Swiger v. Alghny Energy Inc ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
8-25-2008
Swiger v. Alghny Energy Inc
Precedential or Non-Precedential: Precedential
Docket No. 07-1706
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
NO. 07-1706
____________
CLIFTON G. SWIGER
Appellants
v.
ALLEGHENY ENERGY, INC.,
ALLEGHENY ENERGY SUPPLY CO., LLC,
ALLEGHENY ENERGY SERVICES CORP., and
MORGAN, LEWIS & BOCKIUS, LLP
____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 05-CV-5725)
District Judge: The Honorable J. Curtis Joyner
Argued March 25, 2008
BEFORE: MCKEE, RENDELL and TASHIMA * ,
Circuit Judges,
(Filed: August 25, 2008)
Gregory A. Beck (Argued)
Paul Alan Levy
Public Citizen Litigation Group
1600 20th Street, NW
Washington, DC 20009
Counsel for Appellants
Theresa J. Chung (Argued)
Michael J. Ossip, Esq.
Michael A. Bloom, Esq.
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Sara A. Begley, Esq.
Robert A. Nicholas, Esq.
Tracey G. Weiss, Esq.
Reed Smith 1650 Market Street
2500 One Liberty Place
Philadelphia, PA 19103-7301
Counsel for Appellees
*
The Honorable A. Wallace Tashima, Senior United States
Circuit Judge for the Ninth Circuit, sitting by designation.
2
OPINION
TASHIMA, Circuit Judge:
We must decide whether a federal district court has
diversity jurisdiction over a lawsuit involving a partnership
where one of its partners is a dual American-British citizen
domiciled in a foreign state. The district court held that it lacked
diversity jurisdiction over such an entity, and we affirm.
I. APPELLATE JURISDICTION & STANDARD OF
REVIEW
We have jurisdiction pursuant to 28 U.S.C. § 1291 over
a dismissal for lack of subject matter jurisdiction, and our
review for lack of subject matter jurisdiction is plenary. See
Frett-Smith v. Vanterpool, 511 F.3d 396, 399 (3d Cir. 2008).
II. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Clifton G. Swiger sued Allegheny Energy, Inc.,
3
Allegheny Energy Supply Co., LLC, Allegheny Energy Services
Corp., and Morgan, Lewis & Bockius LLP (“Morgan Lewis”),
(collectively “Defendants”), on several state law claims,
including abuse of process, wrongful use of civil proceedings,
invasion of privacy, and wrongful discharge, in the Eastern
District of Pennsylvania based upon diversity jurisdiction.
Morgan Lewis, joined by the other Defendants, moved to
dismiss the complaint pursuant to Federal Rule of Civil
Procedure 12(b)(1), on the ground that complete diversity
between the parties was lacking. Morgan Lewis is a partnership
that, at the time of the filing of the lawsuit, had among its
partners, Charles Lubar, a dual United States and United
Kingdom citizen domiciled in the United Kingdom. The district
court dismissed the case for lack of jurisdiction, concluding that
“[g]iven that for diversity purposes, the court must consult the
citizenship of all of the members of an artificial entity such as
4
a general or limited partnership and because a United States
citizen who is not domiciled in one of the United States cannot
invoke diversity jurisdiction in one particular state, we must
conclude that we are without jurisdiction to act in this matter.”
Swiger v. Allegheny Energy, Inc., No. 05-CV-5725, 2007 WL
442383, at *5 (E.D. Pa. Feb. 7, 2007) (emphasis in the original)
(citations omitted). Swiger timely appealed.
III. ANALYSIS
Swiger argues that the district court erred in holding that
it lacked diversity jurisdiction because, according to Swiger, a
single partner who is not a citizen of a state does not render the
entire partnership stateless for diversity purposes.1 Whether a
federal district court has diversity jurisdiction over a lawsuit
1
Swiger “assumes” that Lubar is in fact stateless, thus
accepting the factual basis of the district court’s ruling, that
Lubar is an American-British dual citizen domiciled in the
United Kingdom.
