McCann v. George W. Newman Irrevocable Trust
458 F.3d 281 (2006)
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Rule of Law:
The standard of proof for establishing a change of domicile for federal diversity jurisdiction purposes is a preponderance of the evidence. The presumption of a continuing domicile only shifts the burden of production to the party alleging the change and does not heighten the ultimate burden of persuasion.
Facts:
- William E. McCann worked as President and CEO for a development company in New Jersey connected to the George W. Newman Irrevocable Trust.
- A dispute over McCann's compensation arose, and two trustees of the Newman Trust agreed to settle by granting McCann an equity interest in the development project.
- McCann and his wife, Virginia, had lived in New Jersey for over thirty years before purchasing a second house in New Hampshire in 1990.
- In June 2000, the McCanns sold their New Jersey house and moved their furniture and belongings to their New Hampshire house.
- Virginia became a full-time resident of New Hampshire, while McCann rented an apartment in New Jersey to continue working there during the week, spending weekends in New Hampshire.
- In November 2001, McCann stopped receiving his salary and stopped his regular commute to New Jersey.
- McCann maintained ties to both states, including a New Jersey driver's license and brokerage account, but also obtained a New Hampshire driver's license, registered his cars there, and moved his personal bank accounts to New Hampshire.
- McCann died in February 2002.
Procedural Posture:
- A third trustee filed an action in New Jersey state court to block a settlement agreement between other trustees and McCann.
- After McCann died, his estate's motion to intervene in the state court action was denied, and the state actions were dismissed.
- McCann's estate filed a new action in the U.S. District Court for the District of New Jersey against the Newman Trust and its trustees, asserting federal jurisdiction based on diversity of citizenship.
- The defendants filed a motion to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1), arguing that McCann was domiciled in New Jersey, thus destroying diversity.
- The District Court granted the defendants' motion to dismiss, holding that the estate failed to prove a change of domicile by the 'clear and convincing evidence' standard.
- McCann's estate (plaintiff-appellant) appealed the dismissal to the U.S. Court of Appeals for the Third Circuit.
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Issue:
Is the standard of proof required to establish a change of domicile for the purpose of federal diversity jurisdiction 'clear and convincing evidence'?
Opinions:
Majority - Scirica
No, the standard of proof to establish a change of domicile for diversity jurisdiction purposes is not 'clear and convincing evidence'; it is 'preponderance of the evidence.' The party asserting federal jurisdiction always bears the burden of proving it, typically by a preponderance of the evidence. While there is a legal presumption that an established domicile continues, this presumption does not heighten the standard of proof. Applying Federal Rule of Evidence 301 and the 'bursting bubble' theory, the court reasoned that the presumption only shifts the burden of production—requiring the party alleging a change to present some evidence of it. Once that evidence is produced, the presumption 'bursts' and disappears, leaving the party asserting jurisdiction with its original burden of proving the change by a preponderance of the evidence. The court rejected the Second Circuit's 'clear and convincing' standard, noting it was improperly based on state law rather than the governing federal law for diversity jurisdiction.
Analysis:
This decision clarifies a circuit split on the standard of proof for a change of domicile in diversity jurisdiction cases. By firmly adopting the 'preponderance of the evidence' standard, the Third Circuit makes it easier for parties who have recently moved to establish federal jurisdiction. The court's reasoning, grounded in Federal Rule of Evidence 301's 'bursting bubble' theory, provides a clear framework that treats the domicile question like other jurisdictional facts. This holding lowers the evidentiary bar for plaintiffs in the Third Circuit who are trying to prove a change of domicile to get into federal court.
