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KLEIN v. MARRIOTT INTERN.

United States District Court, Southern District of New York


January 20, 1999

JEFFREY D. KLEIN, M.D., BARBI BLAIRE KLEIN, JEFFREY D. KLEIN, M.D. AND BARBI BLAIRE KLEIN AS PARENTS AND NATURAL GUARDIANS OF ALEXANDER BENNETT KLEIN AND IAN DANIEL KLEIN, INFANTS UNDER THE AGE OF FOURTEEN (14) YEARS, BARBARA BLUMBERG, MURREY TARGOWNIK, DAVID WHITAKER AND MARY LOU WHITAKER, FRANK BROOKFIELD, ELEANOR BROOKFIELD AND MICHELLE BROOKFIELD, PLAINTIFFS,
v.
MARRIOTT INTERNATIONAL, INC., MARRIOTT INTERNATIONAL SERVICES, INC. AND MARRIOTT'S CASTLE HARBOUR RESORT, DEFENDANTS.

The opinion of the court was delivered by: William C. Conner, Senior District Judge.

OPINION AND ORDER

In these diversity actions, plaintiffs seek damages for personal injuries allegedly sustained as a result of drinking contaminated water while staying at a hotel in Bermuda. Presently before the Court is defendants' motion to dismiss the respective Complaints pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction. In the alternative, defendants move to dismiss on the ground of forum non conveniens. For the reasons discussed below, defendants' motion is granted.

BACKGROUND*fn1

Defendant Marriott International Services, Ltd. ("Marriott Services"),*fn2 is a corporation organized and existing under the laws of Bermuda, with its principal place of business in Bermuda.*fn3

Marriott Services manages, operates and does business as Marriott's Castle Harbour Resort, a resort hotel in Bermuda.*fn4 Defendant Marriott's Castle Harbour Resort (the "Castle Harbour" or the "Hotel") is not a separate or independent legal entity.

Bermuda Properties Limited ("Bermuda Properties"), a Bermuda corporation not named as a defendant herein, owns the Hotel buildings and land upon which the Hotel is situated.*fn5

Defendant Marriott International, Inc. ("Marriott International"), is a corporation organized and existing under the laws of the State of Delaware. Marriott Services is a wholly owned subsidiary of Marriott International. See Conklin Aff. ¶ 6.

Plaintiffs Jeffrey D. Klein, M.D., Barbi Blaire Klein, Alexander Bennett Klein, Ian Daniel Klein,*fn6 Barbara Blumberg, Murrey Targownik, Frank Brookfield, Eleanor Brookfield and Michelle Brookfield are residents and citizens of the State of New York, and were such at all times relevant to their Complaints.

Plaintiffs David Whitaker and Mary Lou Whitaker are residents and citizens of the State of New Jersey, and were such at all times relevant to their Complaint.

All plaintiffs were guests of the Hotel for different periods of time between February 14, 1998 and February 23, 1998. Plaintiffs claim that during their stay at the Hotel, they ingested contaminated water and became ill as a result. All Complaints allege that this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332 because there is a diversity of citizenship between plaintiffs and defendants and the amounts in controversy exceed $75,000.00 exclusive of interest and costs.

Defendants now move to dismiss these actions for lack of subject matter jurisdiction on the ground that the amounts in controversy do not exceed $75,000, or, in the alternative, pursuant to the doctrine of forum non conveniens.

DISCUSSION

Plaintiffs invoke this Court's diversity jurisdiction under 28 U.S.C. § 1332(a)(3), which provides original jurisdiction over civil actions where the amount in controversy exceeds $75,000, and are between "citizens of different States and in which citizens or subjects of a foreign state are additional parties." The diversity statute must be strictly construed. See Matimak Trading Co. v. Khalily, 118 F.3d 76, 87 (2d Cir. 1997), cert. denied, ___ U.S. ___, 118 S.Ct. 883, 139 L.Ed.2d 871 (1998). Further, when plaintiffs sue more than one defendant in a diversity action, the plaintiffs must meet the requirements of the diversity statute for each defendant or face dismissal. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). Therefore, if a putative U.S. citizen joined as a defendant with foreign defendants pursuant to 28 U.S.C. § 1332(a)(3) is proven to be "stateless," complete diversity is destroyed and the Court must either dismiss the case in its entirety, or dismiss only the nondiverse party if he is dispensable and his dismissal would preserve the court's diversity jurisdiction. See Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989). The same action would be required if the U.S. citizen met the diversity requirement, but the foreign defendants proved not to qualify as "citizens or subjects of a foreign state" within the meaning of 28 U.S.C. § 1332(a)(3).*fn7

Marriott Services (d/b/a the Castle Harbour) is a corporation organized and existing under the laws of Bermuda.*fn8 See Conklin Aff. ¶ 2. "For purposes of diversity jurisdiction, a corporation is a `citizen' or `subject' of the entity under whose sovereignty it is created." See Matimak, 118 F.3d at 79 (citing Nat'l S.S. Co. v. Tugman, 106 U.S. 118, 121, 1 S.Ct. 58, 27 L.Ed. 87 (1882)). Therefore, Marriott Services is a citizen of Bermuda.*fn9 Thus, Marriott Services would be a properly diverse defendant if Bermuda were a "foreign state" within the meaning of 28 U.S.C. § 1332(a)(3).

