DIVERSITY JURISDICTION AND THE COMMON-LAW SCOPE OF THE CIVIL ACTION.

• Date: 01 October 2021
• Author: Woolley, Patrick

TABLE OF CONTENTS INTRODUCTION AND SUMMARY OF ARGUMENT I. RECOVERING THE HISTORICAL UNDERSTANDING A. A Brief Primer on "Joint" and "Several" Rights and Obligations B. The Amount-in-Controversy Requirement 1. The Settled Law in Multi-Party Suits 2. The Settled Law and the Scope of the Civil Action C. The Diversity-of-Citizenship Requirement 1. A Descriptive Analysis of the Marshall Court's Jurisprudence 2. A New Construction of the Judiciary Act of 1789? 3. The Complete-Diversity Requirement and the Judiciary Act of 1875 II. MODERN PRACTICE AND THE HISTORICAL UNDERSTANDING A. The Relevance of the Historical Understanding to Modern Practice B. Rethinking the Court's Modern Diversity Jurisdiction Cases 1. Kroger and Newman-Green 2. Allapattah C. Applying the Historical Understanding to Modern Practice 1. Supplemental Jurisdiction based on Diversity Jurisdiction 2. Diversity Jurisdiction under Section 1332(a)(3) CONCLUSION INTRODUCTION AND SUMMARY OF ARGUMENT

Federal law generally grants federal district courts subject-matter jurisdiction over prescribed "civil actions." (1) But despite the ubiquity of the term, courts and commentators have mostly ignored the crucial role it plays. (2) This Article looks at diversity jurisdiction through the lens of the civil action and argues that a commonly accepted assumption about the scope of the civil action over which Section 1332(a) grants jurisdiction has obscured the proper application of the diversity and supplemental jurisdiction statutes in limited but important ways. (3)

The most common understanding of "civil action" includes within its scope the claims and defenses asserted together as a package by parties to litigation in accordance with the rules that govern joinder in a given procedural system. (4) The scope of the civil action authorized by the Federal Rules of Civil Procedure (Federal Rules) is broad, and that breadth has influenced modern understandings of federal subject-matter jurisdiction in a variety of ways. A prominent example is the widespread modern assumption that complete diversity requires that all the plaintiffs in the civil action authorized by the Federal Rules be diverse from all the defendants.

This Article argues instead that a civil action within the meaning of Section 1332(a) has essentially the same scope as a suit at common law in 1789. A suit at common law prototypically involved a demand asserted by one party against another. Only when a "joint interest" was at issue could a suit at common law include more than one person on the same side of the "v." The Marshall Court construed both the amount-in-controversy and diversity-of-citizenship requirements against this template even when adjudicating suits brought under rules of party joinder more liberal than those at common law. Specifically, parties on the same side of the "v." who had distinct--as opposed to joint--interests were treated as if they were part of separate suits for purposes of analyzing subject-matter jurisdiction. The settled rules governing the amount-in-controversy requirement are the product of this historical understanding. And because Section 1332(a) does not differentiate between the amount-in-controversy and diversity-of-citizenship requirements, the same definition of "civil action" must--as a textual matter--govern the application of both.

Treating a civil action for purposes of Section 1332(a) as having essentially the scope of a suit at common law means that the presence of a nondiverse plaintiff or defendant in a civil action authorized by the Federal Rules will not necessarily destroy diversity jurisdiction over all claims between plaintiffs and defendants in that action. Rather, the nondiverse party will spoil diversity jurisdiction only with respect to claims that would have been asserted in the same suit under common-law rules of party joinder. This distinction has important implications for subject-matter jurisdiction.

But the importance of the distinction has been obscured by the longstanding power of federal courts to cure defects in diversity jurisdiction. The presence of a nondiverse plaintiff or defendant in a civil action-however that action is defined--generally creates a jurisdictional defect. And by 1833, federal circuit courts in equity cases clearly had authority to cure such defects by dismissing nondiverse parties before entry of the decree. When a defect could not be cured through dismissal of the nondiverse party because the party was indispensable, the rules of equity required dismissal of the suit in its entirety. Thus, it was usually unnecessary for circuit courts to look to common-law joinder rules in applying the diversity-of-citizenship requirement to suits in equity.

