Ellison Steel, Inc. v. Greystar Construction LP , 199 F. App'x 324 ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
August 17, 2006
for the Fifth Circuit
Charles R. Fulbruge III
Clerk
No. 05-20822
ELLISON STEEL, INC.,
Plaintiff-Counter Defendant-Appellee,
VERSUS
GREYSTAR CONSTRUCTION LP, ET AL.,
Defendants,
GREYSTAR CONSTRUCTION WEST, LLC,
Defendant-Counter Claimant-Appellant.
Appeal from the United States District Court
for the Southern District of Texas
(4:04-CV-629)
Before DeMOSS, BENAVIDES, and PRADO, Circuit Judges.
PER CURIAM:*
Appellant Greystar Construction West, LLC (“GCW”)
appeals the district court’s Amended Final Judgment
*
Pursuant to 5TH CIR. R. 47.5, the Court has determined that this
opinion should not be published and is not precedent except under
the limited circumstances set forth in 5TH CIR. R. 47.5.4.
awarding attorney’s fees in the amount of $123,725.00 to
Appellee Ellison Steel, Inc. (“Ellison”) pursuant to an
arbitration award adopted by the court. Because it is not
clear from the record whether the district court had
subject matter jurisdiction over the case, specifically,
whether the various parties to the case were diverse, we
vacate the district court’s judgment and remand the case
to the district court for a determination of whether
subject matter jurisdiction existed.
I.
Underlying this case is a contract dispute regarding
a Colorado construction project. GCW, a citizen of
Delaware and Colorado for diversity purposes, was the
general contractor on the project; Ellison, a citizen of
Texas for diversity purposes, was GCW’s subcontractor.
The subcontract between the parties contained an
arbitration clause and a Colorado choice of law
provision. The subcontract also specified that the party
prevailing in any litigation or arbitration was entitled
to recover from the other party its attorney’s fees and
costs.
2
In November 2003, one of Ellison’s subcontractors,
H&E Equipment Services LLC, sued GCW and Ellison in
Colorado state court to recover amounts allegedly owed by
Ellison for work on the construction project.2 A month
later, in December 2003, GCW initiated arbitration
against Ellison in Colorado to recover amounts allegedly
owed under their subcontract. Finally, in January 2004,
Ellison filed suit against GCW on their subcontract in
Texas state court.3 GCW removed the Texas action to the
U.S. District Court for the Southern District of Texas on
diversity grounds. Post-removal, Ellison amended its
complaint to add claims against another party, Greystar
Construction Development, L.P. (“GCD” or the “named
defendant”), a party GCW alleges is non-diverse. Ellison
later clarified that it intended to sue Greystar
Development & Construction LP (“GDC” or the “intended
defendant”), a party GCW alleges is also non-diverse.
2
Another of Ellison’s subcontractors, Namasco Corporation, later
intervened to recover the amounts allegedly owed it.
3
Ellison named Greystar Construction, L.P. as the defendant, but
GCW clarified when it removed the case that it was the “proper
party” and “intended defendant” because the construction
subcontract was between Ellison and GCW.
3
GDC’s name appears on all subsequent court filings. After
Ellison added claims against GDC, GCW filed a motion to
dismiss the case, an alternative motion to stay the case
pending resolution of arbitration, and a motion to strike
the joinder of GDC. The court denied without prejudice
the motion to dismiss and the motion to strike and agreed
to stay the case so that the Colorado arbitration could
proceed.
The arbitrator awarded Ellison $47,528.49 in damages
and $6,812.25 in pre-award interest. However, the
arbitrator ordered each party to bear its own costs,
finding that neither party was the prevailing party for
purposes of the contractual fee/cost-shifting clause in
the arbitration agreement. The arbitrator then found that
it did not have jurisdiction to make an award of
attorney’s fees, nor to make an express finding regarding
who the prevailing party was with respect to attorney’s
fees, and stated that the court of law in which the
parties sought to enforce the award was the appropriate
tribunal to decide those issues.
After arbitration concluded, Ellison moved to reopen
4
the case pending in the Southern District so that the
court could award attorney’s fees and enter final
judgment pursuant to the arbitration award. GCW contested
Ellison’s motion to reopen and filed alternative motions
to dismiss for lack of personal jurisdiction, to dismiss
for improper venue, and to transfer venue. The court
granted Ellison’s motion to reopen and its request for
attorney’s fees and denied GCW’s alternative motions. GCW
then filed an answer to Ellison’s First Amended
Complaint, a counterclaim, and various other motions,
arguing that the court lacked subject matter
jurisdiction, that venue was not proper in the Southern
District, and that the court should either abstain from
exercising jurisdiction, confirm the arbitration award,
specifically the arbitrator’s finding that neither party
was the prevailing party, or remand to the arbitrator so
that he could answer any open questions regarding
attorney’s fees. GCW also argued that the district court
had misinterpreted Colorado law in determining that
Ellison was entitled to attorney’s fees. The district
court struck the answer and counterclaim, confirmed the
5
arbitration award, denied the remainder of GCW’s motions,
and entered final judgment against GCW and GDC totaling
$54,340.74 in damages and $123,735.00 in attorney’s fees.
