Opinion ID: 146487
Heading Depth: 1
Heading Rank: 3

Heading: Vaden's Impact on These Cases.

Text: As the district court and the parties acknowledge, Vaden does not directly control these cases because the Supreme Court carefully defined the issues and limited its holding to § 4 petitions based upon federal question jurisdiction: we approve the look through approach to this extent: A federal court may look through a § 4 petition to determine whether it is predicated on an action that arises under federal law; in keeping with the well-pleaded complaint rule... however, a federal court may not entertain a § 4 petition based on the contents, actual or hypothetical, of a counterclaim. 129 S.Ct. at 1273. Here, Northport bases its claim of independent federal jurisdiction on undisputed allegations of diversity of citizenship between the parties to the federal actions, Northport and the representatives, and the requisite amounts in controversy. In their motions to vacate the orders compelling arbitration, the representatives distorted the Supreme Court's decision in Vaden. First, ignoring the nature of the circuit conflict at issue, and the Court's careful statement of its limited holding, the representatives argued that the Court resolved a broad conflict in the circuits by adopting the look through approach for all § 4 jurisdictional issues, diversity jurisdiction as well as federal question jurisdiction. Second, they argued that the Court's discussion of the second issue in Vaden the nature of the look through to be conducted in federal question casesmust be applied in deciding diversity of citizenship (and presumably amount in controversy) § 4 jurisdictional disputes. [4] The district court adopted these arguments. Because the entire actual controversy in each case involved the non-diverse nursing home administrators, the court vacated the orders compelling arbitration, explaining: Diversity jurisdiction in this Court was found only because [Northport] broke off a piece of the underlying dispute and sought to arbitrate it. While this was within the mainstream of case law before Vaden, it clearly cannot be done now. On appeal, Northport argues that Vaden did not mandate a new analysis for § 4 diversity jurisdiction disputes and therefore our prior decision in Advance America is controlling. The representatives counter by arguing that, after Vaden, courts must look through to the whole controversy as framed by the parties in deciding § 4 diversity jurisdiction disputes. They further argue that this is not contrary to Advance America, because that case involved only an amount-in-controversy diversity dispute, and we applied a look through approach in resolving that issue. This contention is without merit. In Advance America we looked through only to the value at stake in the arbitration sought to be compelled, 526 F.3d at 1174, not to the whole controversy as framed by the parties in a parallel state court action. If the nature of the look through is the issueand without question some type of look through is needed to determine the amount in controversy for diversity jurisdiction purposesthe look through we conducted in Advance America is comparable to the look through unsuccessfully urged by the dissenting Justices in Vaden. This case involves diversity of citizenship, not amount in controversy, and on that issue the pre- Vaden circuit decisions were unanimous in looking only to the citizenship of the parties to the federal action. Of course, the Supreme Court's resolution of a different circuit split in Vaden could implicitly overrule this line of diversity jurisdiction circuit precedents, even though the Court carefully limited its decision to federal question jurisdiction issues. Were we to conclude that Vaden has that impact, then Advance America would not be controlling precedent. [I]t is well settled that a panel may depart from circuit precedent based on an intervening opinion of the Supreme Court that undermines the prior precedent. Ark. Blue Cross & Blue Shield v. Little Rock Cardiology Clinic, P.A., 551 F.3d 812, 821 (8th Cir.2009). The fundamental flaw in the representatives' contention that Vaden implicitly overruled prior circuit court diversity jurisdiction decisions (favorably cited in Advance America) is that it ignores the underlying facts and the Supreme Court's decision in Moses H. Cone. [5] In that case, the Supreme Court stated that the independent basis of federal jurisdiction was diversity of citizenship. But it did not discuss that threshold issue, despite noting the presence of a non-diverse party who made the parallel state court action non-removable. 460 U.S. at 7 & n. 4, 103 S.Ct. 927. In deciding that abstention principles did not require a stay of the federal action, and affirming the order compelling arbitration, the Court explained, Although the Hospital will have to litigate the arbitrability issue in federal rather than state court, that dispute is easily severable from the merits of the underlying disputes. Id. at 20-21, 103 S.Ct. 927. Moses H. Cone is factually on all fours with these cases. Even if no party challenged diversity jurisdiction, that the Supreme Court did not even discuss the issue is telling because in other cases it has noted that federal courts are obligated to consider lack of subject matter jurisdiction sua sponte. Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 93-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998), citing Great So. Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 453, 20 S.Ct. 690, 44 L.Ed. 842 (1900). Thus, the representatives' contention requires us to assume both that the Court overlooked a serious diversity jurisdiction issue in Moses H. Cone and then implicitly overruled Cone's jurisdictional underpinnings in Vaden. This is contrary to well-established principles. The Supreme Court does not normally overturn, or so dramatically limit, earlier authority sub silentio.  Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 18, 120 S.Ct. 1084, 146 L.Ed.2d 1 (2000). In addition to a strong reluctance to assume that the Court implicitly overruled an earlier precedent, we find many clues in the majority opinion in Vaden that it did not intend to overrule Moses H. Cone sub silentio. The Court cited Moses H. Cone approvingly. It carefully limited its statement of the issues and holding to federal question jurisdiction. It cited the circuit court cases creating the federal question conflict but did not cite any of the circuit court § 4 diversity cases. This was not likely inadvertent because the circuit court opinions adopting the look through approach to federal question issues cited their earlier no-look-through diversity decisions approvingly. Moreover, in describing the curious practical consequences of the no-look-through approach to federal question issues, the Court explained that it limited federal courts to entertaining § 4 petitions only when a federal-question suit is already before the court, when the parties satisfy the requirements for diversity-of-citizenship jurisdiction, or when the dispute over arbitrability involves a maritime contract. 129 S.Ct. at 1275 (emphasis added). In other words, while the Court adopted the look-through approach to expand the universe of § 4 cases in which there will be an independent basis of federal question jurisdiction to be more compatible with diversity jurisdiction cases (i.e., Moses H. Cone ), the representatives urge us to read Vaden as severely contracting pre-existing § 4 diversity jurisdiction. Finally, we think it significant that Vaden relied on traditional principles of federal question jurisdiction, such as the well-pleaded complaint rule, in fashioning its look-through approach. A traditional principle of diversity jurisdiction is that it cannot be defeated by a non-diverse joint tortfeasor who is not a party to the federal action, unless that party is indispensable under Rule 19. Temple v. Synthes Corp., 498 U.S. 5, 7, 111 S.Ct. 315, 112 L.Ed.2d 263 (1990). For all these reasons, we decline to conclude that Moses H. Cone was implicitly overruled sub silentio in Vaden. Therefore, Moses H. Cone continues to be precedent that resolves these appeals. As the Supreme Court has frequently instructed, If a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions. Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989), quoted in Agostini v. Felton, 521 U.S. 203, 237, 117 S.Ct. 1997, 138 L.Ed.2d 391 (1997). Likewise, Vaden did not implicitly overrule our decision in Advance America and the pre- Vaden § 4 diversity jurisdiction decisions from other circuits. Accord L.A. Fitness Int'l LLC v. Harding, 2009 WL 3676272, at -3 (W.D.Wash., Nov.2, 2009). Therefore, we conclude that diversity of citizenship is determined in these cases by the citizenship of the parties named in the proceedings before the district court, plus any indispensable parties who must be joined pursuant to Rule 19. [6]