Limited Remands to Clarify Diversity Jurisdiction: The Fifth Circuit’s Approach in OXEA Corp. v. Certain Underwriters at Lloyd’s

I. Introduction

The Fifth Circuit’s unpublished per curiam decision in OXEA Corporation d/b/a OQ Chemicals Corporation v. Certain Underwriters at Lloyds, London Subscribing to Policy No. ENVP0000060-20, No. 25‑20138 (5th Cir. Dec. 4, 2025), is not a merits decision about insurance coverage. Instead, it is a procedural opinion focused entirely on subject‑matter jurisdiction in a removed diversity case. The court declines to reach the merits of the district court’s summary judgment and instead issues a limited remand to resolve serious questions about whether diversity jurisdiction ever properly existed.

The decision is significant because it illustrates, in a concrete way:

• How carefully federal courts must police their own subject‑matter jurisdiction, even when the parties agree it exists;
• How confusion over the citizenship and status of parties—especially LLCs, foreign insurers, and misnamed entities—can jeopardize diversity jurisdiction; and
• How 28 U.S.C. § 1653 is used to authorize limited remands to clarify or amend defective allegations of jurisdiction while the appellate court retains jurisdiction.

Although unpublished and therefore non‑precedential under 5th Cir. R. 47.5, the opinion provides persuasive guidance on best practices for pleading and establishing diversity jurisdiction, particularly in complex insurance disputes involving Lloyd’s market participants and limited liability entities.

II. Case Background

A. Parties and Underlying Dispute

The plaintiff, OXEA Corporation doing business as OQ Chemicals Corporation (“OQ”), sued over insurance coverage relating to an Environmental Site Pollution Insurance Policy (Policy No. ENVP0000060‑20). OQ alleged that the defendants failed to defend and help settle a separate Texas state lawsuit brought against OQ, giving rise to:

• a breach of the environmental site pollution insurance policy, and
• violations of the Texas Prompt Payment of Claims Act.

The originally named defendants included several entities, among them “Euclid Enviant LLC” (“Euclid”), which OQ described as an “affiliated entity” under the Policy, acting as an agent or “Correspondent” in issuing the Policy.

B. State Court Filing and Allegations of Citizenship

In February 2023, OQ filed suit in the 269th Judicial District Court of Harris County, Texas. In its original petition:

• OQ alleged that it was a limited liability company with a principal place of business in Texas.
• OQ alleged that Euclid was a limited liability company with “citizenship” in Texas.
• OQ alleged that the remaining defendants were “foreign companies” incorporated in England and Wales.

Euclid was served and appeared on the state court docket as an “Active Party,” suggesting that, at least initially, Euclid was being treated as a separate defendant—not merely a misnomer of another entity.

C. Removal to Federal Court Based on Diversity

In March 2023, “Certain Underwriters at Lloyd’s, London Subscribing to Policy No. ENVP0000060‑20” (“Underwriters”) removed the case to the U.S. District Court for the Southern District of Texas, invoking solely diversity jurisdiction under 28 U.S.C. § 1332.

In the notice of removal, Underwriters asserted:

1. OQ is not an LLC but a corporation organized in Delaware with a principal place of business in Texas, and thus a citizen of Delaware and Texas.
2. OQ had “improperly denominated” most of the defendant “subscribing Syndicate participants,” but all were citizens of England.
3. There was complete diversity between the “properly joined parties” under § 1332(a).
4. The amount in controversy exceeded $75,000.

Regarding Euclid, Underwriters stated that “Defendants Certain Underwriters at Lloyd's, ... [were] improperly denominated as Euclid Enviant LLC,” effectively suggesting Euclid was a misnomer for Underwriters, not a distinct Texas LLC. However, they did not clearly explain Euclid’s organizational form or membership, nor did they cleanly reconcile OQ’s original allegation that Euclid is a Texas LLC.

OQ, in its certificate of interested persons, acknowledged that “[d]efendants contend [Euclid] should have been identified as Certain Underwriters at Lloyd’s,” yet still listed Euclid as an entity with a financial interest in the litigation.

