MEMORANDUM AND ORDER
Before this Court is the motion of plaintiff Lloyds Bank Plc ("Lloyds" or "Plaintiff"), pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, for summary judgment against defendant David D. Norkin ("Mr. Norkin") and for partial summary judgment against defendant Friema Norkin ("Ms. Norkin") (the Norkins are collectively referred to as "Defendants") on the first and only count of the Amended Complaint and on the counterclaims asserted by Mr. Norkin. Plaintiff further seeks to limit discovery to the amount recoverable from Ms. Norkin. Defendants oppose Plaintiff's motion on various grounds including, inter alia, lack of subject matter jurisdiction, lack of consideration, inadequate pretrial discovery, and existence of factual disputes. For the reasons set forth below, the Complaint is dismissed for lack of subject matter jurisdiction.
This action is based on personal guarantees of payment made by Defendants to secure a $ 4.45 million loan (the "Loan") from Lloyds to Britestarr Homes, Inc. ("Britestarr"). The Loan was made on September 7, 1988 as part of a larger contemplated financing package to finance the purchase of the Oak Point Rail Yard (the "Rail Yard").
(Mr. Norkin's Rule 3(g) Statement P 1.) The Loan was made pursuant to the terms of a Mortgage Note secured by a Mortgage by Britestarr to Lloyds. (Exs. A and C to Notice of Mot.) In addition, Defendants executed a Guarantee of Payment and Performance (the "Guarantee") also dated September 7, 1988. (Ex. A to Am. Compl.)
According to Mr. Norkin, shortly after Britestarr had purchased the Rail Yard and begun to remove excess landfill, its equipment broke down, preventing removal of debris from the site. Thereafter, the City of New York ordered the site closed until sufficient debris was removed. (Mr. Norkin Aff. in Opp'n P 21.) Mr. Norkin further alleges that in order to comply with the City's order, Britestarr required additional financing. At this point, according to Mr. Norkin, "Lloyds refused to advance additional monies" (id.) and "ultimately refused to consent to [a loan from The Middle East Bank], leaving Britestarr unable to conduct business and to pay Lloyds." (Id. P 22.) It is further alleged that Lloyds "fostered Britestarr's default by not consenting to the mortgage by The Middle East Bank . . . refusing to cooperate in any reasonable way to enable Britestarr to reopen the operation." (Id. P 23.)
It is uncontested that the Loan matured in December, 1989. According to Plaintiff, Britestarr made no Loan payments between August 1, 1989 and November 13, 1989. On November 13, 1989, Plaintiff contends, it sent Britestarr written notice of default. Plaintiff further alleges that the default was never cured. (Pl.'s Rule 3(g) Statement P 19.) In response to Mr. Norkin's allegation that it unreasonably refused to cooperate with The Middle East Bank, Lloyds asserts that The Middle East Bank's loan commitment of January, 1990 was subject to certain conditions, one of which required a statement by Lloyds that the Loan was not in default. (Id. P 22.)
Subject matter jurisdiction is premised on diversity pursuant to 28 U.S.C. § 1332. Plaintiff Lloyds is a foreign banking corporation incorporated under the laws of the United Kingdom, with its principal place of business located at 71 Lombard Street, London. Pursuant to Article 5 of the New York Banking Law,
Lloyds is licensed to (and does) maintain a branch banking office in the City of New York. (Pl.'s Rule 3(g) Statement P 1.) Lloyds' New York branch office does not affect this Court's jurisdictional analysis. "An alien corporation's worldwide principal place of business, and not its principal place of business within the United States is controlling" for jurisdictional purposes. Bailey v. Grand Trunk Lines New England, 805 F.2d 1097, 1101 (2d Cir. 1986), cert. denied, 484 U.S. 826, 98 L. Ed. 2d 54, 108 S. Ct. 94 (1987). Mr. Norkin is a citizen of the State of Connecticut.
Ms. Norkin is a permanent resident alien and a domiciliary of New York.
(Am. Compl. P 3.) It is not disputed that the amount in controversy exceeds $ 50,000, exclusive of interest and costs.
Because Ms. Norkin is a permanent resident of the United States and resides in New York, it is alleged that she is a citizen of New York for purposes of subject matter jurisdiction pursuant to the Judicial Improvements and Access to Justice Act (the "Judicial Improvements Act"). The Judicial Improvements Act amended 28 U.S.C. § 1332(a) (last sentence) to read as follows:
For the purposes of this section, section 1335, and section 1441, an alien admitted to the United States for permanent residence shall be deemed a citizen of the State in which such alien is domiciled.
