News Post

By Louisa Weiss

Disclosure statements allow a federal judge to perform a disqualification analysis and to determine whether a case has been properly filed in federal court; thus, they are of utmost importance. Yet, federal courts often receive deficient disclosure statements that require an order—sometimes multiple orders—to amend. This likely causes frustration for all involved.

The main issue with many deficient disclosure statements is improper allegations of citizenship. For example, many unincorporated entities incorrectly use the citizenship test for a corporation. With the goal of providing transparency and efficiency, this article will explain what the Federal Rules of Civil Procedure require from a disclosure statement and how to allege citizenship properly for common types of parties appearing in federal court. A properly filed disclosure statement that correctly provides the party’s citizenship (on the first filing) will allow a court to determine efficiently whether the case belongs in federal court.

Disclosure Statements and Rule 7.1

Federal Rule of Civil Procedure 7.1 is the controlling rule for disclosure statements that must be filed in federal court. The purpose of Rule 7.1 is twofold: (1) it allows federal judges to perform a disqualification analysis under Canon 3C(1)(c)—also known as the “financial interest” standard—of the Code of Conduct for United States Judges; (2) it facilitates the court’s determination as to whether it has subject matter jurisdiction. Early establishment of subject matter jurisdiction and judicial financial compliance preserves the time and resources of both the court and the parties; neither wants to litigate for years only to discover that all work was in vain because the court lacked jurisdiction or the judge had a financial conflict.

There are two different subsections in Rule 7.1(a) detailing which parties and which jurisdictional grounds require disclosure statements, and both are explained below.

 Rule 7.1(a)(1): Nongovernmental corporations must file a disclosure statement.

Under Rule 7.1(a)(1), nongovernmental corporations “must file a statement that: (A) identifies any parent corporation and any publicly held corporation owning 10% or more of its stock; or (B) states that there is no such corporation.”[1] There are two key takeaways from Rule 7.1(a)(1). First, Rule 7.1(a)(1) only applies to corporations—if your client is a limited liability company (LLC) or other unincorporated entity, you are not required to file a disclosure statement under Rule 7.1(a)(1). Second, Rule 7.1(a)(1) applies regardless of jurisdictional grounds; whether you are in federal court under federal question jurisdiction or diversity jurisdiction, if your client is a nongovernmental corporation then you must file a disclosure statement that complies with Rule 7.1(a)(1).

The purpose of Rule 7.1(a)(1) is to “support properly informed disqualification decisions in situations that call for automatic disqualification under” the financial interest standard.[2] That is why Rule 7.1(a)(1)(B) requires parties to disclose “that there is no such corporation”; this statement affirms to the judge that he or she has all of the necessary information to perform a disqualification analysis.

Rule 7.1(a)(2): Parties in a diversity case must file a disclosure statement.

Rule 7.1(a)(2) requires that when “jurisdiction is based on diversity under 28 U.S.C. § 1332(a), a party or intervenor must, unless the court orders otherwise, file a disclosure statement. The statement must name—and identify the citizenship of—every individual or entity whose citizenship is attributed to that party or intervenor.”[3] Rule 7.1 was amended in 2022 to add this section to facilitate early detection of potential issues with diversity jurisdiction, especially concerning attributed citizenship such as for LLCs and partnerships.[4]

The Rule requires every party in a diversity case to file a disclosure statement, as reflected by the advisory committee’s note to the 2022 amendment: “Disclosure is required by a plaintiff as well as all other parties and intervenors.”[5] Recently, the Southern District of Alabama recognized this requirement when it found that a plaintiff, an individual, failed to file a disclosure statement pursuant to Rule 7.1(a)(2).[6] Rule 7.1(a)(2) also requires that a disclosure statement provide the citizenship of the filing party or intervenor as well as the name and citizenship of “every individual or entity whose citizenship is attributed to that party.”[7] For example, the Middle District of Florida recently instructed a corporate defendant to include its state of incorporation and principal place of business in its disclosure form to satisfy the court’s jurisdictional inquiry.[8]

Importantly, an unincorporated entity (like an LLC) must file a disclosure statement that names and identifies the citizenship of its members because its members comprise “individual[s] or entit[ies] whose citizenship is attributed to” the unincorporated entity.[9] The citizenship of an unincorporated entity is determined by the citizenship of its members; thus, its members’ citizenships are attributed to it, and it must provide all members’ names and citizenships in its disclosure statement—no matter how onerous. While any party with attributed citizenship (such as a legal representative of the estate of a decedent) must make such a disclosure,[10] the application of this Rule most often arises with respect to unincorporated entities.

