Section 1332(a)(3) Requires U.S. Citizens on Both Sides When an LLC Has a Foreign Member (and Courts Lack Power to Grant NC Rule 41(b) Savings Relief Absent Jurisdiction)

I. Introduction

In FS Medical Supplies, LLC v. TannerGAP, Inc. (4th Cir. June 25, 2026), the Fourth Circuit addressed a recurring but often misunderstood diversity-jurisdiction problem: how to apply 28 U.S.C. § 1332(a)(3) when an LLC’s membership includes both U.S. citizens and a foreign citizen, and the defendants include both domestic and foreign parties.

The dispute arose from COVID-era supply contracts. Plaintiff FS Medical Supplies, LLC (“FS Medical”) alleged that TannerGAP, Inc. and Tanner Pharma UK Limited bypassed FS Medical by contracting directly with a supplier, prompting breach-related claims. After earlier litigation in California and re-filing in the Western District of North Carolina, jurisdictional discovery revealed that one LLC member was a citizen of China at the time the complaints were filed—an admission that triggered motions to dismiss for lack of subject matter jurisdiction.

The central issues were:

  • Diversity under § 1332(a)(3): Whether an LLC with a foreign member can invoke § 1332(a)(3) by “counting” only its U.S. members for the “citizens of different States” requirement.
  • Time-of-filing rule: Whether a post-filing transfer of the foreign member’s interest can cure the defect.
  • Remedial requests: Whether dismissing the foreign defendant or applying North Carolina’s Rule 41(b) savings statute could preserve the action.

II. Summary of the Opinion

Chief Judge Diaz, writing for a unanimous panel, affirmed dismissal for lack of subject matter jurisdiction. The court held that when an LLC has multiple citizenships (because its members have multiple citizenships), federal courts must “test” jurisdiction by considering each member’s citizenship. Once FS Medical’s Chinese member is considered, the plaintiff side includes a foreign citizen and therefore the case is no longer one “between citizens of different States” as required by the first clause of § 1332(a)(3).

The court also rejected two attempted fixes:

  • Dismissing the foreign defendant (Tanner Pharma UK): would not cure the defect, because the jurisdictional problem stemmed from the plaintiff LLC’s foreign citizenship.
  • North Carolina Rule 41(b) savings relief: the federal courts lacked power to grant it once subject matter jurisdiction was found lacking; it was not a “collateral issue” like sanctions.

III. Analysis

A. Precedents Cited

1. General Technology Applications, Inc. v. Exro Ltda, 388 F.3d 114 (4th Cir. 2004)

The opinion treated General Technology Applications, Inc. v. Exro Ltda as the Fourth Circuit’s foundational instruction for how to analyze entity citizenship when “dual” or multi-citizenship is in play. There, an LLC had members from both Colombia and Virginia; alien citizenship appeared on both sides once the parties were properly aligned, defeating diversity.

Critical to this case, General Technology emphasized there is “no basis upon which to disregard either aspect” of the LLC’s citizenship. The FS Medical panel imported that principle directly: an LLC’s foreign member cannot be ignored merely because the LLC also has U.S. members.

2. Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (2004)

The court leaned on Grupo Dataflux v. Atlas Global Group, L.P. for two linked propositions:

  • Testing entity citizenship: If the plaintiff entity has foreign partners/members, that foreign citizenship counts in the diversity calculus.
  • Time-of-filing: Jurisdiction is measured at filing; later changes to party citizenship generally do not cure the defect.

The panel used Grupo Dataflux to reject FS Medical’s effort to “disaggregate” the LLC—treating it as domestic for one clause of § 1332(a)(3) while simultaneously treating the foreign member as an “additional party.” The Fourth Circuit read Grupo Dataflux as incompatible with that kind of selective counting.

3. Slavchev v. Royal Caribbean Cruises, Ltd., 559 F.3d 251 (4th Cir. 2009)

Slavchev v. Royal Caribbean Cruises, Ltd. reinforced the broader theme: complete diversity principles apply to “dual citizenship” (there, corporate dual citizenship including a foreign state). The FS Medical panel cited Slavchev to underscore that foreign citizenship on both sides can be fatal even when domestic citizenship is also present.

