First Circuit Discusses Split re Recognition of Citizenship of Power of Attorney Holder for Diversity Purposes

Per PRAMCO, LLC, ON BEHALF OF CFSC CONSORTIUM, LLC, Plaintiff, Appellant, v. SAN JUAN, --- F.3d ----, 2006 WL 133977 (1st Cir. Jan 19, 2006):

In its Rule 26.1 disclosure statement filed on appeal, Pramco stated that it has two members and CFSC has three. According to the complaint, Pramco held a power of attorney to collect loans purchased by CFSC. The record, however, does not disclose the citizenship of the members of either Pramco or CFSC. It also does not fully disclose the nature of the arrangement between CFSC and Pramco, which could be relevant to a decision as to whose citizenship-the members of CFSC or the members of Pramco-should be considered in the diversity calculus.

In addition, there may be a circuit split on the issue of whether the sort of arrangement entered into here-whether it involved an assignment of the debt itself or merely the granting of a power of attorney to litigate the case-would suffice to make Pramco, rather than CFSC, the party whose citizenship matters for diversity purposes. Some circuits have held that "the citizenship of an agent who merely sues on behalf of the real parties must be ignored" for diversity purposes. Associated Ins. Mgmt. Corp. v. Ark. Gen. Agency, Inc., 149 F.3d 794, 796 (8th Cir.1998); see also Airlines Reporting Corp. v. S & N Travel, Inc., 58 F.3d 857, 862 (2d Cir.1995). In the Second Circuit, for example, the court asks whether the named plaintiff is more than "a mere conduit for a remedy owing to others, advancing no specific interests of its own." Airlines Reporting Corp., 58 F.3d at 862.

The Third Circuit, by contrast, has adopted a rule that accepts the citizenship of the named plaintiff as the relevant citizenship for diversity jurisdiction purposes in any case where that plaintiff has "capacity to sue" under state law. See Fallat v. Gouran, 220 F.2d 325, 236-27 (3d Cir.1955); see also 6A Charles Alan Wright et al., Federal Practice and Procedure: Civil 2d § 1556, at 426-28 (1990). It subsequently qualified its rule by holding that any attempt to "manufacture" diversity jurisdiction, by appointing a representative "solely to create diversity jurisdiction," offends 28 U.S.C. § 1359 (2000) and so is ineffective to create federal jurisdiction. See McSparran v. Weist, 402 F.2d 867, 875-76 (3d Cir.1968); cf. Pallazola v. Rucker, 797 F.2d 1116, 1126-27 (1st Cir.1986). Yet even with this qualification, one could still see how the Third Circuit's approach could result in contrary results in cases such as Airlines Reporting Corp.Because we cannot on this record determine whether complete diversity exists, we remand to the district court. The district court shall determine whether all of Pramco's and CFSC's members are diverse from San Juan, in which case diversity exists; if either Pramco or CFSC has members who are not diverse, the court must determine whether the nondiverse party's citizenship matters for jurisdictional purposes; to that end, the court will need to make appropriate findings of fact concerning the relationship of Pramco and CFSC and entertain briefs from the parties. So far as we can tell, the problem is a matter of first impression in this circuit.