Court Opinion

ID: 7015694
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:19:25.787151+00
Date Added: 2024-06-11T16:10:22.388704
License: Public Domain

EMILIO M. GARZA, Circuit Judge,
dissenting:
This case should be easy. Imagine that a plaintiff from State X filed suit in federal court against a defendant from State X. The plaintiff incorrectly contended in the complaint that the federal court had diversity jurisdiction. Nearly three years passed. Then the plaintiff moved to State Y, creating diversity. Imagine that, after the jury rendered a verdict for the plaintiff, the district court discovered that, at the time the complaint was filed, the parties were not completely diverse — indeed, there was no diversity between the parties. The district court would recognize the longstanding rule that diversity jurisdiction is determined at the time the complaint is filed. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989). The plaintiffs recent move would make no difference. The district court would dismiss the case for lack of jurisdiction. See Sarmiento v. Texas Bd. of Veterinary Med. Examiners By and Through Avery, 939 F.2d 1242, 1246 n. 6 (5th Cir.1991) (“Although Sarmiento is currently domiciled in Florida, at the time he filed suit he was domiciled in Texas, as he also was when his third amended complaint was filed. Therefore, and neither party contests this, the jurisdiction of the district court could not be based on diversity of citizenship pursuant to 28 U.S.C. § 1332.”).
The dispute between Atlas Global and Dataflux is precisely the above scenario. Atlas Global is a limited partnership, whose citizenship is determined by the citizenship of all its partners. Carden v. Arkoma Associates, 494 U.S. 185, 195-96, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). At the *175time Atlas Global filed its complaint, two of its partners were Mexican citizens. Thus, Atlas was a “citizen” of Mexico. Dataflux was a Mexican corporation. Therefore, the parties were not completely diverse. Indeed, there was no diversity between the parties. Nearly three years after filing its complaint, Atlas conducted a business transaction that removed its two Mexican partners, and effectively “moved out of’ Mexico. The case went to trial; the jury returned a verdict for Atlas. Then, once the district court discovered the jurisdictional flaw, it dismissed the case.
The majority opinion, however, complicates this simple scenario by creating a new exception to the rule that diversity jurisdiction depends on the citizenship of the parties at the time the complaint is filed. The majority opinion crafts the following “narrow exception”: A case will not be dismissed for lack of subject matter jurisdiction where “(1) an action is filed or removed when constitutional and/or statutory jurisdictional requirements are, not. met, (2) neither the parties nor the judge raise the error until after a jury verdict has been rendered, or a dispositive ruling has been made by the court, and (3) before the verdict is rendered, or ruling is issued, the jurisdictional defect is cured.” The majority’s exception threatens to swallow the rule.
The majority opinion asserts that this new rule is only a “slight” extension of the Supreme Court’s decision in Caterpillar Inc. v. Lewis, 519 U.S. 61, 117 S.Ct. 467, 136 L.Ed.2d 437 (1996). The facts of Caterpillar make clear, however, that it has no applicability to a case where a party unilaterally creates diversity jurisdiction.
In Caterpillar, Lewis, a citizen of Kentucky, filed state law tort claims in Kentucky state court against Caterpillar (a Delaware corporation with its principle place of business in Illinois) and Whayne Supply, a Kentucky corporation. 519 U.S. at 64-65, 117 S.Ct. 467. Liberty Mutual, Lewis’ insurance carrier, intervened in the lawsuit, asserting claims against both Caterpillar and Whayne Supply. Id. at 65, 117 S.Ct. 467. Lewis later settled his claims* with Whayne Supply. Id. Caterpillar then tried to remove the case to federal court, asserting diversity jurisdiction. Id. Lewis requested remand, claiming that the district court lacked jurisdiction. Id. Lewis correctly pointed out that Liberty Mutual’s claim against Whayne Supply kept it in the láwsuit, and, as a result, the parties were not completely diverse. Id. at 65-66, 117 S.Ct. '467. The district court erroneously denied his motion to remand. Id. at 66, 117 S.Ct. 467. Three years later, and several months pri- or to trial, Liberty Mutual settled its claims with Whayne Supply, and the district court dismissed Whayne Supply from the lawsuit. Id. The Supreme Court held that, because the “jurisdictional defect” (the presence of Whayne’ Supply) was cured prior to judgment, it was unnecessary to dismiss the case. Id. at 76-78, 117 S.Ct. 467.
The majority opinion acknowledges that, in Caterpillar, there was no “unilateral change” in citizenship, yet asserts that “this factor was not at the heart of the Supreme Court’s analysis in Caterpillar[.Y The majority opinion apparently overlooks the Supreme Court’s response to Lewis’ prediction that creating an exception in his case would “encourag[e] state court defendants to remove cases improperly!.]” Caterpillar, 519 U.S. at 77, 117 S.Ct. 467 (internal quotation marks omitted). The Supreme Court rejected this possibility, because it “assume[d] [a party’s] readiness to gamble that any jurisdictional defect, for example, the absence of complete diversity, [would] first escape detection, then *176disappear prior to judgment.” Id. Under the facts of Caterpillar, the party that brought the case to federal court (Caterpillar) would have had to gamble. Caterpillar had to hope that neither the district court nor any appellate court would detect the jurisdictional defect.1 More significantly for present purposes, Caterpillar had to gamble that Whayne Supply (the party whose presence destroyed diversity) would somehow, disappear from the lawsuit. Caterpillar had no control over whether Whayne Supply remained in the case. It just had to sit back and keep its fingers crossed.
