From Casetext: Smarter Legal Research

Freeport-McMoran Inc. v. K N Energy, Inc.

U.S.
Feb 19, 1991
498 U.S. 426 (1991)

Summary

holding that addition of non-diverse party under Fed. R. Civ. P. 25(c) did not deprive federal court of jurisdiction

Summary of this case from Potvin v. Speedway LLC

Opinion

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

No. 90-655

Decided February 19, 1991

In a diversity action filed in the Federal District Court, petitioners McMoRan Oil and Gas Company (McMoRan) and Freeport-McMoRan Inc., both Delaware corporations, alleged that respondent K N Energy, Inc., a Kansas corporation with its principal place of business in Colorado, had failed to pay the parties' contract price for natural gas. After suit was filed, McMoRan transferred its interest in the contract to FMP Operating Company (FMPO), a limited partnership. whose partners included citizens of Kansas and Colorado. The District Court permitted petitioners to add FMPO as a plaintiff and ruled in petitioners' favor. The Court of Appeals reversed and directed that the suit be dismissed for want of jurisdiction, holding that, under Carden v. Arkoma Associates, 494 U.S. 185, the addition of FMPO destroyed diversity jurisdiction.

Held: Diversity jurisdiction, once established, is not defeated by the addition of a nondiverse party to the action. Carden considered whether limited partners' citizenship must be taken into account in determining whether diversity jurisdiction exists in an action brought by a limited partnership, but suggested nothing to change the well-established rule that, if jurisdiction exists at the time an action is commenced, it may not be divested by subsequent events, see, e.g., Mollan v. Torrance, 9 Wheat. 537. The opinions of both the District Court and the Court of Appeals establish that the parties were diverse at the time the action arose and at the time the proceedings commenced. This Court's decision in Owen Equipment Erection Co. v. Kroger, 437 U.S. 365 — that a District Court's ancillary jurisdiction did not extend to the entertaining of a claim by an original plaintiff in a diversity action against a nondiverse third-party defendant impleaded by the original defendant — also casts no doubt on the principle that diversity jurisdiction is to be assessed at the time a lawsuit is commenced.

Certiorari granted; 907 F.2d 1022, reversed.


Petitioners seek review of a decision of the United States Court of Appeals for the Tenth Circuit, holding that a Federal District Court lacked jurisdiction to entertain their diversity action because they added a nondiverse party after filing their complaint. We grant certiorari and reverse the decision of the Court of Appeals.

Petitioners, McMoRan Oil and Gas Company (McMoRan) and its parent company, FreePort-McMoRan, Inc. (Freeport), sued respondent K N Energy, Inc., (K N) for breach of contract in the United States District Court for the District of Colorado. Petitioners claimed that respondent had failed to pay the price for natural gas agreed upon in their contract, and sought both declaratory relief to establish the contract price and damages for past underpayments. Petitioners based federal jurisdiction upon diversity of citizenship. At all times up to and including the filing of the complaint, Freeport and McMoRan were Delaware Corporations with their principal places of business in Louisiana. K N was and is a Kansas corporation with its principal place of business in Colorado.

After suit was filed, petitioner McMoRan transferred its interest in the contract with respondent to a limited partnership, FMP Operating Company (FMPO), for business reasons unrelated to the instant litigation. FMPO's limited partners included citizens of Kansas and Colorado. Accordingly, before trial commenced, petitioners sought leave to amend their complaint to substitute FMPO as a plaintiff under Rule 25(c) of the Federal Rules of Civil Procedure. The District Court permitted petitioners to add FMPO as a party but did not remove McMoRan as a party. After a bench trial, the District Court held in favor of petitioners, and respondent appealed. The Court of Appeals reversed, and directed that the suit be dismissed for want of jurisdiction. The court held that "although complete diversity was present when the complaint was filed," the addition of FMPO as a plaintiff destroyed jurisdiction. 907 F.2d 1022, 1024 (1990). The court based its holding upon our decision in Carden v. Arkoma Associates, 494 U.S. 185 (1990). The court explained that " Carden establishes that [FMPO's] addition as the real party in interest destroys the district court's diversity jurisdiction." 907 F.2d, at 1025.

