In PNC Bank v. 2013 Travis Oak, No. 24-50101 (5th Cir. May 5, 2025), the Fifth Circuit remands the appeal of actions to enforce a settlement agreement, holding that claims severed from the original action require a separate, independent basis for diversity jurisdiction, and that the jurisdictional allegations in the complaint “on information and belief” were insufficient after the parties had an opportunity to take discovery.
“Disputes arising from alleged breaches of a partnership agreement resulted in a lawsuit -in 2017] that the parties ultimately resolved by settlement. The case was thereafter re-opened [in 2021] so that the parties could file competing motions to enforce the settlement agreement. The district court severed from the original lawsuit the motions to enforce and granted each motion in part, offsetting the balance owed. This appeal followed.”
In the original 2017 lawsuit, the plaintiff PNC Bank alleged that the limited partnerships in the case, “[o]n information and belief, . . . [were] Texas citizens and/or residents.”
“In 2019, the parties settled the 2017 lawsuit and the district court retained supplemental jurisdiction over the enforcement of the Settlement Agreement. In 2021, the Eureka Parties moved to re-open the case, seeking to enforce the Settlement Agreement against the PNC Parties, which the district court granted. The parties then filed competing motions to enforce their respective obligations under the Settlement Agreement.” The district court held that these were new actions and severed them from the original case under Fed. R. Civ. P. 21. It then “granted each motion in part such that the PNC Parties were entitled to recover damages from the Partnership and the Eureka Parties.”
On appeal from the final judgments in the enforcement actions, the Fifth Circuit remands the action for findings on whether there is diversity jurisdiction.
“In assessing our jurisdiction at the outset of this appeal, we could not find sufficient allegations or evidence in the record establishing diversity of citizenship.” This is because claims severed from an action under Rule 21 must have an independent jurisdictional basis once severed. Thus, the fact that the district court found that it had jurisdiction over the original dispute is immaterial. “[S]everance creates an independent, discrete action . . . . Thus, allegations in the amended complaint from the 2017 lawsuit, and the district court’s findings in the 2017 lawsuit based on those allegations, do not form part of the record in the case now before us.”
It also rejects judicial notice of the findings in the original case, per Federal Rule of Evidence 201, as a means to fill the evidentiary gap. While “we have previously taken judicial notice of jurisdictional facts drawn from public records,” the Fifth Circuit rejects factual findings from separate, but related, cases as a source of facts under FRE201. (The panel notes different approaches taken by other circuits as to this issue.) “We have even held that a court may not take judicial notice of its own previous orders in proceedings concerning the same defendant where the plaintiff asks the court to take judicial notice of factual findings, rather than the fact of such litigation.”
Finally, it rejects the suggestion that it may consider the jurisdictional allegations in the complaint. “The principal defect stems from the amended complaint’s allegations of citizenship ‘on information and belief.’” These may be sufficient “in the nascency of litigation,” i.e., to commence an action or support removal from state to federal court, if not contested. But “Appellants do not assert that they lack the necessary information to plead citizenship with more certainty, and the parties had been engaged in litigation for over five years when the severed motions to enforce were filed. Thus, something more than ‘information and belief’ is needed to sufficiently establish jurisdiction for the severed motions to enforce.”