Atlas, by contrast, faced no such “gamble.” As the facts of this case illustrate, Atlas had complete control over whether its two Mexican citizens remained in the company as partners. Atlas could — and did — single-handedly remove the parties whose presence spoiled diversity. It is irrelevant that, in this case, Atlas may have filed its complaint in good faith, genuinely failing to recognize the jurisdictional defect. Under the rule crafted by the majority, a less scrupulous party could deliberately file suit in federal court when diversity was lacking. Such a plaintiff might choose to file quickly because, for example, the statute of limitations on its claim was about to run out. The majority’s rule would allow that plaintiff to file its complaint in federal court, knowing that the federal courts did not have jurisdiction, and then move to a new state (or, in the case of a limited partnership, remove a few partners) and create diversity.2 As long as the party acted before the opposing party or the district court noticed (and before a jury verdict or other dispositive decision), it could single-handedly confer jurisdiction on the federal courts.3
The majority opinion creates a new exception to the long-standing rule that diversity jurisdiction is determined at the time the complaint is filed, apparently out of a concern about judicial economy. The majority stresses that “ ‘[o]nce a diversity case has been tried in federal court, with rules of decision supplied by state law ... considerations of finality, efficiency and economy become overwhelming.’” There is no question that the conservation of judicial resources is an important value. Caterpillar, 519 U.S. at 76, 117 S.Ct. 467 (“ ‘[Requiring dismissal after years of litigation .would impose unnecessary and wasteful burdens on the parties, judges, and other litigants waiting for judicial attention.’ ”) (quoting Newman-Green, 490 U.S. at 836, 109 S.Ct. 2218).
*177The problem with the majority’s holding is that efficiency appears to be its only concern. If that is the case, then the majority’s exception cannot be confined to the “narrow” boundaries it has prescribed. After all, parties “commit[ ] ample resources” to a case long before a jury verdict or a dispositive ruling from the court. The majority opinion states that, under its rule, if one of the parties or the district court discovers a jurisdictional defect prior to the jury verdict, the court should dismiss the case. Yet there is no difference in efficiency terms between the jury verdict and, for example, the moment at which the jury retires. Nor, for that matter, is there a large difference between the verdict and mid-way through the trial. (The trial in this case lasted six days.)4 Indeed, in complicated cases requiring a great deal of discovery, the parties and the court often expend tremendous resources long before the case goes to trial. There is no principled way to limit a holding based solely on “considerations of finality, efficiency and economy.”
Nor is it clear that creating exceptions to our jurisdictional rules would even lead to the conservation of judicial resources. Instead, carving out an exception in one ease merely encourages future parties to file more appeals, urging this Court to create more exceptions. See Saadeh v. Farouki 107 F.3d 52, 57 (D.C.Cir.1997) (refusing to create an exception to “the bright-line rule that citizenship and domicile must be determined as of the time a complaint is filed,” and noting that “the instant case demonstrates the value of a bright-line rule; even on appeal the parties continue to develop new theories and proffer new evidence on citizenship and domicile”). We should enforce our procedural rules as strictly as possible, even if that means a waste of judicial resources in a single case. Otherwise, in the long run, we may waste many more judicial resources litigating all the potential exceptions to our previously “clear” jurisdictional rules.5
However, regardless how these concerns about judicial economy play out, we cannot fashion jurisdictional rules (or exceptions) solely out of a desire to conserve judicial resources. For we must always keep in mind this central principle: “It is axiomatic that the federal courts have limited subject matter jurisdiction and cannot entertain cases unless authorized by the Constitution and legislation.” Coury, 85 F.3d at 248. “Obviously, [this] principle! ] *178can result in a tremendous waste of judicial and private resources.” Id. at 249. But the so-called “waste” of judicial resources that occurs when we dismiss a case for lack of jurisdiction is the price that we pay for federalism. Id.; see also Herrick Co., Inc. v. SCS Communications, Inc., 251 F.3d 315, 330-31 (2d Cir.2001) (“As the Supreme Court has remarked, ‘[o]nce a diversity case has been tried in federal court with rules of decision supplied by state law ... considerations of finality, efficiency, and economy become overwhelming.’ ... At the same time, however, the problems of defective jurisdiction ... are themselves weighty, being tied to the fundamental constitutional idea that federal courts have only limited juris-dietion[.]”) (quoting Caterpillar, 519 U.S. at 75, 117 S.Ct. 467). If we make too many exceptions to our jurisdictional rules, parties will cease to believe that any limitations exist. Parties will begin filing cases in federal court that would be more appropriately handled by the state judicial system. The Supreme Court in Caterpillar did not intend such a result.
I respectfully dissent.