D. Post‑Removal Stipulation and Continued Confusion

In May 2023, OQ and Underwriters filed a “Stipulation to Substitute Real Parties in Interest and Dismiss without Prejudice Enviant” (apparently referring to Euclid). The stipulation:

• Substituted five entities to “correct the names of the parties and/or reflect the real parties in interest,” and
• Provided that, under Federal Rule of Civil Procedure 41(a)(1)(A)(ii), Euclid was dismissed from the action without prejudice, with no award of costs or fees.

This suggested that Euclid’s separate presence in the case would be eliminated, arguably curing any diversity problem stemming from Euclid’s alleged Texas citizenship if that problem existed and if such a cure is legally permissible.

Yet, after this stipulation:

• OQ continued to list Euclid as a “Defendant” in numerous filings, including briefing opposing various motions, its witness list, and proposed jury instructions.
• A proposed joint pretrial order—signed by both parties’ counsel—also listed Euclid as a “Defendant.”
• OQ’s proposed amended complaint (for which leave was denied) again listed Euclid as a defendant and again alleged Euclid was a Texas LLC.
• The district court docket did not show Euclid as “dismissed” or “terminated,” although subsequent orders tended to list defendants without mentioning Euclid.

The district court ultimately granted summary judgment to Underwriters without substantively addressing these jurisdictional discrepancies. OQ appealed and, in its Fifth Circuit briefing, invoked diversity jurisdiction under 28 U.S.C. § 1332(a)(2) (controversies between “citizens of a State and citizens or subjects of a foreign state”).

III. Summary of the Fifth Circuit’s Opinion

On appeal, the Fifth Circuit did not decide whether the district court correctly granted summary judgment. Instead, the panel focused exclusively on subject‑matter jurisdiction.

The court emphasized that it has an independent, non‑waivable duty to ensure subject‑matter jurisdiction, citing Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999), and De Jongh v. State Farm Lloyds, 555 F. App’x 435 (5th Cir. 2014). Even though the parties “agree[d]” below that jurisdiction under § 1332 was proper, and OQ continued to assert on appeal that diversity existed, the panel found the record “confusing” and internally inconsistent on key jurisdictional facts.

In particular, the panel identified:

• Conflicting descriptions of OQ as either an LLC or a Delaware corporation;
• Conflicting treatment of Euclid as either a separate Texas LLC defendant or merely a misnomer for Underwriters;
• The parties’ Rule 41(a)(1)(A)(ii) stipulation dismissing Euclid contrasted against OQ’s persistent listing of Euclid as a defendant and the absence of a clear docket termination entry; and
• Incomplete clarity about the citizenship of the various Lloyd’s syndicate participants and related entities.

Because of these inconsistencies, the court concluded that it could not confidently determine from the existing record whether complete diversity existed. Nevertheless, the panel saw “some reason to believe that jurisdiction exists,” invoking 28 U.S.C. § 1653 and Fifth Circuit precedent (Molett v. Penrod Drilling Co., 872 F.2d 1221 (5th Cir. 1989); J.A. Masters Investments v. Beltramini, 117 F.4th 321 (5th Cir. 2024)) to justify a limited remand.

The court therefore:

• Remanded the case to the district court “to allow the parties and the district court to address these issues, clarify the parties’ citizenship statuses, and, as necessary, supplement the record.”
• Retained appellate jurisdiction over the case pending further proceedings and a return to the Fifth Circuit.

The panel specifically directed the district court to clarify:

• Whether OQ is a corporation (and, if so, its state of incorporation and principal place of business);
• Whether Euclid is in fact a separate limited liability company, its membership and citizenship, and whether and when it was effectively dismissed from the case; and
• The precise citizenship of the various foreign insurer defendants, and whether they should be treated as corporations or unincorporated entities for diversity purposes.

IV. Analysis

A. Precedents and Authorities Cited

1. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999)

The Fifth Circuit quotes Ruhrgas for the principle that “[s]ubject‑matter delineations must be policed by the courts on their own initiative even at the highest level.” In Ruhrgas, the Supreme Court held that a court may, in appropriate circumstances, decide questions of personal jurisdiction before subject‑matter jurisdiction, but it simultaneously reinforced that federal courts have an independent duty to ensure they have subject‑matter jurisdiction.

