GRUPO DATAFLUX v. ATLAS GLOBAL GROUP, L.P.
Atlas Global Group was a limited partnership company created under Texas law. They filed a suit in federal court against Grupo Dataflux, a Mexican corporation. The suit dealt with a state law, but Atlas filed the case in federal court because, it claimed, the court had "diversity jurisdiction" (when a case involves citizens of two different states, or an American citizen and a foreign citizen, it is heard in federal court). However, at the time the case was filed, two of Atlas's partners were Mexican citizens (they left the partnership before the trial began). After the case was decided, but before the judgment was announced, Grupo Dataflux filed a motion to dismiss the case because the court did not have diversity jurisdiction. The judge granted the motion, finding that Atlas was a Mexican "citizen" at the time of filing because of the citizenship of its partners, and that the federal courts therefore did not have jurisdiction. On appeal, Atlas argued that even if the necessary diversity had not been present at the time of filing, it was present before the trial began and the court should therefore ignore the error under an exception for cases that have already been decided. A Fifth Circuit Court of Appeals panel agreed, reversing the decision.
If a suit is filed in federal court without the diversity necessary to establish jurisdiction, but the citizenship of one of the parties changes before the case begins so that diversity is present, should the court ignore the filing error?
Legal provision: 28 U.S.C. 1332
No. In a 5-to-4 decision written by Justice Antonin Scalia, the Court ruled that allowing diversity jurisdiction to change after a case is filed would create uncertainty and expensive litigation that dealt with jurisdiction rather than the merits of the case. "Uncertainty regarding the question of jurisdiction is particularly undesirable, and collateral litigation on the point particularly wasteful," wrote Justice Scalia. "The stability provided by our time tested rule (of requiring diversity at the time of filing) weighs heavily against the approval of any new deviation."
Argument of William J. Boyce
Chief Justice Rehnquist: We'll hear argument next No. 02-1689, Grupo Dataflux v. Atlas Global Group.
Mr. Boyce: Mr. Chief Justice, and may it please the Court:
The central question here is whether Atlas' post-filing change in citizenship should be allowed to create retroactive diversity jurisdiction in this case.
To justify rewriting the longstanding time of filing rule, Atlas relies on the fact that this case was tried to verdict before the jurisdictional issue was identified and raised in the district court.
Justice Ginsburg: May I ask you with respect to that?
When you found out that you had this fundamental jurisdictional objection, when did you know that the partnership included partners not only Texas entities but two Mexican citizens?
When did you find that out?
Mr. Boyce: There are two answers to your question, Justice Ginsburg.
In terms of when we became aware of the issue, that was after verdict, and that's reflected in the affidavit which appears in the record at volume I, page 1887.
In terms of the question of was there evidence in the record that could have been pieced together to identify this issue earlier, the answer to that question is yes.
If... if... it probably could have been identified earlier, should have been identified earlier, but it was not.
Justice Ginsburg: There's a curious thing about what Dataflux did.
Dataflux at one point moved to add the Mexicans as individuals as counterdefendants.
Mr. Boyce: Correct.
Justice Ginsburg: And why would it do that if they were members of the partnership.
If... if it was sure that they were members of the partnership, then you wouldn't need to make them defendants as individuals because partners have individual liability.
Mr. Boyce: Two answers to that... that question, Your Honor.
First, under the Texas Revised Limited Partnership Act, the... the partnership can sue... the limited partnership can sue on its own without the participation of the limited partners.
In terms of all of the counterclaims against Llamosa and Robles, again under the Texas statute, we can choose to sue the partnership itself or we can sue individual limited partners.
In this circumstance, our counterclaim against them was predicated not on their status as limited partners, but rather on the fact that Mr. Llamosa and Mr. Robles made affirmative misrepresentations, was our position, directly to us to induce us to enter the contract that led to the... the lawsuit.
Justice Ginsburg: But at that stage, you called them employees or former employees.
So it seems that the... that you had some inkling.
Mr. Boyce: --There... there was some confusion early on in terms of what exactly their status was and we, Dataflux, did not thoroughly explore that issue early on.
And... and that should have been done earlier.
But I would also note that the bottom line here is that... is that Atlas, the party with unique knowledge of the exact circumstances of its partnership at the time of filing, is the party here who filed the case in Federal court at a time when there was not diversity jurisdiction.
There certainly could have been more that we should have done to explore the issue earlier.
Justice Ginsburg: Well, you've admitted it.
You... you just admitted it flat out in your answer.
Mr. Boyce: Yes, Your Honor.
There were admissions that jurisdiction existed, but I would hasten to add that pursuant to the longstanding rule that jurisdiction cannot be stipulated to, agreed to, created by estoppel or waiver, that those statements are not effective to create jurisdiction if it does not exist at the outset.
And... and I would emphasize the language that was relied most recently in this Court's decision in Kontrick from January in which the Court noted that a court's subject matter jurisdiction cannot be expanded to account for the parties' conduct during litigation.
And I think that principle addresses that.
Is there more that could have been done to explore this earlier... this issue earlier and bring it up?
The answer to that question is yes, but I don't think that that circumstance undermines the fundamental rule here, which is that as of the time of filing, there was not a diversity present, and because of that--
Justice Ginsburg: Well, there was in the constitutional sense.
There wasn't under the statute.
There was diversity, but not complete diversity.
Mr. Boyce: --I think the... there is some room to discuss that, Justice Ginsburg, in light of the dissent's contention that there was, in fact, no diversity where you have one litigant here, one plaintiff, one defendant, and both are citizens of Mexico at that time.
It may be a situation where--
Justice Ginsburg: But that's not what... well, correct me if I'm wrong.
I thought that Atlas is a partnership.
Mr. Boyce: --That is correct.
Justice Ginsburg: And that it... and that there are three players involved... five.
Two are Mexican and three are Texan.
Mr. Boyce: There... there--
Justice Ginsburg: So then you would have on one side Texan and Mexican and the other side Texan.
If you drop out the Mexicans, then you're left, from the plaintiff's side... you're left with a complete diversity case.
Mr. Boyce: --Atlas is one entity with multiple citizenships, and... and if... if the question suggests that there was some kind of a... a dismissal mechanism available to make the... the Mexican citizenship go away, I don't believe that that is available under the facts of this case because it's... it... there were--
Justice Ginsburg: But it's what happened.
They did go away for a reason unrelated to this lawsuit.
Mr. Boyce: --Pursuant to Atlas' decision to change the constitution of its partnership after the time of filing and before the case was submitted to the... to the jury.
That is correct, Your Honor.
Justice Ginsburg: Yes, long before the case was tried.
