NeuroColor, LLC v. Tierney

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
NEUROCOLOR, LLC,
Plaintiff and Counter
Defendant,
v.
JOHN TIERNEY, as Executor of the Estate
of Helen Fisher,
Defendant, Counter
Plaintiff, and Third‐
Party Plaintiff,
v.
DAVID LABNO and LIISA LABNO,
Third‐Party
Defendants.
Case No. 25‐CV‐2089 (PJS/JFD)
ORDER
Brandon Underwood, FREDRIKSON & BYRON, P.A., for plaintiff,
counter defendant, and third‐party defendants.
Erick G. Kaardal, Gregory M. Erickson, and Elizabeth A. Nielsen,
MOHRMAN, KAARDAL & ERICKSON, P.A., for defendant, counter
plaintiff, and third‐party plaintiff.
This dispute arises from the death of Dr. Helen Fisher, one of the three members
of plaintiff NeuroColor, LLC (“NeuroColor”). Upon Fisher’s death, her interests in
NeuroColor passed to her estate. NeuroColor thereafter brought this declaratory‐
judgment action in state court against defendant John Tierney, as Executor of the Estate
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of Helen Fisher (the “Estate”), seeking to enforce a contractual buyout provision
governing the transferred units.
The Estate removed the lawsuit to this Court, invoking federal diversity
jurisdiction. ECF No. 1. The Estate also asserted counterclaims against NeuroColor and
third‐party claims against NeuroColor’s surviving members, David Labno and Liisa
Labno. ECF No. 10. This matter is now before the Court on NeuroColor’s motion to
remand and the third‐party defendants’ motion to dismiss the third‐party complaint.
ECF No. 12. For the reasons that follow, NeuroColor’s motion is granted, this action is
remanded to state court, and the third‐party defendants’ motion is denied as moot.
I. 	BACKGROUND
The relevant jurisdictional facts are undisputed. NeuroColor was formed as a
Delaware limited‐liability company (“LLC”) in 2013. ECF No. 1‐2 at 1 (“LLC
Agreement”).1 NeuroColor had three members: Fisher owned 39.8% of NeuroColor’s
member units, David Labno owned 40.2%, and Liisa Labno owned 20.0%. Id. at 44
(Schedule of Unitholders); Compl. ¶ 11, ECF No. 1‐1. The LLC Agreement defines a
“Unitholder” as “any owner of one or more Common Units as reflected on the
Company’s books and records” and defines a “Common Unit” or “Unit” as “a fractional
1Citations to the “LLC Agreement” refer to the ECF‐generated page numbers that
appear on the copy of the NeuroColor Limited Liability Company Agreement docketed
as ECF No. 1‐2.
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part of the Membership Interests of the Unitholder.” LLC Agreement at 39, 34.
A “Membership Interest,” in turn, means any “interest in the Company owned by a
Unitholder.” Id. at 36.
When Fisher died on August 17, 2024, her interests in NeuroColor automatically
passed to the Estate by operation of Delaware law. Compl. ¶ 12. The parties agree that
this constituted an “Involuntary Transfer” of Fisher’s interests under the LLC
Agreement. Id. ¶ 13; LLC Agreement at 22. Upon an Involuntary Transfer, the LLC
Agreement grants NeuroColor the right to purchase the affected units at their “Fair
Market Value.” LLC Agreement at 22; see also id. at 35–36 (defining “Involuntary
Transfer” and “Fair Market Value”). When NeuroColor sought to exercise its buyout
rights under the Involuntary Transfer provision, however, the Estate disputed
NeuroColor’s valuation of the units. See, e.g., Compl. ¶¶ 15–20; ECF No. 1 ¶¶ 14–23,
44–51. NeuroColor filed suit in Hennepin County District Court on May 2, 2025,
seeking to compel the sale of the transferred units for $50,000. See generally Compl.; see
also ECF No. 13 at 2.
The Estate timely removed the action, claiming that “[t]he Plaintiff and
Defendant have diverse citizenship being citizens of different states.” ECF No. 1 ¶ 28.
The only support that the notice of removal offers for its claim that this Court has
diversity jurisdiction is the following:
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2. 	NeuroColor is a Delaware limited liability company,
filed in Minnesota as a foreign corporation,
incorporated in Delaware, with its principal place of
business in Apple Valley, Minnesota. . . .
