Newman-Green, Inc. v. Alfonzo-Larrain
104 L. Ed. 2d 893 · Supreme Court of the United States · 1989
Facts
Newman-Green, an Illinois corporation, sued a Venezuelan corporation, Venezuelan citizens, and William L. Bettison, a U.S. citizen domiciled in Venezuela, for breach of contract. Bettison's 'stateless' status for diversity purposes destroyed complete diversity in federal court. The Seventh Circuit panel allowed Newman-Green to drop Bettison to cure jurisdiction, but the en banc court reversed, questioning appellate authority to do so.
Procedural history
Newman-Green sued in District Court, which granted partial summary judgment for both sides. Newman-Green appealed to the Seventh Circuit, where a panel granted a motion to drop Bettison to create diversity and ruled on the merits. The Court of Appeals en banc reversed the panel, concluding neither § 1653 nor Rule 21 empowered appellate courts to dismiss such a party, and remanded to the District Court. The Supreme Court granted certiorari and reversed the en banc decision.
Issue
Does a court of appeals have the authority, under 28 U.S.C. § 1653 or Federal Rule of Civil Procedure 21, to dismiss a dispensable nondiverse party to preserve statutory diversity jurisdiction?
Holding
Yes, a court of appeals has the authority to dismiss a dispensable nondiverse party to preserve statutory diversity jurisdiction, reversing the en banc Seventh Circuit. The Court found that § 1653 does not apply to defective jurisdictional facts, but Rule 21 does empower appellate courts to take such action.
Rule
While 28 U.S.C. § 1653 only permits amendment of defective jurisdictional allegations, Federal Rule of Civil Procedure 21 allows courts, including appellate courts, to drop dispensable nondiverse parties at any stage of the action to cure diversity jurisdiction. This power should be exercised sparingly, with careful consideration of prejudice to the parties.
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