Arai v. Tachibana

• Decision Date: 21 November 1991
• Docket Number: Civ. No. 91-00422 DAE.
• Citation: 778 F. Supp. 1535
• Parties: Yasushi ARAI and Japan Extensive Consulting Office Co., Ltd., Plaintiffs, v. Shigeyuki TACHIBANA, Hawaiian International Sporting Club, Inc., and Toshio Masuda, Defendants.
• Court: U.S. District Court — District of Hawaii

778 F. Supp. 1535

Yasushi ARAI and Japan Extensive Consulting Office Co., Ltd., Plaintiffs, v. Shigeyuki TACHIBANA, Hawaiian International Sporting Club, Inc., and Toshio Masuda, Defendants.

Civ. No. 91-00422 DAE.

United States District Court, D. Hawaii.

November 21, 1991.

McCorriston Miho & Miller, Stephen M. Okano, Jerrold Y. Chun, Lisa M. Ginoza, Honolulu, Hawaii, for plaintiffs.

Gilbert & Jeynes, Davor Z. Pevec, Robert Carson Godbey, Honolulu, Hawaii, for Toshio Masuda.

Gallup & Van Pernis, Mark Van Pernis, Gary W. Vancil, Kailua-Kona, Hawaii, for defendants.

Case & Lynch, Valta A. Cook, Diana L. Van De Car, Ivan M. Torigoe, Hilo, Hawaii, for Shigeyuki Tachibana.

ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS

DAVID A. EZRA, District Judge.

This court heard defendants' motions to dismiss on October 21, 1991. Appearances were made by Mark J. Bennett, Esq. and Jerrold Y. Chun, Esq. on behalf of plaintiffs; Mark Van Pernis, Esq. on behalf of defendant Hawaiian International Sporting Club, Inc.; Nenad Krek, Esq. on behalf of defendant Shigeyuki Tachibana; and Davor Z. Pevec, Esq. and Robert C. Godbey, Esq. on behalf of Toshio Masuda. After reviewing the motions and the supporting and opposing memoranda and hearing oral arguments, the court GRANTS defendants' motions to dismiss.

BACKGROUND

Plaintiff Japan Extensive Consulting Office Co., Ltd. ("Japan ECO") is a Japanese corporation. Plaintiff Yasushi Arai ("Arai") is a citizen of Japan and the majority shareholder of Japan ECO. Defendant Hawaiian International Sporting Club, Inc. ("HISC") is a Hawaii corporation doing business in the State of Hawaii. Defendants Shigeyuki Tachibana ("Tachibana") and Toshio Masuda ("Masuda") are Japanese citizens admitted to permanent residency in the United States and domiciled in the State of Hawaii. Katsuhiko Onishi, Hidenori Onishi, Takio Takahashi, and Takumi Hirai (collectively the "Former Shareholders") are all non-party, Japanese citizens who participated in the contracts in dispute.

On October 19, 1990, Japan ECO entered into a Stock Purchase Agreement ("SPA") with Tachibana and the Former Shareholders whereby Japan ECO would purchase 96,000 shares of HISC common stock. HISC's major asset is the Volcano Golf Course located on the island of Hawaii. Japan ECO has paid $1,021,982.10 to Tachibana and the Former Shareholders pursuant to the SPA. Pursuant to another Stock Purchase Agreement ("Transfer Agreement"), dated April 17, 1991, Tachibana purchased the remaining interests of the Former Shareholders in HISC.

On April 25, 1991, Arai, Japan ECO, Tachibana, Masuda, and HISC entered into a separate Stock Purchase and Promotion Agreement ("Agreement"). This Agreement is the primary contract in dispute in this case. Pursuant to the Agreement, Tachibana agreed to sell 91,200 shares of HISC to Arai and Masuda in return for:

(1) Japan ECO's release of the $1,021,982.10 paid pursuant to the SPA;

(2) 300 million yen to be paid upon execution of the Agreement;

(3) 200 million yen to be paid on May 15, 1991; and

(4) 2,800 million yen payable in ten bimonthly equal installments.

Under the Agreement, Japan ECO agreed to assign all of its interest in the SPA to Arai and Masuda. Also pursuant to the Agreement, HISC authorized Tachibana, Arai, and Masuda to incorporate the Japan Volcano Golf and Country Club, Inc. ("Japan Corporation") in Japan to sell golf memberships in Japan in a golf club that would use the Volcano Golf Course. In accordance with the Agreement, Japan ECO released the $1,021,982.10 to Tachibana, and Arai made timely payments of 300 million and 200 million yen to Tachibana on April 25 and May 15, 1991.

On June 12, 1991, Tachibana's attorney purportedly sent a letter to Arai alleging that Arai and Masuda had breached the Agreement and that the Agreement would be terminated on June 27, 1991 unless Arai and Japan ECO cured their breach by that date. On June 15, 1991, the Japan Corporation allegedly held a special shareholders' meeting which was attended by Tachibana and Masuda. Pursuant to actions taken at the meeting, Tachibana and Masuda dissolved the Japan Corporation on June 24, 1991. As a result, Arai alleges that he was prevented from fulfilling and curing his breaches, if any, under the Agreement.

