Court Opinion

ID: 35901
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:34:03+00
Date Added: 2024-06-11T17:14:46.788975
License: Public Domain

United States Court of Appeals
                                                                             Fifth Circuit
                                                                          F I L E D
                     UNITED STATES COURT OF APPEALS
                                                                            July 15, 2004
                              FIFTH CIRCUIT
                                                                      Charles R. Fulbruge III
                                _________________                             Clerk
                                    No. 03-60899

                                (Summary Calendar)
                                _________________

UNITY COMMUNICATIONS INC, a Delaware Corporation,

                        Plaintiff - Appellant,

versus

UNITY COMMUNICATIONS OF COLORADO LLC, Etc; ET AL,

                        Defendants,

UNITY COMMUNICATIONS OF COLORADO LLC, a Colorado Limited Liability Company;
JAMES A NASH; RICHARD M SHERWIN

                        Defendants - Appellees.

                     Appeal from the United States District Court
                       For the Southern District of Mississippi
                               USDC No. 3:01-CV-41

Before BARKSDALE, EMILIO M. GARZA, and DENNIS, Circuit Judges.
PER CURIAM:*

        Unity Communications, Inc. (“Unity Inc.”) appeals from the district court’s dismissal of its

complaint to compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 1 et seq., of its dispute

with Unity Communications of Colorado, LLC (“Unity Colorado”) and certain members of Unity

Colorado.    The Federal Arbitration Act does not provide an independent source of federal

jurisdiction, and an independent basis for jurisdiction must exist before a federal court may assume

jurisdiction. See Moses H. Cone. Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 26 n.32

(1983). Unity Inc. alleges that federal jurisdiction is proper under 28 U.S.C. § 1332 because the

parties to its complaint are diverse. The district court found that the issue of diversity was controlled

by the doctrine of res judicata, and that the parties were not completely diverse. The district court

then dismissed the complaint for lack of subject matter jurisdiction and imposed sanctions under FED.

R. CIV. P. 11 against Unity Inc. and its attorney. We review res judicata determination and dismissals

for lack of subject matter jurisdiction de novo. Corfield v. Dallas Glen Hills LP, 355 F.3d 853, 857

(5th Cir. 2003); Schmueser v. Burkburnett Bank, 937 F.2d 1025, 1031 (5th Cir.1991).

        Unity Colorado previously filed a complaint against Unity Inc. in the Federal District Court

for the District of Colorado (the “Colorado court”). The Colorado court held that a limited liability

company, for purposes of a diversity analysis, takes on the citizenship of its members.1 The Colorado

court dismissed for lack of subject matter jurisdiction because it found that Unity Inc. was a member

        *
          Pursuant to 5th Cir. R. 47.5, the court has det ermined 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.

        1
          We express no opinion about whether or not the district court’s holding regarding the
citizenship of limited liability companies is the proper interpretation of the law.

                                                  -2-
of Unity Colorado and that the parties consequently lacked diversity. Unity Inc. filed a motion to

amend the judgment of the Colorado court, arguing that the Colorado court made a factual error

when it found that Unity Inc. was a member of Unity Colorado. The Colorado court denied this

motion.

        It is well established that there are four requirements in federal court that must be met for a

prior judgment to bar a subsequent action as res judicata: “1) the parties must be identical in both

actions, 2) the prior judgment must have been rendered by a court of competent jurisdiction, 3) the

same cause of action must be involved in both cases, and 4) the prior judgment must have been a final

judgment on the merits.” Steve D. Thompson Trucking Inc. v. Dorsey Trailers, 870 F.2d 1044, 1045

(5th Cir. 1989). The district court in this case properly found that the first three factors are present

in the Colorado court’s diversity determination.

        Unity Inc. argues that the Colorado ruling was not a “final judgment on the merits” because

the Colorado court’s order dismissed the case for lack of subject matter jurisdiction. FED. R. CIV.

P. 41(b). Although a dismissal for lack of jurisdiction is not a ruling on the merits of the claim, “[i]t

has long been the rule that principles of res judicata apply to jurisdictional determinations))both

subject matter and personal.” Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee,

456 U.S. 694, 702 n.9 (1982); see also Boone v. Kurtz, 617 F.2d 435, 436 (5th Cir. 1980)

(“Although the dismissal of a complaint for lack of jurisdiction does not adjudicate the merit[s] so as

to make the case res judicata on the substance of the asserted claim, it does adjudicate the court’s

jurisdiction, and a second complaint cannot command a second consideration of the same

jurisdictional claims.”). Thus, the Colorado court’s jurisdictional ruling is properly the subject of a

res judicata determination.

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        Unity Inc. raises two other claims on appeal to challenge the res judicata consequences of the

Colorado court’s order. First, Unity Inc. argues that the Colorado court made a factual error when

it found that Unity Inc. is a member of Unity Colorado. Second, Unity Inc. argues that the Colorado

court’s order was based upon an incorrect understanding of the law regarding the citizenship of

limited liability companies. Neither of these arguments overcome the res judicata consequences of

the Colorado court’s order. Even if the Colorado court’s order was based upon a factual or legal

error, that error should be raised on direct review of that order and not by challenging its res judicata

consequences. See Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981).

        Finally, the parties appeal the district court’s award of sanctions against Unity Inc. and its

attorney. This is not a final order subject to appellate review because the district court has not yet

reduced that sanctions award to a sum certain. See Southern Travel Club, Inc. v. Carnival Air Lines,

Inc., 986 F.2d 125, 131 (5th Cir. 1993).

        The district court’s order dismissing this case for lack of subject matter jurisdiction is

AFFIRMED. The appeal of the district court’s award of sanctions is DISMISSED for lack of

appellate jurisdiction.

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