907 F.3d 385
5th Cir.2018Background
- Michael Ashford (LA citizen) sued Aeroframe Services, LLC (Aeroframe, LA citizen) and Aviation Technical Services, Inc. (ATS, WA corp.) in Louisiana state court for unpaid wages and related relief; ATS later removed to federal court claiming realignment and complete diversity.
- During litigation, an email drafted by Ashford’s counsel said Aeroframe would ‘stipulate’ to employees’ wages, penalties, and fees and described cooperative representation with Aeroframe’s counsel; ATS relied on that email to argue parties had realigned against ATS.
- The magistrate and district courts treated events after filing (including the email) as supporting realignment, realigned Aeroframe with Ashford, and found diversity and amount in controversy satisfied; Aeroframe did not appeal the grant of summary judgment against it.
- The Fifth Circuit majority held diversity must be assessed based on alignment at the time of filing and accepted the magistrate judge’s unappealed finding that Ashford and Aeroframe were initially adverse, concluding diversity did not exist at filing and remanding to state court.
- Concurring judge would also remand for lack of proof of an irrevocable settlement or sufficient evidence that Aeroframe and Ashford were not adverse; dissent would have upheld realignment, affirmed summary judgment to ATS, and urged sanctions consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal diversity jurisdiction existed | Ashford: parties were adverse at filing; no complete diversity then | ATS: post-filing realignment (email/agreements) made case removable under §1446(b)(3) | Held: Lack of diversity at time of filing; remand to state court (vacating district orders) |
| Whether parties should be realigned for jurisdiction | Ashford: no binding settlement or proof of same ultimate interests at filing | ATS: Somer Brown email and conduct show Aeroframe aligned with Ashford against ATS | Held: Realignment not applied because magistrate’s unappealed finding was that Ashford and Aeroframe were adverse at filing; realignment cannot cure initial lack of diversity here |
| Whether removal may be based on post-filing events under §1446(b)(3) | Ashford: time-of-filing rule controls; diversity must exist at filing | ATS: §1446(b)(3) allows a case to become removable after filing when new facts show removability | Held: Court re-emphasized time-of-filing rule; post-filing realignment did not establish removability given factual findings at filing |
| Whether sanctions (Rule 11 / §1927) were appropriate | Ashford: denies collusion; opposes sanction assertions | ATS: seeks sanctions for alleged contrived litigation and attempts to avoid appellate participation; seeks fees/costs | Held: Majority did not address sanctions in depth; concurrence urged district court to consider sanctions post-remand; no sanctions decision from this court |
Key Cases Cited
- Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (Sup. Ct.) (time-of-filing rule for diversity jurisdiction)
- City of Indianapolis v. Chase Nat. Bank of City of New York, 314 U.S. 63 (Sup. Ct.) (courts may look beyond pleadings to align parties by ultimate interests)
- Zurn Indus., Inc. v. Acton Constr. Co., 847 F.2d 234 (5th Cir.) (primary-purpose test for party alignment)
- Coury v. Prot, 85 F.3d 244 (5th Cir.) (diversity must exist at filing and at removal)
- Vasquez v. Alto Bonita Gravel Plant Corp., 56 F.3d 689 (5th Cir.) (enforceability of settlement relevant when removal premised on settlement)
- Caterpillar Inc. v. Lewis, 519 U.S. 61 (Sup. Ct.) (dismissal of nondiverse defendant before judgment may cure jurisdictional defect)
- Peters v. Standard Oil Co. of Texas, 174 F.2d 162 (5th Cir.) (realignment may be necessary and should be considered before jurisdiction is decided)
- Griffin v. Lee, 621 F.3d 380 (5th Cir.) (align parties by same ultimate interests test)
- Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880 (5th Cir.) (post-removal affidavits cannot defeat jurisdiction when petition facially shows amount in controversy)