Jet Midwest International Co. v. Jet Midwest Group, LLC
932 F.3d 1102
| 8th Cir. | 2019Background
- Jet Midwest International (Hong Kong limited company, principal place of business Beijing) sued Jet Midwest Group, LLC (JMG) for breach of a loan agreement; district court granted summary judgment for Jet Midwest International.
- Jet Midwest International moved for attorneys’ fees under §9.2 of the loan agreement; district court denied the fee award and Jet Midwest International appealed.
- JMG challenged subject-matter jurisdiction on appeal, arguing Jet Midwest International had not established its members’ citizenship and that a Hong Kong limited company is not a "corporation" under 28 U.S.C. §1332.
- The Eighth Circuit analyzed whether a Hong Kong limited company is treated as a corporation for diversity purposes and concluded it is equivalent to a U.S. corporation under the Seventh Circuit framework, so complete diversity existed.
- On the fee issue, §9.2 required the borrower to pay "all costs and expenses" for preparing and enforcing the loan documents; the district court read the clause as allowing fees for preparation (capped at $20,000) but not for enforcement.
- The Eighth Circuit reversed the denial of fees, holding the phrase "all costs and expenses" includes attorneys’ fees for enforcement and remanded for calculation of an appropriate award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the court have diversity jurisdiction given Jet Midwest International's foreign form? | Jet Midwest International: a Hong Kong limited company is a corporation for §1332 purposes and thus a citizen of China. | JMG: foreign entity not expressly called a corporation cannot be treated as one; plaintiff failed to establish members’ citizenship. | Held: Hong Kong limited company is equivalent to a U.S. corporation under the Seventh Circuit test; complete diversity exists. |
| How to determine if a foreign entity is a "corporation" under §1332? | Use a functional equivalence test: does the entity have corporate attributes (perpetual existence, ability to issue transferable shares, limited liability, separate personhood)? | JMG: statutory text favors limiting §1332 treatment to entities denominated as corporations. | Held: Adopted Seventh Circuit framework (functional analysis) to treat foreign entities as corporations when equivalent in legally material respects. |
| Whether §9.2's "all costs and expenses" for enforcement includes attorneys’ fees? | Jet Midwest International: broad phrase covers attorneys’ fees for both preparation and enforcement; cap applies only to preparation. | JMG: specific mention of "reasonable fees" in preparation clause but omission in enforcement clause shows parties did not intend to cover enforcement attorneys’ fees. | Held: The phrase "all costs and expenses" should be construed consistently to include attorneys’ fees for enforcement; reversed denial of fees. |
| Role of governing Hong Kong law and prevailing-party fee rules? | Jet Midwest International: parties expected Hong Kong practice (allowing litigation costs) to inform interpretation of costs. | JMG: American Rule applies absent explicit contractual waiver. | Held: Court interpreted contract language (not American vs English Rule) and concluded the contract’s broad language reflects intent to recover enforcement fees; Hong Kong-law choice explained parties’ drafting choices. |
Key Cases Cited
- Slater v. Republic-Vanguard Ins. Co., 650 F.3d 1132 (standard for de novo review of subject-matter jurisdiction)
- OnePoint Solutions, LLC v. Borchert, 486 F.3d 342 (complete diversity rule explanation)
- GMAC Commercial Credit LLC v. Dillard Dep’t Stores, Inc., 357 F.3d 827 (LLC citizenship depends on members)
- Carden v. Arkoma Assocs., 494 U.S. 185 (limitations on corporate treatment under §1332)
- Lear Corp. v. Johnson Elec. Holdings Ltd., 353 F.3d 580 (Seventh Circuit framework for foreign entities)
- BouMatic, LLC v. Idento Operations, BV, 759 F.3d 790 (factors for treating foreign entities as corporations)
- Superl Sequoia Ltd. v. Carlson Co., 615 F.3d 831 (Hong Kong entities "limited by shares" equivalent to U.S. corporations)
- Baltimore Nat. Bank v. State Tax Comm’n of Md., 297 U.S. 209 (construction of the word "all")
- Aromatique, Inc. v. Gold Seal, Inc., 28 F.3d 863 (discussion of American Rule vs. English Rule)