Diversity Jurisdiction

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DIVERSITY JURISDICTION

SECTION 1: DETERMINATION OF CITIZENSHIP

Sadat v. Mertes (7th Cir 1980)

OVERVIEW: Appellant, who was a dual national, was living in Pennsylvania when he accepted anew job in Lebanon. On his way to the Chicago airport, he was involved in an auto accident, but

proceeded with moving to Lebanon. Later, appellant was living in Egypt when he filed hiscomplaint in federal court. The district court granted a motion to dismiss filed by third partydefendants as appellant was not a citizen of a state for purposes of diversity jurisdiction. Uponreview, the court held that the evidence was sufficient to permit the district court to find that theappellant was domiciled in Egypt notwithstanding his assertion that he never intended to makeEgypt his home, therefore, there was no diversity jurisdiction as appellant was not a citizen of anAmerican state. Appellant's argument, that there was also federal jurisdiction under 28 U.S.C.S. 1332(a)(2) because he was also a citizen of a foreign state, failed as the court ruled appellant'sEgyptian nationality was not dominant. Therefore, the judgment of the district court was affirmed.OUTCOME: The judgment of the district court was affirmed because appellant could not provediversity jurisdiction or jurisdiction as a citizen of a foreign state.

ROLS:1. Status at the time of the commencement of action is the time at which the jurisdiction of the

court is determined.2. A citizen of the United States who is not also a citizen of one of the United States may not

maintain suit under that 28 U.S.C.S. 1332(a)(1).3. To establish a domicile of choice a person generally must be physically present at the

location and intend to make that place his home for the time at least.4. Intent is a state of mind which must be evaluated through the circumstantial evidence of a

person's manifested conduct. Statements of intent are entitled to little weight when inconflict with the facts.

5. A domicile once established continues until it is superseded by a new domicil.

6. The generally accepted test for determining whether a person is a foreign citizen forpurposes of 28 U.S.C.S. 1332(a)(2) is whether the country in which citizenship is claimedwould so recognize him.

REASONING: P was domiciled abroad when he initiated this action and therefore was not acitizen of any state.

1332(a)(1)creates the federal courts jurisdiction over actions btw citizens of different states.For a natural person to fall within the provision he must be both:

a citizen of the US & (2) a citizen of a particular state

1332(a)(2)vests the district courts w/ jurisdiction over civil actions btw state citizens andcitizens of foreign states alineage jurisdiction.

1332. Diversity of citizenship; amount in controversy; costs(a) The district courts shall have original jurisdiction of all civil actions where the matter incontroversy exceeds the sum or value of $ 75,000, exclusive of interest and costs, and is

between--

(1) Citizens of different States;(2) citizens of a State and citizens or subjects of a foreign state;

(3) citizens of different States and in which citizens or subjects of a foreign state are

additional parties; and(4) a foreign state, defined in section 1603(a) of this title [28 USCS 1603(a)], as plaintiff

and citizens of a State or of different States.

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For the purposes of this section, section 1335, and section 1441, an alien admitted to theUnited States for permanent residence shall be deemed a citizen of the State in which such

alien is domiciled.

(b) Except when express provision therefor is otherwise made in a statute of the United States,

where the plaintiff who files the case originally in the Federal courts is finally adjudged to be

entitled to recover less than the sum or value of $ 75,000, computed without regard to anysetoff or counterclaim to which the defendant may be adjudged to be entitled, and exclusive of

interest and costs, the district court may deny costs to the plaintiff and, in addition, mayimpose costs on the plaintiff.

(c) For the purposes of this section and section 1441 of this title--

(1) a corporation shall be deemed to be a citizen of any State by which it has beenincorporated and of the State where it has its principal place of business, except that in any

direct action against the insurer of a policy or contract of liability insurance, whetherincorporated or unincorporated, to which action the insured is not joined as a party-defendant,

such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well asof any State by which the insurer has been incorporated and of the State where it has its

principal place of business; and(2) the legal representative of the estate of a decedent shall be deemed to be a citizen only

of the same State as the decedent, and the legal representative of an infant or incompetentshall be deemed to be a citizen only of the same State as the infant or incompetent.

(d) The word "States", as used in this section, includes the Territories, the District of Columbia,

and the Commonwealth of Puerto Rico.

The SC has held that a change of citizenship after suit is filed in federal courts does not destroy

dj, b/c jurisdiction is determined by the facts existing when the complaint is filed.

1332(c)(2) The legal representative of the estate of a decedent shall be deemed to be a citizen

only of the same State as the decedent, and the legal representative of an infant or incompetentshall be deemed to be a citizen only of the same State as the infant or incompetent.

SECTION 2. COMPLETE DIVERSITY & ANCILLARY JURISDICTION

No P is a citizen of the same state as any DComplete diversity

Strawbridge v. Curtiss (US 1806) Complete diversity of citizenship

Owen Eqp v. Kroger(US 1978) DJ doesnt exist unless each D is a citizen of a diff state from each P Prior to this case, circuit crts have held cld not implead a third

party defendant and collect 100% judgment from TPD.

After the decision of this case, you can join if show joint-liabilityexists, then it is constitutional to implead a nondiverse party b/cargue minimum diversity.

Decision did not overrule what circuits have held earlier, it justclarified it.

Rule 14: Third Party Practice

Permits parties who are defending against claims to join other persons, not yet parties, who may

be obligate to reimburse the party defending the claim for some or all of that partys liability.

A third party defendant joined under R14 does not become a defendant as against the original P,

so that federal jurisdiction is not destroyed where those parties are citizens of the same state.Rule 21 CivPro

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parties to be dropped or added..at any stage of the action, invests district courts w/ authority toallow a dispensible nondiverse party to be dropped at any stage, even after judgment has beenrendered; and the policies informing R21 may equally apply to the courts of appeals.

Treinies v. Sunshine Mining Co. (US 1939)

PROCEDURAL POSTURE: Petitioner, a claimant of certain stock, sought certiorari review of

a judgment from the Circuit Court of Appeals for the Ninth Circuit, which affirmed the trial

court's adverse decree that was entered against petitioner in a proceeding under the InterpleaderAct, 28 U.S.C.S. 41(26), which was filed by complainant stakeholder against, inter alia,petitioner and respondents, adverse claimants and citizens of another state.

