No Claim-Splitting Without Jurisdiction; One Nondiverse LLC Member Defeats Diversity — Eleventh Circuit’s Guidance in Sound Around, Inc. v. O’Donnell

Introduction

In these consolidated, unpublished, non-argument appeals from the Eleventh Circuit, the court addressed two recurrent federal jurisdiction problems that often arise in business disputes involving unincorporated entities: (1) how diversity jurisdiction operates for LLCs and partnerships and (2) when the “claim-splitting” doctrine bars a second lawsuit. The disputes stem from a failed $11 million Florida real estate transaction between Sound Around, Inc. (buyer), Hialeah Last Mile Fund VII LLC, and Hialeah Last Mile LLC (sellers), with Douglas O’Donnell as the signatory for Fund VII.

The court affirmed the district court’s dismissal of Sound Around’s first federal case (Sound Around I) for lack of subject-matter jurisdiction because complete diversity was destroyed by a New York citizen who was a member of an LLC defendant. It simultaneously vacated the dismissal of Sound Around’s later, separate suit against O’Donnell (Sound Around II), holding the district court erred in applying the claim-splitting doctrine because the first suit lacked jurisdiction. The panel remanded Sound Around II for the district court to address the remaining Rule 12 defenses (failure to state a claim and Florida’s litigation privilege).

Procedural Timeline at a Glance

2021: Sound Around contracts to buy a Miami property from Fund VII and HLM after renovations; O’Donnell signs for Fund VII; HLM allegedly intended to be bound.
2022: Sound Around I filed in S.D. Fla. against Fund VII and HLM for specific performance; diversity alleged by state of incorporation/principal place of business, but with no member-by-member allegations for the LLCs.
2022: Sound Around II filed in S.D. Fla. against O’Donnell for fraud and breach of warranty, based on facts learned during Sound Around I.
District court: Dismisses Sound Around II for claim splitting (with prejudice). Appeal No. 23-12479 follows.
District court: Grants summary judgment for specific performance in Sound Around I against Fund VII and HLM. Fund VII/HLM appeal (No. 23-12830).
Eleventh Circuit in 23-12830: Issues jurisdictional question; limited remand to determine diversity. District court finds no complete diversity because an HLM member, Jose Rojas, is a New York citizen. Dismisses Sound Around I. Appeal No. 25-10754 follows.
Eleventh Circuit: Dismisses 23-12830 as moot after district court’s jurisdictional dismissal; consolidates 23-12479 (claim splitting) and 25-10754 (jurisdiction).

Summary of the Opinion

The Eleventh Circuit resolved two core issues:

Jurisdiction (Sound Around I, No. 25-10754): Affirmed the dismissal for lack of subject-matter jurisdiction under 28 U.S.C. § 1332(a). The district court did not violate the limited-remand mandate by finding nondiversity based on a single member’s New York citizenship and need not have traced every member of every nested entity once nondiversity was established. It did not abuse its discretion in declining further jurisdictional discovery because Sound Around had already received some discovery and offered no contrary facts.
Claim Splitting (Sound Around II, No. 23-12479): Vacated the dismissal. The claim-splitting doctrine does not bar a second action when the first action was filed in a court that lacked subject-matter jurisdiction. The panel remanded for the district court to address O’Donnell’s remaining defenses (Rule 12(b)(6) and Florida litigation privilege) in the first instance.

Analysis

Precedents and Authorities Cited

28 U.S.C. § 1332(a): Diversity jurisdiction requires complete diversity and an amount in controversy exceeding $75,000.
McCormick v. Aderholt, 293 F.3d 1254 (11th Cir. 2002): The invoking party bears the burden of proving jurisdictional facts by a preponderance of the evidence.
Palmer v. Hosp. Auth. of Randolph Cnty., 22 F.3d 1559 (11th Cir. 1994): Complete diversity required—every plaintiff diverse from every defendant.
Mallory & Evans Contractors & Engineers, LLC v. Tuskegee Univ., 663 F.3d 1304 (11th Cir. 2011): LLC citizenship equals the citizenship of all its members (like partnerships).
Purchasing Power, LLC v. Bluestem Brands, Inc., 851 F.3d 1218 (11th Cir. 2017): LLC “factor tree” warning; verify diversity early; admonition that it is in everyone’s best interest to confirm jurisdiction first.
Weidner v. Comm’r of Soc. Sec., 81 F.4th 1341 (11th Cir. 2023): Mandate compliance reviewed de novo.
Litman v. Mass. Mut. Life Ins. Co., 825 F.2d 1506 (11th Cir. 1987) (en banc), and Piambino v. Bailey, 757 F.2d 1112 (11th Cir. 1985): Mandate rule and law-of-the-case principles; trial court must execute the “letter and spirit” of the appellate mandate.
ACLU of Fla., Inc. v. City of Sarasota, 859 F.3d 1337 (11th Cir. 2017): Parties have a qualified right to jurisdictional discovery; complete denial can be an abuse of discretion.
Vanover v. NCO Fin. Servs., Inc., 857 F.3d 833 (11th Cir. 2017) & Kennedy v. Floridian Hotel, Inc., 998 F.3d 1221 (11th Cir. 2021): Claim-splitting doctrine and its purposes.
Borrero v. United Healthcare of N.Y., Inc., 610 F.3d 1296 (11th Cir. 2010): The rule against splitting causes of action does not apply where the first forum lacks jurisdiction over all of the plaintiff’s claims.
Stephens v. Tolbert, 471 F.3d 1173 (11th Cir. 2006) & Rothenberg v. Sec. Mgmt. Co., 667 F.2d 958 (11th Cir. 1982): Appellate record limits and judicial notice of subsequent public-record developments.
United States ex rel. Sedona Partners LLC v. Able Moving & Storage Inc., 146 F.4th 1032 (11th Cir. 2025): Preference to allow district court to address unaddressed issues first.

