Caterpillar, Inc. v. Lewis
Encyclopedia
Caterpillar, Inc. v. Lewis, , held that federal jurisdiction predicated on diversity of citizenship
can be sustained even if there did not exist complete diversity at the time of removal
to federal court
, so long as complete diversity exists at the time the district court
enters judgment.
, sustained injuries while operating a bulldozer
. He filed suit
in a Kentucky state court, alleging state-law product liability
claims of defective manufacture, negligent manufacture, failure to warn, and breach of warranty. Lewis named as defendants Caterpillar
and Whayne Supply Company. Caterpillar is a Delaware corporation
with its principal place of business in Illinois
. Whayne Supply Company, the company that sold the bulldozer, was a Kentucky corporation with its principal place of business in Kentucky. Later, the insurance company for Lewis's employer, Liberty Mutual Insurance Group, intervened as a plaintiff
and made its own claims against Caterpillar and Whayne Supply. Liberty Mutual is a Massachusetts
corporation with its principal place of business in Massachusetts.
Lewis settled his claim against Whayne Supply, which led Caterpillar to seek to remove the case to federal court. Lewis opposed this effort, arguing that complete diversity did not exist between all plaintiffs and all defendants because Liberty Mutual had not settled its claims against Whayne Supply. The district court ignored Lewis's argument, and allowed the removal because it believed that the fact that Lewis had settled his claim with Whayne Supply was sufficient to create the diversity necessary for federal jurisdiction.
The case proceeded through the discovery phase, during which Liberty Mutual settled with Whayne Supply. This settlement left Caterpillar as the only defendant in the case, such that all plaintiffs were citizens of different states than all defendants. After a six-day jury trial
, the district court entered judgment for Caterpillar. Lewis appealed, and the Sixth Circuit vacated the judgment. It believed that diversity did not exist because, at the time of removal, a resident of Kentucky (Lewis) was a plaintiff and another resident of Kentucky (Whayne Supply) was still a defendant, although there was no claim between these two. For this reason, the Sixth Circuit reasoned, the district court lacked jurisdiction to hear the case. Caterpillar asked the Supreme Court to review the case, stressing that at the time judgment was entered, the jurisdictional defect that had existed at the beginning had been cured. The Supreme Court agreed to hear the case.
allows federal courts to hear disputes between citizens of different states, but the Court has long interpreted the enabling statute whereby Congress exercised the right to confer this power as requiring that there be "complete diversity" of citizenship before federal courts may hear cases predicated on diversity jurisdiction
. See 28 U.S.C. § 1332, Exxon-Mobil v. Allapattah Servs., and Strawbridge v. Curtiss
. "Complete diversity" means that all plaintiffs must be citizens of different states than all defendants; in the case of corporate parties, their states of incorporation and places of business are both relevant. Under federal statute, diversity must exist at the time of removal and thereafter. In this case, both sides agreed that the district court did not correctly determine that the diversity requirement was satisfied at the time of removal and that the Sixth Circuit correctly identified this defect. Both sides also agreed that complete diversity did exist at the time of judgment. "Does the District Court's initial misjudgment still burden and run with the case, or is it overcome by the eventual dismissal of the nondiverse defendant?"
The Court ruled that because subject-matter jurisdiction
existed at the time of judgment, the jurisdictional defect had been cured, and the Sixth Circuit erred in ruling otherwise. But Lewis had preserved his objection to federal jurisdiction by filing a motion to remand the case to state court and then by raising the issue on appeal. Shouldn't the plaintiff be rewarded for his diligent effort to preserve his choice to try the case in state court? Lewis argued that to allow Caterpillar to benefit from the district court's mistake would encourage defendants to seek removal more often in the hopes that the district court will make a mistake they might exploit. "These arguments are hardly meritless but they run up against an overriding consideration. Once a diversity case has been tried in federal court, with rules of decision supplied by state law under the regime of Erie Railroad Co. v. Tompkins
, , considerations of finality, efficiency, and economy become overwhelming." If the Court were to require that a case that had proceeded through trial to judgment had to be dismissed afterward for lack of jurisdiction, there would be a tremendous waste of judicial resources. In this case, complete diversity, and hence federal jurisdiction, existed at the time of judgment. "To wipe out the adjudication postjudgment, and return to state court a case now satisfying all federal jurisdictional requirements, would impose an exorbitant cost on our dual court system, a cost incompatible with the fair and unprotracted administration of justice." Furthermore, the Court did not foresee that premature removal requests would prove to be the temptation Lewis envisioned. Instead, the Court trusted district courts to apply the removal rules properly, and observed that the fear of irritating district judges would deter defendants from filing frivolous removal requests.
