Written by attorneys · grounded in primary & secondary sources — see below
2 senses
1
in civil procedure
A lawsuit brought directly against a liability insurer without joining the insured as a defendant. Under federal law the insurer receives expanded citizenship for diversity purposes that includes every state of the insured's citizenship in addition to the insurer's own states of incorporation and principal place of business.
Sense 1
1
in civil procedure
A lawsuit brought directly against a liability insurer without joining the insured as a defendant. Under federal law the insurer receives expanded citizenship for diversity purposes that includes every state of the insured's citizenship in addition to the insurer's own states of incorporation and principal place of business.
Sources & Authorities· 1 primary source
Select any source to read its text and confirm it supports the definition.
Statutes
Sense 2
2
in business associations
A suit by a member of a limited liability company or a partner in a limited partnership against another member, manager, or the entity itself to enforce the plaintiff's personal rights and interests. The plaintiff must plead and prove an injury that is not solely the result of harm to the entity.
Sources & Authorities· 3 primary sources
Select any source to read its text and confirm it supports the definition.
A suit by a member of a limited liability company or a partner in a limited partnership against another member, manager, or the entity itself to enforce the plaintiff's personal rights and interests. The plaintiff must plead and prove an injury that is not solely the result of harm to the entity.
Each sense below has its own examples, sources, and questions.
Examples3
Insurer Citizenship in Direct Action
Denise Donovan, a citizen of Florida, sues Desert Oil's liability insurer in federal court after a workplace accident. She names only the insurer and seeks damages exceeding $75,000. Desert Oil is incorporated in New York with its principal place of business in Illinois. The insurer is incorporated in Delaware with its principal place of business in Texas. The court treats the insurer as a citizen of New York, Illinois, Delaware, and Texas for diversity analysis.
Seider-Type Attachment Distinguished
Dwight Dorsey, injured in an out-of-state accident, attempts to obtain jurisdiction over a nonresident driver's insurer by attaching the policy proceeds in the forum state. The court holds that the attachment does not convert the proceeding into a direct action against the insurer for purposes of the special citizenship rule.
Rush v. Savchuk444 U.S. 320, 332 (1980)
Inverse Condemnation Not a Direct Action
Dustin Donovan, owner of land taken by the city without formal condemnation proceedings, sues the city for just compensation. The court treats the suit as an inverse condemnation claim rather than a direct action on the underlying obligation, preserving the owner's right to a jury trial on the compensation issue.
City of Monterrey v. Del Monte Dunes at Monterrey, Ltd.526 U.S. 687, 734 (1980)
Frequently Asked2
How does the direct-action rule affect diversity jurisdiction when a plaintiff sues only an insurer?+
In any 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 can destroy complete diversity even when the insurer and plaintiff would otherwise be diverse.
Supporting sources
When is a beneficiary's suit against a promisor considered a direct action?+
A creditor beneficiary may bring a direct action against the promisor to enforce a promise that satisfies an obligation of the promisee to the beneficiary. The action is appropriate even when the promise does not expressly grant the beneficiary enforcement rights.
Supporting sources
Examples3
Member Sues Manager for Personal Harm
Deborah Dunn, a non-managing member of Duffy Construction LLC, learns that the managing member diverted company funds to a personal venture. Dunn sues the manager individually, alleging the diversion violated her rights under the operating agreement and caused her a distinct loss in distributions. The complaint pleads an injury separate from any harm to the LLC as a whole.
Partner Brings Direct Claim in Limited Partnership
Darius Dixon, a limited partner in Dixon Foods LP, sues the general partner for refusing to honor a contractual right to inspect records that was granted only to him. Dixon alleges the refusal injured his personal inspection right rather than the partnership's collective interests. He proceeds without an accounting and without joining other partners.
Member Must Show Distinct Injury
David Dawson, a member of Diamond Manufacturing LLC, files suit against another member alleging mismanagement that reduced the company's value. The complaint fails to allege any harm to Dawson apart from the company's loss. The court dismisses the action because Dawson has not pleaded an actual or threatened injury independent of harm to the LLC.
Frequently Asked2
What must a member plead to maintain a direct action against another member or the LLC?+
A member 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 liability company. The claim must enforce rights personal to the member rather than rights belonging to the entity.
Supporting sources
Does a direct action by a partner require an accounting?+
A partner may maintain a direct action against another partner or the limited partnership with or without an accounting as to the partnership's activities and affairs. The right to an accounting on dissolution does not revive a claim otherwise barred by law.
Supporting sources
444 U.S. 286 (1980)Civil Procedure
…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…