Mr. Boyce: Before the... approximate--
Justice Ginsburg: Well, so when the case... when this case was tried, there was complete diversity.
Mr. Boyce: --That is correct.
Approximately 6 weeks prior to trial, the change in Atlas' composition became effective so that at that point there would... there is complete diversity if that post-filing change is given effect.
And I would submit to the Court that under the longstanding rule, going back as far as 1824 in Mollan v. Torrance, reflected in the 1891 decision in Anderson v. Watt, that the longstanding rule has been, and should continue to be in this case, that post changes--
Justice Ginsburg: I thought in Mollan v. Torrance exactly what I described happened.
Chief Justice Marshall said you've got one spoiler on the plaintiffs' side.
Take it out and you'll have complete diversity.
Mr. Boyce: --I think that the statement in Mollan, as reflected in Conolly and then applied in Anderson v. Watt, Your Honor, is that if the change in circumstances is the result of the addition or subtraction of a party, that's one circumstance, but here we have something entirely different, which is a change in citizenship.
It would be the same as if a plaintiff had lived in one State and then moved to another State.
Justice Ginsburg: No, it's not the same.
It isn't the same because a partnership is a citizen of every State in which a partner resides.
Isn't that correct?
Mr. Boyce: Correct, under Carden.
Justice Ginsburg: So you have, just as if you'd have five individuals... that's what they are in fact... in effect, because they're jointly and severally liable.
So you have, as I said before, three Texan and two Mexicans.
You don't have one person that can say, ah, I'm going to defeat diversity by moving where I live, or I'm going to create diversity.
You... none of these people's citizenships has ever changed.
That's quite different from somebody saying, I want to change my citizenship.
Mr. Boyce: I would respectfully disagree, Your Honor, because I think Atlas' citizenship changed by virtue of changing the composition of its partnership, and that is on all fours the same circumstance as if a... a litigant had lived in one State and then tried to move to another State in an effort to create retroactive diversity jurisdiction.
Justice Ginsburg: But it didn't leave Texas behind.
Texas was always there.
The Mexican partners left.
So I just don't see that it's anything like... I mean, this... as I said before, there's the same five people.
Two drop out and so you've got three Texans, and there were always three Texans.
They didn't move to Texas.
They were there from the start.
Mr. Boyce: The... the function of Atlas changing its citizenship after the time of filing and thereafter claiming... this is Atlas' argument... that that cures our jurisdictional defect, I would submit to the Court, is the same thing as a citizen moving from one State to the other because, in effect, what Atlas is saying, by relying on that argument, is we moved out of... move out of Mexico and... and resided exclusively in Texas as of the time of suit.
That is the whole basis for Atlas' argument as to why the jurisdictional defect, according to Atlas, was cured as of the time of trial.
And I think that's where the... the conflict comes in with the change of--
Justice Ginsburg: If Atlas had been a corporation incorporated in Texas, then there would have been complete diversity.
Mr. Boyce: --I'm... I didn't--
Justice Ginsburg: If Atlas... instead of being a partnership composed of five members, it had organized as a corporation, as a Texas corporation.
Mr. Boyce: --Then it would be under the... the different provision of 1332.
It would be a citizen of its place of incorporation and its principal place of business, and that would not be the issue that... that we have here today.
Justice Ginsburg: But would... would... my question is wouldn't the... if these... if this entity had been organized as a corporation, there would have been complete diversity.
Mr. Boyce: There... there... yes, there would not be an issue here because of a different operation of 1332 as applied to corporations, but the point of Carden was, as... as I read the case, is that limited partnerships are going to be treated differently.
Justice Ginsburg: Yes.
Mr. Boyce: There is no analog from corporate--
Justice Ginsburg: But I don't want to belabor this any further, but you do see the difference between an individual moving from New York to New Jersey, say, and a... a partnership with five partners, all of whom remain where they are.
They don't move anyplace else.
Those partners, those live human beings, stay exactly what they were.
Their citizenship doesn't change.
Mr. Boyce: --I understand the... the point, and our position is that when Atlas contends that it has cured the jurisdictional defect by changing the composition of its partnership, that is effectively the same as the litigant moving from New Jersey to New York and claiming I have... I have fixed the jurisdictional problem because my citizenship has changed.
It comes down to a change in citizenship, and I think that's what implicates the longstanding rule that the Court has enforced repeatedly.
Justice Stevens: Mr. Boyce, can I ask you a question about how far your position extends?
You say that it wasn't too late to... to raise the jurisdictional issue when you did.
Supposing there had been a trial and instead of your losing, you had won, and then you knew about the jurisdictional defect, and then you waited to see what would happen on appeal.
Then you lost on appeal.
And then you decided to raise the jurisdictional defect.
Would you say that was... they would then be required to dismiss?
Mr. Boyce: Yes, Your Honor.
I think the--
Justice Stevens: All right.
Suppose then it was affirmed and then you decided you didn't realize it until after the judgment had been entered and become final and so forth, and then a year later you find out about it.
Could you raise it then?
Mr. Boyce: --I don't think it would be the proper subject of a collateral attack after the initial case in which it has been adjudicated is over with.
But in terms of where along the line within that case can it be raised, our position is it can be raised, indeed, must be raised--
Justice Stevens: So you say it can always be raised on direct... while... until final judgment is entered, but it can never be raised on collateral attack.
Mr. Boyce: --That is my understanding.
And... and I think the most closely analogous case to the hypothetical that... that you're putting forth would be the Capron v. Noorden case from 1804.
It was discussed in... in this Court's recent decision in Kontrick where in that case the plaintiff who had filed the case in Federal court lost at trial and then went up on appeal to this Court.
The plaintiff who filed the case at that late stage identified the lack of jurisdiction, and then the Court said there is no jurisdiction here.
If there's no jurisdiction, there's no jurisdiction and the... the timing of the conduct of it is not germane to that inquiry because it's not something that can be created by the parties' litigation conduct--
Justice Scalia: We have to punish some other way, maybe fine you or make you pay costs for the other side, but we cannot punish you for that by expanding our own jurisdiction.
That's your point.
Mr. Boyce: --That... that's our point.
Justice Ginsburg: Capron against Noorden was one party on one side, one party on the other.
It wasn't a case where at the time of the trial there was complete diversity.
I frankly have a hard time distinguishing this case from Caterpillar which started out non-diverse but before trial, became diverse.
Mr. Boyce: I... I would like to address the circumstances under which this case is distinguishable from Caterpillar because that obviously is... is what Atlas relies very heavily on in its briefing.
And I think there are a number of important distinctions here, the first and foremost being that the citizenship of the parties to the final judgment in Caterpillar did not change.
