Vantage Drilling Company v. Hsin-Chi Su
741 F.3d 535
5th Cir.2014Background
- Vantage Drilling Co., incorporated in the Cayman Islands with its principal place of business in Texas, sued former director Hsin‑Chi Su (a Taiwanese citizen) in Texas state court for breach of fiduciary duty, fraud, unjust enrichment, and related claims, seeking damages and an accounting.
- Su removed to federal court invoking diversity jurisdiction under 28 U.S.C. § 1332, asserting Vantage’s Texas principal place of business and that the amount in controversy exceeded the jurisdictional minimum.
- Vantage moved to remand, arguing diversity was destroyed because Vantage is a citizen of a foreign state (Cayman Islands) and Su is an alien, so aliens are on both sides of the litigation.
- The district court denied remand, treating Vantage as effectively Texan despite its foreign incorporation and reasoning the risk of local bias against Su warranted federal jurisdiction.
- The Fifth Circuit granted interlocutory review of the denial of remand and reversed, instructing the district court to remand to state court because complete diversity was lacking (alien plaintiff or alien corporation paired with an alien defendant).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether diversity jurisdiction exists when a corporation is incorporated abroad but has its principal place of business in a U.S. state and the opposing party is an alien | Vantage: Foreign incorporation makes it a citizen of a foreign state under § 1332(c)(1); thus aliens are on both sides and diversity is destroyed | Su: Vantage’s U.S. principal place of business and operations make it effectively U.S. citizen for jurisdictional purposes; federal forum needed to avoid local bias | Held: No diversity — foreign incorporation renders Vantage an alien-corporation citizen; presence of aliens on both sides destroys § 1332(a) jurisdiction |
| Whether the Chick Kam Choo rationale (risk of local bias) is binding so as to permit jurisdiction despite alien-on-alien alignment | Vantage: Chick Kam Choo precludes diversity where aliens are on both sides regardless of practical U.S. ties | Su: Chick Kam Choo’s commentary about remote risk of bias is binding and distinguishes this case because Vantage is locally based and may benefit from state forum | Held: Chick Kam Choo’s holding — not its ancillary discussion about risk of bias — controls; the bias discussion was supplemental dictum and not a basis to create jurisdiction |
| Whether a court may look beyond formal citizenship to a corporation’s ‘dominant’ nationality to permit removal | Vantage: Formal statutory citizenship controls; court should not substitute a ‘dominant nationality’ test | Su: Court may consider predominant reality and risk of prejudice to defendant | Held: Court cannot disregard § 1332(c)(1)’s formal citizenship rules; Congress must change the statute to permit less than complete diversity |
| Whether precedent from other circuits allows treating U.S. principal place of business as overcoming foreign incorporation for diversity | Vantage: Relies on Chick Kam Choo and consistent circuit precedent denying jurisdiction when incorporation abroad creates alien status | Su: Argues policy favors federal forum where practical ties are U.S.-based | Held: Other circuits similarly hold foreign incorporation defeats diversity; policy considerations do not override statutory requirement of complete diversity |
Key Cases Cited
- Chick Kam Choo v. Exxon Corp., 764 F.2d 1148 (5th Cir. 1985) (holding diversity unavailable where alien corporation incorporated abroad has principal place of business in a U.S. state and opposing parties are aliens)
- Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996) (articulating what portions of opinions are binding precedent)
- Peninsula Asset Mgmt. (Cayman) Ltd. v. Hankook Tire Co., 509 F.3d 271 (6th Cir. 2007) (foreign incorporation of plaintiff defeated diversity against fully foreign defendants)
- Universal Licensing Corp. v. Paola del Lungo S.p.A., 293 F.3d 579 (2d Cir. 2002) (foreign incorporation of plaintiff destroyed diversity despite U.S. principal place of business)
- Nike, Inc. v. Comercial Iberica de Exclusivas Deportivas, S.A., 20 F.3d 987 (9th Cir. 1994) (treating foreign incorporation as dispositive for diversity despite U.S. operations)
- Smallwood v. Illinois Central R.R., 385 F.3d 568 (5th Cir. 2004) (discussing limits of district court jurisdiction and diversity principles)