Also known as: direct actions
Written by attorneys · grounded in primary & secondary sources — see below
2 senses
A lawsuit brought by a plaintiff directly against a liability insurer without joining the insured as a party defendant. The insurer receives the citizenship of the insured for diversity jurisdiction purposes under federal statute.
A lawsuit brought by a plaintiff directly against a liability insurer without joining the insured as a party defendant. The insurer receives the citizenship of the insured for diversity jurisdiction purposes under federal statute.
Select any source to read its text and confirm it supports the definition.
A lawsuit by a member of a limited liability company or a partner in a limited partnership against another member, manager, partner, or the entity itself to enforce the plaintiff's personal rights and interests. The plaintiff must plead and prove an actual or threatened injury separate from any harm to the entity.
Select any source to read its text and confirm it supports the definition.
A lawsuit by a member of a limited liability company or a partner in a limited partnership against another member, manager, partner, or the entity itself to enforce the plaintiff's personal rights and interests. The plaintiff must plead and prove an actual or threatened injury separate from any harm to the entity.
Each sense below has its own examples, sources, and questions.
Diana Delgado, a permanent resident of State A, sued Insureco alone after suffering injuries on Grove Institute's campus. Insureco, incorporated in State D with its principal place of business in State E, moved to dismiss for lack of diversity. Because the action was direct against the insurer and Grove was not joined, Insureco was deemed a citizen of State A, destroying complete diversity.
A former White House aide sued the former President for damages arising from an alleged unconstitutional dismissal. The plaintiff brought the claim directly under the Constitution rather than through a statutory cause of action. The Court treated the suit as a direct action and applied absolute immunity analysis to the official acts at issue.
A developer sued a city after the city took oceanfront land by eminent domain and denied the developer a jury trial on the compensation amount. The developer argued the proceeding was a direct action requiring a jury. The Court examined whether the direct condemnation procedure carried a Seventh Amendment jury right.
Under 28 U.S.C. § 1332(c)(1), when a plaintiff sues a liability insurer directly without joining the insured, 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 imputation rule prevents the federal courts from hearing most direct actions against insurers.
Supporting sources
Demetrius Douglas, a non-managing member of Diamond Manufacturing LLC, sued the managing member after the manager diverted commissions to his own travel agency and revoked only Douglas's promised employee discounts. Douglas alleged the selective revocation caused him distinct injury. The court permitted the direct action because the harm was not solely derivative of any loss to the LLC.
Denise Donovan, a limited partner in Drake Logistics LP, sued another partner for withholding distributions promised under the partnership agreement. Donovan showed the withholding injured her individually. The court allowed the direct action without requiring an accounting of the partnership's overall affairs.
David Dawson, a member of Delta Dynamics LLC, sued the manager for self-dealing that reduced the company's net assets. Dawson alleged only that his investment value dropped proportionally. The court dismissed the direct action because Dawson failed to plead an actual or threatened injury separate from harm to the LLC itself.
A member must plead and prove an actual or threatened injury that is not solely the result of an injury to the limited liability company. A claim that merely alleges harm to the entity's value or assets is treated as derivative rather than direct.
Supporting sources
A direct action enforces the member's personal rights and interests arising independently of the entity. A derivative action enforces a right belonging to the LLC itself. The distinction turns on whether the alleged injury is particularized to the plaintiff or flows only from harm to the company.
Supporting sources
No. The statute expressly permits a partner to maintain a direct action with or without an accounting as to the partnership's activities and affairs.
Supporting sources
…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…