Our decision last term in Carden considered whether the citizenship of limited partners must be taken into account in determining whether diversity jurisdiction exists in an action brought by a limited partnership. The original plaintiff in Carden was the limited partnership; diversity jurisdiction, then, depended upon whether complete diversity of citizenship existed at the time the action was commenced. But nothing in Carden suggests any change in the well established rule that diversity of citizenship is assessed at the time the action is filed. We have consistently held that if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events. Mollan v. Torrance, 9 Wheat. 537; Clarke v. Mathewson, 12 Pet. 164, 171 (1838); Wichita Railroad Light Co. v. Public Util. Comm'n of Kansas, 260 U.S. 48, 54 (1922) ("Jurisdiction once acquired . . . is not divested by a subsequent change in the citizenship of the parties. Much less is such jurisdiction defeated by the intervention, by leave of the court, of a party whose presence is not essential to a decision of the controversy between the original parties" (citations omitted)).

The opinions of the District Court and the Court of Appeals establish that the plaintiffs and defendants were diverse at the time the breach-of-contract action arose and at the time that federal proceedings commenced. The opinions also confirm that FMPO was not an "indispensable" party at the time the complaint was filed; in fact, it had no interest whatsoever in the outcome of the litigation until sometime after suit was commenced. Our cases require no more than this. Diversity jurisdiction, once established, is not defeated by the addition of a nondiverse party to the action. A contrary rule could well have the effect of deterring normal business transactions during the pendency of what might be lengthy litigation. Such a rule is not in any way required to accomplish the purposes of diversity jurisdiction.

Respondent relies on our decision in Owen Equipment Erection Co. v. Kroger, 437 U.S. 365 (1978), to support the result reached by the Court of Appeals. There we held that the ancillary jurisdiction of a District Court did not extend to the entertaining of a claim by an original plaintiff in a diversity action against a nondiverse third-party defendant impleaded by the original defendant pursuant to Federal Rules of Civil Procedure 14(a). Owen casts no doubt on the principle established by the cases previously cited that diversity jurisdiction is to be assessed at the time the lawsuit is commenced.

The motion of American Mining Congress for leave to file a brief as amicus curiae is granted. The petition for a writ of certiorari is granted, and the judgment of the Court of Appeals is

Reversed.

JUSTICE SOUTER took no part in the consideration or decision of this motion and case.


Summaries of

Freeport-McMoran Inc. v. K N Energy, Inc.

U.S.
Feb 19, 1991
498 U.S. 426 (1991)

holding that addition of non-diverse party under Fed. R. Civ. P. 25(c) did not deprive federal court of jurisdiction

Summary of this case from Potvin v. Speedway LLC

holding that, because there was complete diversity when the action commenced, diversity jurisdiction was not defeated by the addition of a nondiverse plaintiff, which was not indispensable

Summary of this case from Casas Office Machines, Inc. v. Mita Copystar America, Inc.

holding that diversity jurisdiction survived the addition of a nondiverse plaintiff when complete diversity existed at the time the federal action arose

Summary of this case from Odyssey Reinsurance Co. v. Nagby

holding addition of limited partnership to which plaintiff's interest in contract had been transferred did not destroy diversity jurisdiction in breach of contract action where added party was not an "indispensable" party

Summary of this case from Regions Bank v. PJFSF&T Prop. Acquisitions, Inc.

holding that the addition of a non-diverse party that "had no interest whatsoever in the outcome of the litigation until sometime after suit was commenced" did not defeat jurisdiction based on diversity

Summary of this case from Dorchester Fin. Holdings Corp. v. Banco BRJ, S.A.

holding that diversity jurisdiction is assessed as of the time at which the suit is filed

Summary of this case from Aguayo v. Amco Ins. Co.

holding that "[d]iversity jurisdiction, once established, is not defeated by the addition of a nondiverse party to the action"