. In Caterpillar, it was particularly unlikely that the courts would remain unaware of the jurisdictional flaw, since Lewis had pointed it out in his motion to remand.

. The majority’s holding is utterly out of step with the long-standing principle that the party who files a case in federal court is responsible for establishing jurisdiction. See Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.2001) ("[T]he burden of establishing federal jurisdiction rests on the party seeking the federal forum.”); Texas Beef Group v. Winfrey, 201 F.3d 680, 686 (5th Cir.2000) (same); Stafford v. Mobil Oil Corp., 945 F.2d 803, 804 (5th Cir.1991) (same). This rule exists because the federal courts are courts of limited jurisdiction. Accordingly, "[w]e must presume that a suit lies outside this limited jurisdiction,” until the party seeking the federal forum has proven that his suit belongs in federal court. Howery, 243 F.3d at 916.

.We have repeatedly declared that parties may not by agreement confer subject matter jurisdiction on the federal judiciary. Howery, 243 F.3d at 919 ("[S]ubject-matter jurisdiction cannot be created by waiver or consent.”); Coury v. Prot, 85 F.3d 244, 248 (5th Cir.1996) ("The parties can never consent to federal subject matter jurisdiction!.]”). Yet the majority has fashioned a rule that allows a single party to confer jurisdiction on the federal courts.

. The only difference is that after a verdict or dispositive ruling, the parties know the result. Atlas focuses on this fact, suggesting that this Court should not allow the "loser” in the case to have it dismissed on jurisdictional grounds. See Brief of Appellants at x (characterizing the issue in this case as whether the magistrate erred “in dismissing the case after a jury trial when the loser ... moved to dismiss for lack of jurisdiction”) (emphasis added). The majority, correctly enough, does not focus on this factor, apparently recognizing that parties cannot waive the right to challenge the subject matter jurisdiction of the federal courts. Parties may raise that jurisdictional defense at any point, even after judgment is entered. Coury, 85 F.3d at 248 ("[L]ack of [federal subject matter] jurisdiction is a defense which cannot be waived.”). Indeed, the only party that has an incentive to correct a jurisdictional defect (including one that still exists at judgment) is the party that lost the case. In order for our courts to remain courts of limited jurisdiction, we must, in some cases, rely on the "loser” to catch a jurisdictional defect that should have been caught much sooner.

. Indeed, we might even waste the time of the parties in an individual case, if the Supreme Court ultimately rejected the exception we carved out. See E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins. Co., 160 F.3d 925, 930 (2d Cir.1998) ("Nobody's interest would be served if we by stretching the law found jurisdiction to exist, only to have that position ultimately rejected by the High Court.”).