Here, the panel invokes Ruhrgas to justify its sua sponte review of diversity jurisdiction despite both parties’ apparent acquiescence and the district court’s implicit assumption that jurisdiction existed. The message is clear: party agreement cannot confer jurisdiction; federal courts must verify it.

2. De Jongh v. State Farm Lloyds, 555 F. App’x 435 (5th Cir. 2014)

De Jongh—though unpublished—is cited as persuasive authority confirming that the Fifth Circuit has previously scrutinized diversity jurisdiction in removed insurance cases involving complex entity structures (there, State Farm Lloyds, an unincorporated association). De Jongh also cited Ruhrgas for the same proposition regarding policing jurisdiction.

The use of De Jongh underscores that:

• The Fifth Circuit is especially wary of loosely pleaded diversity allegations in insurance disputes involving Lloyd’s‑type or Lloyds‑like structures; and
• Even unpublished cases can be important signals of how the court expects practitioners to handle jurisdictional questions.

3. Ballard v. Burton, 444 F.3d 391 (5th Cir. 2006)

The panel cites Ballard only for the proposition that unpublished decisions like De Jongh “may be [cited as] persuasive authority” under 5th Cir. R. 47.5.4. This citation is a reminder that although the present opinion itself is also unpublished, it can similarly be cited for persuasive—not binding—value in future cases.

4. 28 U.S.C. § 1653

Section 1653 provides: “Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts.”

This statute is central to the remedy the panel chooses:

• It allows amendment of allegations of jurisdiction—e.g., misdescriptions or omissions of citizenship—when the underlying jurisdictional facts support jurisdiction.
• It does not allow creation of jurisdiction where the jurisdictional facts themselves do not support it.

The panel uses § 1653 not to deem jurisdiction established, but to authorize a limited remand for clarification and supplementation of the record, consistent with prior Fifth Circuit practice.

5. Molett v. Penrod Drilling Co., 872 F.2d 1221 (5th Cir. 1989)

Molett establishes two critical principles about § 1653:

1. Where jurisdiction is clear from the record, the Fifth Circuit has allowed “direct amendments to the pleadings without a remand.”
2. Where jurisdiction is not clear from the record, but there is “some reason to believe that jurisdiction exists,” the case may be remanded to the district court “for amendment of the allegations and for the record to be supplemented.”

The OXEA panel fits this case squarely within the second category. Jurisdiction is not plainly absent, but neither is it definitively established. Hence, a limited remand is deemed the proper course.

6. J.A. Masters Investments v. Beltramini, 117 F.4th 321 (5th Cir. 2024)

J.A. Masters—which itself resulted in a limited remand and a subsequent unpublished opinion—is cited as a recent example of using § 1653 to address unclear jurisdictional facts. As the panel notes, J.A. Masters involved a similar situation where:

• Jurisdiction was not clear from the record; yet
• There was some reason to believe that diversity jurisdiction existed.

By relying on J.A. Masters, the panel signals that limited remands to clarify diversity are now a familiar, routine tool in the Fifth Circuit’s institutional toolkit.

7. Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077 (5th Cir. 2008)

Harvey is cited for the standard rule on citizenship of business entities:

• A corporation is a citizen of (1) the state(s) in which it is incorporated and (2) the state where it has its principal place of business.
• A limited liability company (LLC) is treated like a partnership or other unincorporated association: its citizenship is determined by the citizenship of all of its members.

This is crucial to the panel’s instruction to the district court: it must clarify whether OQ and Euclid are corporations or LLCs, and, if LLCs, determine the citizenship of each member. Similarly, it must determine whether any of the Lloyd’s‑related defendants are unincorporated entities whose citizenship depends on their members rather than place of incorporation.

B. The Court’s Legal Reasoning

1. Duty to Examine Jurisdiction Sua Sponte

The panel begins by reaffirming that federal courts—trial and appellate—must ensure they have subject‑matter jurisdiction regardless of what the parties say. This duty is not waivable and is grounded in the constitutional limits of federal judicial power.

Here, the parties agreed below that diversity jurisdiction under § 1332 existed, and OQ repeated that assertion on appeal. However, the Fifth Circuit, after reviewing the record, concluded that the evidence of diversity was “somewhat confusing” and required more careful scrutiny.