That was a circumstance where the... the diversity-spoiling litigant was dismissed pursuant to rule 21.
That is not our circumstance here.
Justice Ginsburg: So if the... this would be the same if the... Atlas had come to the court and said, now, court, I want you to dismiss the two Mexicans because they're no longer part of the corporation, and gotten an order to... to do that.
Mr. Boyce: That would be a different circumstance.
I... I hasten to add that in terms of Atlas suing Dataflux, Mr. Llamosa and Mr. Robles were not plaintiffs.
Atlas itself was the plaintiff, and the problem arises because of the... the Mexican citizenship of Mr. Llamosa and Robles is attributed to Atlas.
But if... if a different circumstance is... is hypothesized where there's a dismissal, then I think that brings rule 21 into play.
As... as the Court discussed in... in the Newman-Green decision, there is a source of authority for addressing that circumstance under rule 21.
Here we have a situation where this is not a removal case, this is not a dismissal case, and the question arises--
Justice Ginsburg: My question was could they have dismissed and... and as far as removal, I perhaps don't remember Caterpillar that well, but of course, it arose out of a removal.
That's how it happened.
But the Court didn't make the removal dispositive.
Mr. Boyce: --Your Honor, I... I would not presume to... to say what the... the Court meant to do, but I would highlight the discussion in the subsequent Lexicon case where the point, I think, was made that indeed Caterpillar was grounded on the removal statute and specifically section 1441, the issue being in Caterpillar that the case was not fit for Federal adjudication at the time of removal and that that was the error.
There was an untimely compliance with--
Justice Ginsburg: Yes.
It certainly was a 1441, and the opinion certainly alerts district judges that when a case comes over from the State court, maybe you ought to look at it to make sure that there is Federal jurisdiction.
But I didn't think that there was anything peculiar about 1441 and the obligation of a judge to look into jurisdiction.
I don't know why the same thing wouldn't apply to 1332.
Mr. Boyce: --I would submit, Your Honor, that there are different... there's a different statutory overlay that... that was being addressed in Caterpillar, the overlay of the removal statutes.
Here we're under a circumstance where this... this is not a removal case.
Therefore, we are under section 1332 alone, and the... the longstanding rule that the citizenship is going to be measured as of the time of filing.
At... at this stage where the rule has been followed for some 180 years, I believe that similar to a complete diversity requirement, it is now part and parcel of section 1332.
So there... there's no removal overlay to be addressed.
And... and there's an additional circumstance here that I think in significant part, Caterpillar operates to protect a defendant's right to removal.
The... the removal in that case... the removal right was subject to being lost because of the timing of the dismissal of the non-diverse party.
There was a... a problem for Caterpillar in bumping up against the 1-year time limit.
In other words, Caterpillar operates to protect a... a right to invoke the Federal forum.
Here, by definition--
Justice Ginsburg: Well, I don't... I don't follow that because it was wrongfully removed by the defendant, had no right to be in the Federal forum when he got there, and... and the poor plaintiff who wanted to be in the State court got stuck with losing a Federal court case.
So it wasn't protecting the defendant right to remove.
The defendant had no right to remove.
It wasn't a proper Federal case until... who was it... one of the parties got dropped out.
Mr. Boyce: --I... I would go back to Lexicon's description of Caterpillar which is that there was an--
Justice Ginsburg: Why don't you go back to Caterpillar's description of Caterpillar?
Mr. Boyce: --Yes, Your Honor.
I... I think at... at bottom Caterpillar cannot be divorced from the removal context in which it arose.
And it... it was... it was--
Justice Stevens: Do you rely on a distinction between a defendant's right to a Federal forum and the plaintiff's to a Federal forum?
It seems to me they're exactly the same.
At the time it's invoked, it's... there's no Federal jurisdiction.
Mr. Boyce: --I think that under certain circumstances Congress has made a distinction between a defendant's right to invoke a Federal forum and a plaintiff's right to invoke a Federal forum.
Justice Stevens: Then are you... are you saying this is... is the rule you rely on a constitutional rule or a statutory rule?
Mr. Boyce: It is a... primarily a statutory rule operating--
Justice Stevens: In other words, you don't say the Constitution would prohibit us from affirming.
Mr. Boyce: --I... I need to qualify my answer, Justice Stevens, because under some circumstances there may be Article III implications here because if... if it's a circumstance where you have just an issue of whether or not there's complete diversity, then that's a statutory issue.
But if... if retroactive diversity is being recognized so as to allow a case to remain in Federal court for some 2 or 3 years, as happened in this situation, where there isn't even Article III diversity requirement... let's say you have an alien versus an alien with no citizen present.
That does have Article III implications.
Justice Stevens: So there's a... there's no subject jurisdiction as a matter of constitutional law, just no subject matter jurisdiction.
But nevertheless, you say there could be no... no collateral attack on the judgment.
I'm not sure that I understand the... why there couldn't be a collateral attack if you're dead right on this.
Mr. Boyce: I think that... and I... I cannot cite the case that... that I'm relying on for that, but in the... in the course of reviewing, I... I believe that I saw the... the statement regarding collateral attack.
Justice Ginsburg: You are correct in that respect.
Justice Stevens: I think you're right, but I'm just wondering why.
Chief Justice Rehnquist: If there... if there was... if there was an adjudication of the jurisdiction in the direct case, that's binding on the parties when the thing has become final, just as well as the merits.
Mr. Boyce: --But I... I think maybe the... the primary focus here in terms of the applicability of the time of filing rule is one that... that turns on the... the purposes of the time of filing rule.
These are summarized in... in the--
Justice Ginsburg: May I take you back a little way?
It is unconstitutional because incomplete diversity is fine.
Minimal diversity is fine under the Constitution.
The statute, 1332, has always been interpreted to require complete diversity.
Mr. Boyce: --Correct.
Justice Ginsburg: When Marshall first mentions that you can't oust jurisdiction by something that happens after, he doesn't talk about the statute.
The cases that you are... are discussing, out of which the timely filing rule arises... it's a kind of a common law that he's spreading out.
He doesn't cite the... the jurisdictional statute for that.
Mr. Boyce: I... I have to agree that... that both Conolly v. Taylor and Mollan v. Torrance do not specifically anchor it in the statute, and to... to some extent, I would... I would have to acknowledge that they're somewhat cryptic.
But I think the... the clearest statutory anchor as the basis of this rule comes from Anderson v. Watt which, applying Mollan and applying Conolly, does specifically anchor it in the 1875 iteration of the diversity statute in the course of its discussion.
And... and I think that's the clearest indication that this is indeed--
Chief Justice Rehnquist: What was the date of Anderson?
