When one deletes a schematic diagram and recreates another through a selection with the same name in the same session, the application is creating the new diagram as empty without any elements in it (it should be including the selection).
The Workaround is to close the application before deleting the existing diagram then re-create a new one.Workaround included an extra step (3), if we use this workflow (closing and re-opening the application) then we can successfully create a new diagram. 1. Start ArcMap2. Create a schematic diagram. Once the diagram is created, remove it from ArcMap.3. Close schematic Session4. Open ArcCatalog5. Delete the newly created schematic diagram6. Make a selection set and create another schematic diagram with the same name using default functionality