Grupo Dataflux v. Atlas Global Group, L.P.
541 U.S. 567 (2004)
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Rule of Law:
A party's change in citizenship after a lawsuit is filed cannot cure a lack of complete diversity jurisdiction that existed at the time of filing. Federal jurisdiction based on diversity of citizenship is determined based on the state of facts at the time the action is commenced.
Facts:
- Atlas Global Group, L.P. was a limited partnership formed under Texas law.
- Grupo Dataflux was a Mexican corporation.
- At the time Atlas filed its lawsuit in November 1997, two of its partners were citizens of Mexico, the same as the defendant, Dataflux.
- Atlas's other partners were citizens of Delaware and Texas.
- A business dispute arose between the parties, leading Atlas to assert claims for breach of contract and quantum meruit against Dataflux.
- In September 2000, nearly three years after the suit was filed, the two Mexican partners withdrew from the Atlas partnership in an unrelated transaction.
Procedural Posture:
- In November 1997, Atlas Global Group sued Grupo Dataflux in the U.S. District Court for the Southern District of Texas, asserting diversity jurisdiction.
- After three years of pre-trial proceedings, a six-day jury trial was held in October 2000, resulting in a $750,000 verdict for Atlas.
- Before judgment was entered, Dataflux filed a motion to dismiss for lack of subject-matter jurisdiction, which the Magistrate Judge granted.
- Atlas, as appellant, appealed the dismissal to the U.S. Court of Appeals for the Fifth Circuit.
- The Fifth Circuit, with Dataflux as appellee, reversed the district court's dismissal, creating a limited exception to the time-of-filing rule.
- The U.S. Supreme Court granted certiorari to review the Fifth Circuit's decision.
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Issue:
Does a party's post-filing change in citizenship, which creates complete diversity, cure a lack of subject-matter jurisdiction that existed at the time the complaint was filed?
Opinions:
Majority - Justice Scalia
No. A post-filing change in a party's citizenship cannot cure a lack of subject-matter jurisdiction that existed at the time of filing. The Court adheres to the time-of-filing rule, a principle of federal jurisdiction established for nearly two centuries, which holds that jurisdiction is assessed based on the parties' citizenship at the commencement of the action. The Fifth Circuit's reliance on Caterpillar Inc. v. Lewis was misplaced, as that case involved a recognized exception where jurisdiction is cured by dismissing a dispensable, diversity-destroying party, not by altering the citizenship of a continuing party. Creating a new exception for changes in citizenship would undermine the certainty and stability of jurisdictional rules, encourage wasteful collateral litigation, and contravene the long-standing precedent that where there is no change of party, jurisdiction is governed by the condition of the party at the suit's commencement.
Dissenting - Justice Ginsburg
Yes. When a jurisdictional defect is the absence of complete statutory diversity, and that defect is cured before a final verdict or dispositive ruling, the adjudication should be preserved. The time-of-filing rule is a practical, court-made doctrine, not a constitutional mandate, and should yield to considerations of finality, efficiency, and economy. This case is functionally indistinguishable from Caterpillar, where a change in the party lineup perfected diversity; here, the withdrawal of the diversity-destroying partners from the partnership achieved the same result. Nullifying a completed six-day jury trial because of an initial, cured defect that was not raised until after the verdict represents an 'exorbitant cost' and elevates a 'hypertechnical' application of a procedural rule over common sense and judicial economy.
Analysis:
This decision reaffirms the rigidity of the time-of-filing rule for diversity jurisdiction, prioritizing jurisdictional certainty over case-specific efficiency. It firmly distinguishes between curing a jurisdictional defect by dismissing a dispensable party (permissible under Caterpillar) and attempting to cure it through a change in a continuing party's citizenship (impermissible). The ruling solidifies the principle that subject-matter jurisdiction is a strict, non-waivable requirement that must be satisfied at the outset of litigation. This precedent serves as a strong warning to litigants to ensure proper jurisdiction before filing, as courts will not create new equitable exceptions to save judgments rendered without it, regardless of the 'sunk costs' of litigation.
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