2. The Confusing Record: Euclid’s Status and Citizenship

The panel’s central concern is the inconsistent treatment of Euclid:

• OQ’s original petition alleged Euclid is a Texas LLC, clearly non‑diverse with OQ if OQ is also a Texas citizen.
• Underwriters’ notice of removal calls Euclid an “improperly denominated” version of the Lloyd’s Underwriters but does not clearly demonstrate that Euclid is not a separate legal entity or that it shares only English citizenship.
• The parties then stipulate to dismiss Euclid under Rule 41(a)(1)(A)(ii), suggesting Euclid is a real party capable of being dismissed, not merely a name correction.
• Despite that, OQ repeatedly lists Euclid as a “Defendant” in multiple filings after the supposed dismissal and repeats that Euclid is a Texas LLC in its proposed amended complaint.
• The district court’s docket does not explicitly mark Euclid as dismissed or terminated, leaving its procedural status ambiguous.

Given this, the panel cannot know whether:

• Euclid was ever truly a separate Texas citizen party at the time of filing and removal;
• Euclid was in substance merely a misnomer for Underwriters; or
• Any lack of diversity at filing or removal was later cured (or could be cured) by the dismissal of Euclid.

Because diversity must generally exist both at the time of filing and at the time of removal, these uncertainties are potentially outcome‑determinative as to jurisdiction.

3. Conflicting Allegations About OQ’s Own Form and Citizenship

OQ’s original state petition alleged that OQ was an LLC with a principal place of business in Texas, but Underwriters’ notice of removal asserted that OQ was a Delaware corporation with its principal place of business in Texas.

This matters because:

• If OQ is an LLC, its citizenship depends on the citizenship of every member, which may include individuals or entities across multiple states or countries.
• If OQ is a corporation, it is a citizen of Delaware and Texas only.

Without clarity, the Fifth Circuit cannot know whether OQ is diverse from all defendants. This is not a trivial detail but a core jurisdictional fact.

4. Unclear Citizenship of the Lloyd’s‑Related Defendants

The court also flags uncertainty regarding the citizenship of the foreign insurer defendants:

• OQ’s original petition alleged they were “foreign companies incorporated in England and Wales.”
• Underwriters’ removal notice asserted that the “subscribing Syndicate participants” were citizens of England.
• For at least one defendant, the notice described a “sole underwriting member” that was a “U.K. corporate entity with citizenship in the U.K.” but also a “limited company.”

These descriptors are not self‑evidently sufficient to determine whether the entities should be treated as corporations (where citizenship is place of incorporation and principal place of business) or unincorporated associations (where citizenship depends on all members). Lloyd’s‑type entities, in particular, have been the subject of complex jurisdictional analyses in federal courts.

The panel therefore instructs the district court to determine, applying Harvey, how each defendant should be classified and what its citizenship is for diversity purposes.

5. Applying § 1653, Molett, and J.A. Masters: Why a Limited Remand?

After identifying the ambiguities, the panel turns to the remedial framework established by § 1653, Molett, and J.A. Masters:

• If jurisdiction were clear from the existing record, the court could allow direct amendment of jurisdictional allegations on appeal and proceed to the merits.
• Because the record is instead equivocal—but there is some reason to suspect that complete diversity may in fact exist—the court chooses a limited remand so the district court can take evidence, clarify party status and citizenship, and allow amendments to pleadings if appropriate.

The limited remand allows:

• The district court, which is better situated to manage the factual record, to resolve factual questions about entity form, citizenship, and the procedural status of Euclid.
• The appellate court to retain jurisdiction and resume consideration of the appeal once the jurisdictional record is clarified.

By explicitly invoking Molett and J.A. Masters, the panel is reinforcing a consistent procedural path for similarly uncertain diversity situations.

C. Impact on Future Cases and the Law of Diversity Jurisdiction

1. Strict Scrutiny of Diversity Allegations in Complex Entity Cases

This opinion underscores that the Fifth Circuit will continue to apply strict scrutiny to diversity allegations when:

• Parties involve LLCs, LPs, or other unincorporated entities;
• Insurance disputes feature Lloyd’s‑style “Underwriters at Lloyd’s, London” or similarly complex market structures; or
• There is any indication that named defendants might be misnamed affiliates, agents, or “correspondents” whose citizenship is unclear.