Summary of this case from Kidd v. Consol. Rail Corp. (In re Paulsboro Derailment Cases)

holding that diversity jurisdiction is assessed as of the time at which the suit is filed

Summary of this case from Ullman v. Safeway Ins. Co.

holding that addition of a non-diverse party after the case was filed in federal court did not destroy diversity

Summary of this case from Lara v. Rupard

holding that diversity jurisdiction is assessed as of the time at which the suit is filed

Summary of this case from Carrillo v. MCS Indus., Inc.

holding that diversity of citizenship is assessed at time action is filed and, once established, is not defeated by addition of nondiverse party to action

Summary of this case from Workers Comp. Bd. of Manitoba ex rel. Rattai v. Meyerhofer

holding that diversity jurisdiction is assessed as of the time the suit is filed

Summary of this case from McEntire v. Kmart Corp.

holding that diversity jurisdiction is assessed as of the time the suit is filed

Summary of this case from Allen v. Allstate Insurance Company

holding that substitution of non-diverse defendant under Rule 25 did not destroy diversity jurisdiction

Summary of this case from Veldekens v. GE HFS Holdings, Inc.

holding that diversity of citizenship is assesed at the time the action is filed and jurisdiction may not be divested by subsequent events

Summary of this case from Fedor v. Amica Mutual Insurance Co.

finding federal diversity jurisdiction in declaratory action concerning breach of contract

Summary of this case from Abbvie Inc. v. Medimmune Ltd.

finding a "well-established rule that diversity of citizenship is assessed at the time the action is filed"

Summary of this case from Cleek v. Ameristar Casino Kan. City, LLC

affirming "the well-established rule that diversity of citizenship is assessed at the time the action is filed"

Summary of this case from Fisher v. Asbestos Corporation Limited

involving substitution under Fed.R.Civ.P. 25(c)

Summary of this case from In re Olympic Mills Corp.

confirming the rule, established in Wichita Railroad Light Co. v. Public Utilities Commission, 260 U.S. 48, 54, 43 S.Ct. 51, 67 L.Ed. 124, that the presence of a nondiverse and not indispensable defendant intervenor does not destroy complete diversity

Summary of this case from Mattel, Inc. v. Bryant

In Freeport-McMoRan, the Court stated that " Owen casts no doubt on the principle established by the cases previously cited that diversity jurisdiction is to be assessed at the time the lawsuit is commenced."

Summary of this case from Cobb v. Delta Exports

noting that "[w]e have consistently held that if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events"

Summary of this case from Doddy v. Oxy USA, Inc.

using this reasoning to support the rule that diversity jurisdiction, once established, is not defeated by the addition of a non-diverse party

Summary of this case from New Rock Asset Partners v. Preferred Entity

In Freeport, the Court concluded that the addition of a non-diverse party to the original complaint does not destroy diversity, on the theory that, "if jurisdiction exists at the time an action is commenced, such jurisdiction may not be divested by subsequent events."

Summary of this case from Klinghoffer v. S.N.C. Achille Lauro

In Freeport, the plaintiffs sued the defendants for breach of contract in the district court in Colorado, alleging federal jurisdiction based on diversity of citizenship given that plaintiffs were Delaware corporations, and the defendant was a Kansas corporation with its principal place of business in Colorado.

Summary of this case from Khela v. Amco Ins. Co.
Case details for

Freeport-McMoran Inc. v. K N Energy, Inc.

Case Details

Full title:FREEPORT-McMORAN, INC. v . K N ENERGY, INC

Court:U.S.

Date published: Feb 19, 1991

Citations

498 U.S. 426 (1991)
111 S. Ct. 858

Citing Cases

Kerr v. Smith Petroleum Co.

Hensgens, 833 F.2d at 1179. However, in Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426, 426-28, 111…

Aion Acquisition LLC v. Dexter Axle Co.

(explaining that the time-of-filing rule avoids “shunt[ing cases] between court systems” because “litigation…