On January 27, 2015, in Conagra Foods, Inc. v. Americold Logistics, LLC, the US Court of Appeals for the Tenth Circuit held that, for the purposes of determining diversity jurisdiction, the citizenship of a trust is determined by examining the citizenship of all its members, including trust beneficiaries (No. 13–3277, (10th Cir., Jan. 27, 2015)).

ConAgra Foods, Inc. and several other plaintiffs brought suit in Kansas state court against Americold Logistics, LLC and Americold Realty Trust (Americold). Americold removed the case to the US District Court for the District of Kansas, asserting that the parties were completely diverse. No party challenged the removal and the district court did not address the issue. The district court granted summary judgment to Americold on the merits and the plaintiffs appealed.

After both parties filed appellate briefs, the Tenth Circuit noted a potential jurisdictional defect in the notice of removal. The court ordered Americold to file a supplemental brief addressing in part whether Americold's notice of removal was sufficient to establish diversity jurisdiction, as the notice did not establish the citizenship of the beneficial shareholders or beneficiaries of the Americold Realty Trust.

In its brief, Americold asserted that the omission of the citizenship of the Americold Realty Trust beneficiaries from the notice of removal was not a jurisdictional defect because a trust’s citizenship is determined exclusively by the citizenship of its trustees, citing US Supreme Court precedent set forth in Navarro Savings Ass'n v. Lee (446 U.S. 458 (1980)).

However, the Tenth Circuit held that Americold had failed to demonstrate the existence of diversity jurisdiction because Americold had not proffered any evidence relating to the citizenship of the Americold Realty Trust beneficiaries. The court distinguished this case from Navarro, finding that Navarro stands for the limited proposition that if a trustee is a proper party to bring a suit on behalf of a trust, then it is the trustee’s citizenship, and not the trust's beneficiaries' citizenship, that is relevant. The Tenth Circuit then relied on the US Supreme Court's decision in Carden v. Arkoma Assocs., under which a trust’s citizenship is derived from the citizenship of all its members when the trust itself is a party to the litigation (494 U.S. 185, 196 (1990)). The Tenth Circuit also pointed to previous decisions from the Third and Eleventh Circuits, which held that:

Based on these cases, the court held that where, as here, the trust itself is a party to the litigation, the trust's citizenship is derived from all the trust's members, including the trust's beneficiaries. The court then concluded that because Americold failed to establish the citizenship of the Americold Realty Trust beneficiaries, Americold also failed to meet its burden of establishing diversity jurisdiction. As a result, the court remanded the case.

Practitioners handling litigation involving trusts should pay careful attention to the citizenship of the trust, its trustees, and its beneficiaries.