Dresser Industries, Inc. Dresser Canada, Inc. v. Underwriters at Lloyd's of London, and Certain London Market Companies Bishopgate Insurance Company, Ltd. Bishopgate Insurance P.L.C. British Law Insurance Company, Ltd. Cornhill Insurance, P.L.C. Dai-Tokyo Insurance Company (u.k.) Limited English & Scottish Maritime & General Insurance Company Ltd. Excess Insurance Company, Limited Hansa Marine Insurance Company (u.k.) Ltd. The Indemnity Marine Assurance Company, Ltd. Insurance Company of North America (u.k.) Limited Icarom P.L.C. (Formerly Known as the Insurance Corporation of Ireland Ltd.) Iron Trades Mutual Insurance Company, Ltd. London & Hull Maritime Insurance Company, Ltd. Minster Insurance Company, Ltd. The National Insurance Company of New Zealand, Limited New Hampshire Insurance Company the Nippon Fire & Marine Insurance Company (Uk) Limited Ocean Marine Insurance Company, Ltd. Pearl Assurance Public Limited Company Phoenix Assurance Public Limited Company Polaris Assurance Provincial Insurance Publi
Docket: 96-1044
Court: Court of Appeals for the Third Circuit; February 5, 1997; Federal Appellate Court
Federal courts have jurisdiction to hear lawsuits involving diverse citizens when aliens are included as both plaintiffs and defendants, as established under 28 U.S.C. 1332(a)(3). This ruling reversed the district court's previous decision. The case involved Dresser Industries, Inc., a Delaware corporation with its primary business in Texas, and its Canadian subsidiary, Dresser Canada, Inc. They filed a suit in the Eastern District of Pennsylvania against various London Market Insurers regarding insurance coverage. Dresser argued for subject matter jurisdiction based on this statute. The London Market Insurers are primarily composed of entities from Lloyd's of London, with one insurer, New Hampshire Insurance Company, being a Pennsylvania corporation with its main business in New York. The dispute centers on seven insurance policies collectively providing $150 million in excess liability coverage, with each policy underwritten by multiple entities assuming varying percentages of the risk, ranging from 0.03% to 5.5%. New Hampshire Insurance Company holds a 0.564% share of one policy, equating to a potential liability of $282,000.
The London Market Insurers filed a motion to dismiss the case, claiming lack of subject matter jurisdiction due to the presence of an alien plaintiff and several alien defendants, which they argued destroyed complete diversity required for federal jurisdiction. The district court agreed with this assessment and dismissed the case, citing previous Circuit interpretations of 28 U.S.C. § 1332(a)(2), which emphasize that complete diversity is necessary for jurisdiction. The court concluded that the reference to aliens as "additional parties" in § 1332(a)(3) was not applicable, as the dispute involved Dresser and Dresser Canada against multiple insurers, with only one being a U.S. citizen and holding minimal exposure (0.564%) in the policies at issue. The appeal followed the district court's dismissal, which was based on § 1332(a)(3) and its interpretation allowing jurisdiction only when aliens are additional parties without limiting language on either side of the controversy. Dresser argued that the absence of limiting language in "additional parties" should grant federal jurisdiction even when aliens are involved on both sides of the dispute.
15 London Market Insurers argues that the statute is ambiguous due to its lack of limitation on "additional parties," which they interpret as potentially allowing aliens on both sides of a controversy. They present two hypothetical interpretations that would clarify the statute if specific language were included. They propose that legislative history should be considered, but the opposing view finds the language of 28 U.S.C. § 1332(a)(3) clear and therefore does not require such consideration. This view is supported by various circuit court decisions affirming jurisdiction exists when diverse citizens are joined with aliens on either or both sides of a dispute. The district court's dismissal, based on the "complete diversity" requirement from Strawbridge v. Curtiss, is contested. It is argued that while Strawbridge requires complete diversity, this requirement is not applicable to the current statute, which allows for minimal diversity as per Article III of the Constitution. The text of § 1332(a)(3) explicitly grants federal jurisdiction over cases involving diverse citizens and aliens, indicating a legislative intent to modify the complete diversity rule established by Strawbridge. The context of the statute’s adoption in 1948, following Strawbridge, supports this interpretation, suggesting Congress was aware of the prior complete diversity requirement when enacting § 1332(a)(3).
