541 U.S. 567 (2004), 02-1689, Grupo Dataflux v. Atlas Global Group, L.P.

Docket Nº:No. 02-1689
Citation:541 U.S. 567, 124 S.Ct. 1920, 158 L.Ed.2d 866
Party Name:Grupo Dataflux v. Atlas Global Group, L.P.
Case Date:May 17, 2004
Court:United States Supreme Court
 
FREE EXCERPT

Page 567

541 U.S. 567 (2004)

124 S.Ct. 1920, 158 L.Ed.2d 866

Grupo Dataflux

v.

Atlas Global Group, L.P.

No. 02-1689

United States Supreme Court

May 17, 2004

Argued March 3, 2004

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

Syllabus

Respondent Atlas Global Group, L.P., a limited partnership created under Texas law, filed a state law suit against petitioner, a Mexican corporation, in federal court, alleging diversity jurisdiction. After the jury returned a verdict for Atlas, but before entry of judgment, petitioner moved to dismiss for lack of subject matter jurisdiction because the parties were not diverse at the time the complaint was filed. In granting the motion, the Magistrate Judge found that, as a partnership, Atlas was a Mexican citizen because two of its partners, also respondents, were Mexican citizens at the time of filing; and that the requisite diversity was absent because petitioner was also a Mexican citizen. On appeal, Atlas urged the Fifth Circuit to disregard the diversity failure at the time of filing because the Mexican partners had left Atlas before the trial began and thus diversity existed thereafter. Relying on Caterpillar Inc. v. Lewis, 519 U.S. 61, the Fifth Circuit held that the conclusiveness of citizenship at the time of filing is subject to an exception where, as here, the jurisdictional error was not identified until after the jury's verdict and the post-filing change in the partnership cured the jurisdictional defect before it was identified.

Held: a party's post-filing change in citizenship cannot cure a lack of subject matter jurisdiction that existed at the time of filing in a diversity action. This Court has long adhered to the rule that subject matter jurisdiction in diversity cases depends on the state of facts that existed at the time of filing. Caterpillar's statement that "[o]nce a diversity case has been tried in federal court . . . considerations of finality, efficiency, and economy become overwhelming," 519 U.S. at 75, did not augur a new approach to deciding whether a jurisdictional defect has been cured. The jurisdictional defect Caterpillar addressed had been cured by the dismissal of the party that had destroyed diversity, a curing method that had long been an exception to the time-of-filing rule. This Court has never approved a deviation from the longstanding rule that

[w]here there is no change of party, a jurisdiction depending on the condition of the party is governed by that condition, as it was at the commencement of the suit.

Conolly v. Taylor, 2 Pet. 556, 565 (emphasis added). Dismissal for lack of subject matter jurisdiction is the only

Page 568

option available here. Allowing a citizenship change in the partnership to cure the jurisdictional defect existing at the time of filing would contravene the Conolly principle. Apart from breaking with this Court's longstanding precedent holding that "finality, efficiency, and judicial economy" can justify suspension of the time-of-filing rule would create an exception of indeterminate scope that is bound to produce costly collateral litigation. Pp. 570-582.

312 F.3d 168 reversed.

SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and O'CONNOR, KENNEDY, and THOMAS, JJ., joined. GINSBURG, J., filed a dissenting opinion in which STEVENS, SOUTER, and BREYER, JJ., joined, post, p. 582.

OPINION

JUSTICE SCALIA delivered the opinion of the Court.

This case presents the question whether a party's post-filing change in citizenship can cure a lack of subject matter jurisdiction that existed at the time of filing in an action premised upon diversity of citizenship. See 28 U.S.C. § 1332.

I

Respondent Atlas Global Group, L.P., is a limited partnership created under Texas law. In November 1997, Atlas filed a state law suit against petitioner Grupo Dataflux, a Mexican corporation, in the United States District Court for the Southern District of Texas. The complaint contained claims for breach of contract and in quantum meruit, seeking over $1.3 million in damages. It alleged that "[f]ederal jurisdiction is proper based upon diversity jurisdiction pursuant to 28 U.S.C. § 1332(a), as this suit is between a Texas citizen [Atlas] and a citizen or subject of Mexico [Grupo Dataflux]."[1]

Page 569

App. 19a (Complaint § 3). Pretrial motions and discovery consumed almost three years. In October, 2000, the parties consented to a jury trial presided over by a Magistrate Judge. On October 27, after a 6-day trial, the jury returned a verdict in favor of Atlas awarding $750,000 in damages.

