NEWMAN-GREEN, INC. v. ALFONZO-LARRAIN ET AL.
No. 88-774
SUPREME COURT OF THE UNITED STATES
Argued April 24, 1989—Decided June 12, 1989
490 U.S. 826
Phil C. Neal argued the cause for petitioner. With him on the briefs were Rowe W. Snider and Michael D. Sher.
Frank K. Heap argued the cause for respondents. With him on the brief were Charles G. Albert and William L. Barr, Jr.
JUSTICE MARSHALL delivered the opinion of the Court.
We decide today that a court of appeals may grant a motion to dismiss a dispensable party whose presence spoils statutory diversity jurisdiction.
I
Petitioner Newman-Green, Inc., an Illinois corporation, brought this state-law contract action in District Court against a Venezuelan corporation, four Venezuelan citizens, and William L. Bettison, a United States citizen domiciled in Caracas, Venezuela. Newman-Green‘s complaint alleged that the Venezuelan corporation had breached a licensing agreement, and that the individual defendants, joint and several guarantors of royalty payments due under the agreement, owed money to Newman-Green. Several years of discovery and pretrial motions followed. The District Court ultimately granted partial summary judgment for the guarantors and partial summary judgment for Newman-Green. 590 F. Supp. 1083 (ND Ill. 1984). Only Newman-Green appealed.
At oral argument before a panel of the Seventh Circuit Court of Appeals, Judge Easterbrook inquired as to the statutory basis for diversity jurisdiction, an issue which had not been previously raised either by counsel or by the District Court Judge. In its complaint, Newman-Green had invoked
The Court of Appeals granted the remaining guarantors’ motion for rehearing en banc and reversed the panel decision. 854 F. 2d 916 (1988). Writing for the en banc majority, Judge Posner concluded that neither
Unlike the Seventh Circuit, the Courts of Appeals for the Second, Third, Ninth, and District of Columbia Circuits have held that appellate courts have the power to dismiss jurisdictional spoilers like Bettison.3 We granted Newman-Green‘s petition for certiorari in order to resolve this conflict, 488 U. S. 1003 (1989), and now reverse.
II
The existence of federal jurisdiction ordinarily depends on the facts as they exist when the complaint is filed. See, e. g., Smith v. Sperling, 354 U. S. 91, 93, n. 1 (1957). Like most general principles, however, this one is susceptible to exceptions, and the two that are potentially applicable here are reflected in
A
Title
This interpretation of
B
We turn next to the other source of authority discussed by the Court of Appeals,
Almost every modern Court of Appeals faced with this issue has concluded that it has the authority to dismiss a dispensable nondiverse party by virtue of
The motion granted in Mullaney represented the exercise of an appellate power that long predates the enactment of the Federal Rules. In Anonymous, 1 F. Cas. 996, 997 (No. 444) (CC Mass. 1812), Justice Story, sitting as Circuit Justice, wrote that “[t]here is then, in the nature of an appellate jurisdiction, nothing which forbids the granting of amendments.” Justice Story derived this appellate power from “the course of the common law,” which permitted ” ‘the superior court... [to] make such amendments, as the court below may.’ ” Ibid., quoting King v. Ponsonby, 1 Wils. 303, 95 Eng. Rep. 631 (K. B. 1751); see also 1 F. Cas, at 997, citing Pease v. Morgan, 7 Johns. 468, 469 (N. Y. 1811). He also looked to § 32 of the Judiciary Act of 1789, which provided that a federal court “may at any time permit either of the parties to amend any defect in the process or pleadings, upon such conditions as the said courts respectively shall in their discretion and by their rules prescribe.” 1 Stat. 91, formerly codified at
While Justice Story‘s opinion dealt generally with the amendment power of appellate courts, Chief Justice Marshall‘s opinion for this Court in Carneal v. Banks, 10 Wheat. 181 (1825), dealt with the issue at hand—the power of appellate courts to grant motions to dismiss dispensable non-
By contrast, Horn v. Lockhart, 17 Wall. 570 (1873), clearly involved a trial court‘s decision to dismiss dispensable nondiverse parties. In approving such action, however, the Court used language that is strikingly reminiscent of that employed in Carneal: “[T]he question always is, or should be, when objection is taken to the jurisdiction of the court by reason of the citizenship of some of the parties, whether... they are indispensable parties, for if their interests are severable and a decree without prejudice to their rights can be made, the jurisdiction of the court should be retained and the suit dismissed as to them.” 17 Wall., at 579. This similarity of language is not surprising; the considerations implicit in a trial court‘s exercise of this power are equally applicable when an appellate court exercises the same power. Moreover, once it is recognized that trial courts have this amendment power, it is exceedingly difficult to argue that a similar
Although these 19th-century cases were decided in a procedural era different from our own, it is apparent that the weight of authority favored the view that appellate courts possessed the authority to grant motions to dismiss dispensable nondiverse parties.11 Courts relied then on § 32 of the Judiciary Act of 1789 or on the inherent power of appellate courts. Today courts rely on Mullaney or
In this case, the practicalities weigh heavily in favor of the decision made by the Court of Appeals panel to grant Newman-Green‘s motion to dismiss Bettison as a party. If the entire suit were dismissed, Newman-Green would simply refile in the District Court against the Venezuelan corporation and the four Venezuelans and submit the discovery materials already in hand. The case would then proceed to a preordained judgment. See id., at 932, 939-940 (Easterbrook, J., dissenting).12 Newman-Green should not be compelled to jump through these judicial hoops merely for the sake of hypertechnical jurisdictional purity.
