Court Opinion

ID: 45647
Source: CourtListenerOpinion
Date Created: 2010-04-25 22:41:53+00
Date Added: 2024-06-11T17:17:27.749490
License: Public Domain

United States Court of Appeals
                                                              Fifth Circuit
                                                            F I L E D
                UNITED STATES COURT OF APPEALS
                                                            August 17, 2006
                     for the Fifth Circuit
                                                         Charles R. Fulbruge III
                                                                 Clerk

                           No. 05-20822

                     ELLISON STEEL, INC.,

                      Plaintiff-Counter Defendant-Appellee,

                              VERSUS

             GREYSTAR CONSTRUCTION LP, ET AL.,

                                                     Defendants,

             GREYSTAR CONSTRUCTION WEST, LLC,

                      Defendant-Counter Claimant-Appellant.

       Appeal from the United States District Court
            for the Southern District of Texas

                         (4:04-CV-629)

Before DeMOSS, BENAVIDES, and PRADO, Circuit Judges.

PER CURIAM:*

      Appellant Greystar Construction West, LLC (“GCW”)

appeals   the   district    court’s    Amended   Final     Judgment

  *
   Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.
awarding attorney’s fees in the amount of $123,725.00 to

Appellee Ellison Steel, Inc. (“Ellison”) pursuant to an

arbitration award adopted by the court. Because it is not

clear from the record whether the district court had

subject matter jurisdiction over the case, specifically,

whether the various parties to the case were diverse, we

vacate the district court’s judgment and remand the case

to the district court for a determination of whether

subject matter jurisdiction existed.

                               I.

      Underlying this case is a contract dispute regarding

a   Colorado   construction    project.     GCW,    a   citizen    of

Delaware and Colorado for diversity purposes, was the

general contractor on the project; Ellison, a citizen of

Texas for diversity purposes, was GCW’s subcontractor.

The    subcontract   between       the   parties     contained     an

arbitration    clause   and    a     Colorado      choice   of    law

provision. The subcontract also specified that the party

prevailing in any litigation or arbitration was entitled

to recover from the other party its attorney’s fees and

costs.

                               2
      In November 2003, one of Ellison’s subcontractors,

H&E Equipment Services LLC, sued GCW and Ellison in

Colorado state court to recover amounts allegedly owed by

Ellison for work on the construction project.2 A month

later,   in    December    2003,       GCW   initiated      arbitration

against Ellison in Colorado to recover amounts allegedly

owed under their subcontract. Finally, in January 2004,

Ellison filed suit against GCW on their subcontract in

Texas state court.3 GCW removed the Texas action to the

U.S. District Court for the Southern District of Texas on

diversity     grounds.    Post-removal,       Ellison       amended   its

complaint to add claims against another party, Greystar

Construction     Development,      L.P.      (“GCD”    or   the   “named

defendant”), a party GCW alleges is non-diverse. Ellison

later    clarified   that    it        intended   to    sue    Greystar

Development & Construction LP (“GDC” or the “intended

defendant”), a party GCW alleges is also non-diverse.

  2
   Another of Ellison’s subcontractors, Namasco Corporation, later
intervened to recover the amounts allegedly owed it.
  3
   Ellison named Greystar Construction, L.P. as the defendant, but
GCW clarified when it removed the case that it was the “proper
party” and    “intended   defendant”  because   the   construction
subcontract was between Ellison and GCW.

                                   3
GDC’s name appears on all subsequent court filings. After

Ellison added claims against GDC, GCW filed a motion to

dismiss the case, an alternative motion to stay the case

pending resolution of arbitration, and a motion to strike

the joinder of GDC. The court denied without prejudice

the motion to dismiss and the motion to strike and agreed

to stay the case so that the Colorado arbitration could

proceed.

      The arbitrator awarded Ellison $47,528.49 in damages

and    $6,812.25    in   pre-award      interest.    However,     the

arbitrator ordered each party to bear its own costs,

finding that neither party was the prevailing party for

purposes of the contractual fee/cost-shifting clause in

the arbitration agreement. The arbitrator then found that

it    did   not   have   jurisdiction    to   make   an   award    of

attorney’s fees, nor to make an express finding regarding

who the prevailing party was with respect to attorney’s

fees, and stated that the court of law in which the

parties sought to enforce the award was the appropriate

tribunal to decide those issues.

