Also known as: perfect diversity · perfected diversity · perfects diversity · complete diversity · diversity jurisdiction
Written by attorneys — see sources below.
A procedural mechanism in federal diversity cases by which nondiverse parties are dismissed or realigned so that complete diversity exists among the remaining parties.
Pablo Perez and Philip Powell, citizens of different states, sued a limited partnership whose members included citizens of both states. The court dismissed the nondiverse member from the action, allowing the case to proceed with complete diversity intact among the remaining parties.
Priscilla Parks filed a diversity suit exceeding the jurisdictional amount against a diverse defendant. She later joined a nondiverse party. The court dismissed the nondiverse party before trial, allowing the case to proceed with complete diversity among the remaining parties.
Phoebe Park sued a corporation and an individual in federal court under diversity jurisdiction. After the court realigned the parties, the nondiverse defendant was dropped, establishing complete diversity for the remaining claims.
Harry Tompkins, a citizen of Pennsylvania, was injured on a dark night by a passing freight train of the Erie Railroad Company while walking along its right of way at Hughestown in that State. He claimed that the accident occurred through negligence in the operation or maintenance of the train. He also claimed that he was rightfully on the premises as a licensee because he was on a commonly used beaten footpath which ran for a short distance alongside the tracks. To enforce that claim he brought an action in the federal court for southern New York, which had jurisdiction because the company is a corporation of that State. The Erie Railroad Company denied liability, and the case was tried by a jury. The railroad insisted that its duty to Tompkins was no greater than that owed to a trespasser. It contended that under the law of Pennsylvania, as declared by its highest court, persons who use pathways along the railroad right of way are to be deemed trespassers. The railroad further contended that it is not liable for injuries to undiscovered trespassers resulting from its negligence unless the conduct is wanton or wilful. Tompkins denied that any such rule had been established by the decisions of the Pennsylvania courts. He contended that since there was no statute of the State on the subject, the railroad's duty and liability is to be determined in federal courts as a matter of general law. The trial judge refused to rule that Pennsylvania law precluded recovery. The jury brought in a verdict of $30,000, and the judgment entered thereon was affirmed by the Circuit Court of Appeals. The Erie had contended that application of the Pennsylvania rule was required by section 34 of the Federal Judiciary Act of September 24, 1789. Because of the importance of the question whether the federal court was free to disregard the alleged rule of the Pennsylvania common law, the Supreme Court granted certiorari.
View casePatrick Phan brought a contract action against two defendants in federal court. One defendant shared citizenship with Phan. The court dismissed that defendant before judgment, perfecting diversity and allowing the action to continue.
In May 1930 the Van Sweringen Corporation issued $30,000,000 in notes under an indenture naming Guaranty Trust Co. of New York as trustee with power to enforce noteholders' rights. In October 1930 Guaranty and other banks advanced large sums to companies affiliated with the Corporation and controlled by the Van Sweringens. When the Corporation could not meet its obligations, Guaranty participated in an exchange plan under which noteholders could surrender their notes for cash equal to 50 percent of face value plus twenty shares of Van Sweringen stock per $1,000 note; the offer remained open until December 15, 1931. In 1934 respondent York received $6,000 of the notes as a gift from a donor who had not accepted the exchange offer. In April 1940 three accepting noteholders filed the Hackner suit in federal court charging Guaranty with fraud and misrepresentation in connection with the exchange. York's motion to intervene was denied, and summary judgment for Guaranty was affirmed on appeal. On January 22, 1942, after her exclusion from the Hackner litigation, York filed the present class action in the United States District Court for the Southern District of New York on behalf of non-accepting noteholders. The complaint, resting exclusively on diversity of citizenship, alleged that Guaranty had breached its trust by failing to protect noteholders' interests when it assented to the exchange offer and by failing to disclose its own self-interest. The district court granted Guaranty's motion for summary judgment on the authority of the Hackner decision. The Circuit Court of Appeals reversed, holding that a federal court sitting in equity is not required to apply the New York statute of limitations that would govern an identical suit in the New York state courts. The Supreme Court granted certiorari.
