Opinion ID: 772184
Heading Depth: 2
Heading Rank: 1

Heading: Diversity Subject Matter Jurisdiction

Text: 9 As we discussed in Squibb I, Squibb's consolidated complaint named Allan Peter Denis Haycock, a British subject, as a representative of certain underwriters at Lloyd's. See Squibb I, 160 F.3d at 928. The parties later stipulated that Haycock was appearing in the action both in his individual capacity, and for administrative convenience, as a representative of all Lloyd's Underwriters. 1 Id. (internal quotation marks omitted). 10 When, during the pendency of the last appeal, we asked for additional briefing on the issue of subject matter jurisdiction given the presence of these underwriters at Lloyd's, the parties discovered that Haycock had died. Squibb and Lloyd's therefore moved to add Stephen Merrett, another Lloyd's underwriter and British subject, as a replacement for Haycock. See id. at 928 & n.6. We did not grant this motion, but rather remanded, asking the district court to reassess all the facts supporting diversity jurisdiction. We also asked the district court, after it had all of the information before it, to determine whether the substitution of Merrett would be proper. 11 In particular (because we had concluded that suing an underwriter in a representative capacity required the court to determine if each and every party that individual represented -- in this case, a large number of unspecified individuals -- met the diversity requirements), we asked the district court to ascertain if the parties represented by Haycock were indispensable or if, instead, one Lloyd's underwriter could be sued solely in his individual capacity without prejudicing the other parties to the litigation. See id. at 939. If this were possible, and if the individual underwriter sued was both diverse in citizenship and satisfied the statutory requirement of a minimum amount in controversy, the jurisdictional problem could be avoided in a fairly straightforward fashion. 12 On remand, the district court found that, in the instant case, any individual underwriter at Lloyd's (a Name) could be sued in his individual capacity without creating difficulties. See Squibb II, 1999 WL 350857, at . Specifically, it held that dismissing the suit against either Haycock or Merrett in their representative capacity would not result in the dismissal of indispensable parties because the record clearly establishes that as a matter of contract and the rules of Lloyd's, a judgment [in this country] against either Haycock or Merrett will be honored by the other Names, i.e., by the other underwriters who are bound by contract to share the policy liability. Squibb II, 1999 WL 350857, at . As a result, the court concluded that there would be no prejudice to any of the other defendants from dropping the represented parties. It expressly found that the record establishes that the absent Names are, for practical purposes, as bound by a judgment against Haycock or Merrett in their individual capacities as they would be by a judgment against them in their representative capacities. Id. at . 13 The district court also determined that both Haycock and Merrett satisfied the diversity requirements and that, therefore, subject matter jurisdiction could be based on the presence of either one of them, individually. First, as British subjects, they each met the diversity of citizenship standards. Second, for a variety of reasons, most of which we need not consider, the court found that both had satisfied the amount in controversy requirement. See id. at -. We now ratify the district court's conclusion that subject matter jurisdiction over this suit can be established. But we do so only on the premise that Merrett (in his individual capacity) will be the sole Name present as a defendant. To that end, we order that Merrett be substituted for Haycock as a defendant, and that Merrett's presence in the suit be solely in an individual capacity. 14 To begin with, we agree with the district court -- substantially for the reasons it gave -- that Merrett, a British subject, may be sued in an individual capacity, and that, contrary to the claims of CNA, no prejudice results if we allow the suit to be recast as a suit against Merrett in that capacity. As a matter of contract, each of the underwriters of the policy will be bound by an individual judgment against Merrett. See Squibb I, 160 F.3d at 929. And given the peculiar structure of Lloyd's, this fact suffices to protect all the parties, substantially to the same degree as if Merrett (or Haycock) were being sued in a representative capacity. Moreover, given Haycock's death, there is no problem in substituting Merrett for Haycock. See Fed. R. App. P. 43(a)(1) (if a party dies and there is no personal representative to act on his behalf, the court may take such action as it deems appropriate); see, e.g., Ward v. Edgeton, 59 F.3d 652 (7th Cir. 1995). 15 The more difficult question is whether Merrett, himself, satisfies the requirements of diversity, and in particular those concerning the required jurisdictional amount. Merrett's liability -- the district court found -- is $ 23,762.00. As a result, the requirement will be readily satisfied if it is found that the $ 10,000 jurisdictional amount, which was in effect at the time the consolidated complaint was filed, applies, but not if the $ 75,000 amount currently mandated, governs. Which figure controls depends on whether, upon the granting of Squibb's motion to amend its complaint to effect the substitution, the replacement of Haycock in a representative capacity with Merrett in an individual capacity relates back under Rule 15(c)(3) of the Federal Rules of Civil Procedure. That rule provides: 16 An amendment of a pleading relates back to the date of the original pleading when . . . the amendment changes the party or the naming of the party against whom a claim is asserted if the foregoing provision (2) [requiring that the asserted claims arise out of the occurrence set forth in the original pleading] is satisfied and, within the period provided by Rule 4(m) for service of the summons and complaint, the party to be brought in by amendment (A) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (B) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party. 