Accordant Communications, LLC v. Sayers Constructi ( 2020 )

Case: 20-50169 Document: 00515660517 Page: 1 Date Filed: 12/03/2020
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 3, 2020
No. 20-50169 Lyle W. Cayce
Clerk
Accordant Communications, L.L.C.,
Plaintiff—Appellee,
versus
Sayers Construction, L.L.C.,
Defendant—Appellant,
consolidated with
_____________
No. 20-50513
_____________
Accordant Communications, L.L.C.,
Plaintiff—Appellant,
versus
Sayers Construction, L.L.C.,
Defendant—Appellee.
Appeals from the United States District Court
for the Western District of Texas
USDC No. 1:19-CV-401
Case: 20-50169 Document: 00515660517 Page: 2 Date Filed: 12/03/2020
No. 20-50169
c/w No. 20-50513
Before Higginbotham, Smith, and Dennis, Circuit Judges.
Per Curiam:*
This appeal stems from a mistake that went unnoticed in the district
court: defective pleadings that failed to properly allege diversity jurisdiction.
For the following reasons, we remand.
I.
Accordant Communications, L.L.C. (“Accordant”), plaintiff in the
district court, and Sayers Construction, L.L.C. (“Sayers”), defendant, were
parties to a contract for electric utility construction in South Florida. On
December 6, 2017, pursuant to the contract’s arbitration clause, Accordant
filed an arbitration proceeding with the American Arbitration Association
asserting claims for breach of contract, quantum meruit, and fraud. Sayers
counterclaimed for breach of contract.
On March 22, 2019, the Arbitration Tribunal issued a partial award in
favor of Accordant for $459,392 in money damages, plus amounts for
interest, costs, and attorney’s fees to be determined later by the Arbitrator,
and awarded Sayers nothing. On April 10, 2019, Accordant filed an
“application to confirm arbitration award” in federal district court in the
Western District of Texas. Accordant alleged the district court had
jurisdiction under 28 U.S.C. § 1332 “because the amount in controversy
exceeds $75,000 and is between citizens of different states.” As to the
citizenship of the parties, Accordant alleged that it “is a limited liability
company organized under the laws of Georgia with its principal place of
business in Seminole County, Florida” and that Sayers “is a limited liability
*
Pursuant to 5th Circuit Rule 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opinion should not be published and is not precedent except under the limited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 Circuit Rule 47.5.4.
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company organized under the laws of Texas with its principal place of
business in Travis County, Texas.”
On May 9, 2019, the Tribunal issued a final award in favor of
Accordant in the amount of $1,397,436.71 (the partial award, plus attorney’s
fees, costs, expenses, and interest). Accordant filed an amended application
to confirm arbitration award with the district court that same day. On May
23, 2019, Sayers filed a motion to dismiss for lack of subject matter
jurisdiction, contending that the district court lacked jurisdiction to confirm
partial awards and that therefore the court lacked jurisdiction at the time
Accordant filed its initial application. Sayers further argued that the district
court lacked subject matter jurisdiction because the partial award was not ripe
for adjudication at the time the action was commenced. On February 3,
2020, the district court denied Sayers motion and granted Accordant’s
amended application to confirm arbitration award. Sayers filed a timely
notice of appeal.
As Sayers had not posted a bond or security to suspend execution of
the judgment, see Fed. R. Civ. P. 62, Accordant began to take steps to
collect on its judgment. Encountering difficulties, Accordant served post-
judgment discovery on Sayers to which Sayers refused to respond, objecting
that the underlying judgment was “void.” Accordant then filed a motion to
compel answers to post-judgment discovery with the district court, followed
by a motion for leave to amend its application to assert bases for diversity
jurisdiction. Sayers—after filing its opening appellate brief with this court
raising, for the first time, a challenge to subject matter jurisdiction on the
grounds that diversity was lacking—filed responses to both motions with the
district court and argued (1) that the district court was divested of jurisdiction
to decide the question of its own subject matter jurisdiction once Sayers’s
notice of appeal was filed because that issue was on appeal, and (2) that the
district court therefore also lacked the ability to consider the motion to
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compel. The district court agreed with Sayers, denied the motion for leave
to amend, and dismissed Accordant’s motion to compel post-judgment
discovery without prejudice to Accordant’s re-filing the motion after this
court rendered a decision in the jurisdictional appeal. Accordant appealed
the district court’s order. See United States v. McWhirter, 376 F.2d 102, 104–
05 (5th Cir. 1967) (holding that district court order denying motion to compel
answers to post-judgment discovery is final and appealable order). Upon
motion from Accordant, opposed by Sayers, we consolidated the two appeals.
On appeal, Sayers argues that the district court’s confirmation of the
arbitral award is “jurisdictionally flawed,” i.e. diversity jurisdiction was not
established because it was not properly alleged and “there is no evidence in
the record” of the LLC’s members’ citizenship. Sayers seeks to have the
confirmation vacated and the case dismissed. It is of no moment that Sayers
raises this issue for the first time on appeal. “Questions of subject matter
jurisdiction cannot be forfeited or waived and are reviewed de novo.” Nat'l
Football League Players Ass'n v. Nat'l Football League, 874 F.3d 222, 225 (5th
Cir. 2017). Accordant argues that diversity jurisdiction exists and that it was
an abuse of discretion for the district court to refuse to exercise its
jurisdiction in aid of enforcing its judgment by failing to consider the merits
of the motion to compel post-judgment discovery.
II.
