Newman-Green Inc. v. Alfonzo-Larrain

• Decision Date: 12 June 1989
• Docket Number: ALFONZO-LARRAIN,No. 88-774,NEWMAN-GREE,INC,88-774
• Parties: , Petitioner v. Alejandro, et al
• Court: U.S. Supreme Court

490 U.S. 826

109 S.Ct. 2218

104 L.Ed.2d 893

NEWMAN-GREEN, INC., Petitioner

v Alejandro ALFONZO-LARRAIN, et al.

No. 88-774.

Argued April 24, 1989.

Decided June 12, 1989.

Rehearing Denied Aug. 11, 1989.

See 492 U.S. 932, 110 S.Ct. 12.

Syllabus

Title 28 U.S.C. § 1332 confers diversity jurisdiction in the district courts when a citizen of one State sues both aliens and citizens of a State different from the plaintiff's, § 1332(a)(3), and when a citizen of a State sues aliens only, § 1332(a)(2). Petitioner, an Illinois corporation, invoking jurisdiction under § 1332(a)(3), brought a state-law contract action in the District Court against a Venezuelan corporation and, as joint and several guarantors of royalty payments due under the agreement, four Venezuelan citizens and one Bettison, a United States citizen domiciled in Venezuela. After several years of litigation, the District Court, inter a ia, granted partial summary judgment for the guarantors. A Court of Appeals panel found that Bettison's status as a United States citizen not domiciled within a State destroyed § 1332(a)(3) jurisdiction, but granted petitioner's motion to dismiss him from the suit, thereby producing complete diversity under § 1332(a)(2). The court then decided the merits. The Court of Appeals en banc reversed, concluding that neither 28 U.S.C. § 1653—which provides that "[d]efective allegations of jurisdiction may be amended . . . in the trial or appellate courts"—nor Federal Rule of Civil Procedure 21—which provides that a court may add or drop parties at any stage of the action on such terms as are just—empowers appellate courts to dismiss a dispensable party who spoils statutory diversity jurisdiction. However, recognizing that Rule 21 permits district courts to drop dispensable nondiverse parties, the court remanded the case to the District Court for a determination whether it would be prudent to drop Bettison from the litigation.

Held: A court of appeals has the authority to grant a motion to dismiss a dispensable nondiverse party and need not remand the case to the district court for dismissal in that court's discretion. Pp. 830-838.

(a) Since § 1653 speaks of amending jurisdictional allegations, it would apply if petitioner had made an incorrect statement about jurisdiction that actually existed, but it does not apply where, as here, there are defects in the jurisdictional facts themselves. This interpretation is consistent with § 1653's legislative history and the language of its predecessor statute, as well as the view of every Court of Appeals that has considered § 1653's scope. Pp. 830-832.

(b) Virtually every modern Court of Appeals faced with this issue has concluded that it has the authority to dismiss a dispensable nondiverse party by virtue of Rule 21. Furthermore, this Court has exercised similar authority both under Rule 21, see Mullaney v. Anderson, 342 U.S. 415, 72 S.Ct. 428, 96 L.Ed. 458, and prior to the enactment of the Federal Rules. See Carneal v. Banks, 10 Wheat. 181, 6 L.Ed. 297. Other early appellate courts relied for their authority to dismiss a nondiverse party on § 32 of the Judiciary Act of 1789 or on the courts' own inherent powers. This Court declines to disturb that deeply rooted understanding of appellate power, particularly when requiring dismissal of the suit after years of litigation would impose unnecessary and wasteful burdens on the parties, judges, and other litigants awaiting judicial attention. Here, the practicalities weigh heavily in favor of the decision to dismiss Bettison since, if the suit were dismissed, petitioner would be compelled to refile in the District Court against the diverse parties and proceed to a preordained judgment merely for the sake of a hypertechnical jurisdictional purity. Although an appellate court should exercise its authority sparingly, carefully considering whether dismissal of the nondiverse party will prejudice any of the other parties and remanding to the district court when appropriate, this Court declines to erect a per se rule that the district court must first make such a determination in every case. Here, none of the parties will be harmed by Bettison's dismissal, since his presence did not provide petitioner with a tactical advantage; since he was not indispensable to the suit; and since any possible prejudice to him personally was eliminated when the Court of Appeals panel terminated the litigation against him with prejudice. Pp. 832-838.

854 F.2d 916 (CA 7 1988), reversed and remanded.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, BLACKMUN, STEVENS, and O'CONNOR, JJ., joined. KENNEDY, J., filed a dissenting opinion, in which SCALIA, J., joined, post, p. 839.

Phil Caldwell Neal, Chicago, Ill., for petitioner.

Frank K. Heap, Chicago, Ill., for respondents.

Justice MARSHALL deliver d the opinion of the Court.

