Litigation of counsel Martin Flumenbaum and partner Brad Karp’s latest Second Circuit Review column, “Diversity Jurisdiction and Federally Chartered Corporations: ‘Schneiderman v. American Chemical Society,’” appeared in the April 28 issue of the New York Law Journal. The authors discuss a Second Circuit’s decision holding that the diversity jurisdiction statute’s principal-place-of-business provision does not independently confer state citizenship on federally chartered corporations.
The underlying action was brought by Arnold Schneiderman, a citizen of New York, against the American Chemical Society (ACS), a federally chartered corporation with its principal place of business in Washington, DC. Schneiderman sued ACS in federal court in New York for a single count of disability discrimination under the New York State Human Rights Law. Since the operative complaint alleged only a state law violation, federal jurisdiction was premised on the diversity jurisdiction statute, which gives federal courts jurisdiction to hear cases that do not involve a federal question if the parties in the lawsuit are citizens of different states. According to the diversity jurisdiction statute, a corporation is deemed to be a citizen of “every state and foreign state by which it has been incorporated and of the state or foreign state where it has its principal place of business.” The district court dismissed, holding that Schneiderman had failed to demonstrate diversity of citizenship. A divided Second Circuit panel agreed, holding that the two requirements of a state place-of-incorporation and state place-of-business must both be satisfied. As a result of this decision, in the Second Circuit, federally chartered entities are not citizens of any state for diversity purposes unless Congress has specifically said otherwise or the localization doctrine applies, under which federally chartered corporations whose activities are confined to a single state may be deemed citizens of that state.
Litigation associate Michael Pisem assisted in the preparation of this column.
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