Navigating New Jurisdictional Requirements: The Implications of Markley v. U.S. Bank for Diversity and Supplemental Jurisdiction Practice in the Tenth Circuit

The Implications of Markley v. U.S. Bank

A recent Tenth Circuit Court of Appeals decision will significantly impact federal jurisdiction practice and requires careful consideration by practitioners handling cases with mixed federal and state law claims. The case, Markley v. U.S. Bank National Association, 142 F.4th 732 (10th Cir. 2025), effectively creates new requirements for pleading jurisdiction that fundamentally alter litigation strategy in diversity and supplemental jurisdiction cases.

The Markley Decision: Background and Holding

In Markley, the plaintiff filed a federal lawsuit against his former employer, asserting both federal age discrimination claims under the Age Discrimination in Employment Act (ADEA) and state law wrongful discharge claims under Colorado common law. Following established practice, Markley invoked federal question jurisdiction under 28 U.S.C. § 1331 for his federal claims and supplemental jurisdiction under 28 U.S.C. § 1367 for his related state law claims.

This jurisdictional approach was both permissible and common. Federal courts routinely exercise supplemental jurisdiction over state law claims that form part of the same case or controversy as federal claims. The federal court had apparent authority over both sets of claims at the time of filing.

However, when the district court granted summary judgment in favor of U.S. Bank on the federal ADEA claim, it thus eliminated the basis for federal question jurisdiction. The court exercised its discretion under 28 U.S.C. § 1367(c)(3). It declined to continue exercising supplemental jurisdiction over the remaining state law claims. It dismissed them without prejudice.

When Markley attempted to pursue his state law claims in Colorado state court, U.S. Bank removed the case to federal court and successfully argued that the claims were barred by claim preclusion (res judicata). The Tenth Circuit affirmed this result, holding that Markley’s state law claims were precluded because he could have – but did not – invoke diversity jurisdiction in the original federal lawsuit.

Four Practical Implications for Federal Practice

The Markley decision creates several new considerations that will influence federal litigation practice:

Implication 1: Strategic Pleading of Diversity Jurisdiction

The most immediate consequence is that practitioners can no longer rely solely on supplemental jurisdiction when diversity jurisdiction might be available. Under the Tenth Circuit‘s reasoning, plaintiffs who fail to plead diversity jurisdiction risk having their state law claims permanently barred if the federal court later exercises its discretion to decline supplemental jurisdiction.

This shifts the pleading strategy from optional jurisdictional tools to necessary defensive measures. Attorneys must now anticipate potential jurisdictional scenarios and plead comprehensively, even when additional jurisdictional bases may seem unnecessary at the time of filing.

For example, a business owner suing a corporation for both federal trademark violations and state law tortious interference must now consider invoking diversity jurisdiction to protect the state claims, regardless of whether they prefer to focus the case on federal law or have state law issues decided by state courts.

Implication 2: Enhanced Corporate Disclosure Requirements

Federal Rule of Civil Procedure 7.1 requires parties in diversity cases to disclose “every individual or entity whose citizenship is attributed to that party.” This 2022 amendment was designed to ensure proper diversity analysis, but it has significant implications for business privacy.

Many companies, particularly private entities and LLCs, prefer to maintain confidential ownership structures. Previously, a company could file a lawsuit based solely on federal question jurisdiction with supplemental state law claims without triggering these disclosure requirements.

The Markley decision changes this calculation. Companies with both federal and state law claims, where diversity may exist, must now weigh the benefits of avoiding claim preclusion against the costs of disclosing potentially sensitive ownership information.

Implication 3: Increased Federal Court Caseload

The decision may significantly impact the distribution of cases between federal and state courts. Federal courts are designed to be courts of limited jurisdiction, typically hearing cases involving federal law, diversity of citizenship between state residents, or other specific federal interests.

The Markley approach effectively requires cases with mixed federal and state law issues to proceed in federal court whenever diversity exists. This may reduce the role of state courts in interpreting and applying state law. This affects areas such as employment law, intellectual property disputes, and commercial litigation, where federal and state claims frequently overlap.

Implication 4: Complex Pleading in Multi-Party Litigation

Multi-party litigation presents particular challenges under the Markley framework. Diversity jurisdiction requires complete diversity between all plaintiffs and all defendants. As parties are added, dismissed, or substituted throughout litigation, diversity status can change multiple times.

Consider a patent infringement case where the plaintiff initially sues one defendant (diverse citizenship exists), later adds a non-diverse third-party defendant (diversity destroyed), then that third party is dismissed (diversity restored). Under the Markley logic, counsel may need to amend pleadings repeatedly to maintain diversity jurisdiction allegations, thereby avoiding claim preclusion issues. This could potentially lead to increased litigation costs and procedural complexity.

Doctrinal Considerations

The Markley decision raises several important questions about established legal principles:

Claim Preclusion Analysis: Traditional claim preclusion analysis examines whether substantive claims were or could have been asserted in prior litigation. The Markley decision shifts this analysis to whether jurisdictional theories were adequately pleaded. This change may require practitioners to reassess their approach to claim preclusion defenses and arguments.

Jurisdictional Timing: Federal jurisdiction is typically determined based on allegations at the time of filing. The Markley approach requires retrospective jurisdictional analysis after cases are dismissed, representing a departure from traditional jurisdictional assessment methods.

Discretionary Authority: Congress made supplemental jurisdiction discretionary under 28 U.S.C. § 1367(c), recognizing that district courts need flexibility to manage their dockets while promoting comity with state courts. The Markley rule may limit this discretion by creating consequences for its exercise that extend beyond the immediate case.

Relationship to Supreme Court Precedent

The Markley decision presents an interesting counterpoint to Supreme Court precedent in Carnegie-Mellon University v. Cohill, 484 U.S. 343 (1988), which emphasized that declining supplemental jurisdiction should promote comity with state courts rather than create barriers to state law adjudication.

The Carnegie-Mellon decision recognized concerns about forcing plaintiffs to lose valid claims simply because federal courts exercise lawful discretion, noting that such results “may work injustice to the plaintiff” and “undermine the State’s interest in enforcing its law.” Practitioners should consider how the Tenth Circuit’s approach in Markley relates to these broader principles.

Practical Recommendations

Given the Markley decision’s implications, practitioners should consider several strategic adjustments:

Comprehensive Jurisdictional Pleading: When filing cases with mixed federal and state law claims, carefully analyze whether diversity jurisdiction exists and consider pleading all available jurisdictional bases to ensure a comprehensive approach.

Client Counseling: Discuss with corporate clients the potential disclosure requirements that may result from invoking diversity jurisdiction and weigh these against the risk of claim preclusion.

Case Management: In multi-party litigation, monitor changes in party composition that may affect diversity status and consider whether pleading amendments are necessary to maintain jurisdictional protections.

Appeal Strategy: Consider whether Markley-type issues may arise in pending cases and preserve arguments regarding the relationship between jurisdictional pleading requirements and claim preclusion.

Looking Forward

The Markley decision represents a notable development in federal jurisdiction practice. It is likely to influence litigation strategy in circuits beyond the Tenth Circuit. The decision highlights the intersection between jurisdictional pleading requirements. It also highlights the claim preclusion doctrine in a way that may prompt a broader examination of these issues. The decision affects subject matter jurisdiction and claim preclusion in ways that may influence court workloads and the balance between federal and state judicial authority.

Practitioners must now navigate this evolving area of law while monitoring potential appellate developments that may clarify or modify the Markley approach. The decision underscores the importance of comprehensive jurisdictional analysis and strategic pleading in cases involving both federal and state law claims.