5
involving a partnership that has among its partners an American
citizen domiciled in a foreign state is an issue of first impression
in this Circuit. To our knowledge, however, all courts that have
addressed this issue have held that such an entity does not
qualify for diversity jurisdiction. For the reasons set forth
below, we agree with those other courts and hold that if a
partner of a partnership is a United States citizen permanently
living abroad, there can be no diversity of jurisdiction over the
partnership because the partner is neither a citizen of a state nor
a citizen of a foreign country.
Swiger also argues that even if the stateless partner
destroys diversity, the district court nevertheless had alienage
jurisdiction because Lubar, as a dual citizen of the United States
and the United Kingdom, is a citizen or subject of a foreign
state. This argument, however, is foreclosed by our recent
decision in Frett-Smith, 511 F.3d at 400, in which we held that,
6
for purposes of diversity jurisdiction, we consider only the
American citizenship of a dual American-foreign national. We
consider each of Swiger’s arguments in turn.
A. Diversity Jurisdiction and the “Stateless” Partner
Under 28 U.S.C. § 1332(a):
district courts . . . have original jurisdiction of all
civil actions where the matter in controversy
exceeds the sum or value of $75,000, exclusive of
interest and costs, and is between—(1) citizens of
different States; (2) citizens of a State and citizens
or subjects of a foreign state; (3) citizens of
different States and in which citizens or subjects
of a foreign state are additional parties; and (4) a
foreign state, defined in section 1603(a) of this
title, as plaintiff and citizens of a State or of
different States.
A natural person is deemed to be a citizen of the state where she
is domiciled. See Gilbert v. David, 235 U.S. 561, 569 (1915).
A corporation is a citizen both of the state where it is
incorporated and of the state where it has its principal place of
business. 28 U.S.C. § 1332(c).
7
Partnerships and other unincorporated associations,
however, unlike corporations, are not considered “citizens” as
that term is used in the diversity statute. See Carden v. Arkoma
Assocs., 494 U.S. 185, 187–92 (1990) (holding that a limited
partnership is not a citizen under the jurisdictional statute); see
also Lincoln Prop. Co. v. Roche, 546 U.S. 81, 84 n.1 (2006)
(“[F]or diversity purposes, a partnership entity, unlike a
corporation, does not rank as a citizen[.]”); United Steelworkers
of Am. v. Bouligny, 382 U.S. 145, 149–50 (1965) (holding that
a labor union is not a citizen for purposes of the jurisdictional
statute); Great S. Fire Proof Hotel Co. v. Jones, 177 U.S. 449,
454–55 (1900) (holding that a limited partnership association,
even though it was called a quasi-corporation and declared to be
a citizen of the state under the applicable state law, is not a
citizen of that state within the meaning of the jurisdictional
statute); Chapman v. Barney, 129 U.S. 677, 682 (1889) (holding
8
that although the plaintiff-stock company was endowed by New
York law with the capacity to sue, it could not be considered a
“citizen” for diversity purposes); 15 James Wm. Moore,
Moore’s Federal Practice § 102.57[1] (3d ed. 2006) [hereinafter
Moore’s Federal Practice] (“[A] partnership is not a ‘citizen’ of
any state within the meaning of the statutes regulating
jurisdiction[.]”).