Legal Reasoning

1) Diversity Jurisdiction: One Nondiverse LLC Member Ends the Case

The panel affirmed the dismissal of Sound Around I because complete diversity was destroyed: Sound Around is a New York citizen, and the district court found that HLM had a New York citizen, Jose Rojas, as a member when the suit was filed. Under settled Eleventh Circuit law, an LLC is a citizen of every state in which any of its members is a citizen. Thus, the presence of one New York member made HLM a New York citizen, defeating complete diversity with Sound Around.

On limited remand, the district court relied on Rojas’s sworn declaration (New York residence, tax filings, driver’s license, vehicle registration, property ownership, intent to remain) and a contemporaneous subscription agreement (listing New York address and residency at entry into HLM in 2019). The court found this evidence persuasive and unrefuted. Because nondiversity was established, the district court had no obligation to trace the citizenship of all 45+ HLM members and 85+ partners in Fund VII’s ultimate limited partnership. The touchstone is complete diversity; once a single nondiverse member was confirmed, the analysis could stop.

The panel also rejected Sound Around’s argument that the district court violated the mandate on limited remand by relying on Rojas’s declaration. The earlier motions panel had denied a motion to supplement the appellate record “without prejudice,” expressly permitting the parties to raise such materials on remand. The district court’s consideration of the declaration and additional corroborating documents complied with both the letter and spirit of the mandate.

Finally, the panel found no abuse of discretion in the district court’s handling of jurisdictional discovery. The plaintiff received some discovery; it neither offered contrary facts nor sought to compel Rojas’s deposition. Given the undisputed materials establishing Rojas’s New York domicile, additional discovery was unnecessary.

2) Claim Splitting: No Bar When the First Suit Lacks Jurisdiction

The district court dismissed Sound Around II as an improper claim-split, reasoning it overlapped with Sound Around I and involved the same parties or their privies. The Eleventh Circuit vacated that decision, invoking Borrero: the claim-splitting doctrine presupposes the first action is in a court of competent jurisdiction. Because the district court in Sound Around I lacked subject-matter jurisdiction, claim splitting could not bar Sound Around II. The panel took judicial notice of the Sound Around I dismissal (a subsequent public record relevant to the appeal), then remanded Sound Around II for the district court to address the remaining arguments (Rule 12(b)(6) sufficiency and Florida’s litigation privilege) in the first instance.

3) The Mandate Rule on Limited Remand

The court clarified how the mandate rule operates when an appellate panel issues a limited remand for jurisdictional factfinding. The district court’s task was to determine whether diversity existed. It complied by finding nondiversity based on competent evidence regarding a single LLC member’s domicile. The mandate did not require the court to undertake a full-scale census of all members across nested entities once nondiversity became evident, nor did it bar reliance on the Rojas declaration accompanied by contemporaneous documentation.

4) Jurisdictional Discovery: Qualified, Not Absolute

A party has a qualified right to jurisdictional discovery, but a district court does not abuse its discretion by declining more if the record already establishes the jurisdictional defect and the party seeking discovery offers no contrary facts. Here, the court pointed to the documents corroborating Rojas’s declaration and the absence of any opposing evidence from Sound Around.

