MidCap Media Finance, L.L.C. v. Pathway Data, Inco
929 F.3d 310
5th Cir.
2019

Background

  • MidCap (an LLC) loaned Pathway up to $1.5M under a written financing agreement; Pathway defaulted and MidCap sued Pathway and CEO David Coulter (who executed a personal guaranty).
  • After a bench trial, the district court found Pathway breached and awarded damages to MidCap but held Coulter not personally liable under the guaranty.
  • On appeal, the parties had assumed diversity jurisdiction existed and appealed to the Fifth Circuit on the merits and cross-appeals.
  • The Fifth Circuit sua sponte examined subject-matter jurisdiction and found the record lacked proper allegations/evidence of citizenship for diversity under 28 U.S.C. § 1332.
  • Defects: Coulter was alleged only as a California resident (not domiciliary); MidCap, as an LLC, lacked pleading of each member’s citizenship, and proffered new evidence on appeal (declarations and filings) that the court declined to consider.
  • The Fifth Circuit remanded for the district court to permit supplementation of the record and amendment of jurisdictional allegations rather than decide the merits, and denied as moot a pending motion to strike.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether the record establishes complete diversity of citizenship for § 1332 MidCap: parties are diverse; Coulter is a California citizen; MidCap is Texas-based (implying diversity) Pathway: record contains only residency allegations and insufficient proof of LLC members’ citizenship; new appellate evidence disputed Remand: record lacks adequate proof; district court must supplement and amend jurisdictional facts before federal jurisdiction can be assumed
Whether residency allegations suffice to prove individual citizenship/ domicile MidCap relied on pleadings, trial testimony, and business mail showing California ties Pathway argued those show residence only, not domicile; thus inadequate to prove citizenship Held: residency alone is insufficient; citizenship requires domicile and proof thereof
Whether appellate supplementation (new affidavits/declarations) may be considered to cure jurisdictional defects MidCap submitted declarations and public filings on appeal to show members’ citizenship Pathway disputed the declarations and argued parties cannot introduce new jurisdictional evidence on appeal Held: appellate courts generally cannot receive new jurisdictional evidence; §1653 does not allow adding new facts on appeal; remand required for district court fact-finding
Whether the record permits the Fifth Circuit to take judicial notice of public filings to establish citizenship MidCap relied on public tax filings for some LLC-member tracing Pathway contended factual disputes remain and some exhibits are not part of the record Held: court may take judicial notice of certain public filings not subject to reasonable dispute, but here overall record was insufficient and remand was appropriate

Key Cases Cited

  • Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999) (courts must ensure they have subject-matter jurisdiction before proceeding)
  • Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254 (5th Cir. 1988) (pleadings must contain clear, precise jurisdictional allegations)
  • McLaughlin v. Miss. Power Co., 376 F.3d 344 (5th Cir. 2004) (complete diversity requirement explained)
  • Robertson v. Cease, 97 U.S. 646 (1878) (residency allegation insufficient to establish citizenship/domicile)
  • Stine v. Moore, 213 F.2d 446 (5th Cir. 1954) (place of residence is prima facie domicile but not conclusive)
  • Strain v. Harrelson Rubber Co., 742 F.2d 888 (5th Cir. 1984) (allegation of residency does not satisfy citizenship requirement)
  • Texas v. Florida, 306 U.S. 398 (1939) (citizenship requires residence plus intent to make home)
  • Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077 (5th Cir. 2008) (LLC citizenship is determined by citizenship of all members)
  • Settlement Funding, L.L.C. v. Rapid Settlements, Ltd., 851 F.3d 530 (5th Cir. 2017) (must allege citizenship of every LLC member to establish diversity)
  • Molett v. Penrod Drilling Co., 872 F.2d 1221 (5th Cir. 1989) (when record gives some reason to believe jurisdiction exists, remand to supplement the record is appropriate)
  • Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (1989) (§1653 allows correction of pleading defects but not supplementation with new factual evidence on appeal)
  • Howery v. Allstate Ins. Co., 243 F.3d 912 (5th Cir. 2001) (§1653 permits cure of pleading errors only if evidence of jurisdiction is already in the record)
  • Swindol v. Aurora Flight Sciences Corp., 805 F.3d 516 (5th Cir. 2015) (appellate court may take judicial notice of undisputed public records)
  • Burdett v. Remington Arms Co., 854 F.3d 733 (5th Cir. 2017) (discussed in context of appellate consideration of jurisdictional evidence)
  • Warren v. Bank of Am., [citation="717 F. App'x 474"] (5th Cir. 2018) (per curiam) (addressed use of undisputed declarations on appeal for jurisdictional purposes)
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