Court Opinion

ID: 1015187
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:28:53.135569+00
Date Added: 2024-06-11T12:39:38.491096
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 04-1271

SAXON FIBERS, LLC; ROSS ROGERS; JERRY LEONARD,

                                              Plaintiffs - Appellees,

          versus

LARRY WOOD; DALTON     MACHINERY   AND   SURPLUS,
INCORPORATED,

                                             Defendants - Appellants.

                             No. 04-1472

SAXON FIBERS, LLC; ROSS ROGERS; JERRY LEONARD,

                                              Plaintiffs - Appellees,

           versus

LARRY WOOD; DALTON     MACHINERY   AND   SURPLUS,
INCORPORATED,

                                             Defendants - Appellants.

Appeals from the United States District Court for the District of
South Carolina, at Spartanburg.    Margaret B. Seymour, District
Judge. (CA-02-2373-7-24)

Argued:   December 2, 2004                  Decided:   January 4, 2005
Before WILKINS, Chief Judge, and MICHAEL and TRAXLER, Circuit
Judges.

Vacated and remanded with instructions by unpublished per curiam
opinion.

Thomas Howard Keim, Jr., EDWARDS, BALLARD, BISHOP, STURM, CLARK &
KEIM, Spartanburg, South Carolina, for Appellants. Matthew Elliott
Cox, JOHNSON, SMITH, HIBBARD & WILDMAN, Spartanburg, South
Carolina, for Appellees.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

                                2
PER CURIAM:

      Larry Wood and Dalton Machinery and Surplus, Inc. (Dalton

Machinery) appeal a judgment against them on the ground that the

district court lacked subject matter jurisdiction over the case.

We   vacate    the    judgment         and   remand    with   instructions        for   the

district court to dismiss the action.

                                              I.

      Saxon Fibers, LLC (Saxon) is a limited liability company

composed of three members--Georgia residents Larry Wood, Ross

Rogers, and Jerry Leonard--each of whom owns one-third of the

company.      Dalton Machinery is a company owned by Wood.

      Saxon filed this action in federal court against Wood and

Dalton Machinery (collectively, “Appellants”) on July 17, 2002,

alleging several state law causes of action arising from Wood’s

alleged failure to make an agreed-upon capital contribution to

Saxon. The complaint alleged that the district court had diversity

jurisdiction, see 28 U.S.C.A. § 1332 (West 1993 & Supp. 2004),

because Saxon was organized in South Carolina--and hence, a South

Carolina citizen--and Appellants were both citizens of Georgia.

      Appellants          moved   to    dismiss      for   lack   of    subject    matter

jurisdiction         on     the   basis       that    Rogers      and    Leonard        were

indispensable parties whose joinder as plaintiffs would destroy

diversity.      See Fed. R. Civ. P. 19.                    Appellants also answered

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Saxon’s complaint on August 23, 2002, while their motion to dismiss

was pending.

     On August 26, 2002, Saxon moved to amend its complaint, see

Fed. R. Civ. P. 15(a), to add Rogers and Leonard as plaintiffs and

to add a claim against Wood under the Racketeer Influenced and

Corrupt Organizations Act (RICO), see 18 U.S.C.A. § 1962(c) (West

2000),     thereby   purporting    to    establish     federal     question

jurisdiction, see 28 U.S.C.A. § 1331 (West 1993).                Appellants

opposed the motion, arguing that a party may not establish federal

question jurisdiction by amending its complaint to add a new cause

of action when the district court lacks subject matter jurisdiction

over the original complaint.      The district court granted Saxon’s

motion to amend and denied Appellants’ motion to dismiss.

     The case proceeded to trial, and the jury awarded Saxon,

Rogers,    and   Leonard   (collectively,   “Appellees”)    $468,679     in

damages.    Further, the district court awarded Appellees $79,873.12

in attorneys’ fees and denied Appellants’ renewed motion to dismiss

for lack of subject matter jurisdiction.

                                   II.

     Appellants contend that the district court erred in permitting

Saxon to amend its complaint and in refusing to dismiss this action

for lack of subject matter jurisdiction.             We are compelled to

agree.