4. Tango Music, LLC v. DeadQuick Music, Inc., 348 F.3d 244 (7th Cir. 2003) (distinguished)

FS Medical relied on Tango Music, LLC v. DeadQuick Music, Inc., where the Seventh Circuit upheld § 1332(a)(3) jurisdiction involving foreign parties on both sides. The Fourth Circuit distinguished it as addressing a different question (whether “additional parties” can include foreign citizens on both sides), not whether a sole plaintiff that is an LLC with a foreign member satisfies the “citizens of different States” requirement.

The panel further suggested that any broader reading of Tango Music would be inconsistent with Grupo Dataflux, and it cited ImagineX Consulting, L.P. v. Reprivata, L.L.C. as an example of courts treating such mixed-membership entities as “aliens” for jurisdictional purposes.

5. Citizenship and standard-of-review authorities

  • Evans v. United States, 105 F.4th 606 (4th Cir. 2024): de novo review of subject matter jurisdiction dismissals.
  • Axel Johnson, Inc. v. Carroll Carolina Oil Co., 145 F.3d 660 (4th Cir. 1998): domicile/national citizenship for individuals’ state citizenship.

6. Savings statute / collateral-issues authorities

  • Topshelf Mgmt., Inc. v. Campbell-Ewald Co., 203 F. Supp. 3d 608 (M.D.N.C. 2016): a federal court sitting in diversity may grant North Carolina Rule 41(b) relief (but only if it has jurisdiction).
  • Shortt v. Richlands Mall Assocs., Inc., No. 90-2056, 1990 WL 207354 (4th Cir. Dec. 19, 1990): without subject matter jurisdiction, a court generally cannot take action going to the merits; “collateral issues” are limited.
  • Willy v. Coastal Corp., 503 U.S. 131 (1992): sanctions are collateral and may be imposed even after jurisdiction is found lacking.
  • 84 Lumber Co. v. Barkley, 461 S.E.2d 780 (N.C. Ct. App. 1995): discretionary nature of Rule 41(b) relief (addressed by the panel in dicta on equities).
  • WG/Welch Mech. Contractors, LLC v. Int'l Ass'n of Sheet Metal, Air, Rail & Transpo. Workers, 684 F. Supp. 3d 432 (D. Md. 2023): plaintiff bears burden to investigate and plead diversity adequately before filing.

B. Legal Reasoning

1. The court’s core move: clause one of § 1332(a)(3) controls

Section 1332(a)(3) authorizes jurisdiction in actions between: (i) “citizens of different States” and (ii) “in which citizens or subjects of a foreign state are additional parties.” The panel held the case fails at step (i).

FS Medical was an LLC with members who were citizens of Texas, California, and China at filing. Under the settled rule (reaffirmed here), an LLC takes the citizenship of all its members. Therefore, the plaintiff side included a foreign citizen.

Once FS Medical’s Chinese citizenship is included, the lawsuit is not “between citizens of different States,” because the plaintiff side is not composed solely of U.S. state citizens. The panel treated this as jurisdictionally dispositive—making the “additional parties” clause irrelevant.

2. Rejection of “count only domestic members” for LLCs

FS Medical argued that only its domestic citizenship should “count” for the first clause, because Texas/California were completely diverse from North Carolina defendants. The panel explained that while some contexts allow ignoring an individual’s foreign citizenship, that approach does not extend to LLCs. Citing General Technology Applications, Inc. v. Exro Ltda, the court stated it cannot “disregard either [the domestic or foreign] aspect” of a dual-citizen LLC’s citizenship.

3. Time-of-filing rule blocks post-filing fixes

FS Medical attempted to cure the defect by having the Chinese member transfer her interest to another member. The court relied on the time-of-filing principle (as framed in the record and consistent with Grupo Dataflux v. Atlas Global Group, L.P.) that jurisdiction is assessed when the complaint is filed, not after. Thus, the transfer did not retroactively create jurisdiction.

