Morson v. Kreindler & Kreindler, LLP, 2009 WL 1375945 (D. Mass. 2009)

Brief Summary
For purposes of diversity jurisdiction, a Limited Liability Partnership was not a citizen of Massachusetts despite having both an office and a “contract partner” in the state.

Complete Summary
Plaintiff Gregory Morson sued his former law firm, Kreindler & Kreindler, LLP (“Kreindler”) for malpractice in state court. Kreindler then removed the case to the United States District Court for the district of Massachusetts. Morson moved to remand the case for lack of diversity. Morson was a resident of Massachusetts. Thus, the issue was whether Kreindler was also a resident of Massachusetts.

The court held that Kreindler, despite having an office in Boston, was not a citizen of Massachusetts because none of the firm’s members/partners were citizens of Massachusetts. Morson argued that Kreindler’s resident agent in Boston, who was a contract partner, destroyed diversity. The court, however, held that the contract partner was effectively just an employee because he did not control the firm or share in the firm’s profits or losses, and he received a W-2 instead of a K-1 tax form. The court implied that sharing of losses or tax forms could each be individually determinative of partnership status. The court applied New York partnership law because Kreindler was registered in New York.

The court also declined to accept Morson’s argument that the contract partner was a partner by estoppel. The court did not decide whether partnership by estoppel could destroy diversity. Rather, the court noted that Morson could not possibly establish the detrimental reliance element of partnership by estoppel because Kreindler’s Boston office did not exist when the alleged malpractice took place.

Significance of Opinion
The court’s conclusion is straightforward, but it highlights the fact that diversity jurisdiction may turn on state partnership law. The court also leaves open a substantial question as to the potential interaction between partnership by estoppel and diversity jurisdiction.

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