“Hey, do we have jurisdiction over this case?”

North-CarolinaIn the district court, Bank of America won and Fulcrum lost.  Fulcrum appealed.  The Fifth Circuit noticed that the pleadings identified Fulcrum as “a limited liability company organized and existing under the laws of the State of Nevada.”  As that allegation does not in fact establish Fulcrum’s citizenship, the Court asked for amendment pursuant to 28 U.S.C. § 1653 (“Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.”)  In response, Fulcrum alleged that is members were from Georgia, Nevada, New York, and North Carolina.  Because Bank of America is also a citizen of North Carolina, and because “we find no evidence in the record, and Fulcrum has cited none, supporting Fulcrum’s recent assertions that it is a citizen of North Carolina,” the court remanded for the purpose of discovery and findings on the citizenship question.  Bank of America v. Fulcrum Enterprises LLC, No. 14-20532 (March 18, 2016, unpublished).

CAFA — how to claim $75,000

mass chartIn yet another opinion showing that the seemingly simple language of CAFA is anything but, in Robertson v. Exxon Mobil the Fifth Circuit reversed the remand of a mass action, concluding that the district court erred in finding that no plaintiff satisfied the $75,000 amount-in-controversy requirement.  No. 15-30920 (Dec. 31, 2015).  In a footnote, the Court declined to engage the broader issue of whether at least 100 plaintiffs had to satisfy that requirement, and the Court declined to rule on potentially applicable exceptions to jurisdiction (such as “local controversy”) until the district court addressed them on remand.  On the proof point, the Court noted: “(1) [Plaintiff] Eddie Ashley claims that she has suffered, among other harms, emphysema and the wrongful death of her husband from lung cancer; and (2) [Plaintiff] Tommie Jones avers that he developed prostate cancer and a host of other ailments. We hold that it is more likely than not that these plaintiffs seek to recover more than $75,000. Indeed, Plaintiffs’ counsel acknowledged at oral argument that for the plaintiffs who contracted cancer, he would be ‘asking [the] jury, come trial, for a whole lot more than $75,000.'”

An exhausting look at improper joinder

LA flagA prospective plaintiff in a medical malpractice case in Louisiana must submit the claim to a medical review panel before filing suit.  When suit is filed before the panel is done, district courts have divided on whether an in-state defendant is “improperly joined” for purposes of a diversity analysis in a removal.  In Flagg v. Stryker Corp., the Court concluded that such a defendant is not improperly joined, finding that the panel did not actually adjudicate the claim, and that the panel process could be waived by the parties. A dissent reasoned that the Louisiana statute was analogous to federal statutes where thee court had found improper joinder in similar situations.  No. 14-31169 (Sept. 4, 2015).

Controversy amount; controversy about

Defendants removed, averring: “The real property at issue has a current fair market value of $87,500.”  The district court denied remand.  Plaintiffs appealed, and the Fifth Circuit entertained her argument because it went to the existence of subject matter jurisdiction. Taking judicial notice of county appraisal records that valued the property at $62,392, the Court remanded for the gathering of more evidence about the amount in controversy. Statin v. Deutsche Bank, No. 14-20200 (Dec. 19, 2014, unpublished).  The Court noted the recent Supreme Court case of Dart Cherokee Basin Operating Co. v. Williams, No. 13-719 (U.S. Dec. 15, 2014), which confirmed that while “defendants to not need to attach evidence supporting the alleged amount in controversy to the notice of removal,” “once the notice of removal’s asserted amount is ‘challenged,’ the parties ‘must submit proof and the court decides, by a preponderance of the evidence, whether the amount-in-controversy requirement has been satisfied.'”

No controversy, about the amount in controversy

molehillThe borrowers’ complaint in a wrongful foreclosure case sought: “‘an order canceling the Mortgage’ on property that is worth more than $200,000 while also stipulating that they will not recover more than $75,000.”  Accordingly: “Given our established rule that the amount in controversy in cases like this is determined by the value of the property, it is irrelevant whether the stipulation is binding. A party cannot sue over a mountain but stipulate that it is a molehill.”  Solis v. HSBC Bank USA, No. 14-40489 (Nov. 17, 2014, unpublished).

Some jurisdiction, but not much.

