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Two years after the couple divorced, Heard described surviving domestic violence in an op-ed for The Washington Post. Although Heard never mentioned her ex-husband by name, Depp sued Heard for defamation. A jury agreed and awarded Depp $10 million in compensatory damages and $5 million in punitive damages.
Heard’s insurer, which defended her under a comprehensive personal liability policy, now seeks to recover millions in legal defense costs from the defamation suit. Since Heard was found liable for an intentional act, Heard’s insurer argues she should pay for their legal defense. To avoid being sued in federal court by her insurer, Heard claimed that she was stateless. While still a U.S. citizen, Heard sold her house in California and moved to Spain, claiming she was no longer domiciled in any state and, therefore, stateless.
In this case, the insurance company would need to show diversity jurisdiction to sue Heard in federal court. Pursuant to 28 U.S.C. § 1332(a), both the insurance company and Heard would need to be citizens of different states. Heard’s position is that she is not domiciled in any state, so for purposes of diversity jurisdiction, she cannot be held in federal court.
While Heard’s stateless position has gotten attention, she is not the first to make this argument. In Freidrich v. Davis,1 a defendant successfully avoided being sued in federal court on the same theory. In that case, the plaintiff and defendant were both passengers on a plane flying from Pennsylvania to Germany when the defendant fell and broke the plaintiff’s arm. The plaintiff sued the defendant in federal court, alleging diversity jurisdiction in that she was a citizen of Ohio while the defendant a citizen of Pennsylvania. The defendant moved to dismiss, arguing that although he was still a citizen of the United States, he was no longer a citizen of Pennsylvania, as he was domiciled in Germany—hence, stateless. The district court ruled, and the Third Circuit affirmed, that defendant was in fact stateless and could not be sued under diversity jurisdiction.
More recently, in Page v. Democratic National Committee,2 the plaintiff, a citizen of Oklahoma, filed a defamation suit against multiple entities claiming diversity jurisdiction because no other entity was a citizen of Oklahoma. One defendant (a law firm), however, had three stateless partners domiciled in China. The Seventh Circuit held that even if a single partner was stateless, the whole firm would be considered stateless and could not be sued in diversity.
The United States Supreme Court has also addressed the issue of diversity jurisdiction being destroyed by a stateless party in Newman-Green, Inc. v. Alfonzo-Larrain,3 Carden v. Arkoma Assocs,4 and Americold Realty Tr. v. Conagra Foods, Inc.5 Those cases generally held that a stateless person cannot be sued in any district based on diversity since such a person is neither a citizen of a state, nor a citizen or subject of any foreign state, as required by 28 U.S.C. § 1332(a) for purposes of diversity jurisdiction.
While the issue of diversity jurisdiction being destroyed by a party’s statelessness is not new, this legal oddity will only become more prominent. With the rise of multinational business entities, requiring complete diversity under 28 U.S.C. § 1332(a) does not comport with today’s reality. In addition, an increasing amount of U.S. citizens work remotely or live abroad, creating more stateless diversity jurisdictional issues like in Heard’s case. Until the statute is changed to recognize that not all U.S. citizens necessarily reside in the United States, federal courts will continue to preclude such suits against stateless citizens.
1 Freidrich v. Davis, 989 F. Supp. 2d 440 (E.D. Pa. 2013), aff’d, 767 F.3d 374 (3d Cir. 2014).
2 Page v. Democratic Nat’l Comm., 2 F.4th 630 (7th Cir. 2021), cert. denied, 142 S. Ct. 776 (2022).
3 Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828, 109 S. Ct. 2218, 2221, 104 L. Ed. 2d 893 (1989) (holding that a diversity jurisdiction was destroyed when one party was stateless by being a U.S. citizen but not domiciled in any state).
4 Carden v. Arkoma Assocs., 494 U.S. 185, 110 S. Ct. 1015, 108 L. Ed. 2d 157 (1990) (holding that citizenship of all limited partners had to be taken into account to determine diversity of citizenship among the parties).
5 Americold Realty Tr. v. Conagra Foods, Inc., 577 U.S. 378, 136 S. Ct. 1012, 1013, 194 L. Ed. 2d 71 (2016) (holding for purposes of diversity jurisdiction, a real estate investment trust’s citizenship is based on the citizenship of its members, which include its shareholders).