Wilson v. Humphreys (Cayman) Ltd.

Decision Date21 November 1990
Docket Number88-2496,Nos. 88-2495,s. 88-2495
Citation916 F.2d 1239
PartiesDorothy A. WILSON and Louis P. Wilson, Plaintiffs-Appellees, v. HUMPHREYS (CAYMAN) LIMITED, a corporation, and Holiday Inns, Inc., a corporation, Defendants-Appellants.
CourtU.S. Court of Appeals — Seventh Circuit

Robert L. Gibson, Alfred H. Kreckman, Jr., Massey, Anderson & Gibson, Paris, Ill., Phillip A. Terry, McHale, Cook & Welch, Indianapolis, Ind., for plaintiffs-appellees.

James A. McDermott, Jan M. Carroll, Barnes & Thornburg, Indianapolis, Ind., Theodore J. Nowacki, Bose, McKinney & Evans, Indianapolis, Ind., for defendants-appellants.

Before BAUER, Chief Judge, and RIPPLE, Circuit Judge, and WILL, Senior District Judge. *

RIPPLE, Circuit Judge.

Dorothy and Louis Wilson initiated this diversity action in 1986. The Wilsons asserted

                that the two defendants involved in this appeal, together with a third defendant, were liable to them for damages in connection with a serious injury suffered by Mrs. Wilson while staying as a guest in appellant Humphreys' hotel. 1   Humphreys and Holiday Inns moved to dismiss the complaint due to lack of subject matter and personal jurisdiction, and asserted that the forum selected by the plaintiffs violated the doctrine of forum non conveniens.    The district court denied these motions.  Upon application by the appellants, the district court certified the questions of jurisdiction and forum non conveniens to this court on May 25, 1988 (for Humphreys), and July 7, 1988 (for Holiday Inns).  This court accepted the appeal on July 13, 1988.  We now affirm the judgment of the district court in part and remand for further consideration

Humphreys (Cayman) Limited is incorporated under the laws of the Cayman Islands. Humphreys is a licensee of appellant Holiday Inns, Inc. and operates a hotel in the Cayman Islands under authority of that license. Humphreys maintains a corporate office in Memphis, Tennessee and has operated a reservations office in Miami, Florida. Holiday Inns, Inc. is a Tennessee corporation and is registered to do business in Indiana. The record does not reveal the nature or extent of its activities within the state.

Since 1976, Humphreys has participated in a continuing commercial relationship with American Trans Air (American) to provide accommodations for tours run by American to the Cayman Islands. As part of this relationship, Humphreys sent officers to Indianapolis on at least one occasion to meet with representatives of American. During a trip to Indiana in the summer of 1981, Humphreys' representatives negotiated a long-term contract with American by which a certain number of rooms at Humphreys' hotel would be guaranteed at a reduced rate for American-run tours, with American tour leaders receiving free accommodations. American frequently has listed trips to the Cayman Islands in its regular advertising brochures and has included specific references to Humphreys' hotel. In addition, Humphreys advertises extensively in national magazines directed both at travel agents and potential travellers. Humphreys printed rate cards and brochures that it sent for further distribution to American in Indiana and to various travel agents around the country.

Dorothy and Louis Wilson participated in a tour organized by American that left Indianapolis International Airport on October 28, 1984. The group stayed at Humphreys' hotel in the Cayman Islands. According to Mrs. Wilson's affidavit, arrangements for the trip were made as a result of advertisements for the tour that appeared in American's travel bulletin. Arrangements were made with American's tour subsidiary, Ambassadair, and payment was made to Ambassadair in Indianapolis, Indiana.

On October 30, 1984, Mrs. Wilson was assaulted by an intruder in her hotel room. The intruder attempted to rob and rape Mrs. Wilson, and she suffered serious injuries. She spent a week in a hospital on the Cayman Islands and then returned to Indianapolis to be treated at Methodist Hospital.

The complaint contains thirteen counts against the two appellants in this case. The counts charge the appellants with negligence, breach of express and implied warranties, breach of contract, and negligent infliction of emotional distress. The appellants moved to dismiss the complaint on the grounds of lack of subject matter or personal jurisdiction, and forum non conveniens. The district court denied these motions, but subsequently certified them for

interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b). We accepted the appeal and now consider each issue in turn.

A. Subject Matter Jurisdiction

Diversity jurisdiction in this suit is based on 28 U.S.C. Sec. 1332(a)(3), which provides for jurisdiction when the suit is between "citizens of different States and in which citizens or subjects of a foreign state are additional parties." Humphreys argues that the district court cannot exercise subject matter jurisdiction over it because it is a company incorporated in the Cayman Islands, and the Cayman Islands is not a "foreign state." Humphreys reaches this conclusion by noting that the Cayman Islands is a dependency of Great Britain and that the United States does not regard the Cayman Islands as an independent sovereign. See The World Factbook 1989 at 56.

