Has the Seductive Siren of Judicial Frugality Ceased to Sing: Dataflux and Its Family Tree

In January of 2003, the Court of Appeals for the Second Circuit found it necessary to remand a case back to the district court for a determination as to whether subject matter jurisdiction existed. In reaching this decision, the court expressed its ongoing concern that instances of cases brought in federal court where diversity of citizenship was improperly alleged or nonexistent had become "far too common." The court reiterated its prior admonition to counsel and the district courts not to treat the question of subject matter jurisdiction as one that only needed to be considered when raised by a party or the court. Rather, the issue of subject matter jurisdiction should be viewed as a threshold issue for resolution. In addition, the court addressed possible sanctions for pursuing an action with a doubtful jurisdictional basis.This Article posits that the Supreme Court's disproportionate glorification of judicial efficiency and economy has resulted in decisions endorsing and expanding the doctrine of retroactive diversity jurisdiction. The Court professes that this doctrine is merely the result of permissible exceptions to the court-created time-of-filing rule. Although the Court may choose to characterize retroactive jurisdiction as the result of legitimate exceptions to a court-created policy, the doctrine is undermining the constitutional and statutory commandment that federal courts, as courts of limited jurisdiction, must have proper subject matter jurisdiction prior to considering the merits of a case. Consequently, the Court's validation of retroactive jurisdiction contravenes the jurisdictional precept that where a court lacks the jurisdictional authority to entertain a case, any judgment entered by that court is void. This Article maintains that there is a strong correlation between the growing lack of respect for the prerequisite of diversity jurisdiction shown by counsel and the Court's manipulation of the threshold requirement of proper subject matter jurisdiction. In such an atmosphere, it is not surprising that the Scarlett O'Hara Syndrome is flourishing. In order to renovate this situation, the Supreme Court needs to stop allowing piecemeal "jurisdictional repair work" to be conducted "in its halls." As a backdrop for these propositions, Part II of this Article will provide a brief historical overview of the various theories regarding the creation and original purpose of diversity jurisdiction. The origins of two key rules or policies, that of complete diversity and the time-of-filing rule, will also be traced. Over the past 175 years, these tenets have, in essence, become grafted onto the actual language of the statute granting federal courts original jurisdiction over cases based on diversity of citizenship. Part III will examine and critique the relevant Supreme Court decisions that laid the foundation for the Court's most recent decision in the area of diversity jurisdiction, Grupo Dataflux v. Atlas Global Group, L.P. Two of the foundational cases, Newman-Green, Inc. v. Alfonzo-Larrain and Caterpillar Inc. v. Lewis, are seminal decisions legitimizing the retroactive creation of diversity jurisdiction. Issues of federalism raised by retroactive diversity jurisdiction, particularly in removal situations, and the question of the Court's lack of fidelity to precedent resulting from its insouciant treatment of the time-of-filing rule will also be addressed. The third foundation case, Carden v. Arkoma Associates, sets forth the rule governing the determination of the citizenship of limited partnerships for the purpose of establishing diversity jurisdiction. The result in Carden can be characterized as nothing short of absurd. Part IV will focus on the Dataflux decision and its place in the Court's teeter-totter approach to the longstanding rules surrounding diversity jurisdiction. Instead of recognizing an additional exception permitting retroactive jurisdiction, the Dataflux Court chose to resurrect a bright-line time-of-filing rule. This choice undercut the policy considerations supporting its prior jurisprudence in the area and eroded a substantial portion of the already shaky foundation of those decisions. Even more importantly, however, is that the mixed signals the Court is sending -- as illustrated by Dataflux and the foundation cases -- continue to subvert the respect that should be shown by those invoking the diversity jurisdiction of the federal district courts.