Counsel should expect that:

• Vague references to “foreign company,” “limited company,” or “syndicate participant” will not suffice.
• Courts will demand concrete, entity‑by‑entity citizenship allegations tied to recognized legal categories (corporation vs. LLC vs. partnership vs. unincorporated association).

2. Importance of Internal Consistency Across Pleadings and Dockets

The decision also functions as a cautionary tale about inconsistent filings:

• OQ’s repeated listing of Euclid as a defendant even after a Rule 41 stipulation to dismiss contributed significantly to jurisdictional confusion.
• The absence of a clear docket entry reflecting Euclid’s dismissal compounded the problem.

Going forward:

• Plaintiffs and defendants must ensure that captions, certificates of interested persons, pretrial orders, and proposed jury instructions consistently reflect the actual parties.
• When dismissing a party by stipulation, counsel should ensure the stipulation is clear, the clerk updates the docket to reflect the dismissal, and subsequent filings do not list that party as still present.

Inconsistent practice may not only confuse the district court but can derail an appeal years later, as happened here.

3. Reinforcing the Limited‑Remand Mechanism Under § 1653

By following Molett and J.A. Masters, the panel confirms that limited remands are a preferred mechanism when:

• Jurisdiction is uncertain but plausibly exists; and
• Additional factual development or clarification is needed.

This approach avoids the harshness of outright dismissal of an appeal (and often the entire federal action) where the defect may simply be one of incomplete allegations or sloppy pleading rather than genuine lack of diversity.

At the same time, it respects constitutional limits by insisting that jurisdictional facts be properly established before the merits can be adjudicated.

4. Signals to District Courts

Though couched in respectful terms, the opinion implicitly critiques the district court for not squarely addressing the jurisdictional inconsistencies. The panel notes:

• The district court’s orders “acknowledg[ed] the diversity jurisdiction basis for Underwriters’ removal,” but
• The court “did not substantively address the abovementioned discrepancies, or the basis for its diversity jurisdiction,” in any order or in granting summary judgment.

Going forward, district courts in the Fifth Circuit are on notice that:

• Where the record shows conflicting allegations about entity citizenship or the status of potentially non‑diverse parties, it is incumbent on the court to resolve those conflicts early.
• Simply accepting the parties’ jurisdictional stipulations or assertions, without reconciling facial inconsistencies, risks reversal or remand on appeal.

5. Practical Lessons for Insurance and Lloyd’s‑Market Litigation

For practitioners in insurance coverage litigation:

• When dealing with “Certain Underwriters at Lloyd’s” or similar arrangements, be prepared to:
  • Identify the exact legal nature of each subscribing entity;
  • Specify whether each is a corporation or an unincorporated entity;
  • Allege citizenship in a way that satisfies the Harvey framework.
• If an intermediary such as a “correspondent,” “coverholder,” or “affiliated entity” (like Euclid) is named as a defendant, be very clear whether:
  • It is a separate legal entity with its own citizenship, or
  • It is merely a misnomer or trade name for the actual insurer.

Failure to clarify these points can jeopardize federal jurisdiction and dramatically delay resolution of the substantive insurance dispute.

V. Complex Concepts Simplified

A. What Is Diversity Jurisdiction?

“Diversity jurisdiction” is a type of federal court jurisdiction given by 28 U.S.C. § 1332. It allows a federal court to hear a civil case if:

1. The amount in controversy exceeds $75,000, and
2. The case is between:
   • Citizens of different U.S. states (complete diversity), or
   • A citizen of a U.S. state and a foreign citizen or subject.

“Complete diversity” means no plaintiff can be a citizen of the same state as any defendant. If even one defendant shares citizenship with a plaintiff, diversity jurisdiction is destroyed.

B. Citizenship of Corporations vs. LLCs

Under federal law:

• A corporation is a citizen of:
  • Its state of incorporation, and
  • The state where it has its principal place of business.
• An LLC (limited liability company) is treated like a partnership:
  • It is a citizen of every state where any of its members is a citizen.
  • To determine an LLC’s citizenship, you must know who all the members are and where each is a citizen.