OVERVIEW: The court affirmed a decree adverse to petitioner, the claimant of certain stock,

in a proceeding under the Interpleader Act (the Act), 28 U.S.C.S. 41(26). The court found thatthe Act, which was based upon U.S. Const. art. III, 2, granted jurisdiction broad enough tocover the present situation where complainant stakeholder and petitioner were citizens of thesame state, Washington, while respondent, an adverse claimant, was a citizen of another state,Idaho. The court further found that the Act authorized the enjoining of parties to the interpleaderfrom further prosecution of any suit in any state or federal court on account of the propertyinvolved. The issue of jurisdiction vel non of the Washington court could not be relitigated in

the interpleader. Because the Idaho court was a court of general jurisdiction, its conclusionswere unassailable collaterally except for fraud or lack of jurisdiction. The holding by the Idahocourt of no jurisdiction in Washington necessarily determined the question raised here as to theIdaho jurisdiction against petitioner's contention. She was bound by that judgment.

OUTCOME: The court affirmed the affirmance of a decree adverse to petitioner, the claimant

of certain stock, in an interpleader proceeding, because petitioner was bound in the presentproceeding by a judgment of a court of a sister state that had determined that petitioner's homestate lacked jurisdiction.

By the Act of January 20, 1936, the district courts have jurisdiction of suits in equity,

interpleading two or more adverse claimants, instituted by complainants who have property ofthe requisite value claimed by citizens of different states. The suit may be maintained "althoughthe titles or claims of the conflicting claimants do not have a common origin, or are notidentical, but are adverse to and independent of one another."

Suit was begun by complainant (corporations of the State of Washington), impleading one

group of claimants who are citizens of that same state & another, the adverse group, who arecitizens of Idaho.

Interpleader: Allows a party who owes something to one of two or more other persons, but is

not sure to whom, to force the other parties to argue out their claims among themselves. 2 kindsof interpleader (1)statutory interpleader 1335 & (2)rule interpleader FRCP 22.

Notes 1,2,3 pg. 249-251

1335 Interpleader Statute: Requires only minimal diversity, diversity of citizenship btw two ormore claimants, w/out regard to the circumstances that other rival claimants may be co-citizens.

Haynes v. Felder , 239 F.2d 868(5th Cir 1957)

OVERVIEW: The jurisdictional question on appeal was whether a bank, a Texas plaintiff andmere stakeholder asserting no claim to mislaid property found in a house owned by one appelleeclaimant, could bring interpleader against two rival sets of claimants, consisting of a citizen ofTexas on one side, opposed by four joint claimants of whom three were citizens of Texas, andone of Tennessee. Summary judgment in favor of appellee claimants was affirmed. The partieshad been properly before the district court. Although the action could not have been brought as adiversity action under 28 U.S.C.S. 1332, which required complete diversity between the

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parties, the action could properly have been brought under the Impleader Act, 28 U.S.C.S. 1335 on the absolute minimum diversity present in the case . At least two district court casesasserting jurisdiction with minimal diversity had been cited with general approval by the court,and the legislative history indicated the remedial nature of the impleader statutes, which madethe remedy flexible and more readily available to those unable to secure complete protection inthe state courts because of their geographically limited jurisdiction.1. Interpleader suits may be attempted under Fed. R. Civ. P. 22(1) (normal diversity, 28

U.S.C.S. 1332) orFed. R. Civ. P. 22(2) (statutory interpleader, 28 U.S.C.S. 1335), orboth, by plaintiffs, or defendants, who are disinterested (strict interpleader) or interested (billin the nature of interpleader), and whose citizenship is totally, partially, or not at all diversefrom that of all or some of the claimants.

2. Interpleader Act, 28 U.S.C.A. 1335. The pertinent language of this statute is:'(a) The district courts shall have original jurisdiction of any civil action of interpleader or inthe nature of interpleader * * * if'(1) Two or more adverse claimants, of diverse citizenship as defined in section 1332 of thistitle, are claiming or may claim to be entitled to such money or property * * *.'

This statute does not appear to require any diversity between the plaintiff and the defendant-

claimants, and such an interpretation of the similarly conceived 1936 Interpleader Act washeld to be both correct and constitutional in Treinies v. Sunshine Mining Co., 308 U.S. 66,60 S.Ct. 44, 84 L.Ed. 85.

Owen Eqp v. Kroger (US 1978)

In an action in which federal jurisdiction is based on diversity of citizenship, may the plaintiff

assert a claim against a third-party defendant when there is no independent basis for federaljurisdiction over that claim? No, absent an independent basis.

Held: The Federal District Court lacked power to entertain the claim against the third-party

defendant following the dismissal of the action as to the primary defendant, absent anindependent basis for federal jurisdiction over that claim, since (1) 1332(a)(1) required complete

diversity of citizenship among the parties, and (2) such a claim was not within the ancillaryjurisdiction of federal courts over nonfederal claims.

Although FRCP 14(a) permits a P to assert a claim against a TPD,.it does not purportto say whether or not such a claim requires an independent basis of federal jurisdiction.

Issue reworded: Under what circumstances may a federal court hear and decide a state-law claim arising btw citizens of the same state? Gibbs delineated the constitutionallimits of federal judicial power. Constitutional power is the first hurdle that must beovercome in determining that a federal court has jurisdiction over a particularcontroversy b/c the jurisdiction of the federal courts is limited by the provisions of Art 3and by the Acts of Congress. The statutory law as well as the Constitution may limit afederal courts jurisdiction over nonfederal claims. A finding that federal and nonfederal

claims arise from a "common nucleus of operative fact," the test ofGibbs, does not theinquiry into whether a federal court has power to hear the nonfederal claims along withthe federal ones. Beyond this constitutional minimum, there must be an examination ofthe posture in which the nonfederal claim is asserted and of the specific statute thatconfers jurisdiction over the federal claim, in order to determine whether "Congress in[that statute] has . . . expressly or by implication negated" the exercise of jurisdictionover the particular nonfederal claim.

CONSTITUTIONAL MINIMUMGibbs Test

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THENTo determine whether Congress in the has expressly or by implication

negated the exercise of jurisdiction over the particular nonfederal claim theremust be an Examination of the Posture:

Nonfederal claim is asserted &

Specific statute that confers jurisdiction over the federal claim

In any case where the P cld not have joined the TP originally b/c of jurisdictional limitations

such as lack of diversity of citizenship, the majority view is that any attempt by the P to amendhis complaint and assert a claim against the impleaded third party would be unavailing. Athird-party complaint depends at least in part upon the resolution of the primary lawsuititsrelation to the original complaint is thus not mere factual similarities but logical dependence.