On July 24, 1991, Japan ECO and Arai filed this action against Tachibana, HISC, and Masuda alleging that Tachibana and Masuda induced them to enter into the Agreement for the purpose of defrauding them of the $1,021,982.10 and the 500 million yen. Plaintiffs also contend that the breaches of the Agreement alleged by Tachibana were induced and orchestrated by Tachibana and Masuda. Plaintiffs assert claims for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, tortious interference with prospective advantage, fraud, securities fraud, conspiracy, and unjust enrichment. Plaintiffs seek declaratory relief, injunctive relief, compensatory damages, punitive damages, rescission of the Agreement, restitution, and attorneys' fees and costs.

On August 15, 1991, HISC filed a motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1). This motion was followed by Masuda's and Tachibana's motions to dismiss on August 30, 1991 and September 20, 1991. Generally, defendants allege that this court does not have subject matter jurisdiction over this case because there is no complete diversity of citizenship of the parties as required by 28 U.S.C. § 1332.

More specifically, defendants contend that dismissal is appropriate because complete diversity is destroyed on the following grounds:

(1) Defendant Masuda, a resident of Hawaii, should be realigned as a party plaintiff;

(2) Plaintiff Japan ECO possesses dual citizenship in Japan and Hawaii;

(3) The Former Shareholders, who are all Japanese citizens, are indispensable defendants; and

(4) Defendants Tachibana and Masuda are Japanese citizens.¹

In addition, as an alternative ground for dismissal, Tachibana asserts that if the court does not dismiss for lack of diversity, then it should abstain from exercising its jurisdiction pursuant to Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976).

DISCUSSION

This is a case of first impression. The principal question to be resolved by this motion is whether there exists complete diversity of citizenship of the parties pursuant to the federal diversity jurisdiction statute.² Plaintiffs contend that a recent amendment to the federal diversity statute abrogates the previous rule which denied alienage jurisdiction in cases involving both alien plaintiffs and alien defendants. Because this court finds that defendants Tachibana and Masuda are Japanese citizens who destroy the complete diversity of parties required for alienage jurisdiction, the court does not address defendants' other grounds for dismissal.

I. General Principles of Alienage Jurisdiction

Section 2 of Article III of the United States Constitution provides in part that the judicial power of the United States shall extend to controversies "between a State, or the Citizens thereof, and foreign States, Citizens or Subjects." This type of federal jurisdiction is commonly referred to as "alienage jurisdiction." One of the fundamental principles of alienage jurisdiction is that the federal judicial power cannot extend to cases involving solely aliens. Hodgson v. Bowerbank, 9 U.S. (5 Cranch) 303, 3 L.Ed. 108 (1809).

Article III requires only minimal diversity among parties to support diversity or alienage jurisdiction. See State Farm Fire & Casualty Co. v. Tashire, 386 U.S. 523, 531, 87 S.Ct. 1199, 1203, 18 L.Ed.2d 270 (1967) (Article III requires only minimal diversity for diversity jurisdiction); Verlinden B. V. v. Central Bank of Nigeria, 461 U.S. 480, 492 n. 18, 103 S.Ct. 1962, 1970 n. 18, 76 L.Ed.2d 81 (1983) (implying that the Constitution only requires minimal diversity for alienage jurisdiction); 1 James W. Moore et al., Moore's Federal Practice ¶ 0.751.-2-3 (2d ed. 1991) (Constitution requires only minimal diversity for alienage jurisdiction). Minimal diversity requires that there be at least one plaintiff and one defendant in the case whose citizenships are diverse; there can be other plaintiffs or defendants in the case which do not meet this jurisdictional criteria. Therefore, alienage jurisdiction is constitutionally permissible as long as there is at least one alien party and at least one state or citizen of a state opposing the alien.

Whereas Article III requires only minimal diversity between parties to support diversity jurisdiction, the federal diversity jurisdiction statute requires complete diversity between parties³—there must be diversity of citizenship between every plaintiff and every defendant.⁴ 28 U.S.C. § 1332(a) (Supp.1991). See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373-74, 98 S.Ct. 2396, 2402, 57 L.Ed.2d 274 (1978); Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). The following court of appeals decisions have extended the complete diversity requirement to alienage jurisdiction. Faysound Ltd. v. United Coconut Chems., 878 F.2d 290, 294 (9th Cir.1989) (citing Cheng v. Boeing Co., 708 F.2d 1406, 1412 (9th Cir.1983), cert. denied, 464 U.S. 1017, 104 S.Ct. 549, 78 L.Ed.2d 723 (1983)); Eze v. Yellow Cab Co. of Alexandria, Va., 782 F.2d 1064, 1065 (D.C.Cir.1986); Giannakos v. M/V Bravo Trader, 762 F.2d 1295, 1298 (5th Cir.1985); Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 789-90 (2d Cir.1980), cert. denied, 449 U.S. 1080, 101 S.Ct. 863, 66 L.Ed.2d 804 (1981); Field v. Volkswagenwerk AG, 626 F.2d 293, 296 (3d Cir.1980).

II. The 1988 Amendment To The Federal Diversity Jurisdiction Statute

In 1988, Congress enacted the Judicial Improvements and Access to Justice Act ("Judicial Improvements Act"). Pub.L. No. 100-702, 102 Stat. 4642 (1988). One of the primary...