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A few years ago, Judge Ralph K. Winter of the 2nd U.S. Circuit Court of Appeals lamented what he called a “parade of appeals … that have proceeded to final judgment on the merits — often after extensive proceedings — even though the basis for diversity jurisdiction is either lacking or in considerable doubt.” Universal Reins. v. St. Paul F&M Ins., 224 F.3d 139 (2d Cir. 2000). In that case, the court of appeals discovered a problem with diversity jurisdiction after five years of proceedings in the district court. The same court uncovered a diversity defect in another case after 16 years of district court proceedings. E.R. Squibb & Sons v. Accident & Cas. Ins., 160 F.3d 925 (2d Cir. 1998). GOOD NEWS: PRACTICALITY MAY PREVAIL OVER LOGIC Federal subject-matter jurisdiction ordinarily depends on the facts as they exist when a complaint is filed. One might logically assume, therefore, that nothing can be done at the appellate stage to salvage jurisdiction and rescue rulings rendered by a district court that, it turns out, lacked subject-matter jurisdiction. Happily, practicality may prevail over logic. For federal appellate courts have the authority — tempered only by their discretion — to cure jurisdictional defects while a case is on appeal and retroactively to validate earlier rulings and judgments. We all learned in law school that subject-matter jurisdiction is the prerequisite for the exercise of federal judicial power. Parties cannot by agreement confer jurisdiction upon a federal court; nor can they waive deficiencies in subject-matter jurisdiction. Furthermore, appellate courts cannot turn a blind eye to jurisdictional problems even when they are uncovered after a case has proceeded through trial to final judgment without any objection to jurisdiction. The most common jurisdictional defect discovered by appellate courts is a lack of complete diversity among parties in a multiparty diversity action. The diversity statute, 28 U.S.C. 1332, requires that everyone on one side of the “v.” be of a different citizenship from everyone on the other side. For decades, district courts have solved complete diversity problems by dismissing nondiverse parties if their presence were not required for a proper disposition of the case (“dispensable nondiverse parties”). District judges have found that authority in Rule 21 of the Federal Rules of Civil Procedure, which allows district courts to add or drop parties at “any stage of the action,” and in Rule 15(c), which gives retroactive effect to amended pleadings. However, the Civil Rules only “govern the procedure in the United States district courts,” Fed. R. Civ. P. 1, and there is no cognate to Rule 21 in the Appellate Rules. Nevertheless, in Newman-Green v. Alfonzo-Larrain, 490 U.S. 826 (1989), the U.S. Supreme Court held that courts of appeals possess a similar authority to dismiss retroactively dispensable nondiverse parties when their presence spoils subject-matter jurisdiction. The issue arose in Newman-Greenin a familiar way. While on appeal from a grant of summary judgment after years of discovery and proceedings in the district court, the 7th Circuit discovered that one defendant in a multidefendant case destroyed complete diversity. Because defendants were jointly and severally liable, the nondiverse defendant was dispensable and could be dismissed without prejudicing the remaining defendants. Sitting en banc, however, the court concluded that appellate courts lacked the power to dismiss jurisdictional spoilers such as the nondiverse defendant. The Supreme Court disagreed. Writing for the Court, Justice Thurgood Marshall considered two potential sources of appellate court authority to cure jurisdictional defects — 28 U.S.C. 1653 and Rule 21. The Court concluded that � 1653 applies only to “incorrect statements about jurisdiction that actually exists”; it does not authorize the dismissal of parties to create jurisdiction where none exists. 490 U.S. at 831. Turning to Rule 21, the Court conceded that the Civil Rules strictly apply only to district courts. But the Court emphasized that “practicalities” (and a lengthy history of appellate court practice) weighed heavily in favor of allowing courts of appeals to exercise the same authority. “[R]equiring dismissal after years of litigation would impose unnecessary and wasteful burdens on the parties, judges, and other litigants waiting for judicial attention.” Id.at 836. With admirable candor, Marshall acknowledged that allowing appellate-level amendments to retroactively correct jurisdictional defects might not be the “most intellectually satisfying approach to the spoiler problem.” Id.at 836. But he concluded (quoting Judge Richard Posner) that because “law is an instrument of governance rather than a hymn to intellectual beauty, some consideration must be given to practicalities.” Id.at 837. As the Court put it in its later decision in Caterpillar v. Lewis, 519 U.S. 61, 75 (1996), once a diversity case has proceeded to judgment in the district court, “considerations of finality, efficiency, and economy become overwhelming.” While recognizing appellate court authority to dismiss parties to salvage jurisdiction, the Supreme Court