In Owens v. Kroger, the respondents claim against the petitioner, was entirely separate from her

original claim against OPPD, since the petitioners liability to her depended not at all uponwhether or not OPPD was also liable. Far from being an ancillary and dependent claim, it was anew and independent one. Secondly, the nonfederal claim was asserted by the P, whovoluntarily chose to bring suit upon a state-law claim in a federal court. By contrast, ancillaryjurisdiction involves claims by a defending party haled into court against his will, or by anotherperson whose rights might be irretrievably lost unless he could assert them in an ongoing action

in federal court. Neither the convenience of litigants nor considerations of judicial economy cansuffice to justify extension of the doctrine of ancillary jurisdiction to a Ps c/a against a citizenof the same state in a diversity case. Congress has established the basic rule that diversityjurisdiction exists under 1332 ONLY when there is complete diversity of citizenship. Thepolicy of the calls for its strict construction.

ROL:

1. Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim arisingunder the Constitution, the laws of the United States, and Treaties made, or which shall bemade, under their authority. U.S. Const. art. III, 2. The relationship between that claim and thestate claim permits the conclusion that the entire action before the court comprises but oneconstitutional case. The state and federal claims must derive from a common nucleus of

operative fact. But if, considered without regard to their federal or state character, a plaintiff'sclaims are such that he would ordinarily be expected to try them all in one judicial proceeding,then, assuming substantiality of the federal issues, there is power in federal courts to hear thewhole.

2. A finding that federal and nonfederal claims arise from a common nucleus of operative fact,does not end the inquiry into whether a federal court has power to hear the nonfederal claimsalong with the federal ones. Beyond this constitutional minimum, there must be an examinationof the posture in which the nonfederal claim is asserted and of the specific statute that confersjurisdiction over the federal claim, in order to determine whether Congress in that statute hasexpressly or by implication negated the exercise of jurisdiction over the particular nonfederalclaim.

3. Neither the convenience of litigants nor considerations of judicial economy can suffice to justifyextension of the doctrine of ancillary jurisdiction to a plaintiff's cause of action against a citizenof the same state in a diversity case. Diversity jurisdiction exists under 28 U.S.C.S. 1332 onlywhen there is complete diversity of citizenship. The policy of the statute calls for its strictconstruction.

SYLLABUS: Respondent, a citizen of Iowa, sued for damages based on the wrongful death of

her husband, who was electrocuted when the boom of a steel crane next to which he waswalking came too close to a high-tension electric power line. The action was brought in federalcourt on the basis of diversity of citizenship against a Nebraska corporation (OPPD), whosenegligent operation of the power line was alleged to have caused decedent's death. OPPD then

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filed a third-party complaint against petitioner company which owned and operated the crane,alleging that petitioner's negligence proximately caused the death. Respondent was thereaftergranted leave to amend her complaint by naming petitioner, which she alleged to be a Nebraskacorporation with its principal place of business in Nebraska, as an additional defendant. OPPDsuccessfully moved for summary judgment, leaving petitioner as the sole defendant. Though inits answer petitioner admitted that it was a corporation organized and existing under the laws ofNebraska, during trial it was disclosed that petitioner's principal place of business was in Iowa.

Since both parties were thus Iowa citizens, petitioner moved to dismiss on the basis of lack offederal jurisdiction. After the jury had returned a verdict for respondent, the District Courtdenied petitioner's motion to dismiss. The Court of Appeals affirmed, holding that underMineWorkers v. Gibbs, 383 U.S. 715, the District Court had jurisdictional power, in its discretion, toadjudicate the claim, which arose from the "core of 'operative facts' giving rise to both[respondent's] claim against OPPD and OPPD's claim against [petitioner]," and that the DistrictCourt had properly exercised its discretion because petitioner had concealed its Iowa citizenshipfrom respondent.Held: The District Court had no power to entertain respondent's lawsuit against petitioner as athird-party defendant since diversity jurisdiction was lacking. Gibbs,supra, distinguished.

(a) A finding that federal and nonfederal claims arise from a "common nucleus of operativefact," the Gibbs test, does not suffice to establish that a federal court has power to hearnonfederal as well as federal claims, since, though the constitutional power to adjudicate thenonfederal claim may exist, it does not follow that statutory authorization has been granted.Aldinger v. Howard, 427 U.S. 1; Zahn v. International Paper Co., 414 U.S. 291.

(b) Here the relevant statute, 28 U. S. C. 1332 (a)(1), which confers upon federal courtsjurisdiction over civil actions where the amount in controversy exceeds $ 10,000 and is betweencitizens of different States, requires complete diversity of citizenship, and it is thuscongressionally mandated that diversity jurisdiction is not available when any plaintiff is acitizen of the same State as any defendant, a situation that developed in this case when

respondent.amended.her.complaint.

(c) Under the Court of Appeals' ancillary-jurisdiction theory a plaintiff could defeat the statutoryrequirement of complete diversity simply by suing only those defendants of diverse citizenshipand waiting for them to implead nondiverse defendants.

(d) In determining whether jurisdiction over a nonfederal claim exists, the context in which thatclaim is asserted is crucial. Here the nonfederal claim was simply not ancillary to the federalone, as respondent's claim against petitioner was entirely separate from her original claimagainst OPPD, and petitioner's liability to her did not depend at all upon whether or not OPPDwas also liable. Moreover, the nonfederal claim here was asserted by the plaintiff, who

voluntarily chose to sue upon a state-law claim in federal court, whereas ancillary jurisdictiontypically involves claims by a defending party haled into court against his will, or by anotherperson whose rights might be irretrievably lost unless he could assert them in an ongoing actionin federal court.

Notes on Ancillary Jurisdiction pg. 258-260: 1-41. Before State Farm v. Tashire, ancillary jurisdiction was arguably the constitutional basis for the

power to determine the claims of a nondiverse stakeholder in interpleader.

American Fire v. Finn (US 1951)

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1441(c)Separate and Independent claim or c/a test for removability. A separable controversy isno longer an adequate ground for removal unless it also constitutes a separate and independentclaim or c/a. Congress has authorized removal now under 1441 (c) only when there is a separateand independent claim or cause of action.

