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Di Frischia v. New York Central Railroad Co.

United States Court of Appeals for the Third Circuit · Civil Procedure

Civil ProcedureSubject Matter JurisdictionDiversity JurisdictionPleading and Amendmentdiversity jurisdictionsubject matter jurisdictionstipulationadmission

Facts

Plaintiff, a Pennsylvania citizen, sued defendant railroad in federal court in Pennsylvania after a train-crossing accident. The complaint alleged defendant was incorporated in New York, and although defendant's answer admitted that allegation, it also asserted that defendant was also organized under Pennsylvania law and therefore challenged diversity. After plaintiff requested a preliminary hearing on jurisdiction, both parties signed a stipulation recognizing jurisdiction and venue in the Western District of Pennsylvania, and the district court entered an order that jurisdiction and venue were proper. Nearly two years later, after extensive discovery and after the statute of limitations had run, defendant again moved to dismiss for lack of jurisdiction based on the same claimed Pennsylvania incorporation.

Issue

Whether the district court erred in dismissing for lack of diversity jurisdiction after defendant had effectively withdrawn its jurisdictional defense by stipulation and admission, obtained a court ruling recognizing jurisdiction, and later sought to revive the same objection on facts already known to it.

Rule

Although subject matter jurisdiction cannot be created by consent, a defendant that has raised a diversity objection, then effectively removes that defense by stipulation or admission of the complaint's jurisdictional facts and secures a court determination that jurisdiction exists, may not later, on the same previously known facts, amend its position and reassert the same objection; permitting such a reversal under those circumstances would be an abuse of discretion.

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Nina Ortega, a citizen of Colorado, sued Iron Vale Logistics in federal court in Denver, alleging the company was incorporated only in Utah. Iron Vale's answer admitted the Utah incorporation allegation but also asserted it was incorporated in Colorado, defeating diversity; after Nina requested a preliminary hearing on jurisdiction, both sides signed a stipulation recognizing federal jurisdiction, and the court entered an order finding jurisdiction proper.

Eighteen months later, after discovery closes and with no new jurisdictional facts, Iron Vale moves to dismiss for lack of diversity based on its alleged Colorado incorporation. How should the court rule?

Explanation. The majority treated a post-answer stipulation recognizing jurisdiction, entered after the plaintiff sought a jurisdictional hearing, as the practical equivalent of amending the answer to strike the lack-of-diversity defense and admit the complaint's jurisdictional allegations. Once the court then determined jurisdiction existed on those undisputed facts, the same issue should not be relitigated absent new evidence. Although subject matter jurisdiction cannot be created by consent, the defendant may not reverse course and reassert the same objection based on facts it already knew. (Derived from Di Frischia v. New York Central Railroad Co. (n.d.).)