Harvey Const. Co. v. Robertson-CECO Corp., ROBERTSON-CECO
| Decision Date | 03 January 1994 |
| Docket Number | ROBERTSON-CECO,No. 91-6035,91-6035 |
| Citation | 10 F.3d 300 |
| Parties | HARVEY CONSTRUCTION COMPANY, Plaintiff-Appellant, v.CORPORATION, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
J. Mark Brewer, Patrick E. Gaas, Brewer & Pritchard, Houston, TX, for plaintiff-appellant.
Blake Tartt, Fulbright & Jaworski, Houston, TX, for Robertson.
Gary T. Carr, Charles A. Weiss, Bryan Cave, St. Louis, MO, for Robertson-Ceco Corp.
Appeal from the United States District Court for the Southern District of Texas.
Before JOHNSON, GARWOOD, and WIENER, Circuit Judges.
Plaintiff-appellant Harvey Construction Company (Harvey) appeals the district court's order dismissing its complaint pursuant to 28 U.S.C. Sec. 1359 for want of subject matter jurisdiction. Harvey also appeals the denial of its motions for summary judgment and for default judgment and contests the district court's grant of certain discovery motions of defendant-appellee Robertson-Ceco Corporation (Robertson). We reverse and remand the jurisdictional issue. We decline to address the remaining issues.
In March 1978, Harvey became the general contractor for the construction of the 3D/International Office Tower, a multi-story office building in Houston (the 3D building). The owners of the 3D building were Gerald Hines and 3D Tower, Limited, a Texas limited partnership, one of the partners of which was Gerald D. Hines Interests. 1 Gerald Hines is the father of Jeff Hines, one of Harvey's directors and its current sole shareholder.
In August 1978, Harvey subcontracted with Robertson, 2 to design, construct, and install the 3D building's curtain wall system, the nonstructural stainless steel and glass exterior "skin" of the building. The subcontract and the general contract were completed on time, and the 3D building was occupied by June 1979. The $2,425,800.00 subcontract price was timely paid.
In 1987, 3DT commenced negotiations to sell the building to a third party. At issue in these negotiations were defects in the exterior curtain constructed by Robertson. Some of the stainless steel panels were "buckling or delaminating." Robertson declined to take responsibility for these defects as the warranty for its work had expired. 3DT refused Robertson's offer to construct, for new consideration, an overlay to conceal the damage.
In June 1989, 3DT sued Harvey, Robertson, and Hexcel Corporation (Hexcel), one of Robertson's suppliers of materials, in state court in Houston. The damages alleged in this suit arose out of the work covered by Robertson's subcontract.
The subcontract between Harvey and Robertson contained a provision in which Robertson agreed to indemnify and/or defend Harvey for claims arising out of its subcontract work. 3 On September 5, 1990, Harvey sent a written demand to Robertson for indemnification in the suit by 3DT. 4 On September 21, 1990, Robertson sent a reply in which it stated that it could not then agree to indemnify Harvey but would reassess the request at a later time. Robertson claims that it was unsure about the extent of the indemnity request and was waiting for Harvey to clarify its request. Harvey did not file a cross-action for indemnification in 3DT's state court suit, nor did Robertson ever offer to indemnify or to defend Harvey in the 3DT suit.
On January 22, 1991, in the state court suit 3DT dismissed without prejudice all its claims against Robertson and Hexcel, without notice to either, and entered into a settlement agreement and an agreed judgment with Harvey whereby Harvey assumed liability for $3,950,000.00 for breach of contract. As part of the settlement agreement, 3DT assigned to Harvey all of its claims against Robertson arising out of 3DT's suit. On January 29, Harvey brought this action against Robertson in the United States District Court for the Southern District of Texas on the basis of diversity of citizenship, claiming damages for breach of contract, negligence, fraud, negligent misrepresentation, and violations of the Texas Deceptive Trade Practices Act.
