Who Can Sue OpenAI in Federal Court, Under State Law Claims (Such as Libel)?

Civil cases arising under federal law are generally filed in federal court: copyright cases, federal employment discrimination cases, cases against government agencies alleging violations of the U.S. Constitution, and more. But civil cases arising under state law can also be filed in federal court, if they involve more than $75K and the parties are all citizens of different states (known as "complete diversity of citizenship"). And if a plaintiff files such a case in state court, the defendant can remove the case to federal court, again if both the $75K requirement and the diversity requirement are satisfied. (This is of course an oversimplification.)

Now what happens if one of the parties is a business organization? Corporations are generally viewed as citizens of (1) the state in which they were incorporated, and (2) the state in which they have their principal place of business. But LLC's (limited liability companies) are viewed as citizens of all the states in which their members are citizens. That makes the complete diversity requirement harder to satisfy.

It also makes it important to know where an LLC's members—i.e., co-owners—are citizens. And if the members are LLC's, it's important to know the citizenship of their members. The result is pretty complicated.

But thanks to a filing yesterday in Walters v. OpenAI, one of the libel lawsuits stemming from libel by AI program, we know the current answer as to OpenAI:

OpenAI, L.L.C. is a citizen of Alaska, Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Illinois, Massachusetts, Maryland, Michigan, North Dakota, New Jersey, Nevada, New York, Oregon, Pennsylvania, Texas, Virginia, and Washington, and of other countries.

So if a Californian or North Dakotan sues OpenAI for libel, that case will generally need to be in state court. But if a Georgian or Ohioan sues, that case can generally be placed (by the plaintiff or defendant) in federal court, assuming the $75K amount-in-controversy requirement is satisfied.

If you're curious how we get there, here's an excerpt from the filing. Perhaps it shows the folly of the current rule that LLCs are citizens of all the states where their members and grandmembers and great-grandmembers etc. are citizens; but this is indeed the rule we have (paragraph numbers omitted):

OpenAI, L.L.C. is organized under the laws of the State of Delaware and maintains its principal place of business in California.

OpenAI, L.L.C.'s sole member is OpenAI OpCo, LLC. OpenAI OpCo, LLC is organized under the laws of Delaware and maintains its principal place of business in California. OpenAI OpCo, LLC's sole member is OpenAI Global, LLC.

OpenAI Global, LLC is organized under the laws of Delaware and maintains its principal place of business in California. OpenAI Global, LLC has two members:

• Microsoft Corporation, which is incorporated under the laws of Washington and maintains its principal place of business in Washington. Accordingly, both Microsoft Corporation and OpenAI, L.L.C. are citizens of Washington.
• OAI Corporation, LLC, which is organized under the laws of Delaware and maintains its principal place of business in California. OAI Corporation, LLC's sole member is OpenAI Holdings, LLC.

OpenAI Holdings, LLC is organized under the laws of Delaware and maintains its principal place of business in California. Its members are:

• OpenAI, Inc., which is incorporated under the laws of Delaware and maintains its principal place of business in California. Accordingly, both OpenAI, Inc. and OpenAI, L.L.C. are citizens of Delaware and California.
• Aestas, LLC, which is organized under the laws of Delaware and maintains its principal place of business in California. Aestas, LLC's sole member is Aestas Management Company, LLC.
• Members who are citizens of California and Michigan, or are citizens of other countries.

Aestas Management Company, LLC is organized under the laws of Delaware and maintains its principal place of business in California. Aestas Management Company, LLC's members are citizens of Alaska, Arizona, California, Colorado, Connecticut, the District of Columbia, Delaware, Florida, Illinois, Massachusetts, Maryland, Michigan, North Dakota, New Jersey, Nevada, New York, Oregon, Pennsylvania, Texas, Virginia and Washington, or are citizens of other countries ….