The general rule, which was adopted by the Second Circuit in Matimak, is that a "foreign state" for purposes of 28 U.S.C. § 1332 is one "formally recognized by the executive branch of the United States government." See Matimak, 118 F.3d at 79.*fn10 Bermuda is a Dependent Territory of the United Kingdom which is not regarded as an independent sovereign nation or foreign state by the U.S. Department of State. See Koehler, 1998 WL 557595, at *6-7. Therefore, Marriott Services is not a "citizen or subject of a foreign state" within the meaning of 28 U.S.C. § 1332(a)(3). See id. (holding that court lacked diversity jurisdiction over Bermuda corporations). In so holding, we agree with the Koehler court that Matimak is the controlling authority in the Second Circuit on this issue,*fn11 and that it is determinative with respect to the exercise of alienage jurisdiction over a Bermuda corporation.

Rule 21 of the Federal Rules of Civil Procedure invests this Court with the authority to dismiss nondiverse dispensable parties in order to preserve diversity jurisdiction. See Newman-Green, 490 U.S. at 832, 109 S.Ct. 2218. However, because these suits cannot proceed without indispensable parties, we must dismiss these cases in their entirety if Marriott Services is indispensable within the meaning of Rule 19(b). See id., 490 U.S. at 838, 109 S.Ct. 2218; Kerr v. Compagnie De Ultramar, 250 F.2d 860, 863 (2d Cir. 1958); Fed.R.Civ.P. 19(b).

Rule 19(b) requires a district court to decide "whether in equity and good conscience" an action should be dismissed because an absent person is "regarded as indispensable." The factors to be considered are:

  first, to what extent a judgment rendered in the
  person's absence might be prejudicial to the person
  or those already parties; second, the extent to
  which, by protective provisions in the judgment, by
  the shaping of relief, or other measures, the
  prejudice can be lessened or avoided; third, whether
  a judgment rendered in the person's absence will be
  adequate; fourth, whether the plaintiff will have an
  adequate remedy if the action is dismissed. . . .

Fed.R.Civ.P. 19(b).

In each of their Complaints, plaintiffs allege, upon information and belief, that Marriott International owned, operated or controlled the Castle Harbour.*fn12 However, from the undisputed affidavits filed in support of the motion, it is clear that (1) the Castle Harbour is managed, operated and controlled by Marriott Services; (2) Bermuda Properties owns the Hotel buildings and land upon which the Hotel is situated; and (3) Marriott Services is a wholly owned subsidiary of Marriott International. The Castle Harbour is neither owned, managed nor operated by Marriott International. Therefore, plaintiffs' only basis for claiming liability with respect to Marriott International is that it, as corporate parent, is vicariously liable for the acts of its wholly owned subsidiary, Marriott Services. However, plaintiffs have asserted no basis for piercing the corporate veil. They have not asserted that Marriott Services would be unable to satisfy a judgment should one be entered against it. Further, plaintiffs will not face a statute of limitations problem should these cases be dismissed, and would be free to join in similar suits brought in New York state and Bermudian courts arising out of the events alleged in their Complaints. Undoubtedly, Marriott Services, against whom the majority of allegations are directed, has the greatest interest in defending against these lawsuits and would be substantially prejudiced were any judgments to be entered in its absence. Moreover, all the defendants named herein (as well as Bermuda Properties though not named as a defendant) have a significant interest in avoiding multiple litigation and inconsistent judgments with respect to the events at issue.

We therefore conclude that plaintiffs' actions must be dismissed because Marriott Services is a nondiverse indispensable party. See Chesco Co. v. Nat'l Gypsum Co., 649 F. Supp. 65 (E.D.N.Y. 1986) (dismissing complaint because Delaware corporation's wholly owned subsidiary was nondiverse indispensable party to suit against Delaware corporation); see also H.D. Corp. of Puerto Rico v. Ford Motor Co., 791 F.2d 987 (1st Cir. 1986) (dismissal of action as to both automobile manufacturer and its wholly owned subsidiary proper where nondiverse defendant manufacturer was indispensable party); Polanco v. H.B. Fuller Co., 941 F. Supp. 1512 (D.Minn. 1996) (nondiverse subsidiary indispensable in suit against parent company on theory imputing conduct of subsidiary to parent). Because plaintiffs' complaints are dismissed for lack of subject matter jurisdiction, we do not reach defendants' arguments with respect to the amounts in controversy or forum non conveniens.

CONCLUSION

For the reasons discussed above, defendants' motion to dismiss pursuant to Rule 12(b)(1) is granted, and all the subject actions are dismissed without prejudice and without costs.

SO ORDERED.


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