Mr. Boyce: --1891.
And the point that we would emphasize here, Your Honor, is that the longstanding interpretation, similar to complete diversity as discussed in the Owen Equipment v. Kroger case, is now a part and parcel of section 1332 and its predecessors.
And... and so it's not a situation merely that the Fifth Circuit is... is stepping into some area where the Court did not expressly address it in Caterpillar.
I think the Fifth Circuit has, in fact, gone beyond that by creating this new rule because it's a circumstance where it is going contrary to the longstanding interpretation and understanding of 1332.
Justice Ginsburg: As I understand the bottom line of what the situation would be, there was a trial between totally diverse parties.
You... you say that has to be undone.
There's no question now that there's complete diversity between these same two parties.
So this isn't a case where there's any federalism interest.
This wouldn't go back to the State court.
This is a proper suit for Atlas to bring in Federal court, and so you'd have the same court, the same parties going over exactly the same case, which does seem a terrible waste.
Mr. Boyce: I... I would focus on one portion of Your Honor's question, which is in terms of an assumption that this case automatically would go back to Federal court.
That may well happen, but we don't know--
Justice Ginsburg: No, no.
It would be up to Atlas, but Atlas at this point, being totally diverse from Dataflux, could walk in... the day that Atlas is thrown out, it can come in the revolving door and say, here's a fresh complaint.
Let's start all over again.
Mr. Boyce: --I think an underlying assumption of that question is that Atlas has not yet again changed its... its partnership, and I do not know the answer to that question.
Justice Ginsburg: May... may I ask you is there another impediment that you do know about like the statute of limitations?
Mr. Boyce: There will be an issue... the answer to your question is that... that whether or not limitations would prevent... present an obstacle to Atlas is going to be determined under the Texas savings statute and/or the New York savings statute.
There was a choice of law dispute in the case.
Justice Ginsburg: Well, I assumed... I assumed you looked into this.
Mr. Boyce: And there is a... a savings statute, assuming Texas law applies, that would allow Atlas to refile suit.
One point that I would note... and... and this is outside the scope of the record, but I... I would put it before the Court to completely answer the question... is that Atlas already has refiled once within 10 days of the initial dismissal.
It refiled in Federal court and then subsequently dismissed the second Federal court lawsuit.
There may be an issue under the savings statute in terms of how many times do you get to refile, and... and I don't know the answer to that.
We haven't looked at that specifically.
But there is a savings statute available, and... and I presume Atlas would invoke it.
Justice Ginsburg: At what point did they file and refile?
Because the court of appeals held in their favor.
Mr. Boyce: They filed after the trial court dismissal and before the Fifth Circuit held in their favor, and I believe that the... the second suit was filed in December of 2000 and dismissed in approximately October of 2001.
I think that's the chronology of it.
Justice Ginsburg: Dismissed after they won on appeal or before?
Mr. Boyce: I think it was before the... the Fifth Circuit ruled in the case.
But the... the point that I would emphasize is that the... the purposes of the time of filing rule transcend any individual case--
Justice Breyer: What is it?
What is it?
I mean, imagine the worst case.
A Lithuanian sues a citizen of Taiwan in New York on July 1st.
On July 2nd, they both become citizens.
Well, what I'm going to ask is what's the worst... I don't see a constitutional problem.
They didn't notice till after judgment.
What's the worst thing that could happen if we were to say, as a matter of policy, if you like, Federal policy, there's an exception to the time of filing rule... when nobody notices until after the judgment is entered... to prevent manipulation?
What's the worst thing that would happen?
Mr. Boyce: --Justice Breyer, the worst thing that can happen is uncertainty in what was formerly a bright line rule in terms of litigants being able to determine with some certainty whether or not they belong in Federal court.
And I would also focus on this point, which is I... I think the one question that the Fifth Circuit and Atlas do not answer is what is the source of authority for a Federal court to recognize this retroactive jurisdiction here?
By process of elimination, we know what it is not.
It is not section 1653, because that addresses only defective allegations, not defective facts.
It is not section 1441 or 1446 because this is not a removal case, and it's not rule 21.
So the... the bottom line inquiry then is what is the source of this authority and... and I don't think the authority is there, and in fact this is contrary to section 1332.
And with that, I would reserve the balance of my time.
Argument of Roger B. Greenberg
Chief Justice Rehnquist: Very well, Mr. Boyce.
Mr. Greenberg, we'll hear from you.
Mr. Greenberg: Mr. Chief Justice, and may it please the Court:
Respondent asks that this Court affirm the Fifth Circuit's judgment and hold that, based on this Court's precedent, the trial court had subject matter jurisdiction at the time of trial because the lack of complete diversity between the parties was cured before trial.
This Court unanimously held in Caterpillar that if the jurisdictional defect is cured before trial and then a case is tried on the merits and the court has Article III... it's an Article III court, it has subject matter jurisdiction, that it has the judicial power to... to preside over--
Justice Scalia: Yes, but Caterpillar involved a... a situation in which the jurisdictional defect was cured by a change in which parties were in the case.
That has not occurred here.
Mr. Greenberg: --That's correct.
Justice Scalia: The party is the same, and that makes it a different case.
You can't possibly say we've decided this.
Mr. Greenberg: With all due respect, Justice Scalia, our position is that Caterpillar and the thread through Caterpillar of Newman-Green and Grubbs points out that that is not an issue that was determinative of the decision.
The Court specified unanimously in Caterpillar that once diversity is cured... it didn't say has to be cured a certain way.
It didn't say has to be cured by a dispensable party leaving, et cetera.
It said simply once a case has been tried and diversity obtained at the time of trial, that the... that--
Chief Justice Rehnquist: Well, Caterpillar certainly is not a white horse case for you.
Otherwise, there wouldn't be a conflict in the circuits the way there is.
Certainly there are significant similarities but there are differences too.
Mr. Greenberg: --Respectfully, Chief Justice Rehnquist, our position is that the facts in this case are much narrower than Caterpillar.
We fall under the umbrella of Caterpillar.
Here we did not have, for example, as in Caterpillar a mistaken challenge at the inception of the case that the Court decided in Caterpillar to overlook when it did not remand the case.
There is no issue of that ilk.
Justice Ginsburg: But there was something that you overlooked or whoever was representing Atlas.
When did Atlas first become aware that the citizenship of each partner counts for diversity?
I mean, this was set up as a Texas business, but in a partnership, unlike a corporation, each partner's citizenship counts equally.
And when did you first become aware of that rule?
Mr. Greenberg: Justice Ginsburg, I don't know if the record reflects that issue, but answering your question, I don't think either party in the record adverted to that issue until the motion to dismiss was filed by Grupo Dataflux.
