Ensuring Complete Diversity: Fifth Circuit’s Remand for Jurisdictional Clarity in All About Property v. Midland Mortgage

Introduction

In All About Property, L.L.C. v. Midland Mortgage, No. 24-20092 (5th Cir. May 13, 2025), the Fifth Circuit addressed a threshold jurisdictional defect in a foreclosure dispute removed to federal court on diversity grounds. Plaintiff-Appellant All About Property, L.L.C. (“AAP”) sued Midland Mortgage (a division of MidFirst Bank), CitiMortgage, Inc., and Mortgage Electronic Registration Systems, Inc. (“MERS”) in Texas state court for declaratory relief, quiet title, and equitable right of redemption. Defendants removed the case, claiming complete diversity and an amount in controversy exceeding $75,000 under 28 U.S.C. § 1332(a). On appeal after summary judgment in favor of MidFirst, the Fifth Circuit held that diversity had not been adequately pleaded with respect to AAP’s citizenship and remanded for a limited jurisdictional inquiry.

Summary of the Judgment

The Fifth Circuit, in a per curiam opinion not designated for publication, found that:

1. Defendants bore the burden of establishing complete diversity under St. Paul Reinsurance Co. v. Greenberg (5th Cir. 1998).
2. They properly pleaded the citizenship of the bank and corporate defendants but failed to allege the citizenship of AAP’s members, as required by Harvey v. Grey Wolf Drilling Co. (5th Cir. 2008).
3. Letter briefs showed AAP’s sole member was CH2 Holdings LP, whose partners were CH2 Management, Inc. (a Delaware corporation) and Ramesh Arumugam (a Texas citizen), but the record lacked admissible evidence of those facts.
4. Relying on MidCap Media Finance v. Pathway Data (5th Cir. 2019), the court held it could not accept new, unsworn declarations on appeal to establish citizenship.
5. Because diversity was not conclusively shown, the court remanded to the district court for a limited evidentiary determination of subject-matter jurisdiction. If jurisdiction is found, the appeal will resume; if not, the district court must vacate its judgment and dismiss the case.

Analysis

Precedents Cited

• 28 U.S.C. § 1332(a)(1) – Diversity jurisdiction requires complete diversity and over $75,000 in controversy.
• St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250 (5th Cir. 1998) – Burden of proof on removing party.
• Wachovia Bank v. Schmidt, 546 U.S. 303 (2006) – National bank’s citizenship is where its main office is located.
• Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077 (5th Cir. 2008) – An LLC is a citizen of each state of its members.
• Ashford v. Aeroframe Servs., L.L.C., 907 F.3d 385 (5th Cir. 2018) – Diversity must exist both at filing and removal.
• Louisiana v. Union Oil Co. of California, 458 F.3d 364 (5th Cir. 2006) – Nominal parties may be disregarded in diversity analysis.
• Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996) – Dismissal of a non-diverse defendant before judgment cures jurisdictional defects.
• MidCap Media Finance v. Pathway Data, Inc., 929 F.3d 310 (5th Cir. 2019) – § 1653 allows amendment of jurisdictional pleadings but not introduction of new evidence on appeal.

Legal Reasoning

1. Defective Pleading: Defendants alleged AAP was a Texas citizen but failed to identify its members. Under Harvey, they needed to list every member’s state citizenship. 2. Post-Removal Briefing: Parties agreed AAP’s sole member was CH2 Holdings LP, an LP whose partners were CH2 Management, Inc. (Delaware corp.) and Ramesh Arumugam (Texas citizen). 3. Limits on Appellate Fact-Finding: MidCap precludes relying on new, undisputed declarations or unsworn letter-brief assertions. The appellate court may only take judicial notice of undisputed public filings. 4. Remand: Because the record lacked conclusive evidence of each partner’s citizenship, the case was remanded under § 1653 to the district court to supplement the record, amend pleadings, and determine if jurisdiction exists.

Impact

This decision reinforces that federal courts strictly enforce complete diversity requirements. Litigants must:

• Identify every member of unincorporated entities at the time of filing and removal.
• Support jurisdictional allegations with admissible evidence—public filings or sworn statements in the record.
• Avoid relying solely on letter briefs or extrinsic declarations on appeal.

It also underscores the limited scope of appellate review on jurisdictional facts and the value of limited remands to preserve judicial economy.

Complex Concepts Simplified

• Complete Diversity: No plaintiff shares a state of citizenship with any defendant.
• LLC Citizenship Rule: An LLC is a citizen of every state where its members are citizens.
• Nominal Party Doctrine: Parties with no real interest can be ignored when checking diversity.
• 28 U.S.C. § 1653: Allows amendment of jurisdictional pleadings to correct defective allegations but does not permit new evidence on appeal.
• Limited Remand: Sending a case back for a narrow inquiry (here, citizenship facts) without disturbing other merits or rulings.

Conclusion

All About Property v. Midland Mortgage highlights the federal judiciary’s insistence on precise jurisdictional pleadings. By remanding for a targeted fact-finding on AAP’s membership and citizenship, the Fifth Circuit ensures that diversity jurisdiction is established before proceeding to the merits. The case serves as a cautionary tale: when removing based on diversity, parties must meticulously plead and prove the citizenship of every unincorporated entity’s members at the time of filing and removal. This ruling will guide practitioners in drafting removal notices and remind courts to guard the boundary between state and federal judicial power.