Given that partnerships are not citizens for diversity
purposes, the Supreme Court has long applied the rule of
Chapman v. Barney: that courts are to look to the citizenship of
all the partners (or members of other unincorporated
associations) to determine whether the federal district court has
diversity jurisdiction. See Lincoln Prop. Co., 546 U.S. at 84 n.1;
Carden, 494 U.S. at 196–97; Bouligny, 382 U.S. at 151; Great
S. Fire Proof Hotel, 177 U.S. at 456; Chapman, 129 U.S. at 682;
see also 13B Charles Alan Wright et al., Federal Practice &
9
Procedure § 3630 (2d ed. 1984) (“[W]henever a partnership, a
limited partnership . . . , a joint venture, a joint stock company,
a labor union, a religious or charitable organization, a governing
board of an unincorporated institution, or a similar association
brings suit or is sued in a federal court, the actual citizenship of
each of its members must be considered in determining whether
diversity jurisdiction exists.”). In Chapman, the Supreme Court,
on its own motion, reversed a judgment on the grounds that the
federal court did not have jurisdiction over a stock company
because the record did not demonstrate that all the partners of
the stock company were citizens of a state different than that of
the defendant:
On looking into the record, we find no
satisfactory showing as to the citizenship of the
plaintiff. The allegation of the amended petition
is that the United States Express Company is a
joint-stock company organized under a law of the
state of New York, and is a citizen of that state.
But the express company cannot be a citizen of
New York, within the meaning of the statutes
10
regulating jurisdiction, unless it be a corporation.
[T]he company . . . is, a mere partnership. . . .
. . . . The company may been organized
under the laws of the State of New York, and may
be doing business in that State, and yet all the
members of it may not be citizens of that State.
The record does not show the citizenship of
Barney, or of any of the members of the company.
129 U.S. at 682 (emphasis added). In a nearly unbroken chain,2
2
As the Supreme Court put it in Carden:
The one exception to the admirable consistency
of our jurisprudence [regarding the Chapman
rule] is Puerto Rico v. Russell & Co., 288 U.S.
476 (1933), which held that the entity known as
a soceidad en comandita, created under the civil
law of Puerto Rico, could be treated as a citizen
of Puerto Rico for purposes of determining
federal-court jurisdiction. . . . [However,]
[t]here could be no doubt, after Bouligny, that at
least common-law entities (and likely all entities
beyond the Puerto Rican sociedad en
comandita) would be treated for purposes of the
diversity statute pursuant to what Russell called
“[t]he tradition of the common law,” which is
“to treat as legal persons only incorporated
groups and to assimilate all others to
(continued...)
11
the Supreme Court has consistently applied the Chapman rule,
holding that a partnership is not a citizen, but that the court
“must look in the case of a suit by or against a partnership
association to the citizenship of the several persons composing
such association.” Great S. Fire Proof Hotel, 177 U.S. at 456;
see also Carden, 493 U.S. at 189; Bouligny, 382 U.S. at 151.
Further, in the context of partnerships, the complete
diversity requirement demands that all partners be diverse from
all parties on the opposing side. See Lincoln Prop. Co., 546
U.S. at 84 n.1; accord Carden, 494 U.S. at 195 (accepting the
“rule that the Court will . . . count every member of an
unincorporated association for purposes of diversity
jurisdiction” and “reject[ing] the contention that to determine,
for diversity purposes, the citizenship of an artificial entity, the
2
(...continued)
partnerships.”
494 U.S. at 189–90.
12
court may consult the citizenship of less than all of the entity’s
members”); Carlsberg Res. Corp. v. Cambria Sav. & Loan
Ass’n, 554 F.2d 1254, 1259 (3d Cir. 1977) (“When the rule of
complete diversity is read in conjunction with the principle that
the citizenship of a partnership depends upon that of its
members, it becomes clear that diversity jurisdiction may not
obtain here, unless all of the members of the plaintiff
partnership are of distinct citizenship from all of the
defendants.”); Underwood v. Maloney, 256 F.2d 334, 338 (3d
Cir. 1958) (“[W]here jurisdiction is sought to be founded on
diversity of citizenship, the action being by or against an
unincorporated association . . . the citizenship of the individual
members must be shown to be wholly diverse from that of the
opposing party or those of the opposing parties.”); cf.
Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806) (“[W]here
the interest is joint, each of the persons concerned in that interest
13
must be competent to sue, or liable to be sued in [the federal]
courts.”).
