In Gore and Associates Management Company, Inc. v. SLSCO Ltd., — F.4th —, 2025 WL 2938795 (2025), Plaintiff Gore and Associates Management Company sued Defendant SLSCO Ltd. and its surety, Hartford Fire Insurance Company, as an assignee, for alleged financial losses Gore’s subcontractors (all LLCs) sustained after SLSCO and Hartford Fire allegedly failed to pay for work related to rebuilding projects in Puerto Rico and the Virgin Islands after Hurricane Maria in September 2017. At the outset of the litigation, Gore claimed that the federal courts had diversity jurisdiction over the action.
On appeal, the First Circuit sua sponte questioned whether this was so because the plaintiff had alleged in the operative complaint that it was an assignee of three subcontractors’ claims but failed to allege the citizenship information of the assignors and the record did not provide additional information. The parties were asked to submit supplemental briefs on whether the court had diversity jurisdiction. In addition, Gore was specifically ordered to provide information about the citizenships of the assignor subcontractors. Since the subcontractors were alleged to be LLCs, Gore was obligated to provide information about the citizenship of all the members for each assignee.
While the parties submitted briefs, Gore did not submit any evidence supporting its position that there was complete diversity. Accordingly, the First Circuit remanded the case to the district court for jurisdictional factfinding that directed the district court to determine: (1) whether the subcontractors were completely diverse from the defendants and, if not; (2) whether the assignments to Gore were a collusive attempt to manufacture diversity jurisdiction in violation of 28 U.S.C. § 1359, which provides that “[a] district court shall not have jurisdiction of a civil action in which any party, by assignment or otherwise, has been improperly or collusively made … to invoke the jurisdiction of such court.”
The Result
Upon remand, the parties agreed before the district court to exchange written discovery and reserved the right to take depositions and request an evidentiary hearing—no party sought an evidentiary hearing. Instead, the parties submitted simultaneous briefs to the district court. In a subsequent report issued in September 2025, the district court explained that Gore failed to present sufficient evidence to assess the citizenship of its subcontractor-assignors because it relied on unreliable, speculative, inconsistent documents that were inadmissible (due to lack of authentication and hearsay) under the Federal Rules of Evidence such that the Court could not make adequate factual findings regarding diversity of citizenship much less move to the second question assessing the motive behind the assignments. The First Circuit held that this was fatal to Gore’s suit because it bore the burden of demonstrating the validity of the assignments, as the party seeking to invoke diversity jurisdiction. While Gore sought another remand to conduct additional discovery and seek an evidentiary hearing, the First Circuit refused to do so because Gore had already been given seven months for that purpose. The case was dismissed.
Looking Ahead
It is important to remember that an assignee of an insurance claim steps into the assignor’s shoes. As such, if an insurer has a good faith basis to suspect that diversity jurisdiction exists only as a result of an assignment, then it should alert the federal court to the potential jurisdictional defect. This will force the assignee to provide the court with sufficient evidence that there is complete diversity and there was no collusion. If an assignee cannot, then that may end a suit close to its inception (or even after it has been fully litigated because there was no federal jurisdiction to begin with). It is also important to recognize that LLCs have the citizenship of all their members, and typically the identity of an LLC’s membership is not publicly known. This should be ascertained or confirmed early in litigation, to avoid a potential problem on appeal years later.