A disclosure statement providing the names and citizenships of every individual or entity whose citizenship is attributed to that party “facilitate[s] an early and accurate determination of jurisdiction.”[11] While Rule 7.1(a)(2) is not meant to replace Rule 8(a)(1)’s “obligation to plead the grounds for jurisdiction,”[12] a plaintiff suing an unincorporated entity may not be able to plead the defendant’s citizenship accurately because the plaintiff does not have access to its members and their citizenships. Accordingly, the disclosure statement allows the court to determine early in the litigation whether it has subject matter jurisdiction in a diversity case.

Notably, the local rules of a federal court may impose additional requirements regarding disclosure statements, so attorneys should always check the local rules of the district court in which they are practicing. For example, in the Middle District of Alabama a local rule requires that “[a]ll parties and amici curiae (including individuals and governmental entities) shall file a Conflict Disclosure Statement, at the time of the filing of the initial pleading, or other Court paper on behalf of that party or as otherwise ordered by the Court, identifying all parent companies, subsidiaries, partners, limited liability entity members and managers, trustees (but not trust beneficiaries), affiliates, or similar entities that could potentially pose a financial or professional conflict for a judge.”[13] The local rule later adds that “[t]he statement shall identify the represented entity’s general nature and purpose and if the entity is unincorporated, the statement shall include the names of any members of the entity that have issued shares or debt securities to the public.”[14] The Middle District of Alabama also provides a Conflict Disclosure Form (that has been updated since the 2022 amendments to Federal Rule of Civil Procedure 7.1 were implemented) that attorneys can use as a template.[15] The Southern District of Alabama has a similar local rule and also provides a Civil Disclosure Statement form in the appendix to the local rules.[16]

Alleging Citizenship for Diversity Jurisdiction

This article has highlighted that parties must disclose their citizenship to enter federal court through diversity jurisdiction. But how does one allege citizenship of an individual versus an LLC, for example? Here is a quick run-down on different citizenship tests for common parties in federal court:

Individuals: Residence and citizenship are not the same. Properly alleging citizenship of an individual requires using the magic word “citizenship”; stating an individual is a “resident” of a state is insufficient.[17] To allege citizenship of an individual, one must provide their “domicile,” which is “the place of ‘his true, fixed, and permanent home and principal establishment, and to which he has the intention of returning whenever he is absent therefrom.’”[18]

Corporations: A corporation is a citizen of the state in which it has been incorporated and the state where it maintains its principal place of business.[19] The “principal place of business,” for jurisdictional purposes, is determined by assessing where the corporation’s “nerve center” is.[20] The nerve center is “the place where a corporation’s officers direct, control, and coordinate the corporation’s activities”[21] and is “normally [ ] the place where the corporation maintains its headquarters.”[22]

LLCs: An LLC “is a citizen of any state of which a member of the company is a citizen.”[23] Importantly, if one of the members of the LLC is itself an LLC, the party must allege all the members of that member-LLC to properly allege the citizenship of the party-LLC. “Consequently, citizenship of LLCs often ends up looking like a factor tree that exponentially expands every time a member turns out to be another LLC, thereby restarting the process of identifying the members of that LLC.”[24] The Eleventh Circuit has acknowledged “the difficulty of applying established diversity jurisdiction principles to 21st-century business organizations,”[25] but until Congress or the Supreme Court change these requirements, parties must state all LLC members—no matter how large the factor tree gets.

