MAZAYA TRADING COMPANY v. The Fung Group, Fung Holdings Limited, Defendants. (2020)

SUMMARY ORDER

Plaintiff-appellant Mazaya Trading Company (“Mazaya”) appeals from the district court's judgment, entered January 27, 2020, dismissing its complaint against defendants-appellees Li & Fung Limited (“L&F”) and Global Brands Group Holding Limited (“GBG”), as well as defendants The Fung Group and Fung Holdings Limited. By decision and order entered January 6, 2020, the district court granted defendants' motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). On appeal, Mazaya argues that the district court erred in holding that it lacked subject matter jurisdiction. We assume the parties' familiarity with the underlying facts, procedural history, and issues on appeal.

BACKGROUND

In a complaint filed September 21, 2018, Mazaya brought claims of common law fraud, negligent misrepresentation, breach of the warranty of merchantability, and breach of the implied covenant of good faith and fair dealing against L&F, GBG, The Fung Group, and Fung Holdings Limited for alleged breaches of a distribution contract for handbags and other accessories. The complaint alleged, and it is undisputed, that: Mazaya is a foreign company incorporated in and with a principal place of business in Beirut, Lebanon, L&F has a principal place of business in Hong Kong, and GBG is incorporated in Bermuda.²

On July 2, 2019, defendants submitted a pre-motion letter seeking leave to file a motion to dismiss, and Mazaya responded to the letter on July 9, 2019. On January 6, 2020 the district court sua sponte converted the pre-motion letter into a Rule 12(b)(1) motion to dismiss and filed a decision and order granting the motion. In its January 6, 2020 decision and order, the district court held that it lacked subject matter jurisdiction under either diversity or federal question jurisdiction. Specifically, the district court held that there was no diversity jurisdiction as there were foreign entities on both sides of the case, and no federal question jurisdiction as Mazaya brought only state law claims. This appeal followed.

DISCUSSION

“In reviewing a district court's determination of whether it has subject matter jurisdiction, we review factual findings for clear error and legal conclusions de novo.” Gualandi v. Adams, 385 F.3d 236, 240 (2d Cir. 2004). Federal courts are courts of limited jurisdiction lacking the power to disregard limits imposed on them by the Constitution or Congress. Platinum-Montaur Life Scis., LLC v. Navidea Biopharmaceuticals, Inc., 943 F.3d 613, 616 (2d Cir. 2019). Among these limits, “[p]erhaps the most important” is subject-matter jurisdiction, with the plaintiff bearing the burden of establishing jurisdiction by a preponderance of the evidence. Id. at 617. Under 28 U.S.C. § 1332, diversity jurisdiction exists where the matter in controversy exceeds $75,000 and the matter is between, inter alia, “citizens of a State and citizens or subjects of a foreign state.” 28 U.S.C. § 1332(a). For diversity purposes, a corporation is considered a citizen of both its state of incorporation and its principal place of business. Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 48 (2d Cir. 2012).

“[D]iversity is lacking ․ where the only parties are foreign entities, or where on one side there are citizens and aliens and on the opposite side there are only aliens.” Universal Licensing Corp. v. Paola del Lungo S.p.A., 293 F.3d 579, 581 (2d Cir. 2002); see also Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 790 (2d Cir. 1980) (“[T]he presence of aliens on two sides of a case destroys diversity jurisdiction.”). Indeed, “even if a corporation organized under the laws of a foreign nation maintains its principal place of business in a State, and is considered a citizen of that State, diversity is nonetheless defeated if another alien party is present on the other side of the litigation.” Int'l Shipping Co. v. Hydra Offshore, Inc., 875 F.2d 388, 391 (2d Cir. 1989). Finally, “a corporation organized under the laws of a foreign nation remains an alien corporation under § 1332, even if its principal place of business is in one of the States.” Id. at 392. Federal question jurisdiction arises only where the complaint “raises issues of federal law.” NASDAQ OMX Grp., Inc. v. UBS Sec., LLC, 770 F.3d 1010, 1018 (2d Cir. 2014) (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)).

Here, Mazaya, the sole plaintiff, is both incorporated in and has its principal place of business in Lebanon. The complaint alleges that GBG is incorporated in Bermuda, and, although it does not identify GBG's principal place of business, defendants contended below that GBG's principal place of business is Hong Kong, which Mazaya did not dispute. With foreign entities on both sides of the litigation, there is no diversity jurisdiction. See Int'l Shipping Co., 875 F.2d at 391. Moreover, Mazaya alleges only state law claims, precluding federal question jurisdiction. See NASDAQ OMX Group, Inc., 770 F.3d at 1018. Accordingly, we conclude that the district court did not err when it dismissed Mazaya's complaint for lack of subject matter jurisdiction.

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We have considered Mazaya's remaining arguments and conclude they are without merit. For the foregoing reasons, we AFFIRM the judgment of the district court.

FOOTNOTES

2.   The complaint further alleged that The Fung Group has a principal place of business in Hong Kong, and Fung Holdings Limited conducts business in New York, but appellees contend that these entities have no legal existence.