Diversity jurisdiction
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...
can be sustained even if there did not exist complete diversity at the time of removal
Removal jurisdiction
In the United States, removal jurisdiction refers to the right of a defendant to move a lawsuit filed in state court to the federal district court for the federal judicial district in which the state court sits. This is a general exception to the usual American rule giving the plaintiff the right...
to federal court
United States federal courts
The United States federal courts make up the judiciary branch of federal government of the United States organized under the United States Constitution and laws of the federal government.-Categories:...
, so long as complete diversity exists at the time the district court
United States district court
The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each United States...
enters judgment.
Facts
James David Lewis, a resident of KentuckyKentucky
The Commonwealth of Kentucky is a state located in the East Central United States of America. As classified by the United States Census Bureau, Kentucky is a Southern state, more specifically in the East South Central region. Kentucky is one of four U.S. states constituted as a commonwealth...
, sustained injuries while operating a bulldozer
Bulldozer
A bulldozer is a crawler equipped with a substantial metal plate used to push large quantities of soil, sand, rubble, etc., during construction work and typically equipped at the rear with a claw-like device to loosen densely-compacted materials.Bulldozers can be found on a wide range of sites,...
. He filed suit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
in a Kentucky state court, alleging state-law product liability
Product liability
Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause...
claims of defective manufacture, negligent manufacture, failure to warn, and breach of warranty. Lewis named as defendants Caterpillar
Caterpillar Inc.
Caterpillar Inc. , also known as "CAT", designs, manufactures, markets and sells machinery and engines and sells financial products and insurance to customers via a worldwide dealer network. Caterpillar is the world's largest manufacturer of construction and mining equipment, diesel and natural gas...
and Whayne Supply Company. Caterpillar is a Delaware corporation
Delaware corporation
The Delaware General Corporation Law is the statute governing corporate law in the state of Delaware. Delaware is well known as a corporate haven. Over 50% of U.S...
with its principal place of business in Illinois
Illinois
Illinois is the fifth-most populous state of the United States of America, and is often noted for being a microcosm of the entire country. With Chicago in the northeast, small industrial cities and great agricultural productivity in central and northern Illinois, and natural resources like coal,...
. Whayne Supply Company, the company that sold the bulldozer, was a Kentucky corporation with its principal place of business in Kentucky. Later, the insurance company for Lewis's employer, Liberty Mutual Insurance Group, intervened as a plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
and made its own claims against Caterpillar and Whayne Supply. Liberty Mutual is a Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
corporation with its principal place of business in Massachusetts.
Lewis settled his claim against Whayne Supply, which led Caterpillar to seek to remove the case to federal court. Lewis opposed this effort, arguing that complete diversity did not exist between all plaintiffs and all defendants because Liberty Mutual had not settled its claims against Whayne Supply. The district court ignored Lewis's argument, and allowed the removal because it believed that the fact that Lewis had settled his claim with Whayne Supply was sufficient to create the diversity necessary for federal jurisdiction.
The case proceeded through the discovery phase, during which Liberty Mutual settled with Whayne Supply. This settlement left Caterpillar as the only defendant in the case, such that all plaintiffs were citizens of different states than all defendants. After a six-day jury trial
Jury trial
A jury trial is a legal proceeding in which a jury either makes a decision or makes findings of fact which are then applied by a judge...
