A friend sent along this email comment:
Grynberg v. Kinder Morgan Energy Partners, L.P. concludes that a Master Limited Partnership, which is a publicly traded type of firm used in the oil and gas business, should be treated for purposes of federal diversity jurisdiction as a collection of individual investors (and "aggregate") rather than as an entity. That may be consistent with legal doctrine in your field but it defies common sense. The court offers the following argument:
"Second, even if we consider the MLP’s characteristics, they do not support treating an MLP like a corporation for diversity jurisdiction. MLPs and corporations are publicly traded, centrally managed, and have freely transferable interests. But the similarities end there. MLPs are formed as unincorporated entities under state law, and Carden reaffirmed the dichotomy between corporations and unincorporated entities."
This certainly deserves the famous observation, "I understand everything but the therefore."
To which I responded: It may be that the common law is an ass, but until UPA (1997) changed the law in this area, partnerships were regarded by PARTNERSHIP LAW itself as an aggregate not an entity. Hence, partnerships have long been viewed as a collection of the partners for purposes of diversity. The rule has been extended to LLCs, by the way:
Notwithstanding LLCs' corporate traits, however, every circuit that has addressed the question treats them like partnerships for the purposes of diversity jurisdiction. See Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 120 (4th Cir.2004); GMAC Commercial Credit LLC v. Dillard Dep't Stores, Inc., 357 F.3d 827, 828–29 (8th Cir.2004); Rolling Greens MHP, L.P. v. Comcast SCH Holdings LLC, 374 F.3d 1020, 1022 (11th Cir.2004); Handelsman v. Bedford Village Assocs. Ltd. P'ship, 213 F.3d 48, 51 (2d Cir.2000); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir.1998). This treatment accords with the Supreme Court's consistent refusal to extend the corporate citizenship rule to non-corporate entities, including those that share some of the characteristics of corporations. Carden, 494 U.S. at 189, 110 S.Ct. 1015 (treating a limited partnership as having the citizenship of all its members); Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456–57, 20 S.Ct. 690, 44 L.Ed. 842 (1900) (refusing to extend the corporate citizenship rule to a “limited partnership association” although it possessed “some of the characteristics of a corporation”).
RUPA adopts the “entity” theory of partnership as opposed to the “aggregate” theory that the UPA espouse[d]. Under the aggregate theory, a partnership is characterized by the collection of its individual members, with the result being that if one of the partners dies or withdraws, the partnership ceases to exist. On the other hand, RUPA's entity theory allows for the partnership to continue even with the departure of a member because it views the partnership as “an entity distinct from its partners.”
Republic Properties Corp. v. Mission W. Properties, LP, 391 Md. 732, 744, 895 A.2d 1006, 1013 (2006). See UPA (1997) Section 201. Partnership as entity: "(a) A partnership is an entity distinct from its partners."