Ms. Norkin, a signatory to the Guarantee assertedly jointly and severally liable to Lloyds, is not a dispensable party and, therefore, may not be dropped from the action pursuant to Rule 21 of the Federal Rules of Civil Procedure.
Under a literal application of 28 U.S.C. § 1332(a), amended as set forth above, this Court plainly has subject matter jurisdiction: under that section, the action is brought by an alien (Lloyds) against a citizen of Connecticut (Mr. Norkin) and a citizen of New York (Ms. Norkin, by virtue of section 1332(a)), so that complete diversity exists. It is equally plain, however, that prior to the amendment the Court would not have had subject matter jurisdiction, under the rule that "diversity jurisdiction under 28 U.S.C. § 1332 is defeated by the presence of aliens both as plaintiffs and as defendants." IIT v. Vencap, Ltd., 519 F.2d 1001, 1015 (2d Cir. 1975) (citation omitted).
Several commentators, however, have raised the question of the constitutionality of section 1332(a) as amended. Paul M. Bator et al., Hart and Wechsler's The Federal Courts and the Federal System 200 (3d ed. Supp. 1992); Charles A. Wright et al., 13B Federal Practice and Procedure § 3604, at 77 (Supp. 1992); David D. Siegel, Changes in Federal Jurisdiction and Practice under the New Judicial Improvements and Access to Justice Act, E123 F.R.D. 399, 408-09F (1989). One District Court, on the other hand, has found that the constitutionality of section 1332(a) as amended, as applied to facts essentially similar to those presented here--alien plaintiffs against a citizen of a state and permanent resident aliens domiciled in a state--need not be addressed, since Congress did not intend section 1332(a) as amended to apply to such a situation. Arai v. Tachibana, 778 F. Supp. 1535, 1542-43 (D. Haw. 1991).
In view of the questions thus raised and the obligation of federal courts to examine, sua sponte if need be, their subject matter jurisdiction, see Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701, 72 L. Ed. 2d 492, 102 S. Ct. 2099 (1982) and Fed. R. Civ. P. 12(h)(3), the Court, by Memorandum and Order dated October 5, 1992, invited the parties to brief the issue, inter alia, of the constitutionality of the last sentence of section 1332(a) as amended and other issues relevant to subject matter jurisdiction.
The Court now concludes that the question of the constitutionality of the amendment as applied to this case need not be reached, since Congress did not intend the amendment to confer subject matter jurisdiction over an action brought by an alien against a citizen of a state and a permanent resident alien domiciled in a state. Since Congress did not so intend, however, and since established judicial doctrine requires dismissal absent application of the amendment, the action must be dismissed for lack of subject matter jurisdiction.
As background to a consideration of Congress' intent, a brief review of the alienage jurisdiction, the complete diversity rule, and their combination in a line of cases concluding that an action brought by an alien against a citizen of a state and another alien must be dismissed for lack of subject matter jurisdiction, is necessary.
It is clear that Article III of the Constitution does not give Congress the power to grant the federal courts jurisdiction over an action between two aliens. See, e.g., Mossman v. Higginson, 4 U.S. (4 Dall.) 12, 14, 1 L. Ed. 720 (1800) ("the legislative power of conferring jurisdiction on the federal Courts, is, in this respect, confined to suits between citizens and foreigners");
Jackson v. Twentyman, 27 U.S. (2 Pet.) 136, 136, 7 L. Ed. 374 (1829) ("the judicial power was not extended to private suits, in which an alien is a party, unless a citizen be the adverse party");
Joseph Muller Corp. v. Societe Anonyme de Gerance et d' Armement, 451 F.2d 727, 729 (2d Cir. 1971) ("all parties are aliens, and neither the constitutional nor statutory grants of jurisdiction include such a suit"), cert. denied, 406 U.S. 906, 31 L. Ed. 2d 816, 92 S. Ct. 1609 (1972). In Verlinden B.V. v. Central Bank of Nigeria, 647 F.2d 320, 325 (2d Cir. 1981), rev'd on other grounds, 461 U.S. 480, 76 L. Ed. 2d 81, 103 S. Ct. 1962 (1983), the court explained that Article III
provides, inter alia, that the judicial power shall extend to "Controversies . . . between a State, the Citizens thereof, and foreign States, Citizens or Subjects." The phrase nowhere mentions a case between two aliens. Accordingly, Congress is powerless to confer jurisdiction over such suits, at least on the basis of the diversity grant, . . . and Verlinden must look elsewhere in Article III for language to support its suit.