Partnerships which have American partners living abroad
pose a special problem. “In order to be a citizen of a State
within the meaning of the diversity statute, a natural person
must be both a citizen of the United States and be domiciled
within the State.” Newman-Green, Inc. v. Alfonzo-Larrain, 490
U.S. 826, 828 (1988). An American citizen domiciled abroad,
while being a citizen of the United States is, of course, not
domiciled in a particular state, and therefore such a person is
“stateless” for purposes of diversity jurisdiction. See id. Thus,
American citizens living abroad cannot be sued (or sue) in
federal court based on diversity jurisdiction as they are neither
“citizens of a State,” see 28 U.S.C. § 1332(a)(1), nor “citizens
or subjects of a foreign state,” see id. § 1332(a)(2). See
Newman-Green, 490 U.S. at 826.
14
Putting these principles together, that is, that the
citizenship of the individual partners must be shown to be
wholly diverse from that of the opposing party (or those of the
opposing parties) and that American citizens living abroad
cannot sue (or be sued) in federal court based on diversity
jurisdiction, our sister circuits and other federal courts have
concluded that if a partnership has among its partners any
American citizen who is domiciled abroad, the partnership
cannot sue (or be sued) in federal court based upon diversity
jurisdiction. See Herrick Co. v. SCS Commc’ns, Inc., 251 F.3d
315, 322 (2d Cir. 2001); accord ISI Int’l, Inc. v. Borden Ladner
Gervais LLP, 316 F.3d 731, 733 (7th Cir. 2003) (“One of [the
partnership’s] partners is a U.S. citizen domiciled in Canada; she
has no state citizenship, so the diversity jurisdiction is
unavailable.”); Cresswell v. Sullivan & Cromwell, 922 F.2d 60,
69 (2d Cir. 1990) (“If in fact any of S & C's foreign-residing
15
United States citizen partners are domiciled abroad, a diversity
suit could not be brought against them individually; in that
circumstance, since for diversity purposes a partnership is
deemed to take on the citizenship of each of its partners, a suit
against S & C could not be premised on diversity.” (internal
citations omitted)); see also 15 Moore’s Federal Practice §
102.37[16] (“If a member of a partnership is a United States
citizen permanently living abroad, there can be no diversity of
jurisdiction because the member is neither a citizen of a state nor
a citizen of a foreign country.”).
Swiger, however, asks us to disregard these cases and
create an exception to the Chapman tradition. He argues that we
should ignore Lubar’s lack of state citizenship and focus only on
the partners who are citizens of a state. Morgan Lewis has
American partners domiciled in, among other states,
Pennsylvania, New York, and California; therefore, Morgan
16
Lewis, according to Swiger, is a citizen of Pennsylvania, New
York, California, and so on. Although Morgan Lewis has a
stateless partner, Swiger contends that the partnership can hardly
be characterized as “stateless”; indeed, under this view, Morgan
Lewis is quite “stateful.” That is, according to Swiger, one
party, Morgan Lewis, is a citizen of Pennsylvania, New York,
and California, and so on, and the other party, Swiger, is a
citizen of West Virginia, ipso facto, the parties are “citizens of
different States.”
We cannot agree. First, the Supreme Court has explicitly
held, and consistently stated, as we have already noted, that a
partnership is not a “citizen” for purpose of diversity
jurisdiction. Instead, for purposes of diversity jurisdiction, a
partnership’s citizenship as a party is determined by reference to
all partners, and all partners must be diverse from all parties on
17
the opposing side.3 Lincoln Prop. Co., 546 U.S. at 84 n.1; see
also Carden, 494 U.S. at 195 (“[W]e reject the contention that
to determine, for diversity purposes, the citizenship of an
artificial entity, the court may consult the citizenship of less than
all of the entity’s members.”). Second, Morgan Lewis, as an
entity, is just as “stateless” as it is “stateful”: Morgan Lewis is
not an American citizen, and it “has no domicile in any state.”
