First Things First: Federal Courts Should Determine the Legal Status of Lloyd\u27s of London Syndicate Before Deciding the Syndicate\u27s Citizenship for Diversity Purposes
Lloyd\u27s of London provides a marketplace where groups of underwriters form syndicates to insure risk. The United States Circuit Courts of Appeals have split on the question of how to determine whether a federal court has diversity jurisdiction over a controversy involving Lloyd\u27s syndicates. In a diversity action, each party must have diverse citizenship from all opposing parties. Circuit courts disagree about which diversity of citizenship test applies to suits involving Lloyd\u27s syndicates. The Second, Third, and Sixth Circuits have applied the real party in interest test. This test looks only to the citizenship of the parties that have a real interest in the litigation and ignores the citizenship of nominal or formal parties. In contrast, the Seventh Circuit has applied the unincorporated association test to assess the citizenship of a syndicate. This test requires a court to look to the citizenship of each of the underwriters in a syndicate. This Comment argues that the circuit courts have failed to consider whether a syndicate is a formal legal entity, which is a determination that will control the test that the court must apply. To answer this question, courts should first decide which law to apply to the case. Second, they should determine the syndicate\u27s legal status under that law. Courts should then apply the appropriate test to determine the citizenship of the underwriters. If the applicable law does not recognize a syndicate as a legal entity, then the real party in interest test applies. However, if the applicable law recognizes a syndicate as a legal entity, then the unincorporated association test applies
