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MIDCAP Media Finance, L.L.C. v. Pathway Data, Inc.

United States Court of Appeals, Fifth Circuit

July 9, 2019

MIDCAP MEDIA FINANCE, L.L.C., Plaintiff-Appellee Cross-Appellant,
v.
PATHWAY DATA, INCORPORATED, doing business as Consumer Direct, Defendant-Appellant Cross-Appellee.

          Appeals from the United States District Court for the Western District of Texas

          Before CLEMENT, DUNCAN, and OLDHAM, Circuit Judges.

          ANDREW S. OLDHAM, CIRCUIT JUDGE.

         This appeal involves a contract dispute that pits MidCap Media Finance, L.L.C., against Pathway Data, Inc., and Pathway's CEO, David Coulter. But we cannot reach the merits because the parties have failed to establish diversity of citizenship. We remand to allow the district court to consider additional evidence regarding jurisdiction.

         I.

         MidCap agreed to loan Pathway up to $1.5 million for online advertising under the Media Financing, Security and Assignment Agreement (the "Agreement"). Coulter executed a Guaranty of Repayment (the "Guaranty") that personally obligated him to pay MidCap damages in certain circumstances. When Pathway stopped making the required periodic payments and refused to repay the outstanding amount-despite receiving a notice to cure and a default notice-MidCap sued Pathway and Coulter. Pathway asserted counterclaims and defenses.

         After a bench trial, the trial court concluded Pathway breached the Agreement and awarded damages to MidCap. The trial court, however, found Coulter was not personally liable for those damages under the Guaranty. Pathway appealed the trial court's determination that MidCap did not materially breach the Agreement. MidCap cross-appealed, contending the trial court erred in concluding Coulter was not personally liable.

         II.

         In their opening appellate briefs, the parties agreed the district court had diversity jurisdiction under 28 U.S.C. § 1332. And they said we have jurisdiction under 28 U.S.C. § 1291. Notwithstanding the parties' agreement, we have an independent obligation to assess our own jurisdiction before exercising the judicial power of the United States. See, e.g., Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999).

         When we did so at the outset of this case, we could not find proper allegations or evidence of the parties' citizenship. So we asked for and received supplemental briefs on the issue. We are now convinced the evidence does not exist in this record.

         A.

         Because federal courts have limited jurisdiction, parties must make "clear, distinct, and precise affirmative jurisdictional allegations" in their pleadings. Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1259 (5th Cir. 1988). To properly allege diversity jurisdiction under § 1332, the parties need to allege "complete diversity." McLaughlin v. Miss. Power Co., 376 F.3d 344, 353 (5th Cir. 2004) (per curiam). That means "all persons on one side of the controversy [must] be citizens of different states than all persons on the other side." Ibid. (quotation omitted).

         The difference between citizenship and residency is a frequent source of confusion. For individuals, "citizenship has the same meaning as domicile," and "the place of residence is prima facie the domicile." Stine v. Moore, 213 F.2d 446, 448 (5th Cir. 1954). Nevertheless, "[c]itizenship and residence, as often declared by this court, are not synonymous terms." Robertson v. Cease, 97 U.S. 646, 648 (1878). Citizenship requires not only "[r]esidence in fact" but also "the purpose to make the place of residence one's home." Texas v. Florida, 306 U.S. 398, 424 (1939). Therefore, an allegation of residency alone "does not satisfy the requirement of an allegation of citizenship." Strain v. Harrelson Rubber Co., 742 F.2d 888, 889 (5th Cir. 1984) (per curiam).

         This distinction is not empty formalism. Take for example the Supreme Court's decision in Robertson v. Cease. Robertson was a citizen of Texas. But the complaint relied ...


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