The power to exercise jurisdiction over a foreign citizen under 28 U.S.C. Sec. 1332 has been referred to as "alienage jurisdiction." Sadat v. Mertes, 615 F.2d 1176, 1182 (7th Cir.1980). This type of jurisdiction "was intended to provide the federal courts with a form of protective jurisdiction over matters implicating international relations where the national interest was paramount." Id.

"The dominant considerations which prompted the provision for such jurisdiction appear to have been:

(1) Failure on the part of individual states to give protection to foreigners under treaties; ... [and]

(2) Apprehension of entanglements with other sovereigns that might ensue from failure to treat the legal controversies of aliens on a national level."

Id. (quoting Blair Holdings Corp. v. Rubinstein, 133 F.Supp. 496, 500 (S.D.N.Y.1955)).

Our inquiry therefore must be whether the policies supporting alienage jurisdiction permit a United States District Court to assume jurisdiction over a citizen of the Cayman Islands. 2 The Cayman Islands is a British Dependent Territory. 3 A citizen of a British Dependent Territory is a "citizen of the United Kingdom and Colonies." British Nationality Act 1981 Sec. 51(3)(a)(ii). According to an affidavit of a Cayman Islands attorney submitted by Humphreys, the court system in the Cayman Islands is patterned after that of Great Britain. In addition, "[t]he Common Law of England ... is recognised and applied by the Courts in all cases where there has not been a specific local enactment." Humphreys' App. at 66. The Cayman Islands is administered by a governor who is appointed by the British monarch. The United Kingdom represents Caymanian diplomatic interests and is responsible for its military defense. The World Factbook 1989 at 56.

Several federal courts have determined, although generally without discussion, that subject matter jurisdiction existed in suits between citizens of the United States and Cayman Island corporations. See Bally Export Corp. v. Balicar, Ltd., 804 F.2d 398, 399-400 (7th Cir.1986); Philan Ins. Ltd. v. Frank B. Hall & Co., Inc., 712 F.Supp. 339, 345 (S.D.N.Y.1989); Rolls Royce (Canada) Ltd. v. Cayman Airways, Ltd., 617 F.Supp. 17, 18 (S.D.Fla.1985). In addition, the Second Circuit concluded that alienage jurisdiction existed over a company incorporated in Bermuda, also a British Dependent Territory. Netherlands Shipmortgage Corp. v. Madias, 717 F.2d 731, 735 (2d Cir.1983); see also British Nationality Act 1981, 31 Halsbury's Statutes 172 (4th ed. 1987) (Bermuda identified as a British Dependent Territory).

Humphreys relies on one unpublished district court decision for support of its assertion that alienage jurisdiction does not apply to this case. St. Germain v. West Bay Leasing, Ltd., CV-81-3945, order (E.D.N.Y.1982). That court in fact did conclude that subject matter jurisdiction was lacking when one of the parties was a Cayman Islands corporation. The court relied in part on an earlier decision denying diversity jurisdiction over a business incorporated in Hong Kong, a British colony. Windert Watch Co. v. Remex Elecs. Ltd., 468 F.Supp. 1242 (S.D.N.Y.1979). However, the force of the Windert decision has been eroded by a more recent case from the same court. In Tetra Finance (HK) Ltd. v. Shaheen, 584 F.Supp. 847 (S.D.N.Y.1984), the court noted that corporations should not be denied access to American courts simply because of the status of the country in which they are incorporated. "It would seem hypertechnical to preclude Hong Kong corporations from asserting claims in our courts simply because Hong Kong has not been formally recognized by the United States as a foreign sovereign in its own right." Id. at 848. 4

We agree with the district court that subject matter jurisdiction under section 1332 is present. We see no reason to depart from the weight of authority. Certainly, the exercise of American judicial authority over the citizens of a British Dependent Territory implicates this country's relationship with the United Kingdom--precisely the raison d'etre for applying alienage jurisdiction. Not applying alienage jurisdiction in this case would allow "form rather than substance" to govern. Murarka v. Bachrack Bros., 215 F.2d 547, 552 (2d Cir.1954) (Harlan, J.). 5

B. Personal Jurisdiction

In a diversity case, a federal district court has personal jurisdiction over a nonresident defendant "only if a court of the state in which it sits would have such jurisdiction." Turnock v. Cope, 816 F.2d 332, 334 (7th Cir.1987). Therefore, review of decisions regarding jurisdiction of a ...

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