospecti ve plainti ffs,

they may be foreclosed from even com-

mencing an action in federal court. S ee,

e.g., Sienna Ventures, LLC v. Halley Equip.

Leasing, LLC, No. 18-c v-201 (E.D.N.Y.

Apr. 2, 2018) (dismissing complaint for