Purchasing Power, a limited-liability company, sued Bluestem Brands in federal court after the parties and their lawyers failed to trace the citizenship of every member of the LLC structure. The district court later imposed a large sanction under its inherent power after discovering that diversity jurisdiction had not been verified and that the litigation had proceeded on an incorrect jurisdictional assumption. The Eleventh Circuit reversed the sanction. The court explained that an LLC’s citizenship depends on the citizenship of all its members, including members nested through other entities, but held that the record did not satisfy the subjective bad-faith standard required for an inherent-power sanction. The district court had conflated negligence or recklessness with the more demanding showing of bad faith and had not adequately separated the available sanctions authorities. The sanction order was reversed.