Unincorporated entities generally: Like LLCs, other unincorporated entities must provide the citizenships of all their members.[26]

Insurance Companies: There is a fun wrinkle for alleging citizenship of insurance companies under 28 U.S.C. § 1332(c)(1) that applies to direct actions where the insured is not a defendant. Section 1332(c)(1) provides that:

in any direct action against the insurer of a policy . . . to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of—(A) every State and foreign state of which the insured is a citizen; (B) every State and foreign state by which the insurer has been incorporated; and (C) the State or foreign state where the insurer has its principal place of business[ ] . . . .[27]

This wrinkle only applies to “direct actions.” “[A] direct action is one in which an injured third-party claimant sues an insurance company for payment of a claim without first joining or obtaining judgment against the company’s insured.”[28] In other words, a direct action is one where a third party has a claim against an insured tortfeasor but only brings the claim against the tortfeasor’s insurer.[29] The Middle District of Alabama has explained the reasoning behind this approach:

The reason for this exception is simple. If a plaintiff sues a tortfeasor’s insurer without first joining the tortfeasor or obtaining a judgment against him, the insurer and tortfeasor have a unified interest in contesting liability and damages. Both want to retreat behind the castle walls, raise the drawbridge, and beg[in] preparing to defend against the plaintiff’s siege. And because both insurer and tortfeasor have manned the same walls, it only makes sense to treat them as citizens of the same jurisdiction. Which is exactly what § 1332(c)(1)’s exception seeks to accomplish.[30]

Section 1332(c)(1)’s direct action provision “does not affect suits against the insurer based on its independent wrongs”[31], which includes allegations of “the insurer’s failure to settle within policy limits or in good faith.”[32] In these situations, a tortfeasor and its insurer are not comrades in arms and therefore no longer automatically treated as citizens of the same jurisdiction.

Why Does Properly Alleging Citizenship Matter?

Properly alleging citizenship in a pleading, removal notice, or disclosure statement allows the court to assure itself that it has subject matter jurisdiction over the case. Without jurisdiction, the court is constitutionally obligated to dismiss or remand the case.[33] It should also be noted that a consequence of purposefully failing to allege citizenship properly may also result in a default judgment or sanctions.[34]

This entire process of disclosure statements (and amending disclosure statements) may seem hyper technical. However, precedent shows that “disclosure is necessary both to ensure that diversity jurisdiction exists and to protect against the waste that may occur upon belated discovery of a diversity-destroying citizenship.”[35] For example, in Purchasing Power, LLC v. Bluestem Brands, Inc., the Eleventh Circuit explained that previously, on appeal of a summary judgment in favor of the defendant, the Court had determined that the pleadings did not sufficiently allege the plaintiff LLC’s citizenship.[36] “This started an inquiry, more than two years after removal, that led to the realization that there was no diversity jurisdiction.”[37] The Eleventh Circuit stated that “[w]hile the requirements of diversity jurisdiction in this scenario are complicated, they are the law. No party in this case acted with bad intentions, but the result was a colossal waste of time and effort.”[38] “In the end, when the parties do not do their part, the burden falls on the courts to make sure parties satisfy the requirements of diversity jurisdiction. We must be vigilant in forcing parties to meet the unfortunate demands of diversity jurisdiction in the 21st century.”[39]

By requiring proper allegations of citizenship in the disclosure statement and pleading or removal notice, courts ensure that practitioners, parties, and the court make the best use of their time and effort on cases that are properly in federal court. With a compliant disclosure statement and knowledge of how to allege citizenship properly in hand, you are now ready to breeze through a federal court’s doors.

[1] Fed. R. Civ. P. 7.1(a)(1).

[2] Fed. R. Civ. P. 7.1 advisory committee’s note, 2002 adoption.

[3] Fed. R. Civ. P. 7.1(a)(2).

[4] Fed. R. Civ. P. 7.1 advisory committee’s note, 2022 amendment.

[5] Id.

[6] Ross v. Lowe’s Home Centers, LLC, 2024 WL 1585570, at *4 (S.D. Ala. Apr. 11, 2024).

