Cortlandt Street Recovery Corp. v. Hellas Telecommunications

SACK, Circuit Judge,

concurring:

Unsurprisingly, I concur in the foregoing opinion — I am, after all, its author. I add this brief concurrence, though, to explain my view that a decision referred to in that opinion, Zurich Insurance Co. v. Logitrans, Inc., 297 F.3d 528 (6th Cir.2002), is not the law of this Circuit, and also to express some doubt that it should be. My colleagues point out that the resolution of this issue is not necessary to our resolution of this appeal, and decline, therefore, to express their views on the subject.

In Zurich Insurance Co., the Sixth Circuit affirmed the denial of a motion that had been brought in an attempt to cure a standing defect under Fed.R.Civ. P.17(a)(3). An insurance company subsidiary, Zurich Switzerland, initially thinking itself to be the subrogee of certain claims, requested leave of the district court to substitute the proper subrogee of all of those claims, a parallel subsidiary * referred to as American Guarantee. Zurich Ins. Co., 297 F.3d at 530. The district court denied the motion, see id. at 530-31, and the court of appeals affirmed, id. The court of appeals concluded that because the plaintiff “had no standing to bring th[e] action, [it had] no standing to make a motion to substitute the real party in interest.” Id. at 531. The court explained:

An attorney made a mistake and filed the action in the name of Zurich Switzerland, when Zurich Switzerland had no claims whatsoever against the defendants, and no Article III standing to sue. American Guarantee, a totally separate entity, which was not vigilant in protecting its claims, cannot now benefit from Zurich Switzerland’s mistake.

*426Id. at 532. The court cited other cases— Ensley v. Cody Resources, Inc., 171 F.3d 315, 320 (5th Cir.1999), and Whelan v. Abell, 953 F.2d 663, 672 (D.C.Cir.1992) — in which courts first determined that a plaintiff had standing independent of any requested substitution before addressing the Rule 17 inquiry, Zurich Ins. Co., 297 F.3d at 532. Those cases did not address whether that order of operations was constitutionally required.

As our opinion notes, some courts and commentators have criticized Zurich Insurance Co. See ante at 423. I think this criticism has some merit. It was undisputed in Zurich Insurance Co. that an entity, waiting in the wings and willing to become a party to the action, had a claim that could be “appropriately resolved through the judicial process.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (internal quotation marks omitted). The Zurich Insurance Co. court declined to permit the substitution, even though the kinds of concerns typically raised by a standing challenge, such as the risk that “a plaintiff raising only a generally available grievance about government — claiming only harm to his and every citizen’s interest in proper application of the Constitution and laws, and seeking relief that no more directly and tangibly benefits him than it does the public at large,” id. at 573-74, 112 S.Ct. 2130—would inadequately present or defend his claim, would have been absent had the substitution been allowed. The only bar to the court’s jurisdiction was a complaint heading containing the wrong client’s name.

To be sure, the Supreme Court has frequently said that a federal court’s constitutional authority to hear the merits of a case must be established at the outset of the litigation. See, e.g., Mollan v. Torrance, 9 Wheat. 537, 22 U.S. 537, 539, 6 L.Ed. 154 (1824) (“[Jjurisdiction ... depends upon the state of things at the time of the action brought.”). This is said to be so both with respect to standing, see, e.g., Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (standing “must exist at the commencement of the litigation”), and with respect to other aspects of subject matter jurisdiction, see, e.g., Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570-71, 124 S.Ct. 1920, 158 L.Ed.2d 866 (2004) (“Th[e] time-of-filing rule ... measures all challenges to subject-matter jurisdiction premised upon diversity of citizenship against the state of facts that existed at the time of filing.”).

But the jurisdiction-at-commencement rule is not absolute. “In cases where the plaintiff lacked initial standing or the case suffered from some other jurisdictional defect at the time suit is commenced, the Supreme Court’s cases are less than clear as to whether and how a jurisdictional defect can be remedied in the course of litigation.” Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 402 F.3d 1198, 1203 (Fed.Cir.2005). In some cases, a jurisdictional defect existing at the outset of litigation can be cured by subsequent events. In the case of diversity jurisdiction, for example, the dropping-out of a nondiverse plaintiff whose presence would otherwise defeat diversity confers diversity jurisdiction upon a federal court, provided other jurisdictional requirements are satisfied. See, e.g.; Grupo Dataflux, 541 U.S. at 572, 124 S.Ct. 1920 (“[Djismissal of [a] party that had destroyed diversity ... [as a] method of curing a jurisdictional defect ha[s] long been an exception to the time-of-filing rule.”). And several courts have held that a loss of standing after commencement of a litigation but prior to trial may be cured by reacquisition of standing or by joinder of a party with standing. See, e.g., Schreiber Foods, 402 F.3d at 1204 (collecting cases); Corbin v. Blankenburg, *42739 F.3d 650, 654 (6th Cir.1994) (en banc); but see id. at 655 (Celebrezze, J., dissenting).

Moreover, in the case of a substitution request such as in Zurich Insurance Co., allowing substitution may be “‘the wiser answer to the problem of expediting trials and avoiding unnecessary delay and expense of requiring an action to be started anew where a substitution is desired though the subject matter of the actions remains identical.’ ” Park B. Smith, Inc. v. CHF Indus. Inc., 811 F.Supp.2d 766, 774 (S.D.N.Y.2011) (quoting Nat’l Mar. Union of Am. v. Curran, 87 F.Supp. 423, 426 (S.D.N.Y.1949)). The cases cited by the Advisory Committee in the note explaining the adoption of Rule 17(a)(3), Levinson v. Deupree, 345 U.S. 648, 73 S.Ct. 914, 97 L.Ed.2d 1319 (1953), and Link Aviation, Inc. v. Downs, 325 F.2d 613 (D.C.Cir.1963), take a similarly pragmatic approach. In the latter case, for example, parties who had subrogated their interests in a given claim mistakenly brought suit in their own names, rather than in the names of the subrogees. Link Aviation, 325 F.2d at 613-14. The court reasoned that this error, while significant, did not render the suit “a nullity.” Id. at 615. It concluded that substitution of the subrogees was merited. Id. The court explained:

Any other rule would be highly technical without meaningful purpose. The complaint alleged injury at the- hands of the defendants. The suit was to recover therefor. That the recovery, if made, would inure not to the benefit of the nominal plaintiffs, but to that of the [subrogees] ... did not deprive the suit of a status which enabled the [subro-gees] to substitute themselves as plaintiffs and continue the suit in their own names.

Id.

Of course, jurisdictional requirements imposed by the Constitution cannot be cast aside because they are onerous or require expense, or because the results of their application appear unfair or unduly technical. But here the concerns animating a constitutional principle are absent, so it seems to me that practical considerations may ultimately prevail.

Concededly, the plaintiffs request in the case at bar to obtain a post-commencement assignment may implicate different concerns than the type of substitution request at issue in Zurich Insurance Co. The latter entails a change in name only, while the former seems to involve a change in the status quo ante, in that Cortlandt would have to obtain title to claims to which it currently lacks title. Even so, having considered this issue in the course of reaching a result on other legal grounds, I have come to doubt that our Court should, when directly confronted by the issue, adopt the categorical approach taken the by the Sixth Circuit.

A separate opinion explained that Zurich Switzerland and American Guarantee were "sister companies under the common ownership of a single corporate entity.” Zurich Insurance Co., 297 F.3d at 533 (Gilman, J., concurring).