The Fifth Circuit withdrew its original opinion in Scarlott v. Nissan North America to issue a revised opinion on rehearing.  No. 13-20528 (Nov.10, 2014).  The Court did not materially change its earlier holding that the amount-in-controversy requirement for diversity jurisdiction was not satisfied, or its disposition by a remand to the district court for purposes of remand to state court.  The Court added discussion — and a dissent — about how the district court should handle a sanctions award on remand.  The plurality simply said: “In light of our holding that the district court did not have jurisdiction over this case, the district court should reconsider whether to award attorneys’ fees and costs to the defendants; and if the court decides that attorneys’ fees and costs are still appropriate, the court should reconsider the amount of the award.”  The dissent would vacate the award; among other points, it made this basic one: “By its very nature, section 1927 involves assessing the merits of the claim, which establishes the inappropriateness of the district court’s order in light of the lack of jurisdiction.”

A corporation, by any other name, would be as diverse.

While resolved on other grounds, a part of the diversity-of citizenship question in Tewari De-Ox Systems, Inc. v. Mountain States-Rosen, LLC was whether a business entity — charted as a corporation in Wyoming — should nevertheless be treated as an unincorporated association because it called itself a “cooperative.”  No. 13-50956 (July 9, 2014).  On that point, the Court noted: “Other circuits have rejected similar arguents: ‘For purposes of diversity jurisdiction, the Cooperative is to be treated as a corporation simply because it has been incorporated under [state] law, regardless of the Cooperative’s individual structure, purpose, operations, or name.”  (quoting Kuntz v. Lamar Corp., 385 F.3d 1177, 1183 (9th Cir. 2004), and also citing Pastor v. State Farm Mut. Auto Ins. Co., 487 F.3d 1042, 1048 (7th Cir. 2007)).

Law school exam on diversity . . .

  1. Thompson sued Defendants in Arkansas in 2011, alleging he was a citizen of Arkansas.  That lawsuit was dismissed for improper venue.
  2. Thompson sued Defendants again in Florida in 2012, and voluntarily dismissed that action after the magistrate concluded that diversity was lacking.
  3. Thompson sued Defendants again in Alabama in 2012, alleging that he was a citizen of Arkansas.  That action was transferred to Mississippi.   It was then dismissed for lack of jurisdiction because Thompson and one of the citizens were both Florida citizens at the time of filing in 2012.

Thompson argued that the relevant facts related to the original 2011 filing, not the 2012 re-filing.  HELD: “[T]he [Alabama] complaint does not relate back to the [Arkansas] complaint because the second complaint was not an amendment, but rather the commencement of a separate action.”  Dismissal affirmed.

Alien + Alien = Remand

Su, a citizen of Taiwan, served on the board of Vantage, an offshore drilling contractor. Vantage is incorporated in the Cayman Islands with its principal place of business in Texas.  Vantage sued Su in Texas state court for breach of fiduciary duty and related claims.   Su removed, remand was denied, and the district court certified the jurisdictional issue for interlocutory appeal.  Vantage Drilling Co. v. Su, No. 13-20379 (Jan. 7, 2014). The Fifth Circuit reversed and ordered remand, relying primarily upon  Chick Kam Choo v. Exxon Corp., 764 F.2d 1148 (5th Cir. 1985).  Section 1332(a)(2) requires complete diversity, and section 1332(c)(1) deems a corporation a citizen of “every State and foreign state” in which it is incorporated — thus, “there are aliens on both sides of the litigation, complete diversity is lacking, and there can be no diversity jurisdiction.”  Su argued that Choo could be read to allow federal jurisdiction to protect against local bias, but the Court rejected that argument as inconsistent with the statute.

“Probate exception” to federal jurisdiction inapplicable

The district court dismissed a case about the misappropriation of trust assets under the “probate exception” to federal diversity jurisdiction.  Curtis v. Brunsting, No. 12-20164 (Jan. 9, 2013) (applying Marshall v. Marshall, 547 U.S. 293 (2006)).  The Fifth Circuit stated that “Marshall requires a two-step inquiry into (1) whether the property in dispute is estate property within the custody of the probate court and (2) whether the plaintiff’s claims would require the federal court to assume in rem jurisdiction over that property.”  Id. at 5.  Finding no evidence that this inter vivos trust was, or even could be, subject to Teas probate administration, the Court reversed and remanded.