                                    4
     The   parties   agree   that    a   plaintiff   may   not   use

28 U.S.C.A. § 1653 (West 1994)1 or any other means to obtain leave

of court to amend a complaint to allege a federal cause of action

not previously pled when the court had no jurisdiction over the

original complaint. See Newman-Green, Inc. v. Alfonzo-Larrain, 490

U.S. 826, 831-32 (1989); Advani Enters. v. Underwriters at Lloyds,

140 F.3d 157, 161 (2d Cir. 1998); Boelens v. Redman Homes, Inc.,

759 F.2d 504, 512 (5th Cir. 1985).   Such a proposition makes sense,

considering that a court without subject matter jurisdiction lacks

authority to grant a party’s amendment motion.2      See Whitmire v.

Victus Ltd., 212 F.3d 885, 888 (5th Cir. 2000).

     Appellants contended in their initial brief that the district

court lacked jurisdiction over the original complaint because

Rogers and Leonard were indispensable parties who, if joined, would

have destroyed complete diversity.   Appellees responded by arguing

that the parties in the original complaint were completely diverse

because Saxon, a South Carolina citizen, was the only plaintiff.

     1
      Section 1653 provides that “[d]efective allegations of
jurisdiction may be amended, upon terms, in the trial or appellate
courts.” The Supreme Court has held that this statute allows only
the correction of incorrect statements in pleadings “about
jurisdiction that actually exists.” Newman-Green, Inc. v. Alfonzo-
Larrain, 490 U.S. 826, 831 (1989). It does not allow an amendment
“to produce jurisdiction where none actually existed before.” Id.
     2
      A party may amend its pleading once as a matter of course
before a responsive pleading is served. See Fed. R. Civ. P. 15(a).
Once the responsive pleading is served, however, as the answer was
here, a pleading may not be amended without leave of court or
written consent of the adverse party. See id.

                                5
Appellees maintained that failure to join indispensable parties

does not create a jurisdictional defect.             See 4 James Wm. Moore et

al., Moore’s Federal Practice § 19.02[4][c] (3d ed. 2004).                   They

therefore argued that the district court had jurisdiction to grant

their motion to amend the complaint to add the RICO cause of

action,   which     conferred    federal      question     and     supplemental

jurisdiction, see 28 U.S.C.A. § 1367 (West 1993), upon the district

court over this suit.

      In their reply brief, Appellants argue for the first time that

it is immaterial whether failure to join indispensable parties is

a jurisdictional defect because even if it is not, the district

court lacked jurisdiction over the original complaint.               See Plyler

v. Moore, 129 F.3d 728, 731 n.6 (4th Cir. 1997) (holding that

issues regarding subject-matter jurisdiction “may be raised at any

time by either party or sua sponte by this court”).                  Appellants

contend that Saxon, a limited liability company, was a citizen of

Georgia   because    its    members   were     citizens    of     Georgia,    and

therefore,   because      Appellees   were    also    Georgia    citizens,    the

parties were not diverse. A recent decision of this court confirms

the   correctness    of    Appellants’       position.      See    Gen.      Tech.

Applications, Inc. v. Exro Ltda., 388 F.3d 114, 120 (4th Cir. 2004)

(holding that limited liability company was citizen of all states

of which its members were citizens); see also Hoffman v. Hunt, 126

F.3d 575, 584 (4th Cir. 1997) (“A decision of a panel of this court

                                      6
becomes the law of the circuit and is binding on other panels

unless it is overruled by a subsequent en banc opinion of this

court or a superseding contrary decision of the Supreme Court.”

(internal quotation marks omitted)).        Thus, because Wood, Rogers,

and Leonard were all Georgia citizens and Saxon was also a citizen

of Georgia, the parties were never diverse.           The district court

therefore never had subject matter jurisdiction over this suit and,

in particular, lacked jurisdiction to authorize the amendment of

the original complaint.

                                  III.

     For   the   reason   discussed,   we   vacate   the   district   court

judgment and remand with instructions for the district court to

dismiss for lack of subject matter jurisdiction.

                              VACATED AND REMANDED WITH INSTRUCTIONS

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