On January 30, one day after Harvey brought this action, Robertson filed a declaratory judgment action against Harvey in the Eastern District of Missouri, also on the jurisdictional basis of diversity of citizenship.
Robertson's answer in the instant suit was due on March 4; Robertson on February 27 requested an extension of time to answer, and it filed its answer on March 15. Also on March 15, Harvey filed a motion for default judgment. At a hearing held on March 21, the district court orally granted the request for an extension of the answer date and denied the motion for default judgment.
Later in March, Harvey moved for partial summary judgment on the issue of indemnity. The district court denied this motion in a speaking opinion on April 25. In May, Robertson filed its motions to dismiss for want of subject matter jurisdiction pursuant to 28 U.S.C. Sec. 1359 and to compel discovery into the settlement discussions held between Harvey and 3DT.
In August 1991, the district court orally granted Robertson's motion to compel discovery. It then dismissed Harvey's complaint for want of subject matter jurisdiction. Harvey filed a timely notice of appeal; it appeals the denial of its motions for summary judgment and for default judgment and the grant of Robertson's discovery orders in conjunction with the final order of dismissal.
Robertson argues that diversity subject matter jurisdiction does not exist in this case because the settlement transactions between 3DT and Harvey, both domiciled in Texas, were an attempt to create federal jurisdiction where it was not previously available. The district court ruled as a matter of law that Harvey achieved diversity jurisdiction collusively and dismissed the action pursuant to 28 U.S.C. Sec. 1359. 5 The legal basis for this ruling is subject to review de novo.
Harvey, as the party seeking to invoke jurisdiction, has the burden of proving the facts necessary to sustain jurisdiction. Green v. Hale, 433 F.2d 324, 329 (5th Cir.1970). We review the factual findings supporting the dismissal under the clearly erroneous standard. Williamson v. Tucker, 645 F.2d 404 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981).
For purposes of deciding the issue of jurisdiction, we distinguish between Harvey's indemnity claim against Robertson and the claims that 3DT assigned to Harvey as part of the settlement agreement in the state court action. In return for assigning its claims against Robertson to Harvey, 3DT retained approximately a 95% interest in any recovery that Harvey might obtain on those claims. 6 3DT had no interest in Harvey's indemnity claim.
In addressing the jurisdictional issue, both Robertson and the district court erroneously focused on the alleged fraud and collusion in the settlement agreement. 7 Focusing instead on the domicile of the parties, it is clear that diversity jurisdiction exists for claims between Harvey and Robertson because they are citizens of different states. 8 28 U.S.C. Sec. 1332(a). Robertson is a Delaware corporation with its principal place of business in Pennsylvania. Harvey is a Texas corporation with its principal place of business in Houston.
Although we note, without so finding, that there may be some truth to the allegations of collusion, we cannot sustain the jurisdictional dismissal of the indemnity claim. Whether the settlement was collusive or not goes only to the merits of the action and does not affect the jurisdiction of the district court. 9 We hold that the district court erred in dismissing Harvey's indemnity claim for want of subject matter jurisdiction.
We are unable, on the record before us, to rule on the dismissal of the claims assigned by 3DT to Harvey because there is no evidence of the diversity status of 3DT and Robertson. 3DT is a Texas limited partnership. The Supreme Court has held that a district court must consider the citizenship of limited partners for purposes of establishing diversity jurisdiction. Carden v. Arkoma Assoc., 494 U.S. 185, 187-196, 110 S.Ct. 1015, 1017-1021, 108 L.Ed.2d 157 (1990). We must remand these claims for a finding by the district court as to the citizenship of 3DT's limited partners.
On remand, if the district court determines that diversity exists between 3DT and Robertson, it must find that the assignment of 3DT's claims to Harvey did not create collusive jurisdiction and thus the parties may proceed to the merits of the claims. 10 If, however, 3DT and Robertson are not diverse, no federal jurisdiction for the assigned claims exists. 28 U.S.C. Sec. 1359; Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 89 S.Ct. 1487, 23...
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