Prospect Funding Holdings (NY), LLC v. Ronald J. Palagi, P.C., L.L.C.

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 22-1871
___________________________
Prospect Funding Holdings (NY), LLC
Plaintiff - Appellant
v.
Ronald J. Palagi, P.C., L.L.C.; Che Stubblefield; Michael A. Shrier, Special
Administrator of the Estate of Ronald J. Palagi
Defendants - Appellees
____________
Appeal from United States District Court
for the District of Nebraska - Omaha
____________
Submitted: January 10, 2023
Filed: August 7, 2023
____________
Before GRASZ, MELLOY, and KOBES, Circuit Judges.
____________
KOBES, Circuit Judge.
Prospect Funding Holdings (NY), LLC, won arbitration awards against
Ronald Palagi and his law firm, Ronald J. Palagi, P.C., LLC. Palagi and his firm
filed an application to vacate the awards in federal court, which the district court
granted. Because the application failed to plead the parties’ citizenship, we vacate

-- 1 of 3 --

-2-
the district court’s order and remand with instructions to dismiss for lack of subject
matter jurisdiction.
I.
Palagi and his law firm represented Che Stubblefield in a then-pending
lawsuit. Stubblefield entered into an agreement to sell Prospect part of his interest
in that lawsuit. The agreement contained an arbitration provision, so when a dispute
came up, Prospect initiated arbitration proceedings against Stubblefield and Palagi’s
firm. In 2017, arbitrators granted Prospect awards against Stubblefield and the firm.
Prospect then sought to confirm the awards in federal court under the Federal
Arbitration Act (FAA). Stubblefield and Palagi’s firm filed motions for summary
judgment and petitions to vacate the awards. The district court granted their motions
and vacated the awards.
Instead of appealing the judgment, Prospect started a new arbitration
proceeding based on the same contract, this time against Palagi’s firm and Palagi in
his individual capacity. Awards were entered against them in 2021. Palagi and his
firm then filed an application to vacate the 2021 arbitration awards in federal court.
But instead of initiating a new action, they filed it like a motion in the previous case
regarding the 2017 awards. Despite Prospect’s jurisdictional objections to the
application, the district court held it had jurisdiction and vacated the awards against
Palagi and his firm. Prospect appeals.
II.
We review the district court’s determination of subject matter jurisdiction de
novo. Carlsen v. GameStop, Inc., 833 F.3d 903, 908 (8th Cir. 2016). Federal courts
have jurisdiction over “two main kinds of cases”: “diversity cases—suits between
citizens of different States as to any matter valued at more than $75,000” and
“federal-question cases—suits ‘arising under’ federal law.” Badgerow v. Walters,
142 S. Ct. 1310, 1315–16 (2022) (citing 28 U.S.C. §§ 1331, 1332(a)).

-- 2 of 3 --

-3-
Sections 9 and 10 of the FAA govern applications to confirm and vacate
arbitration awards, respectively. See 9 U.S.C. §§ 9–10. Applicants seeking to vacate
or confirm awards under § 9 and § 10 must identify an “independent jurisdictional
basis” for their actions. Badgerow, 142 S. Ct. at 1316 (citation omitted); see also id.
(explaining that while certain provisions of the FAA “authorize[] parties to
arbitration agreements to file specified actions in federal court,” they “do not
themselves support federal jurisdiction”). Importantly, “a court may look only to the
application actually submitted to it in assessing its jurisdiction” for these cases.1 Id.
at 1314 (emphasis added).
The dispute between Prospect and Palagi and his firm does not contain a
federal question, so diversity of citizenship between the parties must exist. Here, the
application to vacate the 2021 awards does not identify any jurisdictional basis
whatsoever. Crucially, Palagi and his firm failed to plead the parties’ citizenship in
the application. Even if we could consider Prospect’s and Palagi’s firm’s
citizenships as pleaded in the action for the 2017 awards, Palagi’s individual
citizenship has never been pleaded before the court. Diversity of citizenship has not
been established so the district court lacked jurisdiction over the case.
III.
The judgment is vacated and remanded with instructions to dismiss for lack
of subject matter jurisdiction.
______________________________
1Badgerow explicitly rejected the “look-through” approach permitted for
establishing jurisdiction for § 4 actions—that is, allowing courts to look to the
underlying substantive controversy between the parties—to establish jurisdiction for
§ 9 and § 10 actions. Id. at 1317–22.

-- 3 of 3 --