Jpmorgan Chase Bank v. Traffic Stream (Bvi) Infrastructure Ltd.

• Decision Date: 10 June 2002
• Docket Number: No. 01-651.,01-651.
• Citation: 536 U.S. 88
• Parties: JPMORGAN CHASE BANK <I>v.</I> TRAFFIC STREAM (BVI) INFRASTRUCTURE LTD.
• Court: U.S. Supreme Court

Page 88

536 U.S. 88

JPMORGAN CHASE BANKv.

TRAFFIC STREAM (BVI) INFRASTRUCTURE LTD.

No. 01-651.

Supreme Court of the United States.

Argued April 17, 2002.

Decided June 10, 2002.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Respondent Traffic Stream (BVI) Infrastructure Ltd. is a corporation organized under the laws of the British Virgin Islands (BVI), an Overseas Territory of the United Kingdom. In 1998, petitioner, then known as Chase Manhattan Bank, agreed to finance some Traffic Stream ventures, with the contract to be governed by New York law and with Traffic Stream agreeing to submit to the jurisdiction of federal courts in Manhattan. Chase subsequently sued Traffic Stream for defaulting on its obligations. The District Court for the Southern District of New York found subject-matter jurisdiction under the alienage diversity statute, 28 U. S. C. § 1332(a)(2) — which gives district courts jurisdiction over civil actions where the controversy, inter alia, is "between citizens of a State and citizens or subjects of a foreign state" — and granted Chase summary judgment. In reversing, the Second Circuit found that, because Traffic Stream was a citizen of an Overseas Territory and not an independent foreign state, jurisdiction was lacking.

Held: A corporation organized under the laws of the BVI is a "citize[n] or subjec[t] of a foreign state" for the purposes of alienage diversity jurisdiction. Pp. 91-100.

(a) A corporation of a foreign state is deemed that state's subject for jurisdiction purposes. Steamship Co. v. Tugman, 106 U. S. 118, 121. Although Traffic Stream was organized under BVI law and the BVI is unrecognized by the United States Executive Branch as an independent foreign state, this Court has never held that the requisite status as citizen or subject must be held directly from a formally recognized state, as distinct from that state`s legal dependency; and any such distinction would be entirely beside the point of the alienage jurisdiction statute. Pp. 91-92.

(b) The BVI Constitution was established by the Crown of the United Kingdom. The United Kingdom exercises pervasive authority over the BVI, e. g., the Queen may annul any BVI statute and make laws for the BVI. The Crown`s representatives have imposed laws and international obligations on the BVI. In a practical sense, then, the statutes permitting incorporation in the BVI are enacted in the exercise of the United Kingdom`s political authority, and it seems fair to regard a BVI company as a citizen or subject of this ultimate political authority. Pp. 92-94.

(c) Whether, as the Second Circuit posits, the relationship between the United Kingdom and its territories is too attenuated for that state to be viewed as a governing authority for § 1332(a)(2) purposes depends upon the statute`s objective. The state courts' penchant before and after the Revolution to disrupt international relations and discourage foreign investment led directly to the alienage jurisdiction provided by Article III of the Constitution. The First Congress granted federal courts such jurisdiction, and the statute was amended in 1875 to track Article III`s language. The similarity of § 1332(a)(2) to Article III thus bespeaks a shared purpose. The relationship between the BVI's powers over corporations and the sources of those powers in Crown and Parliament places the United Kingdom well within the range of concern that Article III and § 1332(a)(2) address. It exercises ultimate authority over the BVI`s statutory law and responsibility for the BVI`s external relations. Pp. 94-97.

(d) Two flaws defeat Traffic Stream`s alternative argument that, because the United Kingdom does not recognize BVI residents as citizens or subjects, and because corporations are legally nothing more than a collection of shareholders residing in the corporation`s jurisdiction, Traffic Stream is not a citizen or subject under the alienage diversity statute. First, its outdated notion that corporate citizenship derives from natural persons has long since been replaced by the conception of corporations as independent legal entities. Second, it fails to recognize that jurisdictional analysis under United States law is not governed by United Kingdom law. Traffic Stream`s status under United Kingdom law does not disqualify it from being a citizen or subject under the domestic statute at issue. Section 1332(a)(2) has no room for the suggestion that members of a polity, under a sovereign`s authority, do not qualify as "subjects" merely because they enjoy fewer rights than other members do. Because Traffic Stream concedes that BVI citizens are "nationals" of the United Kingdom, it is immaterial that United Kingdom law may provide different rights of abode for individuals in the territories. Pp. 97-99.