Modern federal courts similarly may look to the civil action authorized by the Federal Rules when doing so would not affect the jurisdictional outcome. But attention to the precise scope of the civil action to which Section 1332(a) refers remains crucial. Indeed, there are at least two important jurisdictional provisions in which that scope makes a difference. First, the recognition that a civil action under Section 1332(a) has essentially the scope of a suit at common law sheds crucial light on Section 1367, the supplemental jurisdiction statute. Specifically, Section 1367 sometimes authorizes the exercise of supplemental jurisdiction over nondiverse plaintiffs in the civil action authorized by the Federal Rules, provided a civil action--as that term historically was understood--exists that would satisfy the requirements of diversity jurisdiction. And second, the common-law scope of the civil action under Section 1332(a) indicates that subdivision (3) of that section authorizes the joinder of citizens of foreign states as additional parties to a civil action only in connection with a joint right or obligation.

The argument unfolds in two parts. Part I recovers the historical understanding of the amount-in-controversy and diversity-of-citizenship requirements, with particular emphasis on the decisions of the Marshall Court. And Part II considers the relevance of the historical understanding to modern practice.

1. RECOVERING THE HISTORICAL UNDERSTANDING

   Diversity jurisdiction under Section 1332(a) requires that there be complete diversity between all of the plaintiffs and all of the defendants in the civil action and that the amount-in-controversy requirement be satisfied. The modern assumption is that the relevant civil action for purposes of the complete-diversity requirement is the civil action authorized by the Federal Rules of Civil Procedure, but that each plaintiff generally must have claims against each defendant that satisfy the amount-in-controversy requirement.

   This Part demonstrates that both the amount-in-controversy and diversity-of-citizenship requirements historically were understood in light of principles of party joinder that defined the scope of a suit at common law. Subpart A provides a primer on the difference between "joint" and "several" rights and obligations, essential concepts for understanding these principles. Subpart B discusses the amount-in-controversy requirement and explains why the use of common-law principles of party joinder in all cases to determine whether the requirement is satisfied furthered the balance between state and federal judicial systems struck by the Judiciary Act of 1789. Subpart C explains that the complete-diversity requirement similarly was applied in light of the principles governing the scope of a suit at common law, even in equity cases.

   1. A Brief Primer on "Joint" and "Several" Rights and Obligations

      The distinction between joint and several rights and obligations has no bearing on joinder under the Federal Rules. (5) By contrast, the common law authorized the joinder of more than one plaintiff in a suit only if the plaintiffs shared a joint right and authorized the joinder of more than one defendant only if the defendants shared a joint obligation to the plaintiff or plaintiffs. (6) Modern lawyers often view with trepidation the need to distinguish between "joint" and "several" rights and obligations. But although the distinction can be difficult to apply, (7) the concepts themselves are not difficult to grasp. As the Seventh Circuit has noted, "where there is a single indivisible res, such as an estate or a piece of property (the classic example), it makes sense to think of co-parties' claims to the res as common and undivided" (8)--in other words, "joint." Put more abstractly, a joint interest is shared by parties on one side of a suit to the extent the substantive law creates the basis for their treatment as a unit vis-a-vis a party or parties on the other side of the "v." It is after all the substantive law that determines whether an estate or piece of property should be treated as a single, indivisible whole.

      A suit by the members of a partnership against a defendant for nonpayment provides another simple example. Because the substantive law of partnership provides that the partners as a unit would be entitled to recover for the alleged breach of contract, the partners--if joined as plaintiffs--share a joint interest. (9) That does not necessarily mean that each partner would be entitled to an equal share of the contractually-required payment. The partnership agreement for example, might allot the senior partner 40% of the partnership's income, and each of the six junior partners 10%. So although the partners share a joint interest vis-a-vis the defendant, they may have several interests as between themselves.

      Consider, by contrast, a parent and her minor child who join in a suit against a tortfeasor. Because the parent and child are not a unit for purposes of tort law, it is simply not the case that they share a joint interest. The parent, for example, might seek to recover the cost of medical expenses in the suit and the minor child damages for permanent physical injury. (10) Similarly, if a...