Therefore, the case continued on from filing through trial to verdict without either party adverting to the fact that there may have been a jurisdictional problem until after--
Justice Kennedy: Is it your understanding that the... that the attorney for Atlas in this case would have the obligation to advise the court of the problem the moment it was discovered?
Does the attorney have an ethical duty to advise that the original pleading was... was misleading as... as soon as the attorney finds out that this problem existed?
Mr. Greenberg: --Justice Kennedy, I believe so, yes.
And I... and I believe that the parties on either side, as well as the court I might add, if the court learned of or had an issue would have brought it up, but I think certainly counsel had an ethical duty to do so.
The... the issue before you is whether this case creates a new or different exception to the rule of time of filing, and we posit it does not because Caterpillar, contrary to... to the position of the petitioner... Caterpillar stands for the propositions, as I have stated, which are overwhelming according to the court.
Finality in that opinion, costs of litigation, litigants waiting in line.
That is an exception to the rule of the time of filing.
This case falls within much narrower... because the Fifth Circuit said, if it's cured before trial and not raised till after trial, then that's the test.
That's a much narrower test.
Chief Justice Rehnquist: What... what's the latest time it can be raised in the view of the Fifth Circuit?
Mr. Greenberg: In the... in the view of the Fifth Circuit, raised before trial... cured before trial, but not raised... but raised after is what the court's test was.
Chief Justice Rehnquist: Yes, but in your time of filing rule, you... you have a very definite period.
Now, this is an exception.
And when is the... under the rule of the exception, when is the last time this can be raised?
Mr. Greenberg: I would... would... respectfully, Chief Justice Rehnquist, I would think before trial is... is the last time it can be raised because Caterpillar says once a case has been tried.
It's very clear.
And... and our... in this case Atlas was tried to a jury.
And as Justice Ginsburg correctly pointed out, this case goes right back to the same court.
And if the considerations of finality, of costs of litigation, of people, litigants waiting in line to have their cases tried is to have any meaning, then this Court should overlay that on the facts of this case and say, well, it would be as Yogi Berra said, deja vu all over again, just to go try this case.
Justice Kennedy: Does... does the record tell us why the partnership was changed in its composition?
Mr. Greenberg: The... the record does not.
The... the record only reflects that 6... 6 months before the trial, the two Mexican partners were bought out, if you will, were no longer partners.
That was not finalized because of some... it was... it was final from the parties' standpoint, but there was a technical need for some document from the NASD, and I'm not sure that's in the record, that that's why petitioner says, well, it was really only finally cured a month before trial.
Justice Kennedy: Did the same attorneys represent the partnership in... in this change of partner transaction as were representing the... Atlas in the litigation?
Mr. Greenberg: --No.
No, Your... no, Justice Kennedy, that is not the case.
Justice Ginsburg: Do you see any impediment?
Or, first of all, explain to me what that second filing was.
Mr. Boyce told us--
Mr. Greenberg: Yes.
Justice Ginsburg: --that you filed a second complaint.
Mr. Greenberg: That is not in the record, but what occurred is when the judge dismissed this case after the jury trial, the thought process was, well, let's start anew so that whatever happens on appeal, that case will be advanced so much it would be tried right away, we thought.
But after discussing it and after thinking about it, we didn't want two cases to go along at the same time.
So we... it... we dismissed it without prejudice, relying on whatever happens in this case.
Justice Ginsburg: So you did that before you knew what the outcome was--
Mr. Greenberg: Oh, yes.
We did that long before we knew what the... long before we knew what the outcome or the briefing was in... in the... in the Fifth Circuit.
Justice Ginsburg: --Do you know of any impediment?
Now... now it's for sure that you can go back to the same court with the same parties, do the same thing all over again.
Mr. Boyce said that as far as the Texas statute of limitations is concerned, it's not a problem.
Is... is there anything that... apart from repeating the same thing, that would put you at a disadvantage?
Mr. Greenberg: Mr. Boyce is a bright lawyer and I don't know what's in his mind, but as for me, I believe there's a savings clause in the Texas statutory scheme that upon ruling by this Court, if it were not to uphold the Fifth Circuit and this case had to be refiled in district court, I... I believe that that savings clause would pertain except... except... that in the record it shows that New York law is to apply to this litigation.
And I don't know whether New York substantive law would apply or Texas procedural law would apply.
My coming here today, of course, was the hope of an affirmance and not have to face that issue.
Justice Kennedy: Under the Fifth Circuit rule, suppose there's no diversity when the suit is filed because the plaintiff resides in the same State as one of the defendants, and then the plaintiff moves in order to create diversity.
Doesn't the Fifth Circuit rule permit that to occur without destroying the jurisdiction of the court?
Mr. Greenberg: --I'll answer--
Justice Kennedy: Then let's say this is done just before trial.
Mr. Greenberg: --And the issue then is raised after the trial?
Justice Kennedy: Yes.
Mr. Greenberg: I would respectfully say this, not only do I think the Fifth Circuit rule allows that, I think Caterpillar allows that.
Justice Kennedy: You think which?
Mr. Greenberg: I think Caterpillar--
Justice Kennedy: Caterpillar.
Mr. Greenberg: --the unanimous decision of this Court, would allow that same fact situation, but--
Justice Scalia: It's... it's really... it's really quite different to say, look it, it's the same party here who was here at the outset of the trial, this very same person, and he's been here all through.
All that's happened is one other person who... who destroyed jurisdiction has gotten out.
It seems to me it's quite something different to say we had... we had one person, you know, originally with... with a certain citizenship.
That's... that same person is here.
It was bad as to... as to him originally, but now it's changed because he's changed his citizenship.
I'm not sure that that's the same situation.
It seems to me quite different.
Justice Ginsburg: It seems to me that that situation is just what Justice Marshall dealt with when he said you cannot oust a court of jurisdiction once lodged.
So if there is authority, then it doesn't matter whether that plaintiff moves.
I mean, the plaintiff who certainly couldn't move and become non-diverse and hope to escape an adverse judgment... I thought... I thought that rule was firm, that a single plaintiff, if it's just a two-party lawsuit, jurisdiction is not ousted.
And I don't think that Caterpillar in any way suggests that that one party plaintiff situation would be different.
The... the partnership is sort of in between.
It's not like a single individual, but it's not quite like Caterpillar either where there were wholly discrete parties.
Mr. Greenberg: --I... I noted in Caterpillar at page 11 that the Court cited the McMahan case from the Third Circuit in which there was a change in the partnership after the filing, but before the trial so as to empower the court with complete diversity and the court had the judicial power to decide the case.