View casePinnacle Holdings sued multiple parties in state court. After removal, a nondiverse defendant was dismissed. The court upheld jurisdiction because diversity had been perfected prior to trial.
Respondents brought this tort action in Alabama state court to recover damages for injuries sustained in a motorcycle accident. Petitioner removed the case to a Federal District Court having diversity jurisdiction. A jury trial resulted in a judgment of $800,000 for respondent Alan Woods and $5,000 for respondent Cara Woods. Petitioner posted bond to stay the judgment pending appeal, and the Court of Appeals affirmed without modification. 768 F.2d 1287 (CA11 1985). Respondents then moved in the Court of Appeals, pursuant to Ala. Code § 12-22-72 (1986), for imposition of that State’s mandatory affirmance penalty of 10% of the amount of judgment. Petitioner challenged the application of this statute as violative of the equal protection and due process guarantees of the Fourteenth Amendment and as “a procedural rule . . . inapplicable in federal court under the doctrine of Erie Railroad Co. v. Tompkins, 304 U. S. 64 (1938) and its progeny.” The Court of Appeals summarily granted respondents’ motion to assess the penalty and subsequently denied a petition for rehearing. The parties have stipulated that the final judgment has been paid, except for the $30,500 statutory affirmance penalty, which petitioner has withheld pending proceedings in this Court. The Supreme Court granted certiorari to consider the equal protection and due process challenges as well as the Erie claim. 475 U. S. 1080 (1986).
View casePhoenix Technologies filed suit against several defendants in federal court. One defendant shared citizenship with the plaintiff. The court dismissed the nondiverse party, thereby perfecting diversity among the remaining litigants.
Stewart Organization, Inc., an Alabama corporation, entered into a dealership agreement with Ricoh Corporation, a nationwide manufacturer whose principal place of business is in New Jersey, obligating Stewart to market Ricoh copier products. The agreement contained a forum-selection clause stating that any appropriate state or federal district court located in the Borough of Manhattan, New York City, New York, shall have exclusive jurisdiction over any case or controversy arising under or in connection with the agreement. Business relations between the parties soured, and in September 1984 Stewart filed a complaint in the United States District Court for the Northern District of Alabama alleging breach of the dealership agreement together with claims for breach of warranty, fraud, and antitrust violations. Relying on the forum-selection clause, Ricoh moved the district court to transfer the case to the Southern District of New York under 28 U.S.C. § 1404(a) or to dismiss for improper venue under 28 U.S.C. § 1406; the district court denied the motion after concluding that Alabama law governed and disfavored enforcement of such clauses, then certified its ruling for interlocutory appeal under 28 U.S.C. § 1292(b). A divided Eleventh Circuit panel reversed, holding that federal law governs venue questions in diversity actions and that the clause is enforceable; after rehearing en banc the full court adopted the panel result and reasoning, and the Supreme Court granted certiorari.
View caseThe court may dismiss the nondiverse party if that party is not indispensable, allowing the action to proceed with complete diversity among the remaining parties.
Yes, if the dismissal occurs before trial and creates complete diversity, the federal court may retain jurisdiction and enter a valid judgment.
A court cannot dismiss a party if doing so would prejudice the remaining parties or destroy an essential claim, and the dismissal must not be used to manufacture jurisdiction improperly.
…an Argument for or against Abolishing Diversity of Citizenship Jurisdiction (1932) 18 A.B.A.J. 809; Ball, Revision of Federal Diversity Jurisdiction (1933) 28 Ill. L. Rev. 356, 362-64; Fordham, Swift v. Tyson and the Construction of State Statutes (1935) 41 W. Va. L.Q. 131. : Compare Mr. Justice Miller in Gelpcke v. City of…