Nike, Inc. v. Comercial Iberica De Exclusivas Deportivas, S.A.

• Citation: 20 F.3d 987
• Decision Date: 31 March 1994
• Docket Number: 92-36583,92-35489,Nos. 92-35487,92-35548,s. 92-35487
• Parties: NIKE, INC., an Oregon corporation, Plaintiff-Appellant, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish corporation; S.A. Distribuciones Internacionales, a Spanish corporation; Carlos Rosal Bertrand, Defendants-Appellees. NIKE, INC., an Oregon corporation, Plaintiff-Appellee, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish corporation; S.A. Distribuciones Internacionales, a Spanish corporation; Carlos Rosal Bertrand, et al., Defendants-Appellants. NIKE, INC., an Oregon corporation, Plaintiff-Appellee, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish corporation; S.A. Distribuciones Internacionales, a Spanish corporation; Carlos Rosal Bertrand; Lorenzo Rosal Bertrand; Mario Loscos, Defendants-Appellants. NIKE, INC., an Oregon corporation, Plaintiff-Appellee, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish corporation; S.A. Distribuciones Internacionales, a Spanish corporation; Carlos Rosal Bertrand; Lorenzo Rosal Bertrand; Mario Loscos, Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 987

20 F.3d 987

NIKE, INC., an Oregon corporation, Plaintiff-Appellant, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish

corporation; S.A. Distribuciones Internacionales,

a Spanish corporation; Carlos Rosal

Bertrand, Defendants-Appellees.

NIKE, INC., an Oregon corporation, Plaintiff-Appellee, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish

corporation; S.A. Distribuciones Internacionales,

a Spanish corporation; Carlos Rosal

Bertrand, et al.,

Defendants-Appellants.

NIKE, INC., an Oregon corporation, Plaintiff-Appellee, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish

corporation; S.A. Distribuciones Internacionales, a Spanish

corporation; Carlos Rosal Bertrand; Lorenzo Rosal

Bertrand; Mario Loscos, Defendants-Appellants.

NIKE, INC., an Oregon corporation, Plaintiff-Appellee, v. COMERCIAL IBERICA DE EXCLUSIVAS DEPORTIVAS, S.A., a Spanish

corporation; S.A. Distribuciones Internacionales, a Spanish

corporation; Carlos Rosal Bertrand; Lorenzo Rosal

Bertrand; Mario Loscos, Defendants-Appellants.

Nos. 92-35487, 92-35489, 92-35548, 92-36583.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 31, 1993.

Decided March 31, 1994.

Sean Donahue, Donahue & Associates, Shelley Larkins, John F. McGrory, Jr., Davis Wright Tremaine, Portland, OR, for defendants-appellees-cross-appellants.

Douglas G. Houser, I. Franklin Hunsaker and Stuart D. Jones, Bullivant, Houser, Baily, Pendergrass & Hoffman, Portland, OR, for plaintiff-appellant-cross-appellee.

Appeal from the United States District Court for the District of Oregon.

Before: BROWNING, SCHROEDER and HALL, Circuit Judges.

CYNTHIA HOLCOMB HALL, Circuit Judge:

These consolidated appeals raise numerous challenges to the proceedings before the district court. We do not address most of these claims, however, because we find that the district court lacked subject matter jurisdiction.

I FACTS AND PROCEDURAL HISTORY

This dispute arises from the alleged breach of several contracts between Comercial Iberica de Exclusivas Deportivas, S.A. (Cidesport) and Nike, International, Ltd. (NIL), a wholly owned subsidiary of Nike, Inc. (Nike). ¹ These contracts authorized Cidesport to act as the exclusive distributor of Nike shoes, apparel and bags in several European countries.

Nike brought these claims for breach of contract, fraud and tortious interference with prospective advantage against Cidesport, its parent corporation, and the individual corporate officers of these two corporations (collectively "defendants"). ² Nike claims the district court had jurisdiction over this action pursuant to 28 U.S.C. Sec. 1332(a)(2) because the action was between a "citizen[ ] of a State," Nike, an Oregon corporation with its principal place of business in Beaverton, Oregon, and "citizens or subjects of a foreign state," the defendants, none of whom are United States citizens. NIL, a Bermuda corporation, was not a party to the action, having assigned its claims to Nike just three days before Nike filed its complaint.

Defendants moved to dismiss for lack of subject matter jurisdiction, alleging that NIL had collusively assigned its claims to Nike to create diversity jurisdiction. The district court granted the motion, reasoning that Nike had not overcome the presumption of collusion applicable because NIL is a wholly-owned subsidiary of Nike. Nike successfully sought reconsideration of this decision. To rebut the presumption of collusion, Nike submitted the affidavit of its corporate counsel, Lindsey Stewart. Stewart explained that the assignment occurred because Nike prefers to litigate in Oregon, particularly the United States District Court in Oregon. Nike considers the district court a superior forum because it is more convenient, more expeditious, less expensive and allows Nike to maintain better control over the litigation.

Nike also submitted an affidavit from George Porter, the Vice President of Finance for Nike and NIL. Porter's affidavit reiterated the language of the assignment, claiming that the assignment was made "for good and valuable consideration." Porter also offered additional reasons for the assignment including Nike's preexisting interest in the enforcement of the contract rights; the similar interest of Nike's newly-created, wholly-owned subsidiary that now performs the tasks Cidesport was previously authorized to do; Nike's ultimate entitlement to NIL's profits; and Nike's interest in protecting its trademarks, trade names, business reputation and goodwill.