3
Despite this, Swiger contends that the Supreme Court’s
recent decision in Grupo Dataflux v. Atlas Global Group,
L.P., supports his view that the partnership takes on the state
citizenship of its partners. See 541 U.S. 567, 569 (2004)
(“[A]s a partnership, [it] is a citizen of each State or foreign
country of which any of its partners is a citizen.”). Grupo
Dataflux, however, does not change the basic principles as to
how an unincorporated association’s citizenship is determined
for purposes of diversity jurisdiction. Indeed, in a post-Grupo
Dataflux opinion, the Supreme Court again reiterated that “for
diversity purposes, a partnership entity, unlike a corporation,
does not rank as a citizen; to meet the complete diversity
requirement, all partners, limited as well as general, must be
diverse from all parties on the opposing side.” Lincoln Prop.
Co., 546 U.S. at 84 n.1 (citing Carden, 494 U.S. at 189,
192–97).
18
But rather than treating partnerships as stateless, the Chapman
rule determines the partnership’s citizenship for purposes of
diversity by referring to the citizenship of each partner. The rule
of Chapman is a legal construct that allows a real legal entity,
though a non-citizen, to sue and be sued in federal court based
upon diversity by looking through the partnership to the
citizenship of each partner.
Because Morgan Lewis has a stateless partner, and thus,
all partners of Morgan Lewis are not diverse from all parties on
the opposing side, the district court correctly held that it lacked
diversity jurisdiction over this action.
B. Alienage Jurisdiction
Swiger argues that even if jurisdiction based on diversity
of state citizenship is lacking, the district court nevertheless had
diversity jurisdiction under 28 U.S.C. § 1332(a)(2), because
Lubar, as a dual citizen of the United States and the United
19
Kingdom would still be a “citizen[] or subject[] of a foreign
state,” and as such, Lubar would be diverse from Swiger within
the meaning of § 1332(a)(2). That is, complete diversity would
exist because Swiger is a citizen of West Virginia and Lubar is
a citizen of the United Kingdom. After this appeal was briefed,
but before oral argument, we decided this question in Frett-
Smith, in which we held “that for purposes of diversity
jurisdiction, only the American nationality of a dual national is
recognized.” See Frett-Smith, 511 F.3d at 400. Because Lubar
is a United States citizen, any reliance on § 1332(a)(2)’s
alienage jurisdiction would be in error. Id. at 400. Thus,
“[o]nly if [Lubar] was domiciled in a particular state of the
United States at the time the suit was filed, and that state was
diverse from that of [Swiger], would subject matter jurisdiction
be present” as against Morgan Lewis. Id.
IV. CONCLUSION
20
Whenever a partnership (or other unincorporated
association) brings suit or is sued in a federal court, the
citizenship of each of its partners (or members) must be
considered in determining whether diversity jurisdiction exists,
and all partners (or members) must be diverse from all parties on
the opposing side. Lubar, a Morgan Lewis partner and
American citizen domiciled abroad, is “stateless” for purposes
of diversity jurisdiction. Because Lubar, as a stateless person,
cannot sue or be sued in federal court based upon diversity
jurisdiction, neither can Morgan Lewis. The judgment of the
district court is AFFIRMED.
McKee, Circuit Judge, concurring in the judgment.
I agree that the authority relied upon by my colleagues
strongly suggests the analysis the lead opinion has adopted and
the result my colleagues have reached. I am therefore reluctant
21
to disagree with that conclusion even though I do not think that
the result we reach today is necessarily compelled by precedent
of this court or the Supreme Court. I am, in fact, concerned that
our decision today unnecessarily extends two conventions of
diversity jurisprudence and thereby inappropriately
circumscribes that jurisdiction. I think my colleagues would
agree that it would be more logical to treat “stateless” partners
in situations like this as “jurisdictional zeroes,” rather than as
citizens of the plaintiff’s state; but we are not writing on a blank
slate.
I realize, of course, that it is not the province of this or
any other lower court to undermine the Carden rule or the
“stateless person” doctrine discussed in the lead opinion.
