A direct lawsuit by a member or partner against another member, manager, partner, or the entity to enforce the plaintiff's own rights under the operating or partnership agreement or arising independently of the membership or partnership relationship. The plaintiff must plead and prove an actual or threatened injury that is not solely the result of an injury to the entity itself.
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How its tested
Common Examples
6
Insurer Citizenship in Direct Suit
Maria, a Texas citizen, sues Shield Insurance alone after slipping at a Texas store insured by Shield. Shield is incorporated in New York with its principal place of business in California, while the store is incorporated in Texas with its principal place of business in Illinois. Because Maria proceeds directly against the insurer without joining the insured, Shield is treated as a citizen of Texas and Illinois in addition to New York and California, destroying complete diversity.
Member Direct Claim in LLC
Uriah, a non-managing member of Bright Lodging LLC, sues Cole after Cole diverts hotel bookings to his own agency and revokes only Uriah's promised employee discounts through side agreements favoring other members. Uriah alleges a personal loss of benefits distinct from any reduction in LLC revenue, allowing him to proceed directly against Cole and the LLC to protect his individual interests under the operating agreement.
A limited partner sues another partner and the limited partnership after the managing partner diverts partnership opportunities that personally reduced the suing partner's distributions. The partner pleads an injury to individual rights arising independently of the partnership relationship and seeks an accounting along with direct relief.
Pleading Injury Requirement
A member of an LLC files a direct action alleging that a manager's self-dealing reduced company profits and thereby lowered the member's distributions. Because the complaint shows only harm flowing through the LLC and fails to allege any separate injury to the member, the court dismisses the direct action for lack of the required individualized injury.
Direct Constitutional Challenge
Voters sue state officials directly to enjoin enforcement of a state constitutional amendment that adds term limits for congressional candidates. The plaintiffs assert their own rights to vote for qualified candidates without waiting for the state legislature or another entity to act.
United States Term Limits v. Thornton514 U.S. 779, 838 (1995)
In November 1992 the voters of Arkansas approved Amendment 73 to their state constitution. The amendment's preamble declared that long-term incumbency had reduced voter participation and made elections less competitive and less representative.
Section 3 barred any person elected to three or more terms in the United States House of Representatives from Arkansas from appearing on the ballot for that office. It imposed a parallel bar on any person elected to two or more terms in the United States Senate from Arkansas.
The amendment was self-executing and applied to all persons seeking election after January 1, 1993. On November 13, 1992, respondent Bobbie Hill, on behalf of herself and similarly situated Arkansas citizens, taxpayers, and registered voters, together with the League of Women Voters of Arkansas, filed suit in the Circuit Court for Pulaski County seeking a declaratory judgment that section 3 was unconstitutional and void. The complaint named then-Governor Clinton, other state officers, the Republican Party of Arkansas, and the Democratic Party of Arkansas as defendants.
The State of Arkansas, through its Attorney General, intervened as a party defendant in support of the amendment. Several proponents of the amendment, including petitioner U. S. Term Limits, Inc., also intervened. On cross-motions for summary judgment the Circuit Court held that section 3 violated Article I of the Federal Constitution. In a 5-to-2 decision the Arkansas Supreme Court affirmed that holding. The State and the intervenors petitioned for writs of certiorari. The Supreme Court of the United States granted both petitions and consolidated the cases for argument.
A plaintiff brings a direct action against a store under federal civil rights statutes alleging that store employees conspired with police to deny service on the basis of race. The complaint asserts the plaintiff's personal injury without requiring any intermediate party to sue first.
Adickes v. S.H. Kress & Co.398 U.S. 144, 152 (1970)
Sandra Adickes, a white school teacher from New York, was working as a volunteer teacher at a Freedom School for Negro children in Hattiesburg, Mississippi, during the summer of 1964. On August 14, 1964, Adickes went with six of her Negro students to the Hattiesburg Public Library, where the librarian refused to allow the students to use the library and summoned the chief of police, who ordered the group to leave. The group then went to the S. H. Kress & Co. store in Hattiesburg to have lunch. Adickes filed suit against Kress in the United States District Court for the Southern District of New York seeking damages under 42 U.S.C. § 1983.
After the group sat down at the lunch counter, a policeman entered the store and observed them. A waitress took the orders of the Negro students but refused to serve Adickes on the ground that she was a white person in the company of Negroes. The group left the store without being served. As they reached the sidewalk, the same policeman arrested Adickes on a vagrancy charge.
The vagrancy charge against Adickes was subsequently changed, and she was tried and acquitted. Her complaint contained two counts under § 1983. One count alleged that Kress had refused her service pursuant to a custom of the community to segregate the races in public eating places that was enforced by the State. The other count alleged that the refusal of service and the arrest were the product of a conspiracy between Kress employees and the Hattiesburg police.
Kress moved for summary judgment on the conspiracy count and submitted depositions from the store manager, the waitress, and the arresting officers, along with affidavits from police officials, all denying any agreement or communication with the police about refusing service or making the arrest. Adickes opposed the motion by pointing to her deposition statement and an unsworn statement from a Kress employee indicating that a policeman had been in the store at the time of the refusal. The District Court granted summary judgment on the conspiracy count, holding that Adickes had failed to allege facts from which a conspiracy might be inferred. After a trial on the custom count, the District Court directed a verdict for Kress because Adickes had not proved other instances of whites being refused service while in the company of Negroes.
The Court of Appeals for the Second Circuit affirmed the District Court's rulings on both counts. The Supreme Court granted certiorari to review the case.
When may a member of an LLC bring a direct action instead of a derivative action?
A member may maintain a direct action only by pleading and proving an actual or threatened injury that is not solely the result of an injury to the LLC itself. The claim must enforce rights personal to the member under the operating agreement or arising independently of the membership relationship.
Supporting sources
How does the direct-action rule affect diversity jurisdiction when a plaintiff sues only an insurer?
In a direct action against a liability insurer where the insured is not joined as a defendant, the insurer is deemed a citizen of every state of which the insured is a citizen in addition to its own states of incorporation and principal place of business. This expanded citizenship often defeats complete diversity.
Supporting sources
What must a partner plead to maintain a direct action in a limited partnership?
The partner must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited partnership. The action may seek to enforce rights under the partnership agreement or arising independently of the partnership relationship.
Supporting sources
444 U.S. 286 (1980)
…beyond what he would face if the suit were in his home State. The real impact on the named defendant is the same as it is in a direct action against the insurer, which would be constitutionally permissible. Watson v. Employers Liability Assurance Corp. , 348 U. S. 66 (1954); Minichiello v. Rosenberg , 410 F. 2d 106, 109-110…