28. 	Venue is proper in the United States District
Court for the District of Minnesota under
28 U.S.C. § 1441(b) based upon diversity of
citizenship per 28 U.S.C. §1332(a). The Plaintiff
and Defendant have diverse citizenship being
citizens of different states.
29. 	The Plaintiff NeuroColor is incorporated in the
State of Delaware.
30. 	The Defendant John Tierney, as the Executor of
the Estate of Helen Fisher, resides in the State
of New York. The decedent was a resident of
New York. The Estate of Helen Fisher is under
New York court jurisdiction[.]
31. 	Jurisdiction is proper[] [u]nder § 1332(a) . . . .
32. 	There should be no dispute the NeuroColor
action involves citizens of different states.
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Id. ¶¶ 2, 28–32.2 Elsewhere in the notice of removal, the Estate identified David and
Liisa Labno as members of NeuroColor, although it did not identify their citizenship.
Id. ¶¶ 5, 47.
For purposes of the remand motion, the parties seem to agree that the Estate is a
citizen of New York and that NeuroColor’s surviving members—David Labno and
Liisa Labno—are citizens of Minnesota. See ECF No. 1 ¶¶ 28–32; ECF No. 13 at 15;
Labno Decl. ¶ 3, ECF No. 15; ECF No. 19 at 22. The parties further agree that although
the Estate was never formally admitted as a member or “Unitholder” of NeuroColor, it
nevertheless holds a “membership interest” in the LLC. See ECF No. 1 ¶¶ 50–51; ECF
No. 13 at 9; ECF No. 19 at 11.
2NeuroColor is an LLC, and thus the states in which it is incorporated and has its
principal place of business are irrelevant to ascertaining its citizenship for purposes of
28 U.S.C. § 1332(a). What is relevant is the citizenship of its members, including David
and Liisa Labno, which the notice of removal does not identify.
Long ago, this Court lamented that, “[i]n recent years, the Eighth Circuit and the
judges of this Court have had to instruct litigants on numerous occasions that, for
purposes of the diversity‐jurisdiction statute, an LLC is a citizen of every state of which
one of its members is a citizen.” Key Enters., LLC v. Morgan, No. 12‐CV‐2628 (PJS/JSM),
2013 WL 353911, at *1 (D. Minn. Jan. 29, 2013) (footnote omitted). It has been 13 years
since the Court published those words, and yet, in the notice of removal, the Estate’s
attorneys display the mistaken belief that an LLC takes the citizenship of the states in
which it is incorporated and has its principal place of business.
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NeuroColor now moves to remand, arguing that complete diversity is lacking
because the Estate’s New York citizenship must be imputed to the LLC.3
II. 	ANALYSIS
A. Standard of Review
As a general matter, a defendant may remove a civil action filed in state court to
federal court if the federal court would have original jurisdiction over the case.
28 U.S.C. § 1441(a). Removal on the basis of diversity jurisdiction is proper only where
there is complete diversity among the parties and the amount in controversy exceeds
$75,000, exclusive of interest and costs. 28 U.S.C. §§ 1332(a), 1441. “Complete diversity
of citizenship exists where no defendant holds citizenship in the same state where any
plaintiff holds citizenship.” OnePoint Sols., LLC v. Borchert, 486 F.3d 342, 346 (8th Cir.
2007) (citation omitted). For purposes of the diversity‐jurisdiction statute, “an LLC’s
citizenship is that of its members.” GMAC Com. Credit LLC v. Dillard Dep’t Stores, Inc.,
357 F.3d 827, 829 (8th Cir. 2004).
The Estate, as the removing party, bears the burden of establishing diversity
jurisdiction by a preponderance of the evidence. Altimore v. Mount Mercy Coll., 420 F.3d
763, 768 (8th Cir. 2005). “All doubts about federal jurisdiction should be resolved in
3NeuroColor also argues that the amount in controversy does not exceed $75,000.
ECF No. 13 at 2. Because the Court agrees that complete diversity is lacking, the Court
does not reach this argument.
