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STY-LITE CO. v. EMINENT SPORTSWEAR INC.

September 20, 2000

STY-LITE COMPANY AND EUROTEX (SAIPAN), INC. PLAINTIFFS,
V.
EMINENT SPORTSWEAR INC., CHRISTINA SPORTSWEAR LTD., HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED AND BANK OF CHINA, NEW YORK BRANCH DEFENDANTS.



The opinion of the court was delivered by: Robert L. Carter, District Judge.

  OPINION

Plaintiffs Sty-Lite Company ("Sty-Lite") and Eurotex (Saipan), Inc. ("Eurotex") have instituted this action against defendants Eminent Sportswear Inc. ("Eminent") and Christina Sportswear Ltd. ("Christina") to recover payment for goods delivered. Plaintiffs have instituted this action against defendants Hongkong and Shanghai Banking Corporation Limited ("HSBC") and Bank of China, New York Branch ("Bank of China") for wrongful authorization of delivery of merchandise and for fraudulent misrepresentation. All defendants have moved pursuant to Rule 56, F.R. Civ. P., for summary judgment on the grounds that there are no genuine issues of material fact and that the respective defendants are entitled to judgment as a matter of law.

BACKGROUND

Plaintiff Sty-Lite is a Hong Kong company having its principal place of business in Hong Kong. (Second Amended Compl. ¶ 2). Plaintiff Eurotex is a Saipan corporation with its principal place of business in Saipan.*fn1 (Id. at ¶ 3). Defendants Eminent and Christina are both incorporated under the laws of New York and have places of business in New York. (Pls.' Local Rule 56.1 Stmt. In Resp. To Def. Eminent's & Christina's Stmts., ¶¶ 1-2). Defendant HSBC is a bank licensed under the laws of Hong Kong with its principal place of business in Hong Kong. (Pls.' Local Rule 56.1 Stmt. In Resp. To Def. Banks' Stmts., ¶ 1). HSBC has a branch office in New York, New York. (Id.). The Bank of China is a banking corporation owned by the government of the People's Republic of China and has a branch office located in New York, New York. (Pls.' Local Rule 56.1 Stmt. In Resp. To Addtl. Stmt. By Bank of China, ¶ 1).

The court finds that a detailed exploration into the facts of this matter is unnecessary for the resolution of this motion. A review of certain undisputed facts, however, is required. Plaintiffs manufactured and shipped various articles of women's clothing to Eminent and Christina in New York. (Pls.' Local Rule 56.1 Stmt. In Resp. To Def. Eminent's & Christina's Stmts., ¶ 22). These items were all shipped by Sea-Land Service Inc. ("Sea-Land"). (Pls.' Local Rule 56.1 Stmt. In Resp. To Def. Banks' Stmts., ¶ 13). The clothing arrived in New York without the original bill of lading. Plaintiffs appear to have retained the original bill of lading. (Pls.' Local Rule 56.1 Stmt. In Resp. To Def. Eminent's & Christina's Stmts., ¶ 23). Eminent then contacted HSBC and asked that it issue a letter of indemnity to Sea-Land, requesting that Sea-Land release Eminent's clothing without the bill of lading and indemnifying Sea-Land for any loss it sustained from complying with that request. (Pls.' Local Rule 56.1 Stmt. In Resp. To Def. Banks' Stmts., ¶¶ 6-8). Christina contacted the Bank of China requesting a letter of indemnity asking Sealand to release Christina's merchandise under similar conditions. (Pls.' Local Rule 56.1 Stmt. In Resp. To Addtl. Stmt. By Bank of China, ¶¶ 4-5). HSBC and the Bank of China did issue these letters of indemnity and Sea-Land did release the goods. (Id. at ¶¶ 5-6; Pls.' Local Rule 56.1 Stmt. In Resp. To Def. Banks' Stmts., ¶¶ 7,13). Plaintiffs allege that they never received payment for the clothing.