“Federal courts are courts of limited jurisdiction.” Howery v. Allstate
Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). “The burden of establishing
federal jurisdiction rests on the party seeking the federal forum.” Id. at 919.
“When courts lack subject matter jurisdiction over a case, they lack the
power to adjudicate the case.” Nat'l Football League Players Ass'n, 874 F.3d
at 225. “[T]he jurisdiction of the court depends upon the state of things at
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the time of the action brought.” Id. (quoting Grupo Dataflux v. Atlas Glob.
Grp. L.P., 541 U.S. 567, 570 (2004)).
“[T]he citizenship of a[n] LLC is determined by the citizenship of all
of its members.” MidCap Media Finance, L.L.C. v. Pathway Data, Inc., 929
F.3d 310, 314 (5th Cir. 2019) (alterations in original) (internal quotation
marks omitted). “For individuals, citizenship has the same meaning as
domicile and requires not only residence in fact but also the purpose to make
the place of residence one’s home. Therefore, an allegation of residency
alone does not satisfy the requirement of an allegation of citizenship.” Id. at
313 (cleaned up).
However, “[a] failure to allege facts establishing jurisdiction need not
prove fatal to a complaint.” Whitmire v. Victus Ltd., 212 F.3d 885, 887 (5th
Cir. 2000) (alteration in original) (internal quotation marks omitted). Under
28 U.S.C. § 1653, “[d]efective allegations of jurisdiction may be amended,
upon terms, in the trial or appellate courts.” We “ha[ve] held that this
section should be construed liberally.” Toms v. Country Quality Meats, Inc.,
610 F.2d 313, 316 (5th Cir. 1980). If “jurisdiction is not clear from the record,
but there is some reason to believe that jurisdiction exists, the Court may
remand the case to the district court for amendment of the allegations[.]”
MidCap Media Finance, L.L.C., 929 F.3d at 315 (quoting Molett v. Penrod
Drilling Co., 872 F.2d 1211, 1228 (5th Cir. 1989)).
III.
Accordant’s initial applications were clearly deficient in terms of
alleging complete diversity. Rather than list the citizenship of each LLC’s
members, Accordant listed the state of organization and principal place of
business of each LLC. This mistake—pleading the citizenship of an LLC as
if it were a corporation—is basic. Id. at 314. Yet it was not noticed or
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addressed by either of the parties in the district court. Accordant and Sayers
disagree as to whether and how this mistake can be fixed.
Sayers proposes a bright-line temporal rule: when considering
whether to allow amendment under § 1653, an appellate court can only look
at evidence entered into the record prior to judgment, and must ignore
evidence entered into the record post-judgment. Sayers argues that none of
Accordant’s allegations, nor evidence in the record prior to entry of
judgment, establishes that the parties are diverse. Accordant’s argument is
that the parties are in fact diverse, that Sayers’s contention that our review
must be limited to evidence in the record prior to entry of judgment is wrong,
and that evidence in the record and judicially noticeable documents support
the existence of diversity. Accordant asks this court to either grant leave to
amend to cure the deficient jurisdictional allegations, or, in the alternative, to
remand on the question of subject matter jurisdiction if we are not convinced
that it in fact exists.
Sayers relies on our decision in Howery for the proposition that we
cannot allow amendment under § 1653 unless there is evidence in the record
from prior to the entry of judgment that establishes complete diversity, and
therefore, that we cannot consider post-judgment record evidence cited by
Accordant. Sayers claims the “Howery rule” was re-affirmed by this court as
recently as last year in MidCap Media Finance. But we think Sayers makes
too much of language in Howery that refers to the need for facts establishing
jurisdiction to be alleged “prior to the entry of judgment in this case.” Howery,
243 F.3d at 916 (emphasis added). Howery concerned an appeal from a
judgment following a jury trial where the question of diversity jurisdiction
was raised for the very first time at oral argument before this court. Id. at 915.
The Howery court did not allow amendment under § 1653 because the party
asserting diversity jurisdiction could not point to evidence of diversity in the
record. Id. at 920–21. The court in Howery did not face the situation before
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us—a consolidated appeal from both a final judgment confirming an
arbitration award and from denial of a post-judgment motion where there is
jurisdictional evidence in the consolidated record.
Further, we find nothing in MidCap that acknowledges or establishes
the kind of bright-line temporal rule urged by Sayers that would limit our
review of the record on appeal. Rather, MidCap confirms that while our court
does not receive new jurisdictional evidence on appeal, as nothing in § 1653
permits us to receive new evidence, we nonetheless can take judicial notice
of jurisdictional facts or can exercise discretion to remand to the district court
for amendment and to supplement the record if necessary. See MidCap Media
Finance, L.L.C., 929 F.3d at 314–315. In sum, we see no reason to limit our
review in this case to only a portion of the record.
Therefore, we next turn to a review of the entire consolidated record
on appeal to ascertain whether the parties are in fact diverse. Considering
the evidence in the record on appeal, like in MidCap, we find that
“jurisdiction is not clear from the record, but there is some reason to believe
that jurisdiction exists.” Id. at 315. Therefore, we exercise our discretion
under § 1653 and “remand the case to the district court for amendment of
the allegations and for the record to be supplemented,” if necessary. Id. at
316 (quoting Molett, 872 F.2d at 1228).
IV.
For the reasons explained above, we REMAND for further
proceedings. 1 If either party seeks appellate review following remand, the
appeal will be assigned to this panel.
1
Having remanded, we deny as moot the motion pending with this court. The
cross-appeal is DISMISSED as moot.
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