I take it that if this Court in its unanimous opinion referred to the McMahan case, Knop v. McMahan, that it... it understood that change in that case and did not dispute the fact, therefore, that the change in a limited partnership is acceptable so that when that change occurs and then there is complete diversity and then there is a trial, that the court has the Article III judicial power to decide the case.
Or as... or as Justice Souter said in Lexicon, while not on all fours with this case by any means, there was no continuing defiance but merely untimely compliance.
In this case there was no continuing defiance of the court's jurisdiction.
Once the limited partners were bought out of the limited partnership, this court acquired the power, and once it acquired the power, the lineage of cases, the thread of cases from... from Grubbs, Newman-Green, and Caterpillar say this court has the power to consider that case.
Chief Justice Rehnquist: Well, Grubbs... what... what... Grubbs was a removal case.
Mr. Greenberg: Yes, that is true.
The only direct filing case... you are correct, Justice... Chief Justice Rehnquist.
Chief Justice Rehnquist: I'm glad to know that.
Unknown Speaker: [Laughter]
Mr. Greenberg: Well... and... and following on that, but of course, Newman-Green, a rule 21 case, admittedly is very instructive here because Newman-Green... the court gave the plaintiff the option of dismissing the dispensable party.
The plaintiff took the option.
While the case was on appeal, the appellate court gave the option.
The plaintiff dismissed the dispensable party and the court said okay, we had jurisdiction then to render... the district court had jurisdiction then to render summary judgment in that case.
The plaintiff could have turned down that power and said, no, I don't want to lose that dispensable party.
He may be the money man.
He may be the one that I can come after later on.
So you do have this Court in Newman-Green approving, if you will, the act of the plaintiff unilaterally to make the decision whether it's going to stay in Federal court or in that case... well, stay in Federal court.
Here, there are... there are... the... the petitioner raises two salient issues: removal is different than remand and this was unilateral.
I've covered the unilateral in my opinion, and I will say one final thing about... subject to questions, about the removal.
And that is once a case comes to this court by removal or by direct filing, the jurisdictional questions are the same at that point, and that is, is there diversity?
And in Caterpillar, it said, well, there wasn't and the court erroneously ruled, but later on diversity obtained and we had Article III jurisdictional power to try the case.
I... it's like coming to Washington, D.C. by train, boat, plane.
Once you get to Washington, D.C., you're subject to the same rules.
Once we be... came before the Federal court by direct filing, or once Caterpillar in the removal filing, the test was the same.
We... we believe this is a very, very narrow case.
Justice Stevens: May I just ask you one general question?
In... in your view is the rule that you advocate a one-way street in the sense that if there was jurisdiction when the case was filed, then the next week the plaintiff moved to the same State of the defendant, there would nevertheless continue to be jurisdiction all the way down the line?
Mr. Greenberg: That... Justice Stevens, that is correct.
Justice Stevens: So it's... this... this rule, if we adopt it, is 100... it's... it's to... it's always to preserve or to allow a... a belated creation of jurisdiction.
Mr. Greenberg: Once the court acquires the power, it doesn't lose it or it is not divested by the actions of the parties.
Justice Stevens: Okay.
Then the second question is... I just want to be 100 percent sure on your view... is if the original defect is discovered before trial, even though it had been corrected a day or 2 later, there would still be a duty to dismiss the complaint, dismiss for want of jurisdiction because there was no jurisdiction at the time of filing, under your view.
Mr. Greenberg: Respectfully, Justice Stevens, it's not my view.
It's what I believe Caterpillar says because Caterpillar speaks of a case having been tried.
The words are cases tried on... on... and I hope it's page 11... it... it--
Justice Scalia: Well, that would be the end of filing, not... not before trial.
He said... the... the question is before... you're... you're taking the position before trial.
Once trial has started--
Mr. Greenberg: --I think the court would have to dismiss the case.
Justice Scalia: --Well, that's not what Caterpillar says.
Having been tried is what--
Mr. Greenberg: It says, having been tried.
Justice Scalia: --I... I take that to mean the trial having been completed.
Mr. Greenberg: So do I.
So I'm agreeing with you.
I think the court--
Justice Ginsburg: As Caterpillar said, that if at the time of trial--
Mr. Greenberg: --Yes.
Justice Ginsburg: --you have no spoiler in the picture, which was what Caterpillar was.
Mr. Greenberg: That's correct.
Justice Ginsburg: And if there's a sentence that says something different, but the facts in Caterpillar was before the trial began, it was complete diversity.
Mr. Greenberg: That's correct.
Justice Breyer: Your answer to Justice Stevens, when he put his question, was yes.
Mr. Greenberg: Yes.
Justice Breyer: If in fact it's noticed before the trial is complete, it is necessary to dismiss.
And that you believe the answer is, one, yes, and you believe that's implicit in Caterpillar because you agree with what Justice Scalia said.
Mr. Greenberg: That is correct.
That's very well put and I thank you very much.
Justice Ginsburg: Suppose... suppose--
Mr. Greenberg: I honestly thought that was my answer.
Justice Breyer: --Who... who is that man?
Unknown Speaker: [Laughter]
Mr. Greenberg: I honestly thought that was my answer.
Justice Breyer: I did too.
Mr. Greenberg: But... but I also... I also have to hasten to point out that Justice Ginsburg's opinion says cured... you know, if it's cured before trial.
In... in this case, it was cured before trial, but it wasn't raised before trial.
It was raised after the trial.
We fall well within the umbrella of Caterpillar.
Justice Ginsburg: Suppose you had gone to that trial with the two Mexicans still in the partnership and you had won, and then could you then have said to the court, we don't need those Mexican partners?
They're out of here.
So now, we'd like to make a motion under rule 21 to drop those two people from the party lineup.
Could you have done that?
Mr. Greenberg: Under rule 21, if they were dispensable, yes.
Justice Ginsburg: So you're suggesting that a plaintiff could play the same game as a defendant could play, say, oh, I'm going to go in... I'm going to go in and get my trial, and I'm going to have those two spoilers in the case, and if I win, fine, I won't open my mouth.
If I lose, out they go and I start over again.
Mr. Greenberg: I understand the question, and respectfully, Justice Ginsburg, I would say that rule 21, Newman-Green, and Caterpillar does allow that.
I would say, though, on the other hand, that there are other checks on... on the ethics of... of lawyers.
If they do go in with that type of mental frame of mind, that there are ethical obligations, and you're going to face the wrath of the court.
The court may have a... a hearing, for example, to you... for you to show cause why you should be sanctioned for misrepresenting things to the court.
I'm very concerned about that.