Impact and Practical Implications

Pleading LLC Citizenship Properly Is Critical: Alleging an LLC’s state of incorporation and principal place of business is insufficient. A complaint must allege the citizenship of every member of every unincorporated entity, tracing through all layers until reaching natural persons or corporations with their respective domiciles or states of incorporation and principal places of business.
One Nondiverse Member Is Dispositive: In the Eleventh Circuit, identifying a single nondiverse member of an LLC (or partner of a partnership) at the time of filing defeats complete diversity. Courts need not continue tracing once nondiversity appears.
Jurisdiction Can Be Raised Late—and It Will Undo Merits Work: Subject-matter jurisdiction is nonwaivable. Parties cannot stipulate to it. Even a late-raised jurisdictional defect will nullify merits orders—here, a summary-judgment decree of specific performance unraveled after a limited remand.
Limited Remand Efficiency: A limited remand can be resolved on focused evidence (e.g., a declaration corroborated by contemporaneous documents). The district court may stop once it finds nondiversity; it need not resolve all citizenship questions for all parties in complex “factor trees.”
Claim-Splitting Has a Jurisdictional Predicate: A second suit cannot be dismissed for claim splitting if the first suit was jurisdictionally defective. This prevents the doctrine from forcing plaintiffs to consolidate claims in a forum that lacks power to adjudicate them.
Jurisdictional Discovery Boundaries: Parties have a qualified right, but courts may deny additional discovery where existing evidence conclusively resolves the jurisdictional question and no contrary facts are proffered.
Strategic Considerations About Dropping Nondiverse Parties: Although not decided here, parties sometimes attempt to salvage diversity by dropping dispensable, nondiverse parties under Rule 21. Litigants should raise this early and consider whether the party is indispensable under Rule 19—especially where specific performance of a contract requires all sellers.
Unpublished but Persuasive: While this opinion is unpublished and therefore not binding precedent, it is a clear, practical reaffirmation of the Eleventh Circuit’s jurisdictional rules for unincorporated entities and the limits of claim splitting.

Complex Concepts Simplified

Complete Diversity: Every plaintiff must be a citizen of a different state than every defendant at the time the complaint is filed.
LLC Citizenship: An LLC is a citizen of every state in which any of its members is a citizen. If a member is itself an LLC or partnership, you must trace through all layers until you reach individuals (citizens of their domiciles) or corporations (citizens of place of incorporation and principal place of business).
Domicile vs. Residence: Domicile is where a person resides with an intent to remain indefinitely (home base). Evidence includes driver’s license, voter registration, tax filings, property ownership, and statements of intent. Residence alone is not always sufficient; intent matters.
Claim Splitting: A case-management doctrine that disfavors a plaintiff filing multiple suits over the same nucleus of operative facts before the first suit reaches final judgment. It conserves judicial resources. But it cannot force consolidation into a case the court lacks power to hear.
Mandate Rule (Limited Remand): When the appellate court remands for a specific purpose (e.g., to determine whether diversity exists), the district court must follow the “letter and spirit” of that instruction, but retains latitude to consider evidence that resolves the remanded issue efficiently.
Jurisdictional Discovery: Limited discovery aimed at facts bearing on subject-matter jurisdiction (such as citizenship). It is not automatic; courts weigh need against the existing evidentiary record.

Practice Guidance and Checklists

Pleading and Proving Diversity with Unincorporated Entities

Before filing, compile a complete list of each LLC’s or partnership’s members (or partners) as of the filing date. For nested entities, trace through every layer.
Plead the citizenship of each member/partner. For natural persons, plead domicile; for corporations, plead both state of incorporation and principal place of business.
Attach or have ready contemporaneous documents (operating agreements, subscription agreements, W-9s, tax records) to support jurisdictional allegations if challenged.
Do not rely on the opposing side’s stipulation to jurisdiction. Courts independently confirm subject-matter jurisdiction.
Be prepared to engage in targeted jurisdictional discovery; move to compel promptly if the other side’s compliance is inadequate.

Guardrails for Claim-Splitting Scenarios

Confirm that the first-filed court has subject-matter jurisdiction over all claims and parties before invoking claim-splitting to dismiss a second suit.
Consider whether second-suit claims involve different parties not before the first court, or whether the relief sought requires parties who are not within the first court’s jurisdiction.
If the first suit’s jurisdiction is uncertain, courts should hesitate to use claim splitting to dispose of a second action and should assess jurisdiction first.

Conclusion

Sound Around underscores two bedrock points of federal practice in the Eleventh Circuit: (1) in cases involving LLCs and partnerships, diversity hinges on the citizenship of every member or partner, and just one nondiverse member defeats jurisdiction; and (2) the claim-splitting doctrine cannot bar a second lawsuit if the first action was jurisdictionally defective. The panel also provides practical guidance for limited remands, confirming that district courts may conclude the inquiry once a single nondiverse member is established and need not undertake exhaustive tracing beyond that point.

The consequences here were stark: a hard-fought specific performance judgment evaporated upon discovery of a jurisdictional defect, and a separately filed second action was improperly dismissed for claim splitting. The opinion reiterates the Purchasing Power admonition—verify diversity at the outset. Doing so protects litigants and courts alike from years of avoidable, ultimately void litigation.