Atlas Global Group, L.P. v. Grupo Dataflux

• Decision Date: 22 November 2002
• Docket Number: No. 01-20245.,01-20245.
• Citation: 312 F.3d 168
• Parties: ATLAS GLOBAL GROUP, L.P., Plaintiff-Counter Defendant-Appellant, and Oscar Robles-Canon, officer with Atlas Global Group, Francisco Llamosa, officer with Atlas Global Group, Counter Defendants-Appellants, v. GRUPO DATAFLUX, Defendant-Counter Claimant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

312 F.3d 168

ATLAS GLOBAL GROUP, L.P., Plaintiff-Counter Defendant-Appellant, and Oscar Robles-Canon, officer with Atlas Global Group, Francisco Llamosa, officer with Atlas Global Group, Counter Defendants-Appellants, v. GRUPO DATAFLUX, Defendant-Counter Claimant-Appellee.

No. 01-20245.

United States Court of Appeals, Fifth Circuit.

November 22, 2002.

Roger B. Greenberg (argued), Schwartz, Junell, Campbell & Oathout, David E. Sharp, Beirne, Maynard & Parsons, Houston, TX, for Appellants.

William Joseph Boyce (argued), Mark Allen Robertson, Julie H. Tellepsen, Fulbright & Jaworski, Houston, TX, for Grupo Dataflux.

Appeal from the United States District Court for the Southern District of Texas.

Before EMILIO M. GARZA, BENAVIDES and STEWART, Circuit Judges.

CARL E. STEWART, Circuit Judge:

Atlas Global Group, L.P. ("Atlas") appeals from the district court's grant of Grupo Dataflux's ("Dataflux") motion to dismiss for lack of subject matter jurisdiction. For the reasons stated herein, we REVERSE and REMAND for the entry of judgment in favor of Atlas.

FACTUAL AND PROCEDURAL HISTORY

Atlas is a limited partnership created under Texas law. Dataflux is a Mexican corporation. On November 18, 1997, Atlas brought suit in the Southern District of Texas against Dataflux alleging breach of contract and quantum meruit. Jurisdiction was predicated solely upon the grounds of diversity pursuant to 28 U.S.C. § 1332(a) (1993). At the time the complaint was filed, Atlas's partnership was comprised of five members: (1) Bahia Management, L.L.C., a Texas limited liability company; (2) Capital Financial Partner, Inc., a Delaware corporation; (3) HIL Financial Holdings, L.P., a Texas limited partnership; (4) Francisco Llamosa, a Mexican citizen; and (5) Oscar Robles-Canon, a Mexican citizen. Shortly before trial, however, Atlas completed a business transaction which removed the two Mexican citizens as partners. After a six-day jury trial, the jury awarded $750,000 in damages to Atlas, finding that Dataflux breached its contract with Atlas. Subsequently, Dataflux moved to dismiss, arguing that the district court lacked subject matter jurisdiction because at the time the complaint was filed, two of Atlas's partners, like Dataflux, were Mexican citizens. The motion was granted. Atlas filed a motion to alter or amend the judgment, which was denied. Atlas appealed.

STANDARD OF REVIEW

We review dismissals for lack of subject matter jurisdiction de novo. Whatley v. Resolution Trust Corp., 32 F.3d 905, 907 (5th Cir.1994).

DISCUSSION

The parties do not challenge the rule that, for purposes of determining diversity jurisdiction, a partnership is a citizen of each jurisdiction in which its individual partners are citizens. See Carden v. Arkoma Assocs., 494 U.S. 185, 195, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990) ("We adhere to our oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of `all the members.'"). Likewise, the parties do not dispute that there was complete diversity when the trial of this matter commenced. Instead, Dataflux asserts that because the parties were not diverse at the time the complaint was filed, the case was properly dismissed for lack of subject matter jurisdiction. Atlas counters that this initial lack of diversity is not determinative. It maintains that the lack of diversity was remedied prior to trial and, therefore, the district court had jurisdiction.

"The existence of federal jurisdiction ordinarily depends on the facts as they exist when the complaint is filed." Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989). However, the Supreme Court has recognized that, as with most general principles, there are exceptions. Id. In Caterpillar, Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996), and Newman-Green, the Supreme Court carved out two such exceptions. Both of these cases are heavily relied upon by Atlas.