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favor of remand to state court.” In re Prempro Prods. Liab. Litig., 591 F.3d 613, 620 (8th
Cir. 2010) (citation omitted).
B. Motion to Remand
To the Estate’s credit, this case presents a difficult jurisdictional question that
neither the Supreme Court nor the Eighth Circuit has squarely addressed: “whether the
citizenship of a non‐member interest owner in an LLC, such as the Estate here, should
be imputed to the LLC.” ECF No. 13 at 10. Not to the Estate’s credit, however, it has
made little effort to engage with this question in either its woefully inadequate notice of
removal or its not‐much‐better brief. The Estate essentially leaves it to the Court to do
its legal work for it.
The Supreme Court has drawn a firm and longstanding distinction between
corporations and unincorporated entities for diversity‐jurisdiction purposes. See Carden
v. Arkoma Assocs., 494 U.S. 185, 197 (1990); Americold Realty Tr. v. Conagra Foods, Inc., 577
U.S. 378, 384 (2016). In Carden, the Court held that a limited partnership assumes the
citizenship of all of its partners—both general and limited. 494 U.S. at 192 (“We have
never held that an artificial entity, suing or being sued in its own name, can invoke the
diversity jurisdiction of the federal courts based on the citizenship of some but not all of
its members.”) (emphasis added). In so holding, the Court expressly rejected
arguments that citizenship should be based on the level of control a partner exercises
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over his respective entity—noting that “such considerations have played no part in [the
Court’s] decisions.” Id.
The “doctrinal wall” separating corporations from other artificial entities that are
not corporations was reaffirmed and clarified in Americold, 577 U.S. at 384. There, the
Court was asked to define the “members” of a “real estate investment trust” organized
under Maryland law. Id. at 382. Rather than treating the trust like a corporation, the
Court looked to Maryland law to identify those who stand “in the same position” as
members of a comparable unincorporated entity. Id. The Court held that “Americold’s
members included its shareholders” because the shareholders had “‘ownership
interests’ and votes in the trust by virtue of their ‘shares of beneficial interest.’” Id.
(quoting Md. Code Ann. Corps. & Ass’ns §§ 8‐704(b)(5), 8‐101)(d)) (noting that
Americold’s shareholders “appear[ed] to be in the same position as the shareholders of
a joint‐stock company or the partners of a limited partnership—both of whom we
viewed as members of their relevant entities”).
Lower courts have not been consistent in applying the directives of Carden and
Americold in this context. Some lower courts undertake granular examinations of state
laws and operating agreements to determine whether a particular interest holder was,
in fact, formally admitted as a member of the entity. See, e.g., United Nat’l Ins. Co. v.
Waterfront N.Y. Realty Corp., 907 F. Supp. 663, 669–71 (S.D.N.Y. 1995) (concluding that
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the citizenship of a decedent partner’s estate “need not be considered for diversity
purposes” because the estate had not met the requirements of the partnership
agreement and state partnership law to become a substituted limited partner); Carbine v.
Xalapa Farm Ltd. P’ship, 980 F. Supp. 860, 862–64 (E.D. La. 1997) (finding complete
diversity lacking where the “requirements of the Partnership Agreement ha[d] been
met,” so the plaintiff became “a limited partner of the Partnership”); Metalmark Nw.,
LLC v. Stewart, No. 04‐0682‐KI, 2008 WL 803011, at *2–3 (D. Or. Mar. 20, 2008) (finding
complete diversity where an assignee had not met the formal requirements of the LLC
operating agreement for becoming a member); Barber Bro. Contracting Co., LLC v.
Hanover Ins. Co., No. 13‐0105‐SDD‐RLB, 2013 WL 6230335, at *2–5 (M.D. La. Dec. 2,
2013) (finding complete diversity where an assignee had not “satisfied the prerequisites
for membership” under the LLC’s operating agreement and applicable state law).
This Court will not follow that approach, as it invites precisely the type of
parsing of the “various classes of members with varying degrees of interest and
control” that Carden eschewed as “particularly unwelcome” in identifying the
citizenship of unincorporated entities for purposes of § 1332(a). 494 U.S. at 197. This
Court understands Carden and Americold to hold that, for the purpose of diversity
jurisdiction, an unincorporated entity is a citizen of all of those who have some type of
ownership or membership interest in the entity. Carden and Americold firmly rejected
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the notion that a court should make distinctions among those who own or belong to an
unincorporated entity:
The 50 States have created, and will continue to create, a
wide assortment of artificial entities possessing different
powers and characteristics, and composed of various classes
of members with varying degrees of interest and control.