nonetheless emphasized that courts should exercise that power “sparingly.” In each case, the Court cautioned, the court of appeals should consider whether dismissal of the nondiverse dispensable party would prejudice any party. For example, the presence of a nondiverse party might have produced a “tactical advantage” for one party or another below. In that regard, the Court noted, the appellate court might choose to remand the case to the district court if it were better positioned to make the determination of prejudice. In the years since Newman-Green, appellate courts appear to have listened more closely to the Supreme Court’s discussion of practicalities than to its emphasis on the sparing use of this power. Courts have stressed the breadth of Newman-Green‘s language. E.g., Ingram v. CSX Transp., 146 F.3d 858 (11th Cir. 1998). And they have exercised the power retroactively to cure jurisdictional problems on appeal in circumstances that have ranged well beyond those presented in Newman-Green. Some circuit courts have relied on Newman-Green– which considered the dismissal of jurisdictional spoilers-as authority to add parties if necessary to overcome jurisdictional problems. For example, while an appeal was pending in Balgowan v. New Jersey, 115 F.3d 214, 217 (3d Cir. 1997), the Supreme Court issued a decision making it apparent that the lone defendant, New Jersey, was immune from suit. Relying on Newman-Green‘s statements about judicial efficiency, the 3rd Circuit allowed plaintiffs retroactively to add the state’s transportation commissioner as a party defendant, thus preserving jurisdiction under the Ex Parte Youngexception. Accord California Credit Union League v. Anaheim, 190 F.3d 997 (9th Cir. 1999). To “escape a multiparty jurisdictional quandary” that had nothing to do with either diversity jurisdiction or dispensable parties, the 8th Circuit invoked Newman-Greento justify severing two subclasses and creating two independent actions. Fielder v. Credit Acceptance, 188 F.3d 1031 (8th Cir. 1999). That permitted the appellate court to remand to state court the claims of one subclass (for which federal jurisdiction was lacking) and allowed the claims of the other subclass (for which subject-matter jurisdiction existed) to proceed. See also Bhatla v. U.S. Capital, 990 F.2d 780 (3d Cir. 1993) (splitting consolidated cases to preserve jurisdiction). DISTRICT COURTS MAY BE BETTER POSITIONED Some courts have heeded the Supreme Court’s suggestion that district courts may be better positioned to decide if dismissal of jurisdictional spoilers will prejudice any party. In Herrick v. SCS Communications, 251 F.3d 315, 332 (2d Cir. 2001), the court acknowledged the “limitations on its institutional competence” to determine if a jurisdictional defect (the presence of a nondiverse, sophisticated and wealthy defendant) had created a tactical advantage for the plaintiff in obtaining a favorable verdict from a jury. Other courts have been less willing to concede a lack of “institutional competence” or the possibility that a nondiverse party’s presence provided a tactical advantage below. E.g., Sweeney v. Westvaco, 926 F.2d 29 (1st Cir. 1991). Courts also cited Newman-Greento justify unilateral change of a plaintiff’s citizenship to salvage jurisdiction over the objection of the district court. In Atlas-Global Group v. Grupo Dataflux, 312 F.3d 168 (5th Cir. 2002), following a jury verdict for the plaintiff partnership, the district court dismissed the case for lack of subject-matter jurisdiction because when the complaint was filed, two of the plaintiff’s partners were not diverse from the defendant. Shortly before trial, however, the plaintiff completed a transaction that removed the nondiverse parties as partners. Taking their cue from the Supreme Court’s “underlying policy theme” of judicial economy and avoidance of waste, the 5th Circuit concluded that the principle announced in Newman-Green(and in its later Caterpillardecision) was not “limited to only the exact same procedural scenarios” in those cases. Id. at 173. That principle — the power to cure jurisdictional defects — allowed the court to resuscitate the jury’s verdict by giving retroactive effect to the partnership’s preverdict change in citizenship. See LeBlanc v. Cleveland, 248 F.3d 95 (2d Cir. 2001). Newman-Greenis an exception to a general rule — that federal subject-matter jurisdiction is determined as of the date on which a complaint is filed and is unaffected by later events and party maneuvers. As with most exceptions, there is always a danger that it will swallow the rule. That danger may be particularly acute where an exception is grounded solely in considerations of “practicalities” and lacks doctrinal moorings. That said, the Newman-Greenexception can be a godsend for appellate advocates-for it offers salvation to clients (and lawyers) who discover far too late in the game that the individual who put together the federal court complaint overlooked or misunderstood that pesky little issue of subject-matter jurisdiction. Mark R. Kravitz, a fellow of the American Academy of Appellate Lawyers, heads the appellate practice group of Wiggin & Dana in New Haven, Conn.

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