The Memberless LLC And Diversity

When faced with someone who is blowing things out of proportion, one response might be "Don't make a federal case out of this!"  Sometimes, it may not even be possible to make a federal case.  The reason is that federal courts are courts of limited jurisdiction.  The power of the federal judiciary is circumscribed by Article III, Section 2 of the United States Constitution which permits federal courts to hear only certain controversies such as those between citizens of different states.  The diversity jurisdiction of the U.S. District Courts is codified at 28 U.S.C. § 1332. 

When a non-natural person is a party to a lawsuit, federal courts must determine where that person is a citizen.  See Court Rules California Unincorporated Association Is A South Dakota Citizen and Where Is A Holding Company's Principal Place Of Business?

In Hellerstein v. Desert Lifestyles, 2018 U.S. Dist. LEXIS 55532, Judge Richard F. Boulware II considered the citizenship of a limited liability company formed under California's Revised Uniform Limited Liability Company Act.  In analyzing the situation, Judge Boulware observed the following:

The CRULLCA does not expressly or impliedly establish a procedure for creating a memberless LLC. While an LLC may be dissolved pursuant to Section 17707.02 after losing members, presumably to death, inactivity or abandonment, the CRULLCA has no procedure for creating a manager-managed LLC without members.

Initially, I was inclined to disagree.  After all, a California corporation can come into existence without shareholders.  Cal. Corp. Code § 200(c).  A similar provision can be found in California's LLC law.  Cal. Corp. Code §17702.01(d) ("A limited liability company is formed when the Secretary of State has filed the articles of organization.") 

Although Judge Boulware didn't cite the statute, I believe that his conclusion finds some support in Corporations Code Section 17704.01(a) which refers to an LLC that is to have "only one member upon formation" and Section 17704.01(b) which refers to an LLC that is to have "more than one member on formation".  Both provisions therefore contemplate that there will be a member or members upon formation.