[7] Fed. R. Civ. P. 7.1(a)(2).

[8] Herezi v. 31-W Insulation Co., 2024 WL 1327484, at *5 (M.D. Fla. Mar. 28, 2024).

[9] Fed. R. Civ. P. 7.1(a)(2) (emphasis added).

[10] See Fed. R. Civ. P. 7.1 advisory committee’s note, 2022 amendment (“Two examples of attributed citizenship are provided by § 1332(c)(1) and (2)[ ] . . . .”).

[11] Fed. R. Civ. P. 7.1 advisory committee’s note, 2022 amendment.

[12] Id.

[13] M.D. Ala. Civil L.R. 7.1(a).

[14] M.D. Ala. Civil L.R. 7.1(c).

[15] U.S. District Court for the Middle District of Alabama, Conflict Disclosure Form (2024), http://www.almd.uscourts.gov/forms/conflict-disclosure-form-2024 (last visited Apr. 29, 2025).

[16] S.D. Ala. Civil L.R. 7.1; id., Part D (appendix of forms including Civil Disclosure Statement form).

[17] See Travaglio v. Am. Express Co., 735 F.3d 1266, 1269 (11th Cir. 2013) (first citing Denny v. Pironi, 141 U.S. 121, 123 (1891); and then citing Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)); Taylor, 30 F.3d at 1367.

[18] McCormick v. Aderholt, 293 F.3d 1254, 1257-58 (11th Cir. 2002) (quoting Mas v. Perry, 489 F.2d 1396, 1399 (5th Cir. 1974)).

[19] 28 U.S.C. § 1332(c)(1).

[20] Hertz Corp. v. Friend, 559 U.S. 77, 92–93 (2010).

[21] Id.

[22] Id. at 93.

[23] Rolling Greens MHP, L.P. v. Comcast SCH Holdings LLC, 374 F.3d 1020, 1022 (11th Cir. 2004).

[24] Purchasing Power, LLC v. Bluestem Brands, Inc., 851 F.3d 1218, 1220 (11th Cir. 2017).

[25] Id.

[26] Rolling Greens MHP, L.P., 374 F.3d at 1021 (citing Carden v. Arkoma Assocs., 494 U.S. 185, 195–96 (1990)).

[27] 28 U.S.C. § 1332(c)(1).

[28] Kong v. Allied Pro. Ins. Co., 750 F.3d 1295, 1300 (11th Cir. 2014).

[29] See Moore v. CNA Found., 472 F. Supp. 2d 1327, 1330 (M.D. Ala. 2007) (“The statute is limited to suits where ‘there is a claim held by a third party against an insured . . . that is identical to the one asserted against the insurance company . . . ; it does not affect suits against the insurer based on its independent wrongs.’”) (alterations in original) (quoting 15 James Wm. Moore, Moore’s Federal Practice § 102.58[2] (3d ed. 2006)).

[30] Porter v. Crumpton & Assocs., LLC, 862 F. Supp. 2d 1303, 1307–08 (M.D. Ala. 2012).

[31] Moore, 472 F. Supp. 2d at 1330.

[32] Id. at 1331 (quoting Fortson v. St. Paul Fire & Marine Ins. Co., 751 F.2d 1157, 1159 (11th Cir. 1985)).

[33] See Travaglio, 735 F.3d at 1269; see also Goodman ex rel. Goodman v. Sipos, 259 F.3d 1327, 1331 n.6 (11th Cir. 2001) (“[A] court must dismiss a case without ever reaching the merits if it concludes that it has no jurisdiction.”) (quoting Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993)).

[34] See Wahl v. McIver, 773 F.2d 1169, 1174 (11th Cir. 1985) (“The district court has the authority to enter default judgment for failure . . . to comply with its orders or rules of procedure.”).

[35] Fed. R. Civ. P. 7.1 advisory committee’s note, 2022 amendment.

[36] 851 F.3d 1218, 1222 (11th Cir. 2017).

[37] Id.

[38] Id. at 1228.

[39] Id. (citing Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006)).