      After arbitration concluded, Ellison moved to reopen

                                 4
the case pending in the Southern District so that the

court    could   award      attorney’s    fees     and   enter    final

judgment pursuant to the arbitration award. GCW contested

Ellison’s motion to reopen and filed alternative motions

to dismiss for lack of personal jurisdiction, to dismiss

for improper venue, and to transfer venue. The court

granted Ellison’s motion to reopen and its request for

attorney’s fees and denied GCW’s alternative motions. GCW

then    filed    an   answer      to   Ellison’s     First    Amended

Complaint, a counterclaim, and various other motions,

arguing      that     the      court    lacked     subject       matter

jurisdiction, that venue was not proper in the Southern

District, and that the court should either abstain from

exercising jurisdiction, confirm the arbitration award,

specifically the arbitrator’s finding that neither party

was the prevailing party, or remand to the arbitrator so

that    he   could    answer    any    open   questions      regarding

attorney’s fees. GCW also argued that the district court

had    misinterpreted       Colorado   law    in   determining     that

Ellison was entitled to attorney’s fees. The district

court struck the answer and counterclaim, confirmed the

                                   5
arbitration award, denied the remainder of GCW’s motions,

and entered final judgment against GCW and GDC totaling

$54,340.74 in damages and $123,735.00 in attorney’s fees.

The final judgment was later amended upon the request of

GCW and GDC because Ellison had not sought relief against

GDC   --   who   was   dismissed    by   the   arbitrator   as   a

respondent to the arbitration -- and because GCW had

already paid the $54,340.74 it owed to Ellison pursuant

to the arbitration award. GCW timely appealed.

                              II.

      GCW makes numerous arguments on appeal; however, we

need only reach its argument that the district court

lacked subject matter jurisdiction, as it disposes of the

case.

      Questions of subject matter jurisdiction are reviewed

de novo. Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d
529, 531 (5th Cir. 2006). Diversity jurisdiction exists

if the parties are diverse and the amount in controversy

requirement is satisfied. See 28 U.S.C. § 1332; see also

Garcia v. Kock Oil of Tex. Inc., 351 F.3d 636, 638 (5th

                               6
Cir. 2003). The party seeking to invoke federal diversity

jurisdiction   bears   the   burden   of   establishing   both.

Garcia, 351 F.3d at 638.

    Both parties agree that diversity existed at the time

of removal; however, GCW contends that subject matter

jurisdiction was later destroyed either by addition of

the named defendant, GCD, or by addition of the intended

defendant, GDC, both of which GCW contends are Texas

citizens for diversity purposes. Ellison counters that

because GDC, the intended defendant, was dismissed from

arbitration and not a party to the final judgment, the

district court’s judgment should stand even if GDC is

non-diverse; however, Ellison argues that GDC is diverse

because it is a limited partnership whose partners are

citizens of South Carolina, making it a citizen of South

Carolina for diversity purposes.

    Diversity jurisdiction is generally determined at the

time of filing, or, in a case removed from state court,

at the time of removal. Grupo Dataflux v. Atlas Global

Group, L.P., 541 U.S. 567, 570-71 (2004). However, the

later addition of a non-diverse defendant will destroy

                               7
diversity jurisdiction. Doleac v. Michalson, 264 F.3d
470,   477    (5th   Cir.   2001).     Nevertheless,    as   Ellison

correctly points out, in some cases this Court will not

disturb a judgment even though a jurisdictional defect

existed at some point prior to entry of judgment if

jurisdiction existed at the time judgment was entered.

See, e.g., H&D Tire & Auto.-Hardware, Inc. v. Pitney

Bowes Inc., 227 F.3d 326, 328 (5th Cir. 2000) (stating

“[e]ven if a Court lacks jurisdiction at the time of

removal and regardless of whether there was an objection

to the removal, the judgment will stand if the court had

jurisdiction at the time it entered judgment”). But the

jurisdictional defect must not linger through judgment,

and in a diversity case involving a non-diverse party,

this has meant the dismissal of the non-diverse party

from the action prior to judgment. See Caterpillar Inc.

v.   Lewis,    519 U.S. 61,   67    (1996);   see   also   Grupo

Dataflux, 541 U.S. at 572-73. GDC was not dismissed from

the district court action; further, we cannot determine

from the record whether GDC is non-diverse, i.e., whether

                                  8
GDC is a Texas resident.4 We refuse to address on this

record -- where the defendant in question’s citizenship

is not clear -- Ellison’s contention that dismissal from

arbitration, without a corresponding dismissal from the

district court action, cured any jurisdictional defect.

Therefore, we vacate the district court’s judgment and

remand this case to the district court so that it can

determine whether the parties to the case were diverse.

We note for the district court’s benefit that if it finds

GDC non-diverse, it could cure the jurisdictional defect

by dismissing GDC from the action. See Grupo Dataflux,
541 U.S.   at   572-73    (citing    Newman-Green,     Inc.   v.

Alfonzo-Larrain, 490 U.S. 826, 832 (1989)).

                               III.

      Accordingly, the district court’s judgment is VACATED

and this case is REMANDED to the district court for

further proceedings in accordance with this opinion.

  4
   GDC is a limited partnership. It is therefore a citizen of any
state in which any of its partners is a citizen. Carden v. Arkoma
Assocs., 494 U.S. 185, 189-96 (1990). Unfortunately, the record
contains inconsistent and incomplete information about the identity
and citizenship of GDC’s partners.

                                9