We decide today that a court of appeals may grant a motion to dismiss a dispensable party whose presence spoils statutory diversity jurisdiction.

I

Petitioner Newman-Green, Inc., an Illinois corporation, brought this state-law contract action in District Court against a Venezuelan corporation, four Venezuelan citizens, and William L. Bettison, a United States citizen domiciled in Caracas, Venezuela. Newman-Green's complaint alleged that the Venezuelan corporation had breached a licensing agreement, and that the individual defendants, joint and several guarantors of royalty payments due under the agreement, owed money to Newman-Green. Several years of discovery and pretrial motions followed. The District Court ultimately granted partial summary judgment for the guarantors and partial summary judgment for Newman-Green. 590 F.Supp. 1083 (ND Ill.1984). Only Newman-Green appealed.

At oral argument before a panel of the Seventh Circuit Court of Appeals, Judge Easterbrook inquired as to the statutory basis for diversity jurisdiction, an issue which had not been previously raised either by counsel or by the District Court Judge. In its complaint, Newman-Green had invoked 28 U.S.C. § 1332(a)(3), which confers jurisdiction in the District Court when a citizen of one State sues both aliens and citizens of a State (or States) different from the plaintiff's. In order to be a citizen of a State within the meaning of the diversity statute, a natural person must both be a citizen of the United States and be domiciled within the State. See Robertson v. Cease, 97 U.S. 646, 648-649, 24 L.Ed. 1057 (1878); Brown v. Keene, 8 Pet. 112, 115, 8 L.Ed. 885 (1834). The problem in this case is that Bettison, although a United States citizen, has no domicile in any State. He is therefore "stateless" for purposes of § 1332(a)(3). Subsection 1332(a)(2), which confers jurisdiction in the District Court when a citizen of a State sues aliens only, also could not be satisfied because Bettison is a United States citizen.

When a plaintiff sues more than one defendant in a diversity action, the plaintiff must meet the requirements of the diversity statute for each defendant or face dismissal. Strawbridge v. Curtiss, 3 Cranch 267, 2 L.Ed. 435 (1806).¹ Here, Bettison's "stateless" status destroyed complete diversity under § 1332(a)(3), and his United States citizenship destroyed complete diversity under § 1332(a)(2). Instead of dismissing the case, however, the Court of Appeals panel granted Newman-Green's motion, which it had invited, to amend the complaint to drop Bettison as a party, thereby producing complete diversity under § 1332(a)(2). 832 F.2d 417 (1987). The panel, in an opinion by Judge Easterbrook, relied both on 28 U.S.C. § 1653 and on Rule 21 of the Federal Rules of Civil Procedure as sources of its authority to grant this motion. The panel noted that, because the guarantors are jointly and severally liable, Bettison is not an indispensable party and dismissing him would not prejudice the remaining guarantors. 832 F.2d, at 420, citing Fed.Rule Civ.Proc. 19(b). The panel then proceeded to the merits of the case, ruling in Newman-Green's favor in large part but remanding to allow the District Court to quantify damages and to resolve certain minor issues.²

The Court of Appeals granted the remaining guarantors' motion for rehearing en ban and reversed the panel decision. 854 F.2d 916 (1988). Writing for the en banc majority, Judge Posner concluded that neither § 1653 nor Rule 21 empowers appellate courts to dismiss a dispensable party whose presence spoils statutory diversity jurisdiction. The court did not, however, order the dismissal of the lawsuit. Recognizing that Rule 21 permits district courts to drop a dispensable nondiverse party, the court remanded the case to the District Court for it to determine whether it would be prudent to drop Bettison from the litigation. Judge Easterbrook, joined by the other two members of the original panel, wrote a dissenting opinion in which he elaborated on the panel opinion. Id., at 927.

Unlike the Seventh Circuit, the Courts of Appeals for the Second, Third, Ninth, and District of Columbia Circuits have held that appellate courts have the power to dismiss jurisdictional spoilers like Bettison.³ We granted Newman-Green's petition for certiorari in order to resolve this conflict, 488 U.S. 1003, 109 S.Ct. 781, 102 L.Ed.2d 773 (1989), and now reverse.

II

The existence of federal jurisdiction ordinarily depends on the facts as they exist when the complaint is filed. See, e.g., Smith v. Sperling, 354 U.S. 91, 93, n. 1, 77 S.Ct. 1112, 1113, n. 1, 1 L.Ed.2d 1205 (1957). Like most general principles, however, this one is susceptible to exceptions, and the two that are potentially applicable here are reflected in 28 U.S.C. § 1653 and Rule 21 of the Federal Rules of Civil Procedure. We discuss each potential exception in turn.

A.

Title 28 U.S.C. § 1653, enacted as part of the revision of the Judicial Code in 1948, provides that "[d]efective allegations of jurisdiction may be...