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Groh v. Brooks


decided: January 14, 1970.


Maris, Seitz and Stahl, Circuit Judges.

Author: Stahl


STAHL, Circuit Judge.

This is an appeal from an order dismissing a survival and wrongful death diversity action on the ground that diversity had been "manufactured" contrary to the rule of McSparran v. Weist, 402 F.2d 867 (3d Cir. 1968), cert. denied sub nom. Fritzinger v. Weist, 395 U.S. 903, 89 S. Ct. 1739, 23 L. Ed. 2d 217 (1969).*fn1

Plaintiff-appellant, a resident of Ohio, is the administrator of the estate of his grandnephew who was a citizen of Pennsylvania. Defendant-appellee Brooks is a citizen of Pennsylvania, and defendant-appellee Pennsylvania Electric Company is a Pennsylvania corporation with its principal place of business in the state.

The decedent, at the age of 19, was killed in Somerset County, Pennsylvania, on June 1, 1966. His death resulted from an electrical contact between a high voltage line of appellee Pennsylvania Electric Company and a crane of appellee Brooks. Prior to his death, decedent resided with his parents who at all times pertinent have been residents of Fayette County, Pennsylvania.*fn2

This suit was filed on January 17, 1967, in the United States District Court for the Western District of Pennsylvania.*fn3 On October 2, 1968 while the instant case was pending trial, we decided in McSparran v. Weist, supra, that 28 U.S.C. ยง 1359*fn4 bars federal court jurisdiction in a suit by a personal representative where the sole purpose of the appointment of the representative was to create diversity. However, in the interest of fairness to litigants whose cases were then pending in the district courts of this circuit, we limited retroactive application of our decision. Whether it was proper to give the McSparran rule retrospective application where the statute of limitations had run, or had nearly run, at the time the order dismissing the suit was issued is the question presented in this appeal.

On February 28, 1969, after all pretrial steps save the pretrial hearing had been completed, appellees moved to dismiss the action alleging that diversity had been manufactured by the appointment of a citizen of Ohio as administrator and that the court was therefore without subject matter jurisdiction under McSparran. In their motion to dismiss, appellees offered to waive the defense of the statute of limitations in the state court as to both the wrongful death and survival actions for a period of six months following a dismissal order.

Neither the court nor the parties suggested or requested a hearing or the filing of affidavits on the issue of manufactured diversity.*fn5 The court asked for the submission of briefs. Aside from mentioning the relationship of the administrator to the decedent, the appellant's lower court brief, which we have examined, did not discuss to any extent the question of alleged manufactured diversity. Thus, while not admitting that diversity had been manufactured, appellant submitted no affidavit or any other factual evidence in support of his claim of federal jurisdiction.*fn6

On March 27, 1969, after consideration of the briefs submitted by the parties, the district court ordered the case dismissed stating that,

In accordance with the doctrine of McSparran v. Weist, * * * for lack of bona fide federal jurisdiction, * * * the Court [was] of [the] opinion that [the] motion should be granted. * * * Appendix (App.) 20a.

No express finding of fact with regard to the artificial creation of diversity jurisdiction was made by the court.

The court conditioned its order upon the agreement of the appellees to waive the defense of the statute of limitations in the state court and to give full effect in the state court to the pretrial discovery and other preliminary steps already taken in the federal court. Further, the court provided that if appellees failed to comply with these conditions within 30 days, the dismissal order would become void and the case would be reinstated on the federal docket.*fn7

Appellant relies on our statement in McSparran that the rule against manufactured diversity is to be applied retroactively "only where the court finds that in the circumstances of the particular case there is ample time and opportunity for the plaintiff to institute a new action in the state court * * *." 402 F.2d at 877.

The import of this language, appellant maintains, is that a defendant necessarily loses the right to have the case dismissed under McSparran when the statute of limitations has run on the plaintiff's state cause of action. At that point, appellant argues, the district court's jurisdiction is "vested" for the purposes of McSparran, and cannot be "divested" by a defendant's promise to waive the statute of limitations.*fn8 Here, since the state limitation had run on the wrongful death action at the time of the lower court's order, appellant argues that his claim could not properly be dismissed by the district court. And, since the court's order of dismissal was entered a little more than a month before the statute of limitations expired on the survival claim,*fn9 it is contended that this, too, should not have been dismissed because appellant, as a citizen of Ohio, may not have had ample time to institute a new state court action.