The final judgment was later amended upon the request of
GCW and GDC because Ellison had not sought relief against
GDC -- who was dismissed by the arbitrator as a
respondent to the arbitration -- and because GCW had
already paid the $54,340.74 it owed to Ellison pursuant
to the arbitration award. GCW timely appealed.
II.
GCW makes numerous arguments on appeal; however, we
need only reach its argument that the district court
lacked subject matter jurisdiction, as it disposes of the
case.
Questions of subject matter jurisdiction are reviewed
de novo. Crockett v. R.J. Reynolds Tobacco Co., 436 F.3d
529, 531 (5th Cir. 2006). Diversity jurisdiction exists
if the parties are diverse and the amount in controversy
requirement is satisfied. See 28 U.S.C. § 1332; see also
Garcia v. Kock Oil of Tex. Inc., 351 F.3d 636, 638 (5th
6
Cir. 2003). The party seeking to invoke federal diversity
jurisdiction bears the burden of establishing both.
Garcia, 351 F.3d at 638.
Both parties agree that diversity existed at the time
of removal; however, GCW contends that subject matter
jurisdiction was later destroyed either by addition of
the named defendant, GCD, or by addition of the intended
defendant, GDC, both of which GCW contends are Texas
citizens for diversity purposes. Ellison counters that
because GDC, the intended defendant, was dismissed from
arbitration and not a party to the final judgment, the
district court’s judgment should stand even if GDC is
non-diverse; however, Ellison argues that GDC is diverse
because it is a limited partnership whose partners are
citizens of South Carolina, making it a citizen of South
Carolina for diversity purposes.
Diversity jurisdiction is generally determined at the
time of filing, or, in a case removed from state court,
at the time of removal. Grupo Dataflux v. Atlas Global
Group, L.P., 541 U.S. 567, 570-71 (2004). However, the
later addition of a non-diverse defendant will destroy
7
diversity jurisdiction. Doleac v. Michalson, 264 F.3d
470, 477 (5th Cir. 2001). Nevertheless, as Ellison
correctly points out, in some cases this Court will not
disturb a judgment even though a jurisdictional defect
existed at some point prior to entry of judgment if
jurisdiction existed at the time judgment was entered.
See, e.g., H&D Tire & Auto.-Hardware, Inc. v. Pitney
Bowes Inc., 227 F.3d 326, 328 (5th Cir. 2000) (stating
“[e]ven if a Court lacks jurisdiction at the time of
removal and regardless of whether there was an objection
to the removal, the judgment will stand if the court had
jurisdiction at the time it entered judgment”). But the
jurisdictional defect must not linger through judgment,
and in a diversity case involving a non-diverse party,
this has meant the dismissal of the non-diverse party
from the action prior to judgment. See Caterpillar Inc.
v. Lewis, 519 U.S. 61, 67 (1996); see also Grupo
Dataflux, 541 U.S. at 572-73. GDC was not dismissed from
the district court action; further, we cannot determine
from the record whether GDC is non-diverse, i.e., whether
8
GDC is a Texas resident.4 We refuse to address on this
record -- where the defendant in question’s citizenship
is not clear -- Ellison’s contention that dismissal from
arbitration, without a corresponding dismissal from the
district court action, cured any jurisdictional defect.
Therefore, we vacate the district court’s judgment and
remand this case to the district court so that it can
determine whether the parties to the case were diverse.
We note for the district court’s benefit that if it finds
GDC non-diverse, it could cure the jurisdictional defect
by dismissing GDC from the action. See Grupo Dataflux,
541 U.S. at 572-73 (citing Newman-Green, Inc. v.
Alfonzo-Larrain, 490 U.S. 826, 832 (1989)).
III.
Accordingly, the district court’s judgment is VACATED
and this case is REMANDED to the district court for
further proceedings in accordance with this opinion.
4
GDC is a limited partnership. It is therefore a citizen of any
state in which any of its partners is a citizen. Carden v. Arkoma
Assocs., 494 U.S. 185, 189-96 (1990). Unfortunately, the record
contains inconsistent and incomplete information about the identity
and citizenship of GDC’s partners.
9