That U.S. LLC May Not Be So “American” After All

Posted: August 26, 2026 / Written by: Karen Monroe /

That U.S. LLC May Not Be So “American” After All

Know Who Owns the LLC Before You Sue

The Fourth Circuit's recent decision in FS Medical Supplies, LLC v. Tanner Pharma UK Ltd. is a useful reminder that in cross-border litigation, who owns an LLC can determine where the case can be heard.

The Facts

FS Medical Supplies LLC sued over a contract involving COVID-related products beginning in March 2021.
Its members included citizens of California, Texas and China.
The defendants included a North Carolina corporation, two North Carolina individuals and a UK corporation.
FS first sued in California state court. The defendants removed the case to federal court, where it was dismissed because the California court lacked personal jurisdiction over the defendants.
FS thereafter pursued the dispute in federal court in North Carolina. The jurisdictional problem surfaced when FS disclosed that one of its members was a Chinese citizen.
The district court concluded that diversity jurisdiction was lacking, and the Fourth Circuit affirmed that ruling on June 25, 2026.

The Conclusion

For diversity purposes, an LLC has the citizenship of each of its members.

That meant FS had foreign citizenship because of its Chinese member. With foreign citizenship on the plaintiff side (China) and a foreign corporation on the defendant side (UK), the Fourth Circuit concluded that the requirements for federal diversity jurisdiction were not satisfied.

The federal case therefore had to be dismissed for lack of subject-matter jurisdiction.

Could FS Fix the Problem?

FS tried. The Chinese member transferred her interest to another member of the LLC. But jurisdiction is generally determined when the lawsuit is filed, so changing the ownership afterward did not cure the defect.

FS also sought to eliminate the UK defendant, but the Fourth Circuit did not allow that effort to save the action.

FS has continued to pursue its claims. It filed another federal action in North Carolina, this time without a Chinese member. That federal action remains pending. FS also filed in North Carolina state court, but that action was dismissed without prejudice in July 2026 because the earlier federal action remained pending.

The Watch-Out

Before filing a U.S. lawsuit involving an LLC — particularly in a cross-border matter — identify every member and the citizenship of every member before choosing the court.

Don't assume that a U.S.-formed LLC is simply “American” for purposes of federal diversity jurisdiction.

One foreign member can change the jurisdictional analysis — and discovering the problem after filing eats up valuable time and money.

We did not handle this case, although I and my colleagues at Schlam Stone & Dolan regularly deal with jurisdictional and other threshold issues in complex commercial disputes, including those involving parties across borders.