                 United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 12-1058
                         ___________________________

                    Luisa Chavez-Lavagnino and Debra Yanez,

                       lllllllllllllllllllll Plaintiffs - Appellees,

                                            v.

                   Motivation Education Training, Inc., and
                 Amy Cerna, also known as Amy Cerna-Espinoza,

                     lllllllllllllllllllll Defendants - Appellants.
                                       ____________

                     Appeal from United States District Court
                    for the District of Minnesota - Minneapolis
                                   ____________

                            Submitted: October 16, 2012
                                Filed: May 8, 2013


Before RILEY, Chief Judge, COLLOTON and GRUENDER, Circuit Judges.
                              ____________

COLLOTON, Circuit Judge.

       Luisa Chavez-Lavagnino and Debra Yanez, two former employees of
Motivation Education Training, Inc. (“MET”), initiated this action in Minnesota state
court. They alleged that MET and their supervisor, Amy Cerna, terminated them in
violation of the Minnesota Whistleblower Act, Minn. Stat. § 181.932, and Minnesota
common law. MET and Cerna removed the case to federal court, and Cerna moved
to dismiss both claims against her. The district court dismissed one of the two claims
against Cerna, and the remainder of the case proceeded to trial. The jury found in
favor of the employees, and Cerna and MET appeal.

       After initial briefing, this court requested supplemental briefs concerning
subject matter jurisdiction. MET and Cerna removed this case to federal court based
on diversity of citizenship. See 28 U.S.C. §§ 1441, 1446(c). The record on appeal
showed that the employees were citizens of Minnesota, and that MET was a citizen
of Texas, but Cerna’s citizenship was unclear. We asked the parties to address
whether a federal court properly has jurisdiction over this case based on diversity of
citizenship under 28 U.S.C. § 1332(a).

       MET and Cerna responded that this court has jurisdiction because diversity of
citizenship existed at the time of judgment in the district court. Although they
acknowledged that Cerna formerly was a citizen of Minnesota, they pointed to her
testimony at trial that she had been living in North Dakota “for going on two years,”
and argued that the timing of her move was irrelevant. In their view, as long as Cerna
was a citizen of North Dakota before the district court entered judgment, such that
there was complete diversity of citizenship at the time of judgment, the district court
properly exercised jurisdiction, and this court has jurisdiction on appeal. The
employees did not file a supplemental brief, but agreed at oral argument that the
district court had jurisdiction.

        Although the parties were diverse when the district court entered its judgment,
it does not necessarily follow that the district court had jurisdiction. The jurisdiction
of a federal court under 28 U.S.C. § 1332(a) depends on the citizenship of the parties
at the time the action is commenced. Grupo Dataflux v. Atlas Global Grp., L.P., 541
U.S. 567, 570-71 (2004). For a party to remove a case to federal court based on
diversity jurisdiction, the parties must be diverse both when the plaintiff initiates the
action in state court and when the defendant files the notice of removal in federal

                                          -2-
court. Gibson v. Bruce, 108 U.S. 561, 563 (1883); Knudson v. Sys. Painters, Inc., 634
F.3d 968, 975 (8th Cir. 2011); 14B Charles A. Wright, Arthur R. Miller, Edward H.
Cooper & Joan E. Steinman, Federal Practice and Procedure § 3723, at 695-700 (4th
ed. 2009). Therefore, the parties are mistaken that a lack of complete diversity at the
time of filing could be cured by showing that Cerna moved from Minnesota to North
Dakota before judgment. A jurisdictional defect at the time of commencement can
be cured by dismissal of the non-diverse party, Caterpillar Inc. v. Lewis, 519 U.S. 61,
64 (1996), but it cannot be remedied by a “change in the citizenship of a continuing
party.” Grupo Dataflux, 541 U.S. at 575. Because Cerna is still a party to this case,
the district court had jurisdiction only if the parties were completely diverse when the
case was filed in state court and removed to federal court.

      The record is unclear, however, about whether the parties were diverse when
the employees commenced this action. There are pleadings filed by counsel
indicating that diversity was lacking. In the notice of removal, MET and Cerna
alleged that Cerna was a citizen of Minnesota (like the employees), but argued that
removal was proper because she had been fraudulently joined. Before trial, MET and
Cerna even moved to dismiss for lack of subject matter jurisdiction, again asserting
that Cerna was a citizen of Minnesota, although that motion later was withdrawn.

      On the other hand, Cerna’s actual testimony at trial on May 13, 2011—that she
had been living in North Dakota for “going on two years”—invites the inference that
she moved to North Dakota before the employees commenced this action. The
ordinary meaning of “going on” suggests that she had lived in North Dakota for a
period approaching two years, and only seventeen months had elapsed since the
employees filed their complaint on December 11, 2009. Cerna’s counsel also
withdrew her pretrial motion to dismiss for lack of jurisdiction after learning that
Cerna was a citizen of North Dakota. The district court, however, made no findings
about where Cerna was a citizen at the time of filing, and in light of the competing



                                          -3-
inferences arising from Cerna’s testimony and the pleadings filed by her counsel, we
cannot resolve this factual question on appeal.

       Accordingly, as in Barclay Square Properties v. Midwest Federal Savings &
Loan Ass’n of Minneapolis, 893 F.2d 968, 969-70 (8th Cir. 1990), we remand this
case to the district court for the purpose of making findings of fact concerning
Cerna’s citizenship. On remand, the district court should determine whether the
parties were completely diverse when the employees filed their complaint and when
MET and Cerna filed the notice of removal. If necessary, the district court may hold
an evidentiary hearing, id. at 970, and receive new evidence. See Jones & Laughlin
Steel Corp. v. Pfeifer, 462 U.S. 523, 551 (1983). If the district court finds that Cerna
was a citizen of Minnesota when the case was filed or removed, such that complete
diversity was lacking, then the court should also determine whether to dismiss her as
a dispensable nondiverse party pursuant to Federal Rule of Civil Procedure 21. See
Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 837-38 (1989). While the
courts of appeals have authority to dismiss such a party, that authority should be
exercised sparingly, and the district court is in a better position to determine whether
such a dismissal would prejudice any of the parties to the litigation. Id.

       For these reasons, we remand the case to the district court, but retain
jurisdiction over the appeal. Once the district court’s supplemental findings are
entered, the clerk should return the case to this panel for disposition of the appeal.
                       ______________________________




                                          -4-