On November 18, before entry of the judgment, Dataflux filed a motion to dismiss for lack of subject matter jurisdiction because the parties were not diverse at the time the complaint was filed. See Fed.Rules Civ.Proc. 12(b)(1), (h)(3). The Magistrate Judge granted the motion. The dismissal was based upon the accepted rule that, as a partnership, Atlas is a citizen of each state or foreign country of which any of its partners is a citizen. See Carden v. Arkoma Associates, 494 U.S. 185, 192-195 (1990). Because Atlas had two partners who were Mexican citizens at the time of filing, the partnership was a Mexican citizen. (It was also a citizen of Delaware and Texas based on the citizenship of its other partners.) And because the defendant, Dataflux, was a Mexican corporation, aliens were on both sides of the case, and the requisite diversity was therefore absent. See Mossman v. Higginson, 4 Dall. 12, 14 (1800).

On appeal, Atlas did not dispute the finding of no diversity at the time of filing. It urged the Court of Appeals to disregard this failure and reverse dismissal because the Mexican partners had left the partnership in a transaction consummated the month before trial began. Atlas argued that since diversity existed when the jury rendered its verdict, dismissal was inappropriate. The Fifth Circuit agreed. 312 F.3d 168, 174 (2002). It acknowledged the general rule that for purposes of determining the existence of diversity

Page 570

jurisdiction, the citizenship of the parties is to be determined with reference to the facts as they existed at the time of filing. Id. at 170. However, relying on our decision in Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996), it held that the conclusiveness of citizenship at the time of filing was subject to exception when the following conditions are satisfied:

(1) [A]n action is filed or removed when constitutional and/or statutory jurisdictional requirements are not met, (2) neither the parties nor the judge raise the error until after a jury verdict has been rendered, or a dispositive ruling has been made by the court, and (3) before the verdict is rendered, or ruling is issued, the jurisdictional defect is cured.

312 F.3d at 174. The opinion strictly limited the exception as follows:

If at any point prior to the verdict or ruling, the issue is raised, the court must apply the general rule and dismiss regardless of subsequent changes in citizenship.

Ibid.

The jurisdictional error in the present case not having been identified until after the jury returned its verdict, and the post-filing change in the composition of the partnership having (in the Court's view) cured the jurisdictional defect, the Court reversed and remanded with instructions to the District Court to enter judgment in favor of Atlas. Ibid. We granted certiorari. 540 U.S. 944 (2003).

II

It has long been the case that "the jurisdiction of the Court depends upon the state of things at the time of the action brought." Mollan v. Torrance, 9 Wheat. 537, 539 (1824). This time-of-filing rule is hornbook law (quite literally[2] )

Page 571

taught to first-year law students in any basic course on federal civil procedure. It measures all challenges to subject matter jurisdiction premised upon diversity of citizenship against the state of facts that existed at the time of filing -- whether the challenge be brought shortly after filing, after the trial or even for the first time on appeal. (Challenges to subject matter jurisdiction can of course be raised at any time prior to final judgment. See Capron v. Van Noorden, 2 Cranch 126 (1804).)

We have adhered to the time-of-filing rule regardless of the costs it imposes. For example, in Anderson v. Watt, 138 U.S. 694 (1891), two executors of an estate, claiming to be New York citizens, had brought a diversity-based suit in federal court against defendants alleged to be Florida citizens. When it later developed that two of the defendants were New York citizens, the plaintiffs sought to save jurisdiction by revoking the letters testamentary for one executor and alleging that the remaining executor was in fact a British citizen. The Court rejected this attempted post-filing salvage operation because at the time of filing, the executors included a New Yorker. Id. at 708. It dismissed the case for want of jurisdiction even though the case had been filed about 51/2 years earlier, the trial court had entered a decree ordering land to be sold 4 years earlier, the sale had been made, exceptions had been filed and overruled, and the case had come to the Court on appeal from the order confirming the land sale. Id. at 698. Writing for the Court, Chief Justice Fuller adhered to the principle set forth in Conolly v. Taylor, 2 Pet. 556, 565 (1829), that "jurisdiction depending on the condition of the party is governed by that condition, as it was at the commencement of the suit." "[J]urisdiction," he reasoned,

could no more be given . . . by the amendment than if a citizen of Florida had sued another in

Page 572

that court and subsequently sought to give it jurisdiction by removing from the State.

138 U.S. at 708.[3]

It is uncontested that application of the time-of-filing rule...

To continue reading

FREE SIGN UP