Held We conclude that where there is a single wrong to plaintiff, for which relief is sought,arising from an interlocked series of transactions, there is no separate and independent claim or

cause of action under 1441 (c). The past history of removal of "separable" controversies, theeffort of Congress to create a surer test, and the intention of Congress to restrict the right of removalleads us to the conclusion that separate and independent causes of action are not stated. The facts ineach portion of the complaint involve Reiss, the damage comes from a single incident. Theallegations in which Reiss is a defendant involve substantially the same facts and transactions as dothe allegations in the first portion of the complaint against the foreign insurance companies. Itcannot be said that there are separate and independent claims for relief as 1441 (c) requires.Therefore, we conclude there was no right to removal.

OVERVIEW: After suffering a fire loss, the insured filed suit against the insurer, not a residentcorporation of the forum state, and two codefendants, one of whom resided in the forum state. The

insurer and a codefendant removed the suit from state court to federal court. Subsequent to thedistrict court's finding against it, the insurer argued that removal of the suit from state court wasimproper. The district court denied the insurer's motion to vacate the judgment and remand the caseto state court, and the court of appeals affirmed. On certiorari, the U.S. Supreme Court held thatthere was no right to removal because the claim against the insurer was not separate andindependent from the claim against the non-diverse codefendant as required under 28 U.S.C.S. 1441(c). In reaching its conclusion, the Court held that the suit involved a single wrong to theinsured that involved an interlocking series of transactions. The Court then held that the insurer wasnot estopped from protesting the removal action because a lack of party diversity deprived thedistrict court of original jurisdiction over the action.

OUTCOME: The Court reversed the judgment with directions to remand the case to the state court.

SYLLABUS: In a suit brought in a Texas court by a resident of that State to recover for a loss byfire, the complaint named as defendants two foreign insurance companies (one of which is thepetitioner here) and a resident agent of the companies. The single wrong for which relief wassought was the failure to compensate for the loss, and the three defendants were joined because ofuncertainty as to who was liable. After September 1, 1948, petitioner removed the case to theFederal District Court, which rendered judgment against petitioner and absolved the otherdefendants. Petitioner thereafter moved to vacate the judgment and to remand the case to the statecourt. Held:

1. In the light of the allegations of the complaint in this case, separate and independent causes of

action were not stated; and, under 28 U. S. C. 1441 (c), there was no right of removal of the casefrom the state court to the federal court.

(a) In adopting the "separate and independent claim or cause of action" test for removability, 28U. S. C. 1441 (c) (1948), Congress intended to avoid the difficulties experienced in determiningthe meaning of the former provision of 28 U. S. C. 71 and to limit removal from state courts.

(b) A separable controversy is no longer an adequate ground for removal unless it alsoconstitutes a "separate and independent claim or cause of action."

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(c) The phrase "cause of action," as used in 1441, must be given a meaning which willaccomplish the congressional purpose of limiting and simplifying removal.

(d) Where a plaintiff seeks relief for a single wrong, arising from an interlocked series oftransactions, there is no "separate and independent claim or cause of action" under 28 U. S. C. 1441 (c).

2. Because of the presence of a citizen of Texas on each side, the District Court would not have

had original jurisdiction of this suit, either as stated in the complaint or in the posture of the case atthe time of judgment. Therefore, the judgment of the District Court must be vacated.

(a) To permit a federal trial court to enter judgment in a case removed without right from a statecourt where the federal court could not have original jurisdiction of the suit, even in its posture atthe time of judgment, would by the act of the parties work a wrongful extension of federaljurisdiction and give district courts power that Congress has denied them.

Notes on Removal 1441(c) pg. 264-267: 1-6, 81. Did Finn destroy the utility of 1441(c) in diversity cases? Finn destroyed removal

based on the fact that complete diversity jurisdiction was lacking and that their was onlyone cause of action.

2. Is there room for pendent jurisdiction of non-diverse claims under the new asinterpreted in Finn? Or is a claim that is separate and independent one that is toounrelated to be pendent? Twentieth Century Fox v. Taylor(SDNY 1965) holds there areclaims independent enough to be removable under 1441 (c) but related enough tosupport pendent jurisdiction over additional parties. In Finn, the P suffered a singlewrong arising out of the fire, which entitled him to but one recovery. In this case, thereare two separate and distinct employment contracts. Nothing in Article III prohibitsCongress from opening the Federal courts to controversies not raising Federal questions,so long as any two adverse parties are of diverse citizenship.

SECTION 3: CORPORATIONS & OTHER ASSOCIATIONS

Carden v. Arkoma Associates (US 1990)Issue: The question presented in this case is whether, in a suit brought by a limited partnership, thecitizenship of the limited partners must be taken into account to determine diversity of citizenshipamong the parties. Whether such an entity may be considered a citizen of the state under whoselaws it was created?Held: For diversity purposes, in determining the citizenship of the partnership, the citizenship of allthe partners was relevant. For purposes of federal diversity jurisdiction under 28 USCS 1332(a), (a)a limited partnership may not be considered, in its own right, a "citizen" of the state under whoselaws it was created, and (b) a court may not determine the citizenship of a limited partnership solelyby reference to the citizenship of its general partners, without regard to the citizenship of its limited

partners; and (2) under the circumstances, the District Court erred in finding complete diversity andthus it lacked jurisdiction over the partnership's suit against the original defendants. No provisionwas made for the treatment of artificial entities other than corporations 1332(c). The 50 Stateshave created, and will continue to create, a wide assortment of artificial entities possessing differentpowers and characteristics, and composed of various classes of members with varying degrees ofinterest and control. Which of them is entitled to be considered a "citizen" for diversity purposes,and which of their members' citizenship is to be consulted, are questions more readily resolved bylegislative prescription than by legal reasoning, and questions whose complexity is particularlyunwelcome at the threshold stage of determining whether a court has jurisdiction. We have long

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since decided that, having established special treatment for corporations, we will leave the rest toCongress; we adhere to that decision.

