On September 7, 2016, in NewGen v. Safe Cig, the US Court of Appeals for the Ninth Circuit held that the lower court properly permitted the plaintiff to amend its complaint under 28 U.S.C. § 1653 to cure defective allegations of diversity jurisdiction, even after the court entered default judgment ( (9th Cir. Sept. 7, 2016).)

NewGen sued Safe Cig, alleging that Safe Cig breached the parties' marketing contracts. Safe Cig did not respond to the complaint, and NewGen moved for a default judgment. Safe Cig objected to the default judgment, but did not contest subject matter jurisdiction. The district court entered default judgment, finding that Safe Cig effectively served NewGen and that it had diversity jurisdiction under 28 U.S.C. § 1332.

Safe Cig appealed, arguing that NewGen failed to plead diversity jurisdiction in its original complaint or otherwise prove jurisdiction prior to entry of the default judgment. Safe Cig also filed a Rule 60(b) motion for relief from the judgment, asking the court to declare the default judgment void for lack of subject matter jurisdiction.

The district court ordered briefing on diversity jurisdiction, and NewGen submitted a declaration clarifying the citizenship of the parties and reasserting diversity. Satisfied with the briefing, the district court concluded that NewGen could amend its original complaint to cure its defect. NewGen obliged and, after reviewing the amended complaint, the district court found that the original default judgment was valid. Safe Cig appealed.

The Ninth Circuit denied Safe Cig's Rule 60(b) motion and upheld the district court's decision to allow NewGen to amend its complaint under 28 U.S.C. § 1653 to cure defective allegations of diversity jurisdiction. The text of 28 U.S.C. § 1653 provides that "[d]effective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts." The Ninth Circuit reasoned that:

Accordingly, NewGen was rightfully allowed to amend its complaint.

The Ninth Circuit further held that Safe Cig did not adequately challenge the basis for diversity jurisdiction, noting that only factual attacks trigger an affirmative obligation to provide proof of jurisdictional allegations. Safe Cig's initial appeal and its rule 60(b) motion could only be characterized as facial (rather than factual) attacks. The Ninth Circuit concluded that Safe Cig simply reasserted that it had doubts about the citizenship of its own officers, and, according to the district court, "carefully avoided taking any position on [its] own citizenship." Safe Cig failed to raise any factual objections to diversity jurisdiction or even assert that the parties were not diverse.