Nevertheless, applying the Carden rule and “stateless person”
doctrine here results in a ruling that is inconsistent with both
reality and common sense. Accordingly, although I concur in
22
the result, I hope that Congress will one day see fit to clarify that
our diversity jurisdiction does extend to this situation.
I.
Article III of the Constitution provides, in pertinent part,
that “[t]he judicial Power shall extend to . . . Controversies . . .
between Citizens of different States.” In its current form, the
diversity statute provides that “[t]he district courts shall have
original jurisdiction of all civil actions where the matter in
controversy exceeds . . . $75,000 . . . and is between . . . citizens
of different States . . . .” 28 U.S.C. § 1332(a). In Chapman v.
Barney, 129 U.S. 677 (1889), the Supreme Court established
that the “citizenship” of an unincorporated association (such as
a partnership) is defined by the citizenship of its individual
members. Unincorporated associations are thus treated
differently than corporations which, under a 1958 amendment to
the diversity statute, are considered to be citizens of their state
23
of incorporation and of their primary places of business.1 See 28
U.S.C. 1332(c)(1).
The Supreme Court has recognized that the disparate
treatment of partnerships and corporations may not conform
with modern business realities, but the Court has rejected
invitations to reinterpret the rule. See Carden v. Arkoma
Assocs., 494 U.S. 185, 196-97 (1990), reaffirmed in Grupo
Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 578 n.6
(2004) (“Whether the Constitution requires it or not, Carden is
1
Even before the diversity statute was amended, the
Supreme Court had judicially devised the rule that a
corporation would be treated as a citizen of its state of
incorporation. See Louisville, C. & C.R. Co. v. Letson, 43
U.S. (2 How.) 497 (1844). The 1958 amendment, adding the
principal place of business to the corporation’s citizenship,
was designed to prevent misuse of the diversity jurisdiction by
corporations. See 15 Moore’s Federal Practice § 102.50 (3d
ed. 2008). A corporation, treated as out-of-state because
incorporated elsewhere, was unlikely to suffer local prejudice
in the courts of the state where the corporation had its
principal place of business. Id.
24
the subconstitutional rule by which we determine the citizenship
of a partnership - and in this case it leads to the conclusion that
there were no opposing parties who were not co-citizens.”)
(emphasis in original). Indeed, in Carden, the Court stated that
this rule “can validly be characterized as technical, precedent-
bound, and unresponsive to policy considerations raised by the
changing realities of business organization.” 494 U.S. at 196.
Yet, the Court viewed the 1958 amendment to 28 U.S.C. §
1332(c) as evidence of Congress’ tacit approval of the rule
regarding citizenship of associations, as “[n]o provision was
made for the treatment of artificial entities other than
corporations.” Id. at 196-97. The Court concluded that the
limited scope of the amendment meant that Congress was
content with the existing method of determining the citizenship
of unincorporated associations such as partnerships.
Accordingly, the Court declared that any change to the Carden
25
rule must come from Congress, as “[s]uch accommodation is not
only performed more legitimately by Congress than by courts,
but it is performed more intelligently by legislation than by
interpretation of the statutory word ‘citizen.’” Id.2
Nevertheless, despite its apparent relevance to this
jurisdictional dispute, Carden does not definitively answer the
specific question here. In Carden, an Arizona limited
partnership brought a diversity action against two Louisiana
citizens. Id. at 186. The partnership asserted that complete
diversity was satisfied because none of its general partners
shared the same citizenship as any adverse party. The
citizenship of its limited partners, it argued, was irrelevant to the
2
The Court further explained that this course “does not so
much disregard the policy of accommodating our diversity
jurisdiction to the changing realities of commercial
organization, as it honors the more important policy of
leaving that to the people’s elected representatives.” Carden,
494 U.S. at 197.
26
presence of diversity jurisdiction. Id. at 192. The Court rejected
that position and held that complete diversity was lacking
because one of the limited partners was, like the defendants, a
citizen of Louisiana, thus precluding complete diversity. The
Court held that the citizenship of partnerships is determined by
the citizenship of all of its partners, not just the general partners.
