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CREACIONES CON IDEA, S.A. v. MASHREQBANK PSC

December 9, 1999

CREACIONES CON IDEA, S.A. DE C.V.; AND IMAGEN TEXTIL Y CONFECCIONES, S.A. DE C.V., PLAINTIFFS,
v.
MASHREQBANK PSC AND MASHREQBANK NEW YORK (FORMERLY BANK OF OMAN LTD.), DEFENDANTS.



The opinion of the court was delivered by: Motley, District Judge.

MEMORANDUM OPINION

Plaintiffs, Creaciones Con Idea, S.A. de C.V. ("Creaciones") and Imagen Textil Y Confecciones, S.A. de C.V. ("Imagen"), filed this action against defendants, Mashreqbank PSC ("Mashreqbank") and Mashreqbank New York ("MNY") on December 31, 1997. Plaintiffs are beneficiaries of two irrevocable letters of credit ("ILC") issued by Mashreqbank. Mashreqbank refused payment on these ILC's due to alleged documentation deficiencies in the payment demands. Plaintiffs brought suit against Mashreqbank, alleging that the refusals constituted breach of contract, fraud and conspiracy to commit fraud. On May 12, 1999, this court granted defendant's pre-answer motion to dismiss as against the fraud and conspiracy claims, finding that these claims were duplicative of the breach of contract claims. Currently before the court is the question of the legitimacy of diversity jurisdiction in this case. The court now finds that the requirements for diversity jurisdiction have not been satisfied, and dismisses the action for lack of subject matter jurisdiction.

I. BACKGROUND

Plaintiffs allege that Creaciones and Imagen are foreign corporations organized under the laws of the principality of Mexico, with offices in Mexico. See Plaintiffs' Compl. ¶ 5,7. According to plaintiffs' complaint, defendant Mashreqbank is a registered commercial bank established under the laws of the United Arab Emirates, with its principal office in Dubai, a city in the United Arab Emirates. See Plaintiffs' Compl. ¶ 9. Plaintiffs further allege that Defendant MNY is the wholly owned branch office of Mashreqbank, organized under the laws of the United States, with its principal office in New York City. See Plaintiffs' Compl. ¶ 10.

Defendants have raised the question of the appropriateness of subject matter jurisdiction in this case due to a lack of diversity of citizenship. Plaintiffs alleged in their complaint that jurisdiction is authorized by Title 28 U.S.C. § 1332 (a)(2) ("Section 1332"), the provision governing diversity jurisdiction in cases involving foreign litigants. Upon examination of the facts and the allegations in plaintiffs' complaint, this court finds that the requirements of Section 1332(a)(2) have not been met, and dismisses the action for lack of subject matter jurisdiction.

II. ANALYSIS

A. Dismissal for Lack of Subject Matter Jurisdiction

Dismissal for lack of subject matter jurisdiction is proper at any stage of trial, regardless of whether a motion has been made by either of the parties. See Alliance of American Insurers v. M. Cuomo, 854 F.2d 591, 605 (2d Cir. 1988) ("The fact that neither party contested the District Court's authority . . . does not act to confer jurisdiction on the Court since a challenge to subject matter jurisdiction cannot be waived and may be raised sua sponte by the district court, or by a federal appellate court."); United Food & Commercial Workers Union, Local 919 v. CenterMark Properties, 30 F.3d 298, 300 (2d Cir. 1994) ("Indeed, our cases make it clear that `[i]t is common ground that in our federal system of limited jurisdiction any party or the court sua sponte, at any stage of the proceedings, may raise the question of whether the court has subject matter jurisdiction.'" quoting Manway Constr. Co. v. Housing Auth. of Hartford, 711 F.2d 501, 503 (2d Cir. 1983)); Fed.R.Civ.P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action.") In examining the issue of subject matter jurisdiction, a court may consider the allegations made in the complaint as well as extrinsic evidence outside of the pleadings. See Transatlantic Marine Claims Agency, Inc., v. Ace Shipping Corp., 109 F.3d 105, 107 (2d Cir. 1997) ("[t]he case law does not limit our right to refer to any material in the record.") If the court ultimately concludes that jurisdiction is lacking, dismissal of the action is mandatory. See United Food & Commercial Workers Union, Local 919, 30 F.3d 298, 300.

B. Diversity Jurisdiction

1. Scope of Diversity Jurisdiction

Pursuant to Title 28 U.S.C. § 1332, federal courts have original jurisdiction in cases involving parties with diverse citizenship. Subsection (a) of Section 1332 outlines the requirements for diversity of citizenship, and reads, in pertinent part:

  `(a) The district courts shall have original
  jurisdiction of all civil actions where the matter in
  controversy exceeds the sum or value of $75,000,
  exclusive of interests and costs, and is between —

`(1) citizens of different States;

    `(2) citizens of a State and citizens or subjects
    of a ...

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