Section 1332(a)(3) employs distinct language compared to sections 1332(a)(1) and 1332(a)(2), indicating that "complete diversity" among alien parties is not mandated. Congress, aware of judicial interpretations requiring complete diversity, crafted section 1332(a)(3) to encompass scenarios involving alien parties without imposing the same restrictions as the other sections. Judicial interpretations from various circuits affirm that complete diversity is necessary only for cases between citizens or between aliens and citizens, but not for alien parties on both sides of a dispute. The statutory language of section 1332(a)(2) parallels that of section 1332(a)(1), justifying a consistent application of the complete diversity rule in that context, but not in section 1332(a)(3).
Furthermore, maintaining federal jurisdiction under section 1332(a)(3) when aliens are on both sides aligns with the underlying policy aimed at providing impartial judicial forums free from local biases. Historical commentary underscores that diversity jurisdiction was established to address concerns of potential prejudice, as noted by Chief Justice Marshall in Bank of the United States v. Deveaux. Additionally, alienage jurisdiction is informed by significant foreign policy interests, which are primarily federal concerns.
Denial or perversion of justice by court sentences is recognized as a just cause for war, which necessitates that the federal judiciary has jurisdiction over cases involving foreign citizens. This jurisdiction is crucial for maintaining public faith and tranquility. Alienage jurisdiction addresses national concerns affecting relations with foreign governments. The complete diversity rule stems from concerns of potential bias in state courts against out-of-state parties. This bias is mitigated when both sides involve a party from the forum state. However, in cases involving aliens, the presence of aliens on both sides does not alleviate concerns of bias toward in-state residents.
For example, in a hypothetical case involving a New Yorker and a Lithuanian suing a Texan, if the co-defendant is also a New Yorker, bias concerns for the Texan are reduced. Conversely, if the co-defendant is Lithuanian, the Texan remains concerned about bias. Thus, the principle of complete diversity does not apply equally to alien cases due to persistent fears of favoritism toward in-state residents and continuing international relations concerns.
Although the necessity of diversity jurisdiction has been debated, the need for alienage jurisdiction remains undisputed, as highlighted by legislation in 1978 that preserved alienage provisions even as it proposed abolishing diversity jurisdiction. Given the increasing involvement of U.S. citizens in international transactions, the demand for impartial federal courts persists. The London Market Insurers contend that even if jurisdiction exists under section 1332(a)(3) with aliens on both sides, they cannot be seen as "additional parties" because New Hampshire Insurance holds a minimal stake in the policy. The Insurers argue that the main suit is effectively between Dresser and the alien defendants, with New Hampshire Insurance being merely a nominal party, but this position is rejected.
The London Market Insurers' argument is challenged based on the case L'Europeenne de Banque v. La Republica de Venezuela, where it was held that U.S. citizens must be the "principal adverse parties" under section 1332(a)(3). The court finds this interpretation unsupported, noting that the relevant sections of the statute differ in language and form. It concludes that a legitimate dispute between diverse citizens is sufficient for jurisdiction under 28 U.S.C. 1332(a)(3), emphasizing that U.S. citizens must be meaningfully involved in the controversy, not merely as a formality. The decision of the district court is reversed, with the case remanded for further consideration. Additionally, the legislative history is insufficient to confirm the London Market Insurers' view that section 1332(a)(3) only permits aliens on one side of the dispute. The court recognizes that the legislative intent was to provide a federal forum for diverse citizens, even with alien parties involved on both sides, aligning with the understanding that the statute allows for aliens to be joined on either side of the controversy. The broad language of section 1332(a)(3) supports this interpretation.
