Independent Jurisdictional Basis Required for Severed Settlement Enforcement Claims

Introduction

PNC Bank v. 2013 Travis Oak Creek, L.P. arises from a dispute over enforcement of a settlement agreement in a prior diversity action concerning an affordable-housing partnership. In the underlying 2017 lawsuit, PNC Bank, Columbia Housing SLP Corporation, and their partner alleged breach of a limited partnership agreement by the general partner and related entities. After that case settled and the district court retained jurisdiction to enforce the settlement, the parties filed competing motions to enforce. The district court severed those motions into a new, standalone action and granted partial relief to both sides. On appeal, the Fifth Circuit addressed whether federal courts may retain subject-matter jurisdiction over severed claims that originally proceeded under supplemental jurisdiction, absent an independent jurisdictional ground.

Summary of the Judgment

The Fifth Circuit unanimously held that once the district court severed the enforcement motions under Federal Rule of Civil Procedure 21, those claims became a separate action requiring its own subject-matter jurisdiction. Because the severed motions presented no federal question, diversity jurisdiction was the only possible base. Reviewing the appellate record, the court found no adequate proof of complete diversity of citizenship among the newly paired parties. The panel rejected the parties’ invitation to cure the defect via judicial notice of other courts’ findings or reliance on allegations “on information and belief.” It concluded that the record lacked sufficient evidence that each plaintiff was diverse from each defendant, and remanded for the limited purpose of allowing the parties to establish an independent jurisdictional basis.

Analysis

Precedents Cited

Ruhrgas AG v. Marathon Oil Co. (526 U.S. 574): reaffirmed federal courts’ duty to police subject-matter jurisdiction sua sponte.
Howery v. Allstate Ins. Co. (243 F.3d 912): held that subject-matter jurisdiction cannot be waived or conferred by consent.
O’Neil v. United States (709 F.2d 361): explained that Rule 21 severance creates a distinct action for jurisdictional purposes.
Honeywell Int’l, Inc. v. Phillips Petroleum Co. (415 F.3d 429) and Louisiana v. American National Property & Cas. Co. (746 F.3d 633): confirmed that severed claims once under supplemental jurisdiction need a fresh jurisdictional showing.
Carney v. Resolution Trust Corp. (19 F.3d 950): established that subject-matter jurisdiction is assessed when the complaint is filed.
Settlement Funding, LLC v. Rapid Settlements, Ltd. (851 F.3d 530): required specific pleading of citizenship for each member of every LLC or partnership in diversity matters.
Swindol v. Aurora Flight Sciences Corp. (805 F.3d 516): authorized judicial notice of undisputed facts from official public records.
Taylor v. Charter Medical Corp. (162 F.3d 827): clarified that courts generally may not take judicial notice of another court’s factual findings for their truth.

Legal Reasoning

1. Severance and Supplemental Jurisdiction
Under Rule 21, severance transforms a claim into a standalone action. Although the district court had retained supplemental jurisdiction when it approved the 2019 settlement, that power cannot extend beyond the one suit. Once severed, the enforcement motions lost the supplemental jurisdiction “umbrella” and must rest on an independent jurisdictional ground.

2. Diversity Jurisdiction Requirements
Because no federal question was presented, the only possible jurisdiction was diversity under 28 U.S.C. § 1332(a). To satisfy diversity jurisdiction, each plaintiff must be completely diverse from each defendant, and the amount in controversy must exceed $75,000. For partnerships or LLCs, a party must specifically plead the citizenship of every member. Here, the appellate record contained no clear proof of the citizenship of all members of 2013 Travis Oak Creek, L.P., its general partner, or Chula Investments Ltd.

3. Rejection of Judicial Notice of Other Courts’ Findings
While Rule 201 allows judicial notice of indisputable adjudicative facts from sources “whose accuracy cannot reasonably be questioned,” the panel held that factual findings made by other courts—even if uncontroverted—do not meet this standard. The Fifth Circuit adhered to its precedent in Taylor, which precludes taking judicial notice of another court’s factual determination for its truth.

4. “Information and Belief” Allegations Insufficient
Although allegations “on information and belief” may suffice in early pleadings or removal notices, they do not carry the same weight once the case is severed and the parties have had ample time to ascertain membership details. Thus, mere allegations of citizenship without concrete proof cannot establish diversity jurisdiction in the severed action.

Impact

This decision clarifies that:

District courts severing settlement-enforcement claims must ensure those claims independently satisfy subject-matter jurisdiction.
Parties invoking diversity must affirmatively prove complete diversity at the time of severance, identifying every member’s citizenship for partnerships and LLCs.
Courts cannot shortcut jurisdictional proof by judicially noticing other courts’ findings or relying solely on “information and belief” allegations after extensive pre-severance discovery.

Going forward, litigants will need to gather and present clear evidence of diversity when a supplemental-jurisdiction matter is spun off into its own case. District courts, too, will be vigilant about sua sponte jurisdictional deficiencies in severed actions.

Complex Concepts Simplified

Severance (Rule 21): Splitting one lawsuit into two; after severance, each part stands alone and needs its own jurisdiction.
Supplemental Jurisdiction: Federal courts’ power to hear additional state-law claims tied to federal ones; does not survive severance.
Diversity Jurisdiction: Requires that every plaintiff be from a different state than every defendant and that the claim exceeds $75,000.
Adjudicative Facts vs. Judicial Notice: Courts may notice basic facts (like dates or corporate filings) from reliable public sources. They generally cannot notice another court’s factual findings for their truth.

Conclusion

PNC Bank v. 2013 Travis Oak Creek underscores the bedrock principle that subject-matter jurisdiction cannot be assumed or inherited after a case is bifurcated. When a district court severs claims originally proceeding under its supplemental jurisdiction, those claims must stand on an independent jurisdictional foundation—most commonly complete diversity of citizenship. Absent clear, record-based proof of diversity, an appellate court will remand for the district court to cure the jurisdictional defect. The ruling reinforces strict adherence to jurisdictional prerequisites, ensuring that federal courts remain within the constitutional bounds of their authority.