Carden v. Arkoma Associates

Background

A limited partnership organized in Arizona sued in a Louisiana federal court over a contract dispute. The defendants were Louisiana citizens and argued that one of the partnership’s limited partners was also from Louisiana. The district court rejected that challenge, the Fifth Circuit affirmed while treating only the general partners’ citizenship as controlling, and the case reached this Court.

Reasoning

The Court addressed whether a limited partnership can be treated like a corporation for diversity purposes or whether courts must look to the citizenship of its members. Relying on long-standing precedents, the majority held that unincorporated entities are treated like partnerships for diversity and that the citizenship of all members must be counted. The Court rejected treating only general partners’ citizenship as controlling. The majority also said Congress, not the courts, should change the rules governing new business forms.

Real world impact

Practically, the decision means limited partnerships cannot avoid a lack of “complete diversity” by pointing to only some members; federal courts must consider every partner’s state citizenship. The Court reversed the Fifth Circuit’s judgment and sent the case back for further proceedings. The Court did not decide a separate question about one intervenor’s diversity, leaving that issue to the lower court on remand.

Dissents or concurrances

A four-Justice dissent argued a narrower test should apply: only the parties who control the litigation or business should be counted. The dissent would have excluded limited partners from diversity calculations because they lack control over management or litigation.