251 F. 3d 334, reversed.

SOUTER, J., delivered the opinion for a unanimous Court.

Sarah L. Reid argued the cause for petitioner. With her on the briefs were Joseph N. Froehlich and Edward H. Tillinghast III.

Jeffrey P. Minear argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Olson, Assistant Attorney General McCallum, Deputy Solicitor General Kneedler, Michael Jay Singer, Wendy M. Keats, William Howard Taft IV, James G. Hergen, and John P. Schnitker.

Craig J. Albert argued the cause for respondent. With him on the brief was Lauren K. Kluger.^*

JUSTICE SOUTER delivered the opinion of the Court.

The question here is whether a corporation organized under the laws of the British Virgin Islands is a "citize[n] or subjec[t] of a foreign state" for the purposes of alienage diversity jurisdiction, 28 U. S. C. § 1332(a)(2). We hold that it is.

I

Respondent Traffic Stream (BVI) Infrastructure Ltd. is a corporation organized under the laws of the British Virgin Islands (BVI), an Overseas Territory of the United Kingdom.¹ In 1998, petitioner Chase Manhattan Bank, now JPMorgan Chase Bank, agreed to finance some ventures Traffic Stream had organized to construct and operate toll roads in China, with the parties' contract to "be governed by and construed in accordance with the laws of the State of New York," App. 85a. Traffic Stream agreed to "submi[t] to the jurisdiction" of federal courts in Manhattan, and to "waiv[e] any immunity from [their] jurisdiction." Ibid.

Chase subsequently charged Traffic Stream with defaulting on its obligations. It sued in the United States District Court for the Southern District of New York, which found subject-matter jurisdiction under the alienage diversity statute, 28 U. S. C. § 1332(a)(2), and granted summary judgment to Chase. When Traffic Stream appealed, the United States Court of Appeals for the Second Circuit sua sponte raised the question whether Traffic Stream was a citizen or subject of a foreign state for the purposes of alienage diversity jurisdiction. The court relied on its precedent in Matimak Trading Co. v. Khalily, 118 F. 3d 76 (1997), in answering that because Traffic Stream was a citizen of an Overseas Territory and not an independent foreign state, jurisdiction was lacking. 251 F. 3d 334, 337 (2001). The judgment of the District Court was reversed, and the case ordered to be remanded with instructions to dismiss the complaint. Ibid. Chase was denied rehearing en banc.

Because the Second Circuit`s decision conflicts with those of other Circuits, see Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group Ltd., 181 F. 3d 410, 413 (CA3 1999); Koehler v. Dodwell, 152 F. 3d 304, 308 (CA4 1998); Wilson v. Humphreys (Cayman) Ltd., 916 F. 2d 1239, 1242-1243 (CA7 1990), and implicates serious issues of foreign relations, we granted certiorari, 534 U. S. 1074 (2001). We now reverse.

II

Title 28 U. S. C. § 1332(a)(2) provides district courts with "original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000 ... and is between ... citizens of a State and citizens or subjects of a foreign state." A "corporation of a foreign State is, for purposes of jurisdiction in the courts of the United States, to be deemed, constructively, a citizen or subject of such State." Steamship Co. v. Tugman, 106 U. S. 118, 121 (1882). Cf. Restatement (Third) of Foreign Relations Law of the United States § 213 (1986) ("For purposes of international law, a corporation has the nationality of the state under the laws of which the corporation is organized"). In spite of this general rule of corporate citizenship, this case presents two issues about the application of the statute to Traffic Stream: whether Traffic Stream has been incorporated under the laws of a "foreign state" given the BVI`s status as an Overseas Territory, and whether the BVI`s corporate citizens are "citizens or subjects" within the meaning of § 1332(a)(2).

A

The argument that the status of the BVI renders the statute inapplicable begins by assuming that Traffic Stream, organized under BVI law, must be a citizen or subject of the BVI alone. Since the BVI is a British Overseas Territory, unrecognized by the United States Executive Branch as an independent foreign state, it is supposed to follow that for purposes of alienage jurisdiction Traffic Stream is not a citizen or subject of a "foreign state" within the meaning of § 1332(a)(2).

Even on the assumption, however, that a foreign state must be diplomatically recognized by our own Government to qualify as such under the jurisdictional statute (an issue we need not decide here), we have never held that the requisite status as citizen or subject must be held directly from a formally recognized state, as distinct from such a state`s legal dependency. On the contrary, a consideration of the relationships of the BVI and the recognized state of the United Kingdom convinces us that any such distinction would be entirely beside the point of the statute providing alienage jurisdiction.

The current BVI Constitution was...