Universal Reinsurance Co. Ltd. v. St. Paul Fire & Marine

• Citation: 224 F.3d 139
• Decision Date: 08 August 2000
• Docket Number: No. 99-9191,99-9191
• Parties: (2nd Cir. 2000) UNIVERSAL REINSURANCE COMPANY, LTD.; HAL FORKUSH and COLIN JAMES, Plaintiffs-Counter-Defendants-Appellants, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Counter-Claimant-Appellee
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 139

224 F.3d 139 (2nd Cir. 2000)

UNIVERSAL REINSURANCE COMPANY, LTD.; HAL FORKUSH and COLIN JAMES, Plaintiffs-Counter-Defendants-Appellants, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Counter-Claimant-Appellee.

No. 99-9191

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued June 5, 2000,

Decided July 20, 2000,

Amended August 8, 2000.

LLOYD De VOS, De Vos & Co., PLLC, New York, New York, for Plaintiffs-Counter-Defendants-Appellants.

LAWRENCE R. SAMUELS, Ross & Hardies, Chicago, Illinois, for Defendant-Counter-Claimant-Appellee.

Before: Before: WINTER, Chief Judge, SACK, Circuit Judge, and HODGES, District Judge.^*

AMENDED OPINION

WINTER, Chief Judge:

This case is the latest in a parade of appeals involving questions of state law only that have proceeded to final judgment on the merits -- often after extensive proceedings -- even though the basis for diversity jurisdiction is either lacking or in considerable doubt. See Franceskin v. Credit Suisse, 214 F.3d 253, 257-59 (2d Cir. 2000) (recounting cases, vacating judgment on claims between aliens, and remanding for determination of defendant's state of incorporation).¹ The instant case has been pending in the district court for almost five years, during which extensive discovery took place and dispositive motions were made. It proceeded to final judgment when Judge Pauley granted appellee's motion for summary judgment. At no time, however, have appellants made allegations or offered evidence sufficient to support diversity jurisdiction. As a result, we remand to the district court for a determination of whether such jurisdiction exists.

DISCUSSION

Appellants Universal Reinsurance Company, LTD., Hal Forkush, and Colin James commenced this litigation in October 1995. They asserted state law claims for breach of a preliminary agreement, confidentiality agreement, and an oral contract. They also asserted claims based on promissory estoppel, theft of trade secrets, and economic duress. Appellee St. Paul Fire and Marine Insurance Co. ("St. Paul") answered with a general denial and asserted state law counterclaims for breach of contract and conversion.

Appellants' amended complaint alleged that Universal was a Bermuda corporation with its principal place of business there, Forkush was a citizen of the United States residing in Bermuda, and that James was a citizen of the United Kingdom. It further alleged that defendant St. Paul was a Minnesota corporation with a principal place of business in that state.² When the litigation commenced, therefore, it purported to be an action by three plaintiffs -- a Bermuda citizen, a United States citizen residing abroad, and a UK citizen -- against a Minnesota citizen. See 28 U.S.C. 1332(c)(1) (providing that corporation is deemed a citizen of its state of incorporation and state in which it has principal place of business); see also FDIC v. Four Star Holding Co., 178 F.3d 97, 100 (2d Cir. 1999) ("'The existence of federal jurisdiction ordinarily depends on the facts as they exist when the complaint is filed . . . .'" (quoting Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830, 104 L. Ed. 2d 893, 109 S. Ct. 2218 (1989)).

Because the claims asserted all arose under state law, the district court had subject matter jurisdiction only if the parties matched a category listed in the diversity statute's jurisdictional grants. In pertinent part, that statute provides as follows:

(a) The district courts shall have original jurisdiction of all civil actions . . . between ------

(1) citizens of different States;

(2) citizens of a State and citizens or subjects of a foreign state;

(3) citizens of different States and in which citizens or subjects of a foreign state are additional parties . . . .

28 U.S.C. 1332(a).

The obstacles to asserting subject matter jurisdiction are twofold. First, under our caselaw, Universal is not a citizen or subject of a "foreign state." Its inclusion as a plaintiff, therefore, was sufficient to destroy diversity jurisdiction. Second, the allegations as to Forkush are not sufficient to establish that he is a citizen of a "State." His inclusion is thus independently fatal to jurisdiction.

In Koehler v. Bank of Bermuda (New York) Ltd., 209 F.3d 130, 138 (2d Cir. 2000), we recently held that an individual citizen of Bermuda and several Bermuda corporations were not "citizens or subjects of a foreign state" for purposes of the diversity statute because the United States does not recognize Bermuda as a foreign state. See also Matimak Trading Co. v. Khalily, 118 F.3d 76, 79-82 (2d Cir. 1997) (holding that Hong Kong corporation was not "citizen or subject of a foreign state" for purposes of diversity statute because U.S. does not recognize Hong Kong as a "foreign state"). Under Koehler, then, Universal is not a citizen of a "foreign state," and this action -- with Universal as a plaintiff -- therefore does not match any of the jurisdictional grants of Section 1332(a) because it is neither an action between "citizens of a State and citizens or subjects of a foreign state" nor one between "citizens of different States . . . in which citizens or subjects of a foreign state are additional parties." 28 U.S.C. 1332(a)(2) & (3). A mandate has not yet issued in Koehler. Were Universal's presence in the action the only bar to asserting diversity jurisdiction, we could hardly fault the plaintiffs for having brought the action in federal court in 1995, some two years before we decided Matimak Trading Co. and more than four years before Koehler. If that were the case, we might simply hold this appeal until the mandate issued in Koehler. But, as mentioned, it is not the only bar.

The other problem with asserting diversity jurisdiction is that appellants have failed to allege that Forkush is a citizen of a particular state. Rather, they have alleged only that he is a citizen of the United States residing in Bermuda. A person is deemed a citizen of the state wherein he or she is domiciled, see Linardos v. Fortuna, 157 F.3d 945, 948 (2d Cir. 1998), and establishing one's domicile in a state generally requires both physical presence there and intent to stay. See 15 Martin H. Redish, Moore's Federal Practice 102.34[2], at 102-64 (3d ed. 2000) ("Domicile generally requires two elements: (1) physical presence in a state and (2) the intent to make the state a home."); see also Linardos, 157 F.3d at 948. Of course, a person may still be domiciled in a state even if a non-resident, so long as he or she has his home there and intends to return. See Linardos, 157 F.3d at 948. However, the allegation as to Forkush's citizenship does not claim that he has his "true fixed home," id., in any one of the United States. Indeed, from the face of the complaint it appears that Forkush's home is in Bermuda.

The failure to allege Forkush's citizenship in a particular state is fatal to diversity jurisdiction. If Forkush is in fact a domiciliary of Bermuda...