, the district court entered judgment for Caterpillar. Lewis appealed, and the Sixth Circuit vacated the judgment. It believed that diversity did not exist because, at the time of removal, a resident of Kentucky (Lewis) was a plaintiff and another resident of Kentucky (Whayne Supply) was still a defendant, although there was no claim between these two. For this reason, the Sixth Circuit reasoned, the district court lacked jurisdiction to hear the case. Caterpillar asked the Supreme Court to review the case, stressing that at the time judgment was entered, the jurisdictional defect that had existed at the beginning had been cured. The Supreme Court agreed to hear the case.
Decision of the court
Article IIIArticle Three of the United States Constitution
Article Three of the United States Constitution establishes the judicial branch of the federal government. The judicial branch comprises the Supreme Court of the United States and lower courts as created by Congress.-Section 1: Federal courts:...
allows federal courts to hear disputes between citizens of different states, but the Court has long interpreted the enabling statute whereby Congress exercised the right to confer this power as requiring that there be "complete diversity" of citizenship before federal courts may hear cases predicated on diversity jurisdiction
Diversity jurisdiction
In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...
. See 28 U.S.C. § 1332, Exxon-Mobil v. Allapattah Servs., and Strawbridge v. Curtiss
Strawbridge v. Curtiss
Strawbridge v. Curtiss, 7 U.S. 267 , was a case in which the Supreme Court of the United States first addressed the question of complete diversity. In a 158 word opinion the court held that for federal diversity jurisdiction under section 11 of the Judiciary Act of 1789, every party on one side...
. "Complete diversity" means that all plaintiffs must be citizens of different states than all defendants; in the case of corporate parties, their states of incorporation and places of business are both relevant. Under federal statute, diversity must exist at the time of removal and thereafter. In this case, both sides agreed that the district court did not correctly determine that the diversity requirement was satisfied at the time of removal and that the Sixth Circuit correctly identified this defect. Both sides also agreed that complete diversity did exist at the time of judgment. "Does the District Court's initial misjudgment still burden and run with the case, or is it overcome by the eventual dismissal of the nondiverse defendant?"
The Court ruled that because subject-matter jurisdiction
Subject-matter jurisdiction
Subject-matter jurisdiction is the authority of a court to hear cases of a particular type or cases relating to a specific subject matter. For instance, bankruptcy court only has the authority to hear bankruptcy cases....
existed at the time of judgment, the jurisdictional defect had been cured, and the Sixth Circuit erred in ruling otherwise. But Lewis had preserved his objection to federal jurisdiction by filing a motion to remand the case to state court and then by raising the issue on appeal. Shouldn't the plaintiff be rewarded for his diligent effort to preserve his choice to try the case in state court? Lewis argued that to allow Caterpillar to benefit from the district court's mistake would encourage defendants to seek removal more often in the hopes that the district court will make a mistake they might exploit. "These arguments are hardly meritless but they run up against an overriding consideration. Once a diversity case has been tried in federal court, with rules of decision supplied by state law under the regime of Erie Railroad Co. v. Tompkins
Erie Railroad Co. v. Tompkins
Erie Railroad Co. v. Tompkins, 304 U.S. 64 , was a decision by the Supreme Court of the United States in which the Court held that federal courts did not have the judicial power to create general federal common law when hearing state law claims under diversity jurisdiction...
, , considerations of finality, efficiency, and economy become overwhelming." If the Court were to require that a case that had proceeded through trial to judgment had to be dismissed afterward for lack of jurisdiction, there would be a tremendous waste of judicial resources. In this case, complete diversity, and hence federal jurisdiction, existed at the time of judgment. "To wipe out the adjudication postjudgment, and return to state court a case now satisfying all federal jurisdictional requirements, would impose an exorbitant cost on our dual court system, a cost incompatible with the fair and unprotracted administration of justice." Furthermore, the Court did not foresee that premature removal requests would prove to be the temptation Lewis envisioned. Instead, the Court trusted district courts to apply the removal rules properly, and observed that the fear of irritating district judges would deter defendants from filing frivolous removal requests.
See also
- List of United States Supreme Court cases, volume 519
- List of United States Supreme Court cases
- Lists of United States Supreme Court cases by volume