Chief Justice Rehnquist: If... if the rule you're proposing kind of invites the sort of conduct that you say is prohibited, maybe there's something wrong with the rule.
Mr. Greenberg: I'm not proposing a rule, Chief Justice--
Chief Justice Rehnquist: Well, you're... you're proposing a rule that is derived, you say, from Caterpillar.
Mr. Greenberg: --I'm proposing that... that this case on its facts falls within the exception in Caterpillar.
I'm not advocating any new rule.
Chief Justice Rehnquist: Well, except that there was not a limited partnership in Caterpillar.
Mr. Greenberg: There was not a limited partnership in Caterpillar, but diversity was cured before trial and the issue was not raised until after trial.
Justice Stevens: And I suppose you would argue that if we're looking for bright line rules, we shouldn't make it turn on what the nature of a particular jurisdictional defect was or they moved to another State or you let one partner resign of something like that.
The bright line rule, it seems to me, has to turn on whether it's equally bright line to say you can make this objection up till the time of a verdict in the trial court or it's equally bright line to say you can do it up to the time that the appellate court judgment is final.
You can't do it after... we all agree you can't do it on collateral attack.
And I don't know why one is any more bright line than the other, unless you get into these ramifications that there's a difference between removal and filing or a difference between the... the plaintiff moving to another State or... or adding a partner.
Those are all... it seems to me any one of those would depart from the need for a bright line rule.
Mr. Greenberg: Respectfully, Justice Stevens, I do agree with that.
I think the rule... the time of filing rule is... is a general rule and it has been subject to exception.
We fall... we... this case falls within the Caterpillar, Newman-Green, Grubbs exception.
Yes, there are distinctions in the factual issues, but those distinctions are without a difference as far as what we would ask this Court to do.
Justice Kennedy: Well, they're pretty big distinctions because in the other cases, they were just extra parties that could be dropped out.
Here the whole partnership... the nature of the partnership had to change.
There was... the... the initial premise for the jurisdiction was wrong based on the identity and the composition of the partnership, not the identity and the composition of all of the parties that are in the complaint.
Now, that may be metaphysical, but it... it does seem to me to open more room for manipulation than existed just with Caterpillar on the books.
Mr. Greenberg: Respectfully, Justice Kennedy, I will answer your question.
I... I do not think it opens the door to more manipulation.
Number one, in Texas the general partner has the right to bring lawsuits.
The limited partners do not have the right to sue or be sued in their name on behalf of the limited partnership.
That's a very important distinction here.
The... the second point... and I think this is more important... the precedent of this Court does not discuss intent.
Caterpillar, Newman-Green, Grubbs did not talk about what were the parties' intent at the time that the jurisdictional Article III power came to this court.
Since there is no discussion in those cases of intent, it is my reading that intent is not an issue.
It's an absolute.
Did the court have jurisdiction or does it not?
And I think there are checks and balances on lawyers who would manipulate, as you say, Justice Kennedy.
Justice Scalia: Can I get back to... to bright line rules?
It seems to me it is a bright line rule, that you can preserve jurisdiction by dismissing a party.
That's very bright line.
I don't think it's very bright line to say, you know, whenever there was a jurisdictional defect which later is cured... in any way whatever?
I mean, this case involves an alteration in the citizenship of the partnership.
What about an alteration of the citizenship of the corporation?
They reincorporate somewhere else before the thing happens?
What about a... a private individual who decides to move to another State?
Is that covered?
Is this bright line when... when we still have all of these... all of these future cases in front of us?
It seems to me it is not.
Mr. Greenberg: Respectfully, Justice Scalia, in Caterpillar at page 11, there are overriding considerations to those analogies, which of course are not the facts here.
There's no showing of intent here.
There's... there's... the only showing is neither party adverted to the issue.
This case was tried.
Justice Ginsburg: There's a difference between the absence of jurisdiction at the outset, which is what is involved when you have a plaintiff from the same State as the defendant which can't be cured by the plaintiff moving to a diverse State, and imperfect jurisdiction, in other words, that you do have diversity, but you have a spoiler in the picture.
That is... that is very clear in Caterpillar, less clear in the partnership.
Although the partners are five individuals, they are not an entity the way a corporation is.
Mr. Greenberg: --That's correct.
In this... in this partnership, there were, I think, two corporations.
Justice Scalia: Wasn't the partnership sued as an entity?
I thought that it was sued as a partnership.
Mr. Greenberg: It was a sued as a partnership.
That is correct.
Justice Scalia: As a partnership.
Mr. Greenberg: Yes, and two individuals.
Justice Scalia: --So there was no jurisdiction initially over the partnership.
Mr. Greenberg: That's correct.
Justice Ginsburg: It wasn't... it was sued.
It... it sued.
It was the plaintiff, wasn't it?
Mr. Greenberg: Atlas sued--
Justice Ginsburg: --Yes.
Mr. Greenberg: --and was counterclaimed against by Dataflux as an entity, and then Dataflux third-partied in the two Mexican individuals.
Justice Scalia: But at... at the outset, contrary to the earlier statement, it was not a matter of imperfect jurisdiction.
There was no jurisdiction over Atlas.
The... of the partnership.
Mr. Greenberg: According to Carden v. Arkoma, Justice Scalia, the way I read it, the jurisdiction did not obtain at the time of filing.
That was only cured later, but the overriding consideration in Caterpillar unanimously by this Court is once a diversity case has been tried in Federal court, with the rules of decisions under State law, under Erie v. Tompkins, considerations of finality, efficiency, and economy become overwhelming.
If I have to take those words as they are, they are overwhelming, then it is overwhelming in this case because this case is narrower than Caterpillar.
Why send this case back?
I would ask this Court... these principles apply regardless of whether the case arrives to Federal court through removal or original filing.
I would ask this Court, on behalf of the respondent, that this Court apply these principles to conclude that the trial court in this case had subject matter jurisdiction at the time of trial, and allow this case to return the district court for entry of judgment consistent with the jury verdict.
Chief Justice Rehnquist: Thank--
Mr. Greenberg: If there are no more questions, I give back the Court my... the balance of my time.
Rebuttal of William J. Boyce
Chief Justice Rehnquist: --Thank you, Mr. Greenberg.
Mr. Boyce, you have 4 minutes remaining.
Mr. Boyce: Thank you, Mr. Chief Justice.
I would like to elaborate on an answer to Justice Breyer's question, which has been touched on by a number of the questions here, which is what's the worst that can happen.
And I... I think the point would be this.
Once the efficacy of a post-filing change in citizenship is... is taken as a given, then I think you're... you're setting up a situation where the door swings both ways.
Jurisdiction can be created and jurisdiction can be destroyed by virtue of post-filing changes.