ROL: Diversity Jurisdiction in a suit by or against the entity(Limited Partnership) depends on thecitizenship of all the members.SYLLABUS: Respondent Arkoma Associates, a limited partnership organized under Arizona law,sued petitioners Carden and Limes on a contract dispute in the District Court, relying on diversity of

citizenship for federal jurisdiction. Carden and Limes, Louisiana citizens, moved to dismiss on theground that one of Arkoma's limited partners was also a Louisiana citizen. The court denied themotion, finding the requisite "complete diversity." After petitioner Magee Drilling Co. intervenedand counterclaimed against Arkoma, the court awarded judgment to Arkoma. The Court of Appealsaffirmed, finding, with respect to the jurisdictional challenge, that complete diversity existedbecause Arkoma's citizenship should be determined by reference to the citizenship of its general,but not its limited, partners. Held:

1. Complete diversity is lacking with respect to Carden and Limes.

(a) A limited partnership is not in its own right a "citizen" of the State that created it within themeaning of the federal diversity statute. This Court has firmly resisted extending the well-established rule treating corporations as "citizens" to other artificial entities. Chapman v. Barney,129 U.S. 677, 682; Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456, 457;Steelworkers v. R. H. Bouligny Inc., 382 U.S. 145, 151.Puerto Rico v. Russell & Co., 288 U.S. 476;Navarro Savings Assn. v. Lee, 446 U.S. 458, distinguished.

(b) A federal court must look to the citizenship of a partnership's limited, as well as its general,partners to determine whether there is complete diversity. That only the general partners haveexclusive and complete control over the partnership's operations and the litigation is irrelevant.This Court's decisions have never held that an artificial entity can invoke diversity jurisdictionbased on the citizenship of some but not all of its members. Bank of United States v. Deveaux, 5Cranch 61, 90-91; Marshallv. Baltimore & Ohio R. Co., 16 How. 314, 328-329; Navarro, supra,distinguished.

(c) Whether, and which, artificial entities other than corporations are entitled to be considered"citizens" for diversity purposes are complex questions best left to Congress to decide.

2. The question whether complete diversity exists between Magee and Arkoma was notconsidered by the Court of Appeals, and this Court will not decide it in the first instance.

Notes pg 272-274:The state itself is not a citizen of a state (Stone v. South Carolina US1886) 1348 of the JudicialCode provides that national banks, for jurisdictional purposes, shall be deemed citizens of the Statesin which they are respectively located. A liability insurer in a direct action is a citizen of its statesof incorporation and principal business and of the state of which the insured is a citizen.

Pg. 270: Moor v. County of Alameda, 411 U.S. 693

ROLA state is not a "citizen" for purposes of the diversity jurisdiction. A political subdivision ofa state, unless it is simply the arm or alter ego of the state, is a citizen of the state for diversitypurposes.

Class NotesFor diversity purposes, a corporation is a citizen of the state where it is

1. voluntarily incorporated AND2. has its principal place of business (Look @ structure of corporation)

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a. Nerve-centerb. Place-of-operations

Kelly v. US Steel Corp (3rd Cir 1960)OVERVIEW: Pennsylvania citizens sought to have the corporation's principal place of businessdeemed New York, thereby gaining access to the federal court system to resolve their complaintsagainst the corporation under diversity of citizenship jurisdiction. On appeal, the court determined

that the place of a corporation's activities, rather than the place where its directors meetoccasionally, indicated the principal place of business. The court looked to the location of thecommittee responsible for the day-to-day operation of the corporation, the location of a majority ofthe corporate officers, and the location of the majority of exempt and non-exempt employees todetermine that Pennsylvania was the place of the corporation's activities. The court also comparedthe manufacturing operations and tangible property holdings of the corporation in both New Yorkand Pennsylvania and determined that the corporation had greater operations and holdings inPennsylvania than New York. Therefore, the court held that the corporation was a citizen ofPennsylvania.

OUTCOME: The judgment of the district court refusing to exercise jurisdiction for lack of

diversity was affirmed.

Issue: The question arises under the 1958 statute, 1332(c) of Title 28. That section states:

'(c) For the purposes of this section and section 1441 of this title, a corporation shall be deemeda citizen of any State by which it has been incorporated and of the State where it has its principalplace of business.'

The appellants urge upon us that the test should be where the 'nerve center' of the corporation'sbusiness is and they urge that the nerve center is New York. We do not find the figure of speechhelpful. Dorland's Medical Dictionary tells us that a nerve center is 'any group of cells of gray nervesubstance having a common function.' We think there will be, in the case of United States SteelCorporation, a good many collections of nerve cells serving the common function of making the

corporate enterprise go. We turn, therefore, from a pleasant and alluring figure of speech to aconsideration of the facts of the Steel Corporation's life. Business by way of activities is centered inPennsylvania and we think it is the activities rather than the occasional meeting of policy-makingDirectors which indicate the principal place of business.

Notes on Principal Place of Business:Place of operations theory v. Nerve Center. 47 IowaL.Rev. 1152 (1962) suggests that the place-of-operations theory is preferable if most of the companys production is in one state and its executiveoffices are in another; but that if there are several places of operation, the nerve-center theory ispreferable, especially if the company has substantial central control. Bruner v. Marjec states thatmost courts follow the suggested distinction.

Majewski v. NY Central Railroad Co (W.D.Mich.1964)P brought action on July 1962 in USDC for ND of Illinois. Jurisdiction was alleged on the groundsthat P, and all of the decedents represented by P were domiciled in and citizens of the State ofMichigan & defendant was a resident and citizen of the State of Illinois by virtue of itsincorporation. The dist. Judge of Illinois granted Ds motion to dismiss for lack of jurisdiction onthe grounds that the requisite diversity of citizenship was not present. P submitted a petition onSep. 1962. to reinstate the cause and transfer to the USDC for the WD of Michigan, which wasgranted by the same district judge. D filed motion to dismiss again on the grounds of lack ofdiversity. At the time of the filing of the suit, D corp was a citizen of the State of Michigan, as well

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as the state of Ill and other states. In the present case, it is clear that the suit could not have beenbrought in Michigan, since the req of diversity of citizenship could not have been met. As of thecommencement of this action in the USDC for ND of Ill, there was diversity of citizenship btw P &D. An order has been granted denying Ds motion to dismiss and returning the cause to the USDCfor ND of Ill.

Diesing v. Vaughn Wood Products, Inc. (W.D.Va.1959)

The plaintiff and the defendant are citizens of the State of Nebraska. The defendant is notincorporated in any other state. The jurisdictional question to be decided is as follows:

Does the fact that the defendant's principal place of business is in Virginia afford the plaintiffdiversity of citizenship when the plaintiff and defendant are citizens of Nebraska?