Id. at 195-96.
The Court addressed the application of diversity
jurisdiction to partnerships again in Grupo Dataflux v. Atlas
Global Group, L.P., 541 U.S. 567 (2004). There, a Texas-based
limited partnership brought a breach of contract action against
a Mexican corporation based on the alienage clause of the
diversity statute. As explained by the Supreme Court:
Because [the partnership] had two partners who
were Mexican citizens at the time of filing, the
partnership was a Mexican citizen. (It was also a
citizen of Delaware and Texas based on the
citizenship of its other partners.) And because the
27
Defendant . . . was a Mexican corporation, aliens
were on both sides of the case, and the requisite
diversity was therefore absent.
Id. at 569. Therefore Grupo Dataflux, does not advance our
inquiry much more than Carden. Neither case directly addresses
the specific jurisdictional question before us. Rather, Grupo
Dataflux, merely restates the principle that diversity jurisdiction
(or alienage jurisdiction) does not obtain where a plaintiff and
defendant share a common citizenship.
In contrast to Carden and Grupo Dataflux, no member of
Morgan Lewis (nor any of the other defendants 3 ) shares the
citizenship of the plaintiff in this case. Swiger is a citizen of
West Virginia. Morgan Lewis is a limited liability partnership
3
Defendants Allegheny Energy, Inc. and Allegheny
Energy Service Corp. are Maryland corporations with their
principal places of business in Greensburg, Pennsylvania.
Defendant Allegheny Energy Supply Co. is a Delaware
limited liability corporation with its principal place of
business in Monroeville, Pennsylvania.
28
registered in Pennsylvania with its principal place of business in
Philadelphia, Pennsylvania. In addition to its stateless partner,
Lubar, Morgan Lewis has partners who are citizens of
Pennsylvania, New York and California. It is undisputed that no
Morgan Lewis partner is a citizen of West Virginia. Ideally, that
should be the beginning and end of our jurisdictional inquiry.
II.
The rule that a United States citizen permanently
domiciled abroad may not sue or be sued on the basis of
diversity of citizenship (sometimes called the “stateless person”
doctrine) is a doctrine likely born of chance rather than design.
It was recognized (without any particular discussion) by the
Supreme Court in Newman-Green, Inc. v. Alfonzo-Larrain, 490
U.S. 826, 828 (1989). The rule has evolved from judicial
interpretation of the words of the diversity statute. Section 1332
applies only to suits between “citizens of different States” and
29
“citizens of a State and citizens of a foreign state.” 28 U.S.C.
1332(a)(1)-(2). The capitalized “State” refers to U.S. states.
Hence, a U.S. citizen with no “State” citizenship falls outside
the literal terms of the statute. This was likely not an intentional
omission from diversity jurisdiction, but rather flowed from the
(now incorrect) assumption that all U.S. citizens would also be
domiciled in a U.S. state. See 13B Charles Alan Wright &
Arthur R. Miller, Federal Practice and Procedure, § 3621
(2008). See also Southern Cross Overseas Agencies, Inc. v.
Wah Kwong Shipping Group Ltd., 181 F.3d 410, 415-16 (3d Cir.
1999) (noting likelihood that problem of “stateless” person - in
the international sense - was unanticipated by the Framers).
At this point, neither the rule nor the cases that have
applied it are open to judicial revision unless the Supreme Court
30
revisits the issue.4 However, the presence of a “stateless”
partner in a partnership whose partners’ citizenship is otherwise
completely diverse from all plaintiffs should not summarily
defeat the exercise of our jurisdiction. After all, it is the
partnership, not the individual partners, who are party to the
action.
III.
It is certainly not our job to create law. We are, however,
charged with filling gaps in statutes when unforeseen
circumstances create ambiguities. For example, Congress has
declared that a corporation is “deemed to be a citizen of any
State by which it has been incorporated and of the State where
it has its principal place of business.” 28 U.S.C. § 1332(c)(1).
