Overview
In an opinion today, Judge Oetken, addressing a question that is unresolved in the Second Court, agreed with a prior opinion of Judge Nathan and ruled that the citizenship of a trust for diversity purposes depends in part on whether the case is brought in the name of the trust itself or in the name of the trustee. Specifically, after surveying the conflicting authorities, Judge Oetken determined that the “rule is, accordingly, as follows”:
[W]here the action is brought in the name of the trust, the citizenship of the beneficiaries—at least in part—controls. Courts need inquire no further. Where the action is brought in the name of the trustee, courts must inquire into whether the trustee is more than just a “sham” who has no real power to control the litigation or the property at issue. Navarro, 446 U.S. at 465. If the trustee possesses “certain customary powers to hold, manage, and dispose of assets for the benefit of others,” id. at 464, she is not a sham trustee, and her citizenship controls. If she does not possess those customary powers, courts will look to the real party who does. This rule might seem overly technical. After all, it places much weight on the name of the parties in the caption, a fact that rarely has legal significance. It exalts form over function. But exalting form over function accords with the Supreme Court’s interpretation of § 1332. And the rule is easy to apply—and, therefore, leads to predictability and uniformity of results. Even if there are thousands of beneficiaries to a given trust, courts need only find one from the same state as the opposing party. Because jurisdictional decisions ought to be made at the beginning of a court’s inquiry, the ease with which those decisions may be made is of particular importance.