We are not here dealing with a multistate incorporated defendant, but we are dealing with a multi-state citizenship defendant. The reasons for recognizing diversity in multi-state incorporateddefendants in cases such as Lake Shore & M.S.R. Co. v. Eder, 6 Cir., 1909, 174 F. 944, and Townof Bethel v. Atlantic Coast Line R. Co., 4 Cir., 81 F.2d 60, 69, are not present in this case. In themultistate incorporations, the corporation is recognized as a corporate entity of each state in whichit is so incorporated for all purposes, and it becomes so voluntarily; whereas, under the amendmentto 28 U.S.C.A. 1332(c), the corporation does not by having its principal place of business in a

state other than the state of incorporation become a corporate entity of that state; it merely becomesa citizen of that state for the purpose of diversity of citizenship when jurisdiction in a federal courtis invoked.

It is generally known that the amendment to section 1332 was made for the purpose ofrestricting federal jurisdiction in diversity cases. It is well recognized that it was not the purpose ofthe amendment to expand federal jurisdiction in such cases. To hold that diversity of citizenshipexists between the parties in this case would be to give every citizen of Nebraska, the only place thedefendant is incorporated, access to the federal courts in Virginia for the purposes of suits againstthe defendant; indeed, it would give that right to the citizens of every state, except Virginia, inwhich the defendant might hereafter become incorporated -- a right they have not heretoforeenjoyed. It is obvious that to so hold would greatly increase the diversity jurisdiction in federal

courts when the recognized purpose of the amendment was to reduce federal jurisdiction in suchcases.

In keeping with the declared purpose of the amendment, I conclude that there is nodiversity of citizenship in this case, and that the Court is without jurisdiction, and that the motion todismiss for want of jurisdiction will be granted.

Notes on the Consequences of Multiple Citizenship 1,4Read pg 284-285

Smith v. Sperling (US 1957)PROCEDURAL POSTURE: Petitioner stockholder initiated a stockholder derivative action

against respondents, directors and corporations, alleging fraudulent waste of assets. Petitionersought review of an order of the United States Court of Appeals for the Ninth Circuit, whichaffirmed the district court's order realigning respondent corporation as a party plaintiff.OVERVIEW: Petitioner stockholder initiated a stockholder derivative action against respondents,directors and corporations, alleging fraudulent waste of assets. Petitioner failed to make a demandon respondent director to institute the action because petitioner believed that such demand wouldhave been futile since the board of directors approved the contracts authorizing such actions. Theappellate court affirmed an order of the district court, which realigned respondent corporation as aparty plaintiff. The court reversed and remanded this decision. The court held that there wasdiversity jurisdiction when the real collision of issues, or the actual controversy, was between

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citizens of different states. The court held that such collision existed between petitioner andrespondents.OUTCOME: The court reversed and remanded an order which realigned respondent corporation asa party plaintiff in a stockholder derivative action initiated by petitioner stockholder againstrespondents, directors and corporations, alleging fraudulent waste of assets. The court held that areal collision of issues, or an actual controversy, existed between petitioner and respondents, andthat diversity jurisdiction existed.

SYLLABUS: This is a stockholder's derivative suit brought in a Federal District Court in Californiaon grounds of diversity of citizenship by a citizen of New York against two Delaware corporationsand the directors of one of them, who are citizens of California. The complaint alleged fraudulentwastage of the assets of Warner Bros., the plaintiff's corporation, for the benefit of a son-in-law ofone of its directors and the son-in-law's corporation. It alleged that a demand on the directors ofWarner Bros. to institute the suit was not made because it would have been futile, since all or amajority of them had approved the contracts involved. The District Court found that (1) thecontracts were made in good faith and without fraud, (2) the stockholders, officers or directors werenot "antagonistic to the financial interests" of Warner Bros., (3) none of the directors "wrongfullyparticipated" in the acts complained of, and (4) if a demand had been made on Warner Bros. toinstitute suit, the management would not have been disqualified "from faithfully doing their duty,"

but that "such a demand would have been futile." On these grounds, the District Court realignedWarner Bros. as a party plaintiff and dismissed the bill for want of diversity jurisdiction.

Held: It erred in doing so, and the judgment is reversed and the cause remanded.

(a) In considering the issue of federal diversity jurisdiction, the District Court should haveconsidered only the face of the pleadings and the nature of the controversy without attempting toadjudicate the merits of the charges of wrongdoing.

(b) Federal law governs the question of federal jurisdiction; but local law will govern thedecision on the merits.

(c) There is "antagonism" between a corporation and its stockholder whenever the management

is aligned against the stockholder and defends a course of action which the stockholder attacks,even though the management acts in good faith.

(d) Absent collusion, there is diversity jurisdiction when the real collision of issues is betweencitizens of different States.

(e) On the record in this case, it is evident that there is such a collision here.

(f) Diversity jurisdiction having once vested, it was not lost merely because the original plaintiffdied while the suit was pending and the special administrator substituted for him was a citizen ofCalifornia.

(g) The bill meets the requirements of Rule 23 (b) of the Rules of Civil Procedure that thestockholder show with particularity what efforts he made to get those who control the corporation totake action, "and the reasons for his failure to obtain such action or the reasons for not making sucheffort."

ROL:

The ultimate interest of a corporation made defendant may be the same as that of a stockholder

made plaintiff, but the corporation may be under a control antagonistic to him, and made to actin a way detrimental to his rights. In other words, his interests, and the interests of thecorporation, may be made subservient to some illegal purpose. If a controversy hence arises, andthe other conditions of jurisdiction exist, it can be litigated in a Federal court.

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Absent collusion, there is diversity jurisdiction when the real collision of issues or "the actual

controversy" is between citizens of different states.

Collusion is shown where the neglect or refusal of the directors to take the desired action on the

part of the corporation is simulated so that it may be made to appear that the diversity ofcitizenship necessary for federal jurisdiction exists.

A finding of a Federal District Court in a stockholder's derivative suit based on alleged

fraudulent wastage of corporate assets that, since there was no fraud on the part of the corporatedirectors in making the contracts alleged to have given rise to the wastage, but only an exerciseof independent business judgment, the management was not antagonistic to the financialinterests of the corporation, goes to the merits of the controversy, and not to the jurisdictionalquestion, pertinent for diversity jurisdiction purposes, of aligning parties in accordance withantagonisms between them.