This is why the panel insists on clarifying whether OQ and Euclid are corporations or LLCs: the answer changes how their citizenship is determined and, potentially, whether diversity exists.

C. Misnomer vs. Separate Entity

Sometimes a plaintiff sues the right entity but uses the wrong name. For example, suing “Acme Insurance” when the real corporate name is “Acme Insurance Company, Inc.” That kind of mistake is a misnomer and usually can be fixed by correcting the name.

Other times, a plaintiff sues an actually different legal entity—such as a local agent or affiliate—believing it to be the correct defendant. That is not just a name correction; it is a separate party with its own citizenship.

In OXEA, it is unclear whether “Euclid Enviant LLC” is:

• Just a misnomer for the Underwriters; or
• A separate Texas LLC (as originally alleged) with its own citizenship.

This distinction is crucial: if Euclid is a separate Texas entity, and OQ is also a Texas citizen, diversity could have been destroyed from the outset.

D. What Is a Limited Remand?

A “limited remand” occurs when an appellate court sends a case back to the district court for a specific, narrow purpose—here, to clarify jurisdictional facts—while the appellate court retains overall jurisdiction over the appeal.

In this case, the Fifth Circuit:

• Did not decide the merits of the summary judgment ruling.
• Did not dismiss the appeal outright.
• Instead, it retained the appeal but sent the case back to the district court so that court can:
  • Clarify party status (e.g., whether Euclid is or was a party);
  • Determine each party’s citizenship under federal rules; and
  • Allow amendments to jurisdictional allegations if the facts support diversity.

Once that work is done, the case will return to the Fifth Circuit for further appellate proceedings.

E. What Does “Sua Sponte” Mean?

“Sua sponte” is Latin for “of its own accord.” When a court acts sua sponte, it does something without being asked by any party.

Here, the Fifth Circuit raised the issue of subject‑matter jurisdiction sua sponte—on its own initiative—because federal courts must ensure they have jurisdiction, even if neither party challenges it.

F. Rule 41(a)(1)(A)(ii) Voluntary Dismissal

Federal Rule of Civil Procedure 41(a)(1)(A)(ii) allows the plaintiff to voluntarily dismiss a case (or a party) without a court order by filing “a stipulation of dismissal signed by all parties who have appeared.”

In OXEA:

• OQ and Underwriters filed such a stipulation dismissing Euclid “without prejudice.”
• That should, in theory, remove Euclid from the case as of the filing of the stipulation.

However, the continued listing of Euclid as a defendant in later filings and the absence of a clear docket entry led the Fifth Circuit to question what actually happened in practice and, crucially, what Euclid’s status was at the key jurisdictional moments (filing and removal).

VI. Conclusion

The Fifth Circuit’s unpublished decision in OXEA Corp. v. Certain Underwriters is a focused procedural ruling that underscores several important principles:

1. Subject‑matter jurisdiction is independent and non‑waivable. Courts must verify it even when parties stipulate or remain silent.
2. Diversity jurisdiction in complex entity cases demands precision. Litigants must carefully and consistently allege the form and citizenship of corporations, LLCs, and Lloyd’s‑style entities, and must clearly identify whether a named entity is a misnomer or a distinct party.
3. Inconsistencies in pleadings and dockets can jeopardize jurisdiction. OQ’s inconsistent treatment of Euclid, combined with conflicting descriptions of OQ’s own structure, created doubts that the Fifth Circuit could not ignore.
4. 28 U.S.C. § 1653 and limited remands are essential tools. When jurisdiction is uncertain but plausible, the Fifth Circuit will remand for clarification and supplementation rather than dismiss outright, as reflected in its reliance on Molett and J.A. Masters.
5. District courts share responsibility for policing jurisdiction. They must resolve facial discrepancies and ensure the jurisdictional record is clear before entering final judgments.

While OXEA does not establish new black‑letter law, it reinforces a rigorous approach to diversity jurisdiction and offers practical guidance to litigants and courts confronted with complex entity structures and inconsistent jurisdictional allegations. As federal jurisdictional doctrine continues to grapple with increasingly intricate business forms and cross‑border insurance arrangements, decisions like OXEA serve as important reminders that jurisdictional clarity is not a mere technicality but a constitutional prerequisite to federal adjudication.