As the year begins, it is appropriate to get back to the basics. Subject matter jurisdiction is the starting point in every case in federal court, scrutinized from the outset by the district court and then the 7th Circuit. Yet in opinion after opinion common errors in complaints or removal notices are noted by these courts, particularly in diversity jurisdiction cases.
Common diversity jurisdiction issues
In Wingler v. Apria Healthcare, LLC, No. 1:17-cv-00177 (S.D. Ind. Jan. 19, 2017), Chief Judge Jane Magnus-Stinson issued a detailed order sua sponte requiring defendants to file an amended notice of removal demonstrating diversity jurisdiction. The order serves as a teaching tool on some of the common errors in diversity cases.
First, the court explained what is required for diversity with respect to limited liability companies, writing: “Defendants do not properly allege their own respective citizenships. The citizenship of an unincorporated association, such as a limited liability company or ‘LLC,’ is ‘the citizenship of all the limited partners, as well as of the general partner.’ Hart v. Terminix Int’l, 336 F.3d 541, 542 (7th Cir. 2003). ‘[T]he citizenship of unincorporated associations must be traced through however many layers of partners or members there may be.’ Id. at 543. Asserting that all partners are citizens of ‘X’ or that no partners are citizens of ‘X’ is insufficient. See Peters v. Astrazeneca LP, 224 Fed. Appx. 503, 505 (7th Cir. 2007) (noting the insufficiency of a limited partnership asserting that none of its partners were citizens destroying diversity ‘rather than furnishing the citizenship of all of its partners so that [the court] could determine its citizenship’). Defendants must specifically identify each of their limited and general partners, and provide their respective citizenships.”
Second, the court addressed the amount in controversy requirement, writing, “Defendants do not properly allege the amount in controversy. The amount in controversy must exceed ‘$75,000, exclusive of interest and costs.’ 28 U.S.C. § 1332. The ‘exclusive of interest and costs’ language must be included in the amount in controversy allegation.”
Third, the court addressed whether amount in controversy allegations can be pleaded based on information and belief, writing, “Defendants have pled their allegations regarding the amount in controversy upon information and belief. Jurisdictional allegations must be made on personal knowledge, not on information and belief, to invoke the subject matter jurisdiction of a federal court. See America’s Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072, 1074 (7th Cir. 1992) (only a statement about jurisdiction ‘made on personal knowledge has any value’ and a statement made ‘to the best of my knowledge and belief’ is insufficient to engage diversity jurisdiction).”
Notably, these pleading requirements for diversity jurisdiction apply equally to plaintiffs in their complaints and to defendants in their removal notices. The district courts and the 7th Circuit scrutinize both.
S.D. Ind. Local Rule 81-1
In the Southern District of Indiana, Local Rule 81-1 puts a post-removal obligation on plaintiffs, as follows: “Within 30 days after the filing of the notice of removal, every plaintiff who has not filed a motion to remand must file a statement responding to the notice of removal’s allegations as to the citizenship of the parties and the amount in controversy. If the plaintiff lacks sufficient information upon which to form a belief about those allegations despite meeting and conferring in good faith with the removing party about them, the plaintiff may so state.” This local rule helps alert the court to potential jurisdictional issues.
In the Wingler order noted above, Chief Judge Magnus-Stinson reminded plaintiff of this obligation after the amended notice of removal is filed, and further wrote, “The parties are advised that, to the extent the Amended Notice of Removal and the Local Rule 81-1 Statement reflect anything other than total agreement regarding any jurisdictional allegations, the Court will require the parties to conduct whatever investigation is necessary and file a joint jurisdictional statement confirming that all parties are in agreement with the underlying jurisdictional allegations before the litigation moves forward.”
7th Circuit scrutiny
On appeal, the scrutiny continues with respect to diversity jurisdiction. As the 7th Circuit Practitioner’s Handbook for Appeals states, “Appeals in cases based in whole or part on diversity jurisdiction receive an extra measure of screening. The court, ever mindful of the limitations on subject matter jurisdiction of federal courts, scrupulously reviews the parties’ docketing statements to determine whether the amount in controversy is established and the citizenship of each party to the litigation is identified.”•
John Maley — [email protected] — is a partner with Barnes & Thornburg LLP, practicing federal and state litigation, employment matters, and appeals. The opinions expressed are those of the author.