Although there is antagonism between a stockholder and the corporate management where the

dominant officers and directors are guilty of fraud or misdeeds, wrongdoing in that sense is notthe sole measure of antagonism for purposes of aligning parties in determining diversityjurisdiction; antagonism for this purpose exists whenever management is aligned against thestockholder and defends a course of conduct which he attacks, his attack normally being cast in

terms of fraud, breach of trust, or illegality. In determining, in a stockholder's derivative suit in which the management is charged with

wrongdoing, whether there is antagonism between the stockholder and the corporation so thatfederal diversity jurisdiction is supported by the alignment of the two on opposite sides of thecontroversy, the proper course is not to try out the issues presented by the charges ofwrongdoing but to determine the issue of antagonism on the face of the pleadings and by thenature of the controversy; for diversity jurisdiction purposes, the bill and answer normallydetermine whether the management is antagonistic to the stockholder.

Class Notes:

The complaint joined Warner Bros. as a defendant. It was urged before the District Court, and it

is claimed here, that since the cause of action sought to be enforced is one that belongs to the

corporation and since the corporation is not "antagonistic" to the stockholder within the meaningof that term as used in Doctor v. Harrington, 196 U.S. 579, 588, Warner Bros. should berealigned as plaintiff. In that event there would be no diversity of citizenship since Delawarecorporations would be on both sides of the lawsuit. Strawbridge v. Curtiss, 3 Cranch 267.

It seems to us that the proper course is not to try out the issues presented by the charges of

wrongdoing but to determine the issue of antagonism on the face of the pleadings and by thenature of the controversy. The bill and answer normally determine whether the management isantagonistic to the stockholder, as Central R. Co. v. Mills, 113 U.S. 249, and Doctor v.Harrington, supra, indicate.

Notes on Shareholders Derivative Suits 1,3,6,7

Class Notes:

Forum Rule: extends diversity, if applied, then D takes identity of forum state inincorporation. (Not applicable to PPB)

IMPT NOTE PG 265 Elizabeth Taylor CaseEXAM Q

Indemnity actions by their nature can be separate and independent

Separate Ks you can argue removal, even though Ks required for them to appear

on the movie, you still have 2 separate Ks.

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SECTION 4. THE JURISDICTIONAL AMOUNT $ 75,000 or more

Snyder v. Harris, 394 U.S. 332Issue: Whether separate and distinct claims presented by and for various claimants in a class actionmay be added together to provide the $ 10,000 jurisdictional amount in controversy?Held: No. Separate and distinct claims presented by and for various claimants in federal diversityactions may not be added together to provide the requisite $ 10,000 jurisdictional amount in

controversy. Fed. Rule Civ. Proc. 23, as amended in 1966, did not change the scope of the statutorygrant of district court jurisdiction, as the longstanding judicial interpretation of that statute cannot bechanged by an amendment to the Rules, and there is no compelling reason for overturning settledjudicial construction of "matter in controversy" in the light of consistent congressional re-enactmentof that language against a background of judicial interpretation that the phrase does not encompassthe aggregation of separate and distinct claims.

Overview: Petitioners allegations showed that she sought for herself 8740 in damages, respondentmoved to dismiss on grounds that the matter in controversy did not exceed $10,000. P contendedthat her claim should be aggregated w/ those of the other members of her class, approximately 4000shareholders of the company stock. The District crt held that the claims could not be aggregated to

meet the statutory test of jurisdiction and the Crt of Appls affirmed. The 1966 amendment to Rule23 did not change the jurisdictional amount doctrine. By 1916 this Court was able to say inPinelv.Pinel, 240 U.S. 594, that it was "settled doctrine" that separate and distinct claims could not beaggregated to meet the required jurisdictional amount. In Clarkv. Paul Gray, Inc., 306 U.S. 583(1939), this doctrine, which had first been declared in cases involving joinder of parties, wasapplied to class actions under the then recently passed Federal Rules. In that case numerousindividuals, partnerships, and corporations joined in bringing a suit challenging the validity of aCalifornia statute which exacted fees of $ 15 on each automobile driven into the State. Raising thejurisdictional amount questionsua sponte, this Court held that the claims of the various fee payerscould not be aggregated "where there are numerous plaintiffs having no joint or common interest ortitle in the subject matter of the suit." 306 U.S., at 588. Nothing in the amended Rule 23 changes

this doctrine. The class action plaintiffs in the two cases before us argue that since the new Rulewill include in the judgment all members of the class who do not ask to be out by a certain date, the"matter in controversy" now encompasses all the claims of the entire class. But it is equally truethat where two or more plaintiffs join their claims under the joinder provisions of Rule 20, each andevery joined plaintiff is bound by the judgment. And it was in joinder cases of this very kind thatthe doctrine that distinct claims could not be aggregated was originally enunciated. Troy Bankv.Whitehead & Co., 222 U.S. 39 (1911);Pinelv.Pinel, 240 U.S. 594 (1916). The fact that judgmentsunder class actions formerly classified as spurious may now have the same effect as claims broughtunder the joinder provisions is certainly no reason to treat them differently from joined actions forpurposes of aggregation.

Class notes

Injunctions, value must exceed jurisdictional amount

Jury determines damages, by strictly scrutinizing the amnt, your asking judge to take the case

away from the jury, therefore a good faith view on that amnt is taken.

Table of quotes from case:

The traditional judicial interpretation under all of these statutes has been from the beginning that

the separate and distinct claims of two or more plaintiffs cannot be aggregated in order to satisfythe jurisdictional amount requirement. Aggregation has been permitted only (1) in cases in

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which a single plaintiff seeks to aggregate two or more of his own claims against a singledefendant and (2) in cases in which two or more plaintiffs unite to enforce a single title or rightin which they have a common and undivided interest.

The doctrine that separate and distinct claims could not be aggregated was never, and is not

now, based upon the categories of old Rule 23 or of any rule of procedure. That doctrine isbased rather upon this Court's interpretation of the statutory phrase "matter in controversy." The

interpretation of this phrase as precluding aggregation substantially predates the 1938 FederalRules of Civil Procedure. In 1911 this Court said in Troy Bankv. Whitehead & Co.: " When twoor more plaintiffs, having separate and distinct demands, unite for convenience and economy ina single suit, it is essential that the demand of each be of the requisite jurisdictionalamount . . . ." 222 U.S. 39, 40.

There is no compelling reason for this court to overturn a settled interpretation of an important

congressional statute in order to add to the burdens of an already overloaded federal courtsystem.