A. Newman-Green

In Newman-Green, the question presented was whether the court of appeals had the authority, pursuant to Federal Rule of Civil Procedure 21, to dismiss a dispensable non-diverse party whose presence spoiled statutory diversity jurisdiction. 490 U.S. at 827, 109 S.Ct. 2218. Newman-Green, an Illinois corporation, brought a contract action in federal court against a Venezuelan corporation, four Venezuelan citizens, and William L. Bettison, a United States citizen domiciled in Venezuela. Id. at 828, 109 S.Ct. 2218. The district court granted partial summary judgment against Newman-Green and an appeal followed. Id. On appeal, the Seventh Circuit sua sponte raised the issue of statutory jurisdiction, i.e., that jurisdiction did not exist under 28 U.S.C. § 1332(a)(2) or (3) because Bettison was a citizen of the United States, but not of any state, and therefore the suit was not either solely against aliens or against aliens and diverse citizens. Id. The panel concluded, however, that Bettison was a dispensable party, and could be dismissed to perfect statutory jurisdiction. Id. at 829, 109 S.Ct. 2218. The Supreme Court agreed. While recognizing the rule that "[t]he existence of federal jurisdiction ordinarily depends on facts as they exist when the complaint is filed," the Court held that, "[l]ike most general principles ... this one is susceptible to exceptions." Id. at 830. The court concluded that a circuit court's power to dismiss a party pursuant to Rule 21 was one such exception. Id. at 837, 109 S.Ct. 2218.

Although Newman-Green is distinguishable because Rule 21 is not at issue in the case before us, we find its underlying policy theme instructive. The Court in Newman-Green stressed that "requiring dismissal after years of litigation would impose unnecessary and wasteful burdens on the parties, judges, and other litigants waiting for judicial attention." Id. at 836, 109 S.Ct. 2218. It is this rationale that persuaded the Court in Newman-Green and again in Caterpillar.

B. Caterpillar

In Caterpillar, James David Lewis commenced a civil action in state court against Caterpillar and Whayne Supply. 519 U.S. at 64-65, 117 S.Ct. 467. Lewis and Whayne Supply were both citizens of Kentucky. Id. Subsequently, Liberty Mutual intervened as a plaintiff, asserting subrogation claims against both Caterpillar and Whayne Supply. Id. at 65, 117 S.Ct. 467. After Lewis settled with Whayne Supply, Caterpillar removed the action, asserting diversity jurisdiction. Id. Lewis moved for remand, contending correctly that there was not complete diversity because Liberty Mutual's claims against Whayne Supply kept it in the suit. Id. at 65-66, 117 S.Ct. 467. The district court erroneously denied the motion. Prior to trial, Liberty Mutual settled with Whayne Supply. Id. at 66, 117 S.Ct. 467. The action proceeded to trial, resulting in a judgment for Caterpillar. Id. at 66-67, 117 S.Ct. 467. The Sixth Circuit reversed, concluding that the error of the court in failing to remand made it necessary to vacate the district court judgment. Id. at 67, 117 S.Ct. 467.

The Supreme Court reversed the Sixth Circuit, effectively reinstating the jury verdict. Id. at 78, 117 S.Ct. 467. The Court held that a "district court's error in failing to remand a case improperly removed is not fatal to the ensuing adjudication if federal jurisdiction requirements are met at the time judgment is entered." Id. at 64, 117 S.Ct. 467; see also Howery v. Allstate Ins. Co., 243 F.3d 912, 916 & n. 5 (5th Cir.2001) (citing Caterpillar for this proposition); H&D Tire & Automotive-Hardware, Inc. v. Pitney Bowes, Inc., 227 F.3d 326, 328 (5th Cir.2000) (same). Addressing the jurisdictional problem specifically, the Court provided that any "jurisdictional defect was cured, i.e., complete diversity was established before the trial commenced. Therefore the Sixth Circuit erred in resting its decision on the absence of subject-matter jurisdiction." Caterpillar, 519 U.S. at 73, 117 S.Ct. 467; accord Grubbs v. Gen. Elec. Credit Corp., 405 U.S. 699, 700, 92 S.Ct. 1344, 31 L.Ed.2d 612 (1972) (holding that an erroneous removal need not cause destruction of final judgment if requirements of subject matter jurisdiction are satisfied when judgment is entered).

The Supreme Court then addressed the still-existing statutory problem — the fact that when the action was removed, it was not removable pursuant to 28 U.S.C. § 1441(a) (1994). The question remaining was whether this error, which lurked "in the unerasable history of the case," required reversal of the district court. Caterpillar, 519 U.S. at 73, 117 S.Ct. 467. The Court concluded that although arguments could be made for reversal on this ground, these arguments failed because they "run up against an overriding consideration. Once a diversity case has been tried in federal court, with rules of decision supplied by state law under the regime Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ..., considerations of finality, efficiency, and economy become overwhelming." Id. at 75, 77, 117 S.Ct. 467 ("To wipe out the adjudication postjudgment, and return to state court a case now satisfying all federal jurisdictional requirements, would impose an exorbitant cost on our dual court system, a cost incompatible with the fair and unprotracted administration of justice."); see also Knop v. McMahan, 872 F.2d 1132, 1139 n. 16 (3d Cir.1989) ("To permit a case in which there is complete diversity throughout trial to proceed to judgment and then cancel the effect of that judgment and relegate the parties to a new trial in a state court because of a brief lack of complete diversity at the beginning of the case would be a waste of judicial resources. It would also encourage litigants to speculate on the jurisdiction issue by saving it for use in the event of a loss.").

While considerations of finality and judicial economy come into play "[o]nce a diversity case has been tried in ...