However, that statute does not determine if a court has
4
Given its statements in Carden, it is not likely to do so
unless Congress once again amends § 1332.
31
jurisdiction when a U.S. corporation has its principal place of
business outside of the United States, or has no principal place
of business at all. When presented with this situation, courts
have not concluded that such a corporation is “stateless” and
thereby beyond the reach of diversity jurisdiction. Rather,
courts have held that the citizenship of the corporation defaults
to the only state citizenship that can be determined - that of the
state of incorporation. See, e.g., Torres v. Southern Peru
Copper Corp., 113 F.3d 540, 543-44 (5th Cir. 1997); Cabalcetta
v. Standard Fruit Co., 883 F.2d 1553, 1561 (11th Cir. 1989).
Likewise, if partners in a partnership are citizens of
several states, but one (or more) partner is not a citizen of any
state, there is no reason to necessarily conclude that subject
matter jurisdiction is defeated. Thus, were we free to address
the issue of Lubar’s citizenship on a clean slate, I hope that we
would readily concede that it adds nothing to the diversity
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equation and that there is no reason to allow it to defeat diversity
jurisdiction. Lubar’s residence in England makes him a
jurisdictional nullity, and his citizenship should be treated that
way for purposes of determining subject matter jurisdiction.
Carden and Grupo Datflux are not necessarily to the contrary.
They merely hold that it is the citizenship of all the members of
a partnership that must be examined, they say nothing about the
lack of a partner’s citizenship.
IV.
The traditional explanation of the purpose of diversity
jurisdiction is “the fear that state courts would be prejudiced
against out-of-state litigants.” See 13B Charles Alan Wright and
Arthur R. Miller, Federal Practice and Procedure § 3601
(2008). Morgan Lewis is a nationally prominent law firm whose
main office is in Philadelphia, Pennsylvania. It is certainly not
unreasonable to believe that local bias might operate in state
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court in favor of a litigant that is as prominent and influential in
the local community as Morgan Lewis.5 That is the rationale for
allowing Swiger to sue in federal court - assuming complete
diversity. The rationale is not undermined one iota merely
because one of Morgan Lewis’ many hundreds of partners has
been residing in England and will apparently continue to reside
there indefinitely. So long as none of Morgan Lewis’ partners
is a citizen of Swiger’s home state of West Virginia, the purpose
of diversity jurisdiction is fully served, and Swiger should be
permitted to test the merits of his claim in a federal forum.
Lubar’s lack of citizenship in any state should not be the
jurisdictional equivalent of citizenship in the same state as
Swiger. Accordingly, we should be able to conclude that this
5
I do not, of course, suggest the accuracy or wisdom of
perpetuating that long-standing assumption, but its historical
role in the evolution of our subject matter jurisdiction can not
be ignored.
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suit presents “two adverse parties [who] are not co-citizens.”
Grupo Dataflux, 541 U.S. at 579 (internal quotation omitted).
V.
According to one 2004 survey, roughly 10,000 of the
110,000 lawyers at the top 250 U.S. firms work overseas.
Michael D. Goldhaber & Carlyn Kolker, Supersonic Lawyers,
American Lawyer (May 2004). As business ventures and legal
relationships become more global in depth and breadth, the
situation we face today will become increasingly common.
When the expanding business universe and shrinking globe are
considered along with the growing population of expatriates and
the apparently increasing popularity of non-corporate business
forms, courts will no doubt be confronted with applying the
Carden rule and the “stateless” person doctrine in this context
with increasing regularity. Unless Congress takes up the
problem and clarifies the meaning of 28 U.S.C. § 1332(a),
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persons suing large partnerships will increasingly be barred from
bringing their claim in federal court. Hopefully, Congress will
address this situation and put the Carden genie back in its
jurisdictional bottle. However, that day is not yet here, and I
therefore concur in this judgment.
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