Remember Capron v. Van Noordan, 6 U.S. (2 Cranch) 126 (1804)?
How about Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)?
From your civil procedure class? In law school? Nothin'?
Well, even if you don't, we may all take comfort in the fact that the D.C. Circuit does. Indeed, the holdings in Capron and Strawbridge prompted a panel of that court last week to come very near to ordering far worse than a bad court thingy.
In Blue Cross and Blue Shield of Mass. v. Mylan Labs., Inc. (In re Lorazepam & Clorazapate Antitrust Litig.), No. 08-5044 (D.C. Cir. Jan. 18, 2011), four insurers sued Mylan in federal court on state antitrust claims. They invoked "diversity" federal jurisdiction on the ground that each insurer's state citizenship differed from the state citizenships of all defendants. See 28 U.S.C. § 1332 (conferring federal court jurisdiction in cases, among others, between citizens of different states). The insurers alleged that Mylan used exclusive licenses to inflate the price for two anti-anxiety drugs. The licenses kept other drug makers from competing. The case resulted in a verdict and judgment against Mylan for $76,823,943.
But, as Mylan's lawyer got ready for oral argument to the court of appeals, he had an epiphany. He knew that the insurers sued not just for themselves but also on behalf of big companies that insured themselves. These "self-funded customers", he realized, should count as parties to the case — and, because the citizenship of at least one of the self-funders matched the citizenship of at least one of the defendants, Capron v. Van Noordan and Strawbridge v. Curtiss required dismissal of the case as one that never belonged in federal court, he concluded.
The D.C. Circuit agreed. But it also found a way to avoid throwing out the whole case. Under Federal Rule of Civil Procedure 21, a court may "add or drop a party". Dropping non-diverse self-funders, the panel noted, would retroactively fix the lack of jurisdiction "through the fiction that Rule 21 relates back to the date of the complaint." Id. slip op. at 8-9. The court continued:
This way, the court may proceed as if the nondiverse parties were never part of the case. With those parties effectively scrubbed from the complaint, they are not present to contaminate the other claims. The fiction also allows the district court to save its prior rulings, and the jury's findings, which otherwise were entered without jurisdiction.
Id. at 9.
Blawgletter, by the way, fully credits the story by Mylan's lawyer that "only when he began preparing for oral argument did he realize" that the non-diverse self-funders killed jurisdiction. Id. at 5. As best we can tell, the lawyer didn't get into the case until a couple years after the jury rendered its verdict (in 2005). That another two and a half years passed before his epiphany doesn't surprise us. The intense preparation that goes into getting ready for oral argument to a U.S. court of appeals forces the superior lawyer to study minute details. The depth of that study, in our experience, often can make the difference between winning and losing.