In Behrens v. JPMorgan Chase Bank, N.A., No. 21-2603 (2d Cir. Mar. 13, 2024), the Second Circuit publishes an opinion “to consider a question of first impression in this Circuit: whether the existence of subject-matter jurisdiction requires a district court to exercise it, even if it is invoked belatedly—on analogy to the rule that a party can object to the lack of such jurisdiction ‘at any time.’” The panel holds that there is no duty to consider a belated argument favoring jurisdiction.
Plaintiffs filed federal and state law claims for investment fraud, arising from a CEO’s defalcation of some $200 million. The case was filed eight years after the losses and four years after the fraud entirely came to light. “On March 31, 2019, the district court dismissed the federal claims as untimely with prejudice, and declined to exercise supplemental jurisdiction. The remaining state-law claims were thus dismissed without prejudice.”
“On May 16, 2019, over a month later, five Defendants … filed motions for reconsideration, arguing for the first time that the district court must exercise subject-matter jurisdiction over Plaintiffs’ state-law claims pursuant to CAFA,” the federal Class Action Fairness Act. The district court rejected the motion as untimely, and the defendants appealed.
The Second Circuit affirms denial of the motion for reconsideration. “We consider only the question whether [Defendants] could require the district court to exercise subject-matter jurisdiction belatedly, just as parties can successfully object to a court’s lack of such jurisdiction ‘at any time,’ even after a judgment or decision has been issued.”
The panel finds no reciprocal duty to consider belated arguments favoring subject-matter jurisdiction. “We now hold that a federal court’s obligation to decide and exercise jurisdiction is not reciprocal. Specifically, while federal courts must ensure that they do not lack subject-matter jurisdiction, even if the parties fail to identify any jurisdictional defect, there is no corresponding obligation to find and exercise subject-matter jurisdiction on a basis not raised by the parties. Accordingly, a party forfeits the invocation of subject-matter jurisdiction when it fails to timely raise it.”
“The consequence of exercising jurisdiction where none exists is not the same as declining to exercise jurisdiction when a district court has not been timely called to do so. If a federal court lacks jurisdiction, it has no adjudicative power to hear the parties’ dispute, and any relief it grants ‘would be void’ . . . No voidness concern arises when a federal court declines to exercise jurisdiction. Putting aside the few cases of exclusive federal jurisdiction, a party deprived of its choice of federal forum can still pursue its claims in state courts.”
The court also notes that three other circuits (the First, Fifth, and Tenth) likewise “have upheld the ‘one-way’ view of the jurisdictional inquiry.”
“In summary: (i) if a party properly and timely invokes subject-matter jurisdiction, the district court must exercise it; (ii) if no party invokes a theory of subject-matter jurisdiction, the district court is not obligated to consider it or to search for jurisdiction sua sponte, although it may choose to do so; and (iii) if a party invokes subject-matter jurisdiction untimely, the district court has discretion to consider the issue or to deem it forfeited, subject to the typical abuse-of-discretion review.”
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