Wednesday, June 13, 2012

Harris v. Rand (9th Cir. - June 13, 2012)

Were I grading these performances in my Civil Procedure classes, I'd give just about everyone except the Ninth Circuit a "D".

Plaintiffs file a lawsuit in which they initially allege that federal diversity jurisdiction exists under Section 1332(a)(2), which provides jurisdiction over actions by U.S. citizens against citizens of a foreign state.  Strike one.  Defendants include a U.S. citizen, so the correct section is (a)(3).

Plaintiffs then amend the complaint to assert jurisdiction under the correct section, but the district court thinks (probably correctly) that the jurisdictional allegations are "patently insufficient" because they don't identify where the defendants are citizens.  So it (properly) issues an OSC that essentially orders plaintiffs to alleged where the defendants are located, and the order cites Hertz -- the recent opinion that held that a corporation is deemed a citizen of its state of incorporation and the state of its "nerve center" (generally, the state of in which its headquarters is located) to help out.  That order seems reasonable and fairly easily followed.

So a couple of weeks later plaintiffs respond to the OSC and identify where the defendants are indeed located -- Louisiana and Hungary -- and further states that diversity thus exists because "while plaintiffs come from several states and Australia, none are residents or citizens of Louisiana."  Strike two.  You can't just say you're "not" from a particular place to properly allege diversity.  You actually have to allege where you are a citizen.  That's crystal clear.  So the allegations are still deficient, if only for this reason (and potentially others).

But the plaintiffs at least conclude their response to the OSC by saying that if what they've said is still deficient -- which it is -- they should be given an opportunity to amend their complaint to rectify the problem.  Fair enough.  The district court responds by granting leave to amend, and the plaintiffs do so, and allege therein where each of the defendants resides and has its "nerve center" (and is thus a citizen).  Good.

Then the district court whiffs for strike three, and dismisses the complaint for lack of subject matter jurisdiction, holding that the plaintiffs failed to prove where the defendants had their nerve center, relying on the heightened pleading standard of Twombly and Iqbal.

The Ninth Circuit properly reverses.  You can make the plaintiffs properly plead their jurisdictional allegations.  You can even require the defendants to prove these allegations as a factual matter.  But the rules don't require the plaintiffs to provide facts that support their jurisdictional allegations.  Even a cursory view of the forms attached to the Federal Rules of Civil Procedure makes that clear.

There might -- and I'll emphasize, might -- perhaps be situations in which the jurisdictional allegations are so implausible that Twombly and Iqbal might potentially come into play.  Perhaps if you allege, for example, that President Obama is a citizen of Alabama.  Or Kenya.  Maybe then we can say that your allegations are so implausible that they don't survive a motion to dismiss.  But that's nowhere near the case here.

So the Ninth Circuit gets a passing grade, but neither the district judge nor the plaintiffs' lawyer come out smelling like a rose.