83 F.4th 405
5th Cir.2023Background
- SXSW canceled its March 2020 festival due to COVID-19; a class action over refunds settled, costing SXSW over $1 million.
- SXSW sued its insurer, Federal Insurance Company, claiming Federal failed to defend the class action.
- The district court adopted the magistrate's recommendation, denied SXSW's partial summary-judgment motion, and granted Federal's summary judgment.
- On appeal the parties assumed diversity jurisdiction, but the Fifth Circuit raised the issue sua sponte because the record lacked clear citizenship allegations for SXSW's LLC members.
- The record identified SXSW’s two members but did not establish the citizenship of Starr Hill Presents – SX, LLC (or whether "ownership" equaled "membership"). SXSW later stated a member was owned by a Virginia resident, but that allegation came after the complaint and used "resident" language.
- The Fifth Circuit found the timing and substance of jurisdictional allegations insufficient and remanded for the district court to determine whether diversity jurisdiction existed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Adequacy of jurisdictional allegations for an LLC plaintiff | SXSW assumed its principal place of business allegation sufficed to establish diversity | Federal pointed to the lack of specific citizenship allegations for every LLC member | Court: allegations were insufficient; must plead citizenship of every LLC member |
| Residency vs. citizenship for an individual member | SXSW identified Robert C. Capshaw as a Virginia resident (and owner) | Federal argued residency is not equivalent to domicile/citizenship for § 1332 | Court: residency alone does not establish citizenship; plaintiff must plead domicile |
| Timing of citizenship inquiry | SXSW provided additional membership/ownership details after filing and on appeal | Federal relied on the record as of the complaint filing date | Court: citizenship is measured at time complaint filed; later assertions cannot cure the defect on appeal without record evidence |
| Amendment / supplementation on appeal | SXSW requested leave to amend or supplement to fix jurisdictional defects | Federal opposed reliance on post-complaint assertions on appeal | Court: Section 1653 amendment doctrine does not permit accepting new jurisdictional evidence on appeal when the record lacks jurisdictional proof; remand required for district court factfinding |
Key Cases Cited
- Steel Co. v. Citizens for a Better Env't, 523 U.S. 83 (1998) (federal courts must independently ensure subject-matter jurisdiction)
- Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254 (5th Cir. 1988) (requirement for clear, distinct, precise jurisdictional allegations)
- MidCap Media Fin., LLC v. Pathway Data, Inc., 929 F.3d 310 (5th Cir. 2019) (distinguishing residency from domicile; pleading LLC citizenship)
- McLaughlin v. Miss. Power Co., 376 F.3d 344 (5th Cir. 2004) (complete diversity requirement)
- Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077 (5th Cir. 2008) (LLC citizenship determined by citizenship of all members)
- Settlement Funding, LLC v. Rapid Settlements, Ltd., 851 F.3d 530 (5th Cir. 2017) (must specifically allege citizenship of every LLC member)
- Howery v. Allstate Ins. Co., 243 F.3d 912 (5th Cir. 2001) (Section 1653 requires some jurisdictional evidence in the record to permit amendment)
- Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (1989) (citizenship is determined at time complaint filed)
- Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449 (1900) (courts must inquire into jurisdiction at every stage)
- Mullins v. Testamerica Inc., [citation="300 F. App'x 259"] (5th Cir. 2008) (remand to district court to resolve jurisdictional facts)