Justice Breyer: Well, he says it's the opposite.
I mean, you... you could do that, but I mean, it's very clear to say it could destroy it; no.
It could create it; yes.
I mean, that's not hard to understand, and there's a lot of authority.
Mr. Boyce: The... the rule... if... if the line is drawn there, then I... I think that raises implications of manipulation.
You can move and create it and then move back and not destroy it.
If... if the concern is creating incentives--
Justice Ginsburg: Only if the court says... only if the court says so because the rule, even the timely filing rule was... was something that John Marshall said and it's been that way ever since, with exceptions and recognizing that a human individual is different from a corporation is different from a partnership.
If... if a court is going to make such a regime, surely it would make a sensible one and not one that's subject to abuse.
Mr. Boyce: --If... there... there may be... the... the court will do what it will do.
The... the question is, is there an... a creation of additional opportunities for manipulation or confusion, and we--
Justice Breyer: What are they?
You were going to say.
What are they?
Mr. Boyce: --And... and I submit that if the bright line rule is no longer bright, if it... if it turns on the fact of how far into the trial court proceedings before this came up, then it's... the... the time when you need certainty most, in terms of being able to decide whether or not you have jurisdiction, that's when there's going to be the least amount of clarity.
And that's the real... the real problem that's... that's created here.
And... and Justice Stevens had... had asked the... the question saying, well, why don't we just draw the... the line?
You want a bright line rule?
We'll... we'll draw it at the time of trial.
I think the problem here is that what you're setting up is a circumstance where for some period of time, a trial court, a Federal district court is acting ultra vires, to borrow the phrase from Steel Company, for some period of time prior to whenever you say the... the post-filing change could become effective.
You've got a Federal trial court that is operating without authority.
It's issuing orders.
Justice Stevens: No.
You assume the jurisdictional defect has been cured.
Mr. Boyce: But prior to the time of that curing of that defect, you have a circumstance as you had here for 3 years, for example, where you've got a Federal district court issuing summary--
Justice Stevens: And as you had in Caterpillar.
Mr. Boyce: --And... and I guess the point I would make is... is this.
If Caterpillar opened the door to a component of retroactive jurisdiction, it did not open that door very wide.
And... and the... the choice is should that... should that door be opened wider and what are the problems that result from that.
And our position would be that the confusion and uncertainty and opportunities for manipulation that are going to result from opening that door wider make it appropriate to leave the line drawn where--
Justice Stevens: Can you imagine a plaintiff's lawyer deliberately filing a Federal lawsuit where he knows there's no Federal jurisdiction?
Why would he ever do that?
Mr. Boyce: --That may not be a... a circumstance that... that is likely to happen, but--
Justice Stevens: But you're talking about deliberate manipulation, and I just don't understand why a competent lawyer would ever do that.
Mr. Boyce: --I... I think the... the greater issue is... is one of uncertainty and of having a circumstance like this case or going back as early as... as the Capron case where the case gets filed and gets tried and then the issue comes up.
I do want to make one note about the reference to the Knop case.
Chief Justice Rehnquist: Thank you, Mr. Boyce.
The case is submitted.
Unknown Speaker: The honorable court is now adjourned until Monday next at 10 o'clock.
Argument of Speaker
Mr. Greenberg: The opinion of the Court in No. 02-1689, Grupo Dataflux versus Atlas Global Group will be announced Justice Scalia.
Argument of Justice Scalia
Mr. Scalia: This case is here on writ of certiorari to the United States Court of Appeals for the Fifth Circuit.
The respondent Atlas Global Group, LP is a limited partnership created under Texas law.
It filed a state law suit against petitioner, a Mexican corporation, in Federal Court alleging diversity jurisdiction.
After the jury returned a verdict in favor of Atlas, but before the entry of judgment, petitioner moved to dismiss for lack of subject matter jurisdiction because the parties were not diverse at the time the complaint was filed.
In granting the motion, the magistrate judge found that as a partnership, Atlas was a Mexican citizen because two of its partners, also respondents in the case, were Mexican citizens at the time of filing.
A partnership, we have held, there is the citizenship of each of its partners.
Thus, the requisite diversity was absent because petitioner Grupo Dataflux was also a Mexican citizen.
On appeal, Atlas urged the Fifth Circuit to disregard the diversity failure at the time of filing because the Mexican partners had withdrawn from Atlas before the trial began, and thus diversity existed from that time on.
Relying on a case called Caterpillar, Inc. versus Lewis, the Fifth Circuit held that the conclusiveness of citizenship at the time of filing is subject to an exception whereas here, the jurisdictional error was not identified until after the jury’s verdict and the post-filing change in the partnership cured the jurisdiction with effect before the defect was identified.
We granted certiorari and now reverse.
This Court has long adhered to the rule that subject matter jurisdiction in diversity cases depends on the state of facts that existed at the time of filing.
Atlas relies principally on our decision in a recent case called Caterpillar which stated that “once a diversity case has been tried in Federal Court, considerations of finality, efficiency, and economy become overwhelming."
However, this statement from Caterpillar did not augur a new approach to deciding whether a jurisdictional defect has been cured.
The jurisdictional defect that Caterpillar addressed had been cured by the dismissal of the party that had destroyed diversity, a curing method that had long been an exemption to the time of filing rule.
But saving diversity by dropping a party, an unnecessary party, is different from trying to save diversity by changing a party's citizenship.
This Court has never approved of deviation from the rule articulated by Chief Justice Marshall in 1829 in a case called Conolly versus Taylor that “where there is no change of party a jurisdiction, depending on the condition of the party, is governed by that condition as it was at the commencement of the suit.”
This principle from Conolly disposes of the present case, there has been no change of party.
The composition of the partnership and consequently its citizenship change but allowing this change in the citizenship of a single party to cure the jurisdictional defect existing at the time of filing would contravene the Conolly principle.
We decline to do today what the Court has refused to do for 175 years, holding that “finality, efficiency, and judicial economy” can justify suspension of the time of filing rule would create an exception of indeterminate scope that is bound to produce costly collateral litigation.
Although, unflinching application of the rule in this case requires dismissal of a fully litigated case, the costs to the system as a whole of maintaining an open-ended exception to the rule outweigh the interest of the individual parties before the Court in today’s case, who after all have none but themselves to blame for not noticing the absence of diversity sooner.
Accordingly, we hold that a party’s post-filling change in citizenship cannot cure a lack of subject matter jurisdiction that existed at the time of filing in a diversity action.
The judgment of the Fifth Circuit is reversed.
Justice Ginsburg has filed a dissent in which Justices Stevens, Souter and Breyer have joined.