Grupo Dataflux v. Atlas Global Group, L.P. - Opinion Announcement

Argument of Speaker

Mr. Speaker: 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Atlas urged the Fifth Circuit to disregard the diversity failure at the time of filing because the Mexican partners had withdrawn from Atlas before the trial began, and thus diversity existed from that time on.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.