4. Dismissing the foreign defendant cannot cure a plaintiff-side defect

FS Medical requested that the appellate court dismiss Tanner Pharma UK (a foreign defendant) to preserve diversity. The panel rejected this because the defect came from FS Medical’s own foreign citizenship (its Chinese member). Removing the foreign defendant would still leave a foreign plaintiff (FS Medical) litigating against U.S. defendants, which still fails under the relevant diversity subsections as the panel explained.

5. North Carolina Rule 41(b) savings statute is not a “collateral issue”

The panel drew a line between a court’s authority to decide “collateral issues” after concluding it lacks subject matter jurisdiction (e.g., sanctions in Willy v. Coastal Corp.) and requests that affect substantive rights to refile.

Rule 41(b) savings relief would extend (or preserve) a party’s ability to bring claims otherwise time-barred—an action the panel characterized as affecting the party’s right to bring suit, not as an incident of policing court procedure. Under Shortt v. Richlands Mall Assocs., Inc., that is not collateral; therefore, the federal courts were “powerless to act.”

C. Impact

1. A clearer Fourth Circuit rule for § 1332(a)(3) and LLCs

The opinion operationalizes a practical rule for litigants and district courts: to invoke § 1332(a)(3), there must be at least one U.S. citizen on each side of the “v.” after testing the citizenship of each LLC member. If the sole plaintiff is an LLC with any foreign member, the plaintiff side is not purely “citizens of different States,” and § 1332(a)(3) cannot be used to bootstrap jurisdiction merely because some members are U.S. citizens.

2. Increased pleading and due-diligence pressure on LLC plaintiffs

The decision underscores that LLCs must investigate and plead membership citizenship accurately at the outset, or risk dismissal after years of litigation (as occurred here). The panel’s equities discussion (citing WG/Welch Mech. Contractors, LLC v. Int'l Ass'n of Sheet Metal, Air, Rail & Transpo. Workers) reinforces that burden.

3. Limited post-dismissal remedies in federal court

By holding that North Carolina’s Rule 41(b) savings relief is not a collateral matter available absent jurisdiction, the court narrows a potential escape hatch for plaintiffs whose limitations period has run during federal litigation. Practically, parties should assume that if federal diversity jurisdiction fails, they may need to seek any savings-statute relief (if available) in state court or ensure jurisdiction is correct before filing federally.

IV. Complex Concepts Simplified

  • “Citizenship” for diversity: Individuals are citizens of the state where they are domiciled. Corporations are citizens of their place of incorporation and principal place of business. LLCs are different: an LLC is a citizen of every place where any member is a citizen.
  • § 1332(a)(3) in plain terms: It covers state-to-state disputes (U.S. citizens on both sides) where foreign parties are present only as “additional” parties. If one side has no U.S. citizen once entity citizenship is properly counted, the provision does not apply.
  • “Complete diversity”: No plaintiff may share a citizenship with any defendant. For LLCs, that means no LLC member may share citizenship with any opposing party.
  • Time-of-filing rule: Courts decide diversity based on facts when the complaint was filed; later changes in party citizenship typically cannot fix jurisdiction.
  • Collateral issues: Even without jurisdiction, courts can sometimes resolve side matters tied to managing the judicial process (like sanctions). But they cannot take actions that effectively alter substantive rights to sue.

V. Conclusion

FS Medical Supplies, LLC v. TannerGAP, Inc. cements a strict, member-by-member approach to LLC citizenship in the Fourth Circuit when § 1332(a)(3) is invoked: courts must consider all member citizenships, domestic and foreign, and the presence of a foreign member in a sole-plaintiff LLC prevents satisfying § 1332(a)(3)’s threshold requirement that the action be “between citizens of different States.”

The decision also signals that jurisdictional missteps can be unforgiving: post-filing membership transfers do not cure defects, dropping a foreign defendant does not fix a plaintiff-side problem, and—critically—federal courts cannot deploy North Carolina’s Rule 41(b) savings statute once they conclude they lack subject matter jurisdiction.