DISCUSSION

Subject Matter Jurisdiction

The Amended Complaint states that the court has jurisdiction pursuant to 28 U.S.C. § 1332(a). It contains no additional information regarding jurisdiction besides alleging that the matter satisfies the amount in controversy requirement and providing the information outlined above relevant to the citizenship of the parties. None of the parties have addressed the issue of subject matter jurisdiction in greater detail in any of their papers. The court is required to consider jurisdiction and is therefore obligated to raise the issue sua sponte. See Franceskin v. Credit Suisse, 214 F.3d 253, 257 (2d Cir. 2000).

"[T]he courts have regularly found that there is no subject matter jurisdiction over actions brought by an alien against another alien and a citizen of a state." Lloyds Bank PLC v. Norkin, 817 F. Supp. 414, 417 (S.D.N.Y. 1993) (McKenna, J.) (citations omitted) (emphasis in original). Complete diversity is required before federal courts may have subject matter jurisdiction over a case that does not involve a federal question. See Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806), overruled on other grounds, Louisville, Cincinnati & Charleston R.R. Co. v. Letson, 43 U.S. (2 How.) 497, 555, 11 L.Ed. 353 (1844). Having alien parties on both sides of the litigation destroys complete diversity. See Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 790 (2d Cir. 1980).

For purposes of determining diversity, 28 U.S.C. § 1332(c) provides that "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." It establishes a theory of dual citizenship for corporations and if either the corporation's place of incorporation or principal place of business destroys diversity, then the courts will not have diversity jurisdiction.

There has been debate in the Second Circuit as to whether § 1332(c) applies to foreign corporations. Recently, the Court of Appeals had occasion to address this question squarely and answered it in the affirmative. In Franceskin v. Credit Suisse, 214 F.3d 253, the court found that it lacked diversity jurisdiction over a lawsuit brought by a citizen of Venezuela against a bank incorporated in Switzerland. In determining the foreign bank's citizenship, the Franceskin court, 214 F.3d 253, 258, explicitly applied § 1332(c). Since it was undisputed that the bank was incorporated in Switzerland, the court found that it need not decide whether the bank's principal place of business was in New York because under the dual citizenship theory, diversity would be destroyed regardless. See id. It is therefore clear that an alien plaintiff may not obtain diversity jurisdiction in a federal court while suing a company which is either incorporated in a foreign country or has its principal place of business in a foreign country.

Plaintiff Sty-Lite is clearly an alien. The Amended Complaint alleges that Sty-Lite is a citizen of Hong Kong. The status of Eurotex as a citizen of Saipan is less clear. Saipan is a commonwealth "in Political Union with the United States of America." 48 U.S.C. § 1801. The court finds that it is unnecessary, however, to determine whether Eurotex is a foreign plaintiff or a citizen of one of the "States" as defined by 28 U.S.C. § 1332(d). Defendants Eminent and Christina appear to be New York citizens. Regardless of whether Eurotex is an alien or a citizen of a "State" for § 1332 purposes, neither Eurotex nor Sty-Lite are New York citizens. Therefore, diversity would exist if these were the only parties to this action.

The defendant banks' citizenship complicates matters. HSBC is apparently incorporated under the laws of Hong Kong. In addition, it is undisputed that HSBC has its principal place of business in Hong Kong. The fact that it has a branch office in New York and is licensed in New York does not alter this analysis. See Lloyds, 817 F. Supp. 414, 415. For purposes of determining whether diversity exists in this matter, HSBC must be considered an alien.

Furthermore, it is the plaintiff's burden to demonstrate that jurisdiction exists. See Universal Reinsurance Co., Ltd. v. St. Paul Fire and Marine Ins. Co., 224 F.3d 139, 140 (2d Cir. 2000) (remanding the case to the district court to address the question of whether there was diversity jurisdiction where plaintiff failed to properly identify the citizenship of two parties). Part of this burden in a diversity case is alleging the citizenship of all parties. Plaintiffs do not elaborate on the citizenship of the Bank of China. All logical inferences to be drawn from the papers submitted in connection with this motion, however, suggest that the Bank of China is organized under the laws of China and maintains its principal place of business in that country.*fn2 The court therefore assumes that the Bank of ...


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