Summary
The Eleventh Circuit vacated the district court's judgment and remanded with instructions to dismiss for lack of subject-matter jurisdiction. The court held that the state-law breach-of-contract claim did not present a substantial federal issue under the Grable test, as determining whether a party acted as an unregistered broker-dealer was heavily fact-bound and lacked precedential significance. Consequently, neither diversity nor federal-question jurisdiction existed.
Topics
Practice areas
Questions Presented
- Whether the district court had federal-question jurisdiction over AST's state-law breach-of-contract claim based on the federal issue of whether Delclaux operated as an unregistered broker-dealer under the Securities Exchange Act.
- Whether the absence of complete alienage diversity rendered the district court's judgment void under Federal Rule of Civil Procedure 60(b)(4).
- Whether the district court's grant of summary judgment on Delclaux's counterclaim could stand after the court determined that subject-matter jurisdiction was lacking.
Holdings
- The district court lacked federal-question jurisdiction because the breach-of-contract claim arose under state law and the federal issue concerning Delclaux's broker-dealer status was not substantial under the Grable four-factor test.
- The parties lacked complete alienage diversity because AST, an LLC, had alien members and Delclaux was a Spanish corporation; therefore, diversity jurisdiction was unavailable.
- A Rule 60(b)(4) motion asserting that a judgment is void for lack of subject-matter jurisdiction is reviewed de novo, and an appellate court must independently inquire into subject-matter jurisdiction whenever it may be lacking.
Key quotations
“We hold that, because the breach-of-contract claim asserted in this case is a creature of state (rather than federal) law, and because the case doesn’t satisfy the multi-factor test established by the Supreme Court in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005), the district court lacked federal-question jurisdiction.” (2)
“For the foregoing reasons, we hold that the district court lacked federal-question jurisdiction over this case. Accordingly, we VACATE the district court’s judgment and REMAND with the instruction that the case be dismissed for want of subject-matter jurisdiction.” (12)
Factual background
AST, a satellite-technology company, hired Delclaux to act as a finder by introducing AST to registered broker-dealers. The parties entered into a Finder's Fee Agreement that required Delclaux not to take actions requiring registration as an investment adviser or broker-dealer and to maintain legally required authorizations. After AST's Series A financing and termination of its agreement with LionTree Advisors, Delclaux claimed fees from four Series B transactions under alleged tail provisions, while AST refused payment and sued, asserting that Delclaux had breached the Finder's Fee Agreement by acting as an unregistered broker-dealer.
Procedural history
AST sued Delclaux for breach of the Finder's Fee Agreement, and Delclaux counterclaimed for fees allegedly due under the parties' financing arrangements. The parties cross-moved for summary judgment; the district court denied summary judgment on AST's complaint and granted summary judgment to AST on Delclaux's counterclaim. After the initial appeal was voluntarily dismissed and AST's remaining claim was settled, Delclaux moved under Rule 60(b)(4), arguing that the judgment was void because diversity jurisdiction was absent. The district court agreed that diversity jurisdiction did not exist but held that federal-question jurisdiction existed; the Eleventh Circuit vacated and remanded for dismissal.
Remand instructions
Remand to the district court with instructions to dismiss the case for lack of subject-matter jurisdiction.