Newman-Green v. Alfonzo-Larrain, 490 U.S. 826 (1989)

Newman-Green, Inc. v. Alfonzo-Larrain

No. 88-774

Argued April 24, 1989
Decided June 12, 1989
490 U.S. 826

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT

Syllabus

Title 28 U.S.C. § 1332 confers diversity jurisdiction in the district courts when a citizen of one State sues both aliens and citizens of a State different from the plaintiff’s, § 1332(a)(3), and when a citizen of a State sues aliens only, § 1332(a)(2). Petitioner, an Illinois corporation, invoking jurisdiction under § 1332(a)(3), brought a state law contract action in the District Court against a Venezuelan corporation and, as joint and several guarantors of royalty payments due under the agreement, four Venezuelan citizens and one Bettison, a United States citizen domiciled in Venezuela. After several years of litigation, the District Court, inter alia, granted partial summary judgment for the guarantors. A Court of Appeals panel found that Bettison’s status as a United States citizen not domiciled within a State destroyed § 1332(a)(3) jurisdiction, but granted petitioner’s motion to dismiss him from the suit, thereby producing complete diversity under § 1332(a)(2). The court then decided the merits. The Court of Appeals en banc reversed, concluding that neither 28 U.S.C. § 1653 -- which provides that "[d]efective allegations of jurisdiction may be amended . . . in the trial or appellate courts" -- nor Federal Rule of Civil Procedure 21 -- which provides that a court may add or drop parties at any stage of the action on such terms as are just -- empowers appellate courts to dismiss a dispensable party who spoils statutory diversity jurisdiction. However, recognizing that Rule 21 permits district courts to drop dispensable nondiverse parties, the court remanded the case to the District Court for a determination whether it would be prudent to drop Bettison from the litigation.

Held: A court of appeals has the authority to grant a motion to dismiss a dispensable nondiverse party, and need not remand the case to the district court for dismissal in that court’s discretion. Pp. 830-838.

(a) Since § 1653 speaks of amending jurisdictional allegations, it would apply if petitioner had made an incorrect statement about jurisdiction that actually existed, but it does not apply where, as here, there are defects in the jurisdictional facts themselves. This interpretation is consistent with § 1653’s legislative history and the language of its predecessor statute, as well as the view of every Court of Appeals that has considered § 1653’s scope. Pp. 830-832.

(b) Virtually 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 Rule 21. Furthermore, this Court has exercised similar authority both under Rule 21, see Mullaney v. Anderson, 342 U.S. 415, and prior to the enactment of the Federal Rules. See Carneal v. Banks, 10 Wheat. 181. Other early appellate courts relied for their authority to dismiss a nondiverse party on § 32 of the Judiciary Act of 1789 or on the courts’ own inherent powers. This Court declines to disturb that deeply rooted understanding of appellate power, particularly when requiring dismissal of the suit after years of litigation would impose unnecessary and wasteful burdens on the parties, judges, and other litigants awaiting judicial attention. Here, the practicalities weigh heavily in favor of the decision to dismiss Bettison since, if the suit were dismissed, petitioner would be compelled to refile in the District Court against the diverse parties and proceed to a preordained judgment merely for the sake of a hypertechnical jurisdictional purity. Although an appellate court should exercise its authority sparingly, carefully considering whether dismissal of the nondiverse party will prejudice any of the other parties and remanding to the district court when appropriate, this Court declines to erect a per se rule that the district court must first make such a determination in every case. Here, none of the parties will be harmed by Bettison’s dismissal, since his presence did not provide petitioner with a tactical advantage; since he was not indispensable to the suit; and since any possible prejudice to him personally was eliminated when the Court of Appeals panel terminated the litigation against him with prejudice. Pp. 832-838.

854 F.2d 916, reversed and remanded.

MARSHALL, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and BRENNAN, WHITE, BLACKMUN, STEVENS, and O’CONNOR, JJ., joined. KENNEDY, J., filed a dissenting opinion, in which SCALIA, J., joined, post, p. 839.