Notes on the Jurisdictional Amount pg. 299-309

The sum claimed by the P controls if the claim is apparently made in good faith. (303 U.S. 283) In damages cases, the P stands to gain whatever the court may award him, so the amount

necessarily a matter of speculation before trial, unless there are legal limits to the possibleaward.

In an injunction suit, the amount at stake is an objective fact, often as ascertainable before as

after trial, and the good-faith test has not been applied; if challenged, the P must prove theamount is sufficient.

ROL from Snyder v. HarrisEach of several Ps asserting separate and distinct claims must

satisfy the jurisdictional amount requirement if his claim was to survive a motion to dismiss.

Rule mandates that there may be no aggregation and that the entire case must be dismissedwhere none of the plaintiffs claims more than $10,000 and requires that any P w/out the

jurisdictional amnt must be dismissed from the case, even though others allegejurisdictionally sufficient claims.

SECTION 5. THE PLACE OF TRIAL

Venue/Service Notes w/ Class discussionpg309-314 N1-11

3 requisites must be present before an action is heard in federal district court:

1. subject matter jurisdiction2. personal jurisdiction or in rem jurisdiction if property3. venue

1391 venue provision

1391 (a) 3 opportunities for venue in cases where jurisdiction is based on diversity (1332)

1. Where Ds reside ; in any judicial district where a single D resides, provided that all Ds residein the same state.

2. Where substantial events or omissions occurred ; in any judicial district where a substantialpart of the property that gave rise to the action is found, such as a dist. in which damageoccurred in a tort case, or where performance was to have occurred in a K action.

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3. Where any D is subject to personal jurisdiction ; in any judicial district in which any D issubject to PJ at the time suit is filed. (used only if a party is unable to satisfy 1391(a)(1) or(a)(2).

1391 (b) controls when subject matter jurisdiction is not based solely on diversity.

1. Where Ds reside2. Where substantial events or omissions occurred3. Where any D may be found [only if (b)(1) or (b)(2) fails]

1391 (c) Residence for Corporations for purposes of venue

1. Corporations are deemed to be residents of any judicial district in which they would besubject to PJ at the time an action is commenced.

2. If a state has more than one judicial dist., corporations are residents only of the judicialdistricts w/n the state in which they would be subject to PJ, if the judicial dist. was aseparate state. Thus, the corp.s activities might satisfy venue only in the judicial dist. inwhich its contacts occurred.

3. Corporate Activities Dispersed Throughout a Multi-District StateIf it arises, a corp isdeemed to reside in the judicial dist. w/ which the corp. has the most significant contacts.

1391 (d) aliens may be sued in any judicial districts.

1391 (e)

applicable if US, a federal agency, or a federal officer acting in an official capacityis a defendant.

1391 (f) applicable when involves foreign countries or their agencies as Ds.

1391 not applicable to a claim removed from a state crt to a federal dist. crt. a removed

claim is treated differently.

1406 allows a federal district crt, on finding venue to be faulty, to transfer a c/a to a judicial

district or division where venue is proper.

Forum Non Conveniens Doctrine which provides that a court selected by the claimant will

not hear a c/a if the court is an inappropriate forum. This doctrine does not apply if there is lackof jurisdiction or venue. Trial courts have substantial discretion to determine whether it is anappropriate forum for a case. A court may resist imposition upon its jurisdiction even when

jurisdiction is authorized by the letter of a general venue statute (Gulf-Oil Corp. v. Gilbert, 330U.S. 501). Held inapplicable in antitrust actions.

Service 1. voluntary connection & 2. minimum contacts; use long-arm statute as a basis to

get out-of-state jurisdiction.ConstitutionalD1. Fairness: There must be minimum contacts sufficient that the exercise of jurisdiction over

the D is fair.2. Minimum Contacts:

a. Purposeful availment to the forum states lawsb. Reasonable anticipation that out of state activities will have consequences in the forum

state that would subject D to jurisdiction

c. Systematic and continuous activityd. If no systematic or continuous activity, in-state activity is basis for lawsuit.

3. NoticeStatutoryD1. Is present in the forum state at the time of service;2. Is domiciled in the forum state;3. Has given express or implied consent to jurisdiction;4. Meets the requirements of the forum states long-arm or other statutes.

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Transfer 1404 (a) For the convenience of parties and witnesses, in the interest of justice, a

district court may transfer any civil action to any other district or division where it might havebeen brought.1. Van Dusen v. Barrack, (376 U.S. 612): Ps were administrators or executors of Penn.s

killed in an airplane crash. They objected to transferring their cases from Penn. to Mass.,arguing that b/c they had not qualified to sue in Mass., the Mass. district was not one in

which the cases originally might have been brought. The court held: [T]he words where itmight have been brought must be construed with reference to the federal laws delimiting thedistricts in which such an action may be brought and not with reference to laws of thetransferee state concerning the capacity of fiduciaries to bring suit.

a. May be brought the statutory context is thus persuasive evidence that the might havebeen brought language refers to the similar wording in the related federal statutes.

2. 1406 (a) provides for transfer as an alternative to dismissal when the original venue isimproper.

Diversity jurisdiction is based upon citizenship, venue statute speaks of the district in which

the parties reside.

Jurisdiction over the person is covered by FRCP 4(f), which permits service anywhere w/n the

state where the action is brought, and outside that state if authorized by federal law or by FRCP.

Supreme court has said that venue is a limitation designed for the convenience of litigants;

personal jurisdiction requires that the D have minimum contacts with the forum state such thatthe maintenance of the suit does not offend traditional notions of fair play and substantialjustice, and an estimate of the inconveniences which would result from a trial away from homeis relevant to the determination.

Notes on the Original Jurisdiction of the Supreme Court pg. 320-328 N1-12

Supreme Court functions as an appellate court of last resort. It shall act as a court of first

instance in 2 narrow categories of cases.

1. shall have original and exclusive jurisdiction of all controversies btw two or more states &2. shall have original but not exclusive jurisdiction ofa. all actions or proceedings to which ambassadors, other public ministers, consuls, or vice

consuls of foreign states are parties;b. controversies btw US and a state;c. controversies btw a state against the citizens of another state or aliens.

Congress can not add to original jurisdiction.

Original-jurisdiction clause is limited by the definition of judicial power.

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Diversity Jurisdiction

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