Although we hold that the courts of appeals have the authority to dismiss a dispensable nondiverse party, we emphasize that such authority should be exercised sparingly. In
In the instant case, it is evident that none of the parties will be harmed by Bettison‘s dismissal. First, Bettison‘s presence did not provide Newman-Green with a tactical advantage. Discovery directed to Bettison while he was a party would have been available even if he had not been a party. See, e. g.,
III
For the reasons stated, the judgment of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion.
It is so ordered.
Our colleagues on the Court of Appeals disagree about whether
That should end the case. For if Congress thought it necessary to provide by affirmative statutory grant the rather ministerial power to cure defective allegations in jurisdiction, the more awesome power of curing actual defects in jurisdiction ought not be presumed, absent a statutory grant just as explicit. The balance of the Court‘s opinion in effect demonstrates that no such clear source of authority can be found to rebut the strong negative implication from the Court‘s interpretation of
As an initial matter, it is disturbing that the Court does not address in a substantive way the grave, brooding question whether
Even on the assumption, however, that
The two 19th-century cases relied upon by the Court, Horn v. Lockhart, 17 Wall. 570 (1873), and Carneal v. Banks, 10 Wheat. 181 (1825), do not establish the authority of an appellate court to dismiss a nondiverse party to preserve jurisdiction. Both the majority and the dissent in the Court of Appeals recognized that, at most, Horn speaks of the powers of a trial court, see 854 F. 2d 916, 921 (1988) (Posner, J.); id., at
The majority‘s reliance on Carneal proceeds from a premise that is most questionable. It assumes that Carneal involved a single action in which this Court dismissed on its own the nondiverse parties. Judge Posner, however, observed that the Court in Carneal may have in fact “treated the suit as if it were two suits, one satisfying the requirement of complete diversity, the other dismissable and dismissed.” 854 F. 2d, at 921. Judge Posner, perhaps, understated his own case. Carneal involved a contract in which the plaintiff, Banks, “agreed to transfer to Carneal the right of the said Banks in 30,000 acres of land purchased by him from John Harvie,” in exchange for which Carneal promised to convey to Banks “a tract of 2,000 acres of land on Green River.” 10 Wheat., at 182. Banks claimed that “Carneal was guilty of fraud in pretending to have a good title to the said 2,000 acres of land.” Id., at 182-183. Because the contract involved a conveyance of the 30,000 acres from Harvie to Carneal, in order for Banks to obtain complete relief, he prayed both “that the contract [between Carneal and Banks]... be rescinded” and “that the heirs of John Harvie... , in whom the legal title to the said 30,000 acres remains, ... be decreed to convey the same to [Banks].” Id., at 183. The jurisdictional problem was that, although there was complete diversity between Banks and Carneal‘s heirs, there was no diversity between Banks and Harvie‘s heirs. See id., at 187-188. The Court appears to have treated the claims against Harvie‘s heirs (the nondiverse parties) as a separate suit which in no way affected jurisdiction over Banks’ suit against Carneal‘s heirs. The Court stated: “If the validity of this objection [the lack of diversity], so far as respects Harvie‘s heirs, be unquestionable, it cannot affect the suit
There is, moreover, a more basic reason not to place heavy reliance on Carneal and Horn. As the Court concedes, these cases “were decided in a procedural era different from our own,” ante, at 836. The powers of the district courts and courts of appeals are now governed by
I am not at all persuaded, either, that practical considerations in the case warrant our holding that courts of appeals have the power to dismiss nondiverse parties. The dissent in the Court of Appeals, and the opinion for the Court here, each assume it would be quite a waste to remand the case to the District Court so that it may determine whether an amendment to the complaint ought to be allowed. But if, as the Court and the dissent below contend, there would be no
For these reasons, and with all due respect, I dissent from the opinion and judgment of the Court.