Nike offered a third affidavit from Philip Knight, the Chief Executive Officer of NIL and Nike. Knight's affidavit reiterated Nike's position that the assignment of claims was made for good business reasons and not for purposes of improper collusion. ³

The district court vacated its earlier decision, finding that Nike had overcome the presumption of collusion by showing that it made the assignment for legitimate business purposes, and reinstated the action. ⁴ In this

appeal, defendants renew their challenge to the district court's jurisdiction.

II STANDARD OF REVIEW

"The existence of subject matter jurisdiction is a question of law, and our review is de novo." Yokeno v. Mafnas, 973 F.2d 803, 806 (9th Cir.1992). "We review the district court's findings of fact relevant to its determination of subject matter jurisdiction for clear error." Id.; see also Syms v. Castleton Indus., Inc., 470 F.2d 1078, 1085 (5th Cir.1972) (applying clear error standard to trial court's finding that assignment was not collusive).

III DISCUSSION

Defendants maintain that the claim assignment from NIL to Nike violates the proscriptions of the federal anti-collusion statute. ⁵ 28 U.S.C. Sec. 1359. Under that statute, "[a] district court shall not have jurisdiction of a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court." 28 U.S.C. Sec. 1359.

A

Before we evaluate this assignment for collusion, we must respond to the district court's suggestion that the assignment did not create jurisdiction. The district court speculated that even if NIL had been a plaintiff in this action, diversity jurisdiction would have existed. If this suggestion is correct, the assignment could not violate the anti-collusion statute regardless of Nike's and NIL's motivation.

We draw no distinction between corporations incorporated in a state of the United States and those incorporated in a foreign country when determining the corporation's citizenship for purposes of diversity jurisdiction. Danjaq, S.A. v. Pathe Communications Corp., 979 F.2d 772, 774 (9th Cir.1992). In each instance, the corporation is deemed a citizen of its place of incorporation and the location of its principal place of business. 28 U.S.C. Sec. 1332(c)(1). Our decision in Mutuelles Unies v. Kroll & Linstrom, 957 F.2d 707 (9th Cir.1992), does not alter this result. In that case, we considered the effect of an individual's potential citizenship in the United States and Ireland and concluded that "[d]ual citizenship ... does not defeat jurisdiction." Mutuelles Unies, 957 F.2d at 711. The distinction between our treatment of individuals and corporations finds its source in the statute establishing diversity jurisdiction. While the statute creates a system of dual citizenship for corporations, see 28 U.S.C. Sec. 1332(c)(1), it contains no indication that we should consider the dual citizenship of an individual for purposes of diversity jurisdiction. Accordingly, we do not. Mutuelles Unies, 957 F.2d at 711.

NIL, however, is a corporation and we cannot disregard either its site of incorporation, Bermuda, or its principal place of business, which Nike alleges is Oregon, ⁶ when testing for complete diversity. In this instance, when we treat NIL as an alien citizen due to its Bermuda incorporation, the requirements of diversity jurisdiction are not met. Although the federal courts have jurisdiction over an action between "citizens of a State and citizens or subjects of a foreign state," 28 U.S.C. Sec. 1332(a)(2), diversity jurisdiction does not encompass a foreign plaintiff suing foreign defendants, Cheng v. Boeing Co., 708 F.2d 1406, 1412 (9th Cir.), cert. denied, 464 U.S. 1017, 104 S.Ct. 549, 78 L.Ed.2d 723 (1983), such as an action between NIL and these alien defendants. Nike's presence as a plaintiff does not salvage jurisdiction because diversity must be complete. See Faysound Ltd. v. United Coconut Chem., Inc., 878 F.2d 290, 294 (9th Cir.1989) (presence of citizen defendant does not save jurisdiction as to alien defendant in action brought by alien plaintiff); cf. Transure, Inc. v. Marsh & McLennan, Inc., 766 F.2d 1297, 1298-99 (9th Cir.1985) (pursuant to Sec. 1332(a)(3) presence of aliens on both sides does not defeat diversity when citizens of United States on both sides who satisfy diversity requirements); 28 U.S.C. Sec. 1332(a)(3) (diversity jurisdiction extends to actions between "citizens of different States and in which citizens or subjects of a foreign state are additional parties").

Moreover, if Nike had filed this suit as the sole plaintiff, it could not have relied on the district court's supplemental jurisdiction to add NIL and NIL's claims. Prior to the assignment, NIL was an indispensable party, see Harrell & Sumner Contracting v. Peabody Peterson, 546 F.2d 1227, 1229 (5th Cir.1977) (joint obligees are indispensable parties to action for enforcement of that obligation), whose presence, as we have just demonstrated, would have defeated diversity. ⁷ Supplemental jurisdiction cannot be used to create jurisdiction over an action that does not satisfy the requirements of the diversity statute. See 28 U.S.C. Sec. 1367(b) (where original jurisdiction founded on diversity supplemental jurisdiction does not extend to claims "by persons proposed to be joined as plaintiffs under Rule 19 ... when exercising supplemental...