Which of them is entitled to be considered a “citizen” for
diversity purposes, and which of their members’ citizenship
is to be consulted, are questions more readily resolved by
legislative prescription than by legal reasoning, and
questions whose complexity is particularly unwelcome at
the threshold stage of determining whether a court has
jurisdiction. We have long since decided that, having
established special treatment for corporations, we will leave
the rest to Congress; we adhere to that decision.
Id.
Here, the Estate asks this Court to do what Carden and Americold told it not to do:
make threshold distinctions among those who have legal interests in an unincorporated
entity. Specifically, the Estate asks the Court disregard its citizenship—even though it is
an owner of NeuroColor—because it is not an owner who is a formal member. The
Court declines to do so. Under the categorical rule stated in Carden and affirmed in
Americold, the citizenship of all members of an unincorporated entity must be
considered for diversity purposes. Id.; Americold, 577 U.S. at 384. Although the Estate is
not a “Unitholder,” it is a holder of units—a type of membership interest—and its
ownership of those units gives it rights with respect to NeuroColor. The Court
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concludes that, under Carden and Americold, the Estate’s New York citizenship must be
imputed to NeuroColor. 4
Because NeuroColor is a citizen of both New York and Minnesota, and because
the Estate is a citizen of New York, New York citizens appear on both sides of the “v” in
this case. Without complete diversity, the Court lacks subject‐matter jurisdiction, and
the case must be remanded to state court.
ORDER
Based on the foregoing, and on all of the files, records, and proceedings herein,
IT IS HEREBY ORDERED THAT:
4The Court also notes that courts frequently “equate[] an association’s members
with its owners.” Americold, 577 U.S. at 381; see also Johnson v. Columbia Props. Anchorage,
LP, 437 F.3d 894, 899 (9th Cir. 2006) (“[A]n LLC is a citizen of every state of which its
owners/members are citizens.”); Ray Brown & Assocs., Inc. v. Hot Spring Senior Props.,
LLC, No. 8:07CV159, 2008 WL 2271488, at *3 (D. Neb. May 29, 2008) (collecting cases
and noting that “the terms ‘membership’ and ‘ownership’ appear to be used by courts
interchangeably when referring to the citizenship of an L.L.C. for diversity jurisdiction
purposes”); Storm River, LLC v. Jordan Foster Constr., LLC, No. 24‐CV‐0327‐WJ‐JFR, 2024
WL 3202355, at *3 (D.N.M. June 27, 2024) (concluding that “diversity does not exist if
any member or owner of an LLC shares citizenship with the opposing party”) (citations
omitted); Fed. R. Civ. P. 7.1(a)(2), advisory comm. notes on 2022 amends. (noting that an
LLC “takes on the citizenship of each of its owners”); but see Post v. Biomet, Inc., No.
3:20‐CV‐0527‐J‐34JRK, 2020 WL 2766210, at *1 (M.D. Fla. May 28, 2020) (acknowledging
“that the terms ‘owner’ and ‘member’ have sometimes been used synonymously with
respect to limited liability companies,” but noting that “these terms are not always
interchangeable”); SXSW, L.L.C. v. Fed. Ins. Co., 83 F.4th 405, 408 (5th Cir. 2023) (noting a
“potentially important difference between LLC membership and LLC ownership”
because “[s]everal states,” including Delaware, “permit LLC membership without
ownership”).
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1. 	Plaintiff’s motion to remand [ECF No. 12] is GRANTED.
2. 	This action is REMANDED to the District Court for the Fourth Judicial
District, County of Hennepin, State of Minnesota.
3. 	Third‐party defendants’ motion to dismiss the third‐party complaint [ECF
No. 12] is DENIED AS MOOT.
Dated: March 25, 2026 	/s/ Patrick J. Schiltz
Patrick J. Schiltz, Chief Judge
United States District Court
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