Lessons in Diversity Jurisdiction from the First Circuit

By: Tommy Tobin*

The importance of subject-matter jurisdiction is axiomatic in federal courts. Parties must either get to federal court via a federal question or on the basis of diversity of citizenship. Given the centrality of subject-matter jurisdiction, Federal Rule of Civil Procedure 12(h)(3) mandates that cases that lack subject-matter jurisdiction must be dismissed. Even when issues of subject-matter jurisdiction are thought to be settled, new concerns can be raised at any time and force the court to reverse itself. Such was the case in an April 27, 2017 case from the First Circuit.

Rule 12(h)(3) enables litigants to raise challenges to the court’s subject-matter jurisdiction at any time. As the First Circuit recently found in Hearts with Haiti, Inc. v. Kendrick, “any time” can even mean after the trial and during the pendency of an appeal. The case’s subject-matter jurisdiction was predicated on the diversity of citizenship, as it raised state tort law issues, rather than a federal question.

In the underlying action, the founder of an orphanage in Haiti brought suit against Paul Kendrick for defamation claiming that Kendrick had falsely accused him of sexually abusing the boys in the orphanage. Kendrick further accused Hearts with Haiti—a non-profit charity raising funds for the orphanage—of enabling the abuse.

At trial, a jury awarded $14.5 million in damages to the orphanage’s founder, Michael Geilenfeld, and the fundraising charity. Kendrick appealed, and during the appeals process his lawyer discovered a colorable argument that the court lacked subject-matter jurisdiction over the dispute. Kendrick presented his plausible theory in his appeal, and the First Circuit remanded the case back to the district court to consider.

The district court dismissed the case, finding that it lacked subject-matter jurisdiction based on “an arcane exception” to the rules governing diversity jurisdiction. This time, it was the charity and Geilenfeld’s turn to appeal.

In a unanimous opinion authored by Retired Supreme Court Justice David Souter, the First Circuit affirmed the dismissal of the case. Under diversity jurisdiction, each plaintiff must be a citizen of a different state from that of the defendants. As Justice Souter explained, “citizen” of a state for subject-matter jurisdiction purposes means both a citizen of the United States as well as a domicile within a state.

Geilenfeld operated the orphanage in Haiti. In pre-trial proceedings, he had regarded himself as a “permanent resident” of Haiti, even though he was an American citizen. Even though he was born in Iowa, raised there, and occasionally visited the state, such facts were “inconsequential” to Justice Souter. Geilenfeld was not domiciled in a state: he was an American citizen without a state.

Without a state domicile, Geilenfeld could not be a “citizen” of diverse states under relevant diversity jurisdiction requirements, and accordingly the case must be dismissed under Rule 12(h)(3).

The plaintiff’s attempted to salvage the jury damage award by arguing that Geilenfeld could be severed from the case, leaving the US-based charity in the case as a diverse plaintiff. This was unsuccessful. Justice Souter found that doing so after trial would unfairly prejudice the defendant, especially as Geilenfeld played a major testimonial role at trial.

Hearts with Haiti illustrates the critical importance of subject-matter jurisdiction in federal court. Put simply, if courts lack subject-matter jurisdiction, they cannot exercise their authority over the parties before them. After years of litigation and a considerable jury verdict, the case boiled down to a simple question that students of Civil Procedure know all too well: are the plaintiffs and the defendants from different states in this diversity jurisdiction case? The answer here was no, as the expatriate orphanage-founder Geilenfeld was domiciled abroad, becoming a citizen without a state.

*Tommy Tobin is a graduate of Harvard Law School and the Harvard Kennedy School. Tommy has served as a Teaching Fellow in the Harvard Economics Department and Instructor of Law at UC Berkeley’s Goldman School of Public Policy. His writing has appeared in scholarly journals and major newspapers, such as the Baltimore Sun, Charlotte Observer, and San Francisco Chronicle.