Appellees argue that the conditions for retroactive application of McSparran have been met by their offer to waive the statute of limitations and by the district court's order requiring that full recognition be given to the federal discovery procedures already effected if the case is tried in the state court.

Retroactive application of the McSparran rule is permitted in a manufactured diversity case if the court finds that,

(1) the plaintiff has "ample time and opportunity" to bring an action in the state court, and

(2) dismissal would not impose an "unreasonable burden" on either party or on the administration of justice. Law v. Converse, supra ; McSparran v. Weist, 402 F.2d at 877.

We are of the opinion that the district court's order in the instant case complies with the spirit of the requirements laid down in McSparran for retroactive application of the rule against manufactured diversity. In limiting retroactivity, we wished to make certain that we would not unfairly deny a party his day in court.*fn10

The provision in the district court's order that appellees must waive the defense of the statute of limitations allows appellant ample opportunity to institute an action in the state court. And the condition that full effect be given to federal pretrial procedures already accomplished insures that appellant will not be unreasonably burdened by duplication of effort and expense. In both McSparran and its companion case, Esposito v. Emery, 402 F.2d 878 (3d Cir. 1968), we stated "our unwillingness to permit the new rule to be applied retrospectively in circumstances which would make it seriously unjust or inequitable." Law v. Converse, 419 F.2d at 40.*fn11

We find no such injustice or inequity in the district court's disposition of the instant case.*fn12 The lower court's action is an innovative application of McSparran comporting with the spirit and purpose of that decision.

The district court's order in this case appears to be deficient in one respect, however. The order grants a dismissal provided the appellees comply with the conditions above mentioned within 30 days.*fn13 By necessary implication, the appellant must actually bring his action in the state court within that period.*fn14 Until the suit is instituted in the state court, appellees cannot comply with the conditions of the order. And if the appellant should choose to wait until the very end of the 30-day period to commence his action, defendants may not then have sufficient time to comply with the requirements of the order. We are, therefore, of the opinion that the order should be reformed to provide for two separate time periods: a reasonable period during which appellant must file a complaint in the state court in order to secure the benefit of appellees' waiver of the statute of limitations, and a further definite period within which appellees must comply with the conditions of the order so as to insure dismissal of the federal court action.*fn15

While we approve the decision of the district court, we will remand the case to permit reformation of the order in accordance with this opinion and to fix another period of compliance from the date of the new order.

There remains a further problem which we deem appropriate to discuss at this time. Since appellant's position on appeal does not raise the issue of the adequacy of the district court's determination that there was manufactured diversity in this case,*fn16 and since the record reveals virtually nothing in support of appellant's claim of federal jurisdiction except that the administrator selected was the decedent's granduncle and was of diverse citizenship from the appellees, we do not question the district court's holding that diversity was manufactured.*fn17 Nevertheless, we believe it proper to indicate our view that it is preferable for such a finding to be clearly expressed by the district court.

If a plaintiff whose assertion of federal jurisdiction is challenged by a motion to dismiss fails to bring forth any factual material to support his claim of jurisdiction, then dismissal may properly be granted against him.*fn18 However, it should clearly appear from the record that plaintiff has had an opportunity to present facts, either by way of affidavit or in an evidentiary hearing, in support of his position that diversity was not manufactured.*fn19 If the plaintiff does present evidence or affidavits supporting the selection of an out-of-state representative, and the district court nevertheless finds that diversity jurisdiction was artificially created, then such finding*fn20 and the reasons underlying it should be clearly set forth in the record so as to inform the parties and facilitate review.

In determining whether or not diversity has been artificially created, the district court may consider, inter alia, such factors as the identity of the representative and his relationship to the party represented; the scope of the representative's powers and duties; any special capacity or experience which the representative may possess with respect to the purpose of his appointment; whether there exists a non-diverse party, such as a parent in a suit for injuries to a child, who might more normally be expected to represent the interests involved; whether those seeking the appointment of the representative express any particular reasons for selecting an out-of-state person; and whether, apart from the appointment of an out-of-state representative, the suit is one wholly local in nature.

The order of the district court will be vacated and the case remanded for entry of an order in accordance with this opinion.

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