17 Fed. R. Civ. P. 15(c). The district court concluded that all of the rule's requirements for relating back had been satisfied here. It therefore acted as if the substitution had taken place on the date the complaint was filed in 1984 and assessed diversity with respect to Merrett as of that moment. 2 18 We affirm the district court's conclusions (a) that the amendment relates back under Rule 15(c)(3), (b) that, therefore, the $ 10,000 amount in controversy requirement applies, and (c) that it has been met. In reaching this result, we hold that, where it is appropriate to relate back an amendment to a pleading under Rule 15, jurisdiction is assessed as if the amendment had taken place at the time the complaint was first filed. This means that the applicable law as to what amount must be in controversy, and as to how diverse the parties must be, will be that in effect at the time of the filing of the relevant complaint. Similarly, questions of fact, such as how much money is actually at stake and where each party lives, will also be determined with reference to the date on which the relevant complaint was filed. 19 Although we have never explicitly stated the rule in this fashion before, it clearly follows from the weight of diversity jurisprudence. As a general matter, it is widely accepted that amendments to cure subject matter jurisdiction relate back. See 6A Charles Alan Wright et al., Federal Practice and Procedure 1497, at 80 (2d ed. 1990) (Amendments curing a defective statement of subject matter jurisdiction . . . will relate back . . . . (footnotes omitted)); 3 James William Moore, Moore's Federal Practice P 15.15 [3.--2], at 15-154 (1996) (Even though parties must be dropped to perfect diversity jurisdiction, if they were not indispensable parties the amendment will relate back to allow for entry of judgment on the original verdict where this is not prejudicial to the remaining parties. Similarly, although there may not be complete diversity when the action is brought, an amendment dropping non-indispensable parties to cure the jurisdictional defect will relate back. (footnotes omitted)); see also Carney v. Resolution Trust Corp., 19 F.3d 950, 954 (5th Cir. 1994) (holding that relation back is appropriate even when the amendment states a new basis for subject matter jurisdiction); Berkshire Fashions, Inc. v. The M.V. Hakusan II, 954 F.2d 874, 887-88 (3d Cir. 1992) (same, and also holding specifically that when an amendment meets the requirements of Rule 15(c)(3), it is proper to evaluate that amendment based on the law as of the date the complaint was filed when deciding whether the amount in controversy requirement is satisfied). 20 Moreover, once subject matter jurisdiction is cured by an amendment, courts regularly have treated the defect as having been eliminated from the outset of the action. In other words, where a change in parties, necessary to the existence of jurisdiction, is appropriate and is made (even on or after appeal), appellate courts have acted as if the trial court had jurisdiction from the beginning of the litigation. This has permitted such courts to affirm decisions of trial courts on the merits, although the requisite change in the parties did not occur until much later in the action. See, e.g., Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 104 L. Ed. 2d 893, 109 S. Ct. 2218 (1989). By thus retroactively validating the pre-amendment substantive decisions of the lower court, appellate courts -- the Supreme Court has told us -- avoid the waste of time and resources [that] would be engendered by remanding to the District Court or by forcing the[] parties to begin anew. Id. at 838. 21 For analogous reasons, federal courts have always assessed jurisdiction and evaluated the factual premises for it, e.g., the amount in controversy and the citizenship of parties, as of the moment the complaint was filed. See 13B Wright et al., Federal Practice and Procedure 3608, at 448-49 (2d ed. 1984 & Supp. 2000). As a result, we have consistently held that federal jurisdiction is not defeated if one party, subsequent to the filing of a complaint, becomes a citizen of the same state as his opponent. See, e.g., In re Agent Orange Prod. Liab. Litig., 818 F.2d 145, 163 (2d Cir. 1987). The same is true with respect to changes in the law. Thus, if a suit is filed and, while the suit is pending, the minimum jurisdictional amount is raised by statute, the court does not lose jurisdiction, even though the amount in controversy in that particular suit does not satisfy the new standard. See, e.g., Central Fiber Corp. v. Site Servs. Ltd., 962 F. Supp. 1426, 1427 (D. Kan. 1997). 22 Having concluded that the relevant time at which to determine whether Merrett met the jurisdictional amount was the moment the instant suit was filed, and that, as of that time, the jurisdictional requirement was satisfied, the only issue that remains before us is whether Merrett's substitution for Haycock meets Rule 15(c)(3)'s standards. As mentioned earlier, this will be so if (1) there is no prejudice as a result of the substitution, (2) the party to be brought in by the curative amendment had notice of the action and knew or should have known that he would be named as the proper party in order to cure the jurisdictional defect, 3 and (3) the claims remain the same as those that were originally asserted. 23 In this case, as discussed above, (1) no prejudice results from replacing Haycock (in both his individual capacity and as the representative of the other Lloyd's Names) with Merrett in his individual capacity, (2) Merrett had notice that this action was brought and knew or should have known that he was the proper party to be sued had the parties not erred as a jurisdictional matter by going after Haycock in a representative capacity, and (3) the claims asserted against Merrett remained the same as those stated in the original 1984 consolidated complaint. 24 Because the substitution of Merrett properly relates back under Rule 15(c)(3) and because Merrett satisfies both the diversity of citizenship requirement and the applicable amount in controversy requirement, we find that, with Merrett as an individual defendant, diversity subject matter jurisdiction exists. We therefore dismiss Lloyd's and Haycock from the suit and substitute Merrett in his individual capacity in their place. Since, with this amendment, diversity jurisdiction over the suit has been established, we need not, and do not, express any opinion on any of the other bases for jurisdiction considered by the district court.