Appeals court says it can’t rule in South by Southwest case

A federal appeals court said Thursday it cannot rule on a coverage dispute between a Chubb Ltd. unit and the organizer of the South by Southwest festival over a more than $1 million settlement because it is unclear whether it has jurisdiction.

Austin, Texas-based SXSW LLC planned to hold the annual festival in March 2020 in Austin, but the city canceled it because of the COVID-19 pandemic, according to the ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in SXSW LLC v. Federal Insurance Co.

When SXSW refused to refund ticket purchases, a group of would-be festivalgoers sued it in a class action. The lawsuit was settled, with a total litigation cost to SXSW of more than $1 million, according to the ruling.

SXSW sued its insurer, Chubb unit Federal Insurance, for not defending it in the class action. The U.S. District Court in Austin granted the insurer’s motion for summary judgment in the case, and SXSW appealed.

Federal courts have jurisdiction when the parties are citizens of different states.  Although the parties in this case agreed the district court had jurisdiction, “We have an independent obligation to assess subject matter jurisdiction before exercising the judicial power of the United States,” a three-judge appeals court panel said. 

“The parties have not presented sufficient evidence of subject matter jurisdiction,” the panel said, in remanding the case to the district court “for the limited purpose of determining whether jurisdiction exists.”

Attorneys in the case did not respond to requests for comment.