Grupo Dataflux v. Atlas Global Group, L.P.

PETITIONER: Grupo Dataflux
RESPONDENT: Atlas Global Group, L.P., et al.
LOCATION: Guantanamo Bay, Cuba

DOCKET NO.: 02-1689
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 541 US 567 (2004)
DECIDED: May 17, 2004
GRANTED: Oct 14, 2003
ARGUED: Mar 03, 2004

ADVOCATES:
Roger B. Greenberg - argued the cause for Respondents
William J. Boyce - argued the cause for Petitioner

Facts of the case

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.

Question

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?

Media for Grupo Dataflux v. Atlas Global Group, L.P.

Audio Transcription for Oral Argument - March 03, 2004 in Grupo Dataflux v. Atlas Global Group, L.P.

Audio Transcription for Opinion Announcement - May 17, 2004 in Grupo Dataflux v. Atlas Global Group, L.P.

William H. Rehnquist:

The opinion of the Court in No. 02-1689, Grupo Dataflux versus Atlas Global Group will be announced Justice Scalia.

Antonin 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.