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Betar v. De Havilland Aircraft of Canada

decided: August 3, 1979.

SAMUEL J. BETAR, PUBLIC ADMINISTRATOR OF COOK COUNTY, AND ADMINISTRATOR OF THE ESTATE OF RAGHUBIR DUTT LAW, DECEASED, PLAINTIFF-APPELLANT,
v.
DE HAVILLAND AIRCRAFT OF CANADA, LTD., A CANADIAN CORPORATION, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 77 C 1912 -- Thomas R. McMillen, Judge.

Before Pell and Bauer, Circuit Judges, and Hoffman, Senior District Judge.*fn*

Author: Pell

The plaintiff, Samuel J. Betar, Public Administrator of Cook County and administrator of the estate of Raghubir Dutt Law, appeals from final orders in the district court denying his motion to remand this cause to the Circuit Court of Cook County, Illinois, and granting the motion of the defendant, De Havilland Aircraft of Canada, Ltd. (Ltd.), to dismiss for lack of personal jurisdiction. The plaintiff argues that the removal of this cause was improper because it is not within the original jurisdiction of the district court, as required by the removal statute, 28 U.S.C. § 1441(a). Specifically, the plaintiff argues that the district court improperly looked to the citizenship of the named fiduciary plaintiff instead of that of the statutory beneficiaries under the Illinois Wrongful Death Act, Ill.Rev.Stat. ch. 70, § 1 Et seq., in determining that it had diversity jurisdiction. The plaintiff also challenges the district court's decision that it did not have personal jurisdiction over the defendant, but, in light of our disposition of the plaintiff's first argument, we do not reach this issue.

The decedent, Raghubir Dutt Law, an Indian national, was killed in 1976 when an airplane manufactured by the defendant crashed in Zambia, Central Africa. On April 27, 1977, the plaintiff was appointed administrator of the estate of the decedent. The record shows no assets in the estate other than the cause of action for wrongful death. On April 28, 1977, the plaintiff filed an action under the Illinois Wrongful Death Act in the Circuit Court of Cook County against the defendant, Ltd., and its subsidiary, De Havilland Canada, Inc., (Inc.), a Delaware corporation with offices in Rosemont, Illinois. On the same day, Crispin Maunder, a British subject injured in the same crash, filed an action in the same court against the same defendants. Ltd. petitioned for removal of both actions to the federal district court for the Northern District of Illinois. Removal was based on diversity of citizenship, Ltd. asserting that Inc. was a "sham" defendant. The plaintiffs joined in the motion to dismiss Inc., leaving Ltd. as the only defendant. Both plaintiffs moved to remand the action to the state court. The Maunder action was remanded on the ground that the court was without jurisdiction, the suit being between aliens: Maunder, a British subject, and Ltd., a Canadian corporation. Basing its determination on the citizenship of the personal representative in the Betar action, the district court concluded that there was diversity between the plaintiff, an Illinois citizen, and the defendant, and denied Betar's motion to remand. The plaintiff, arguing for remand, contends that 28 U.S.C. § 1359 requires that the citizenship of the personal representative be disregarded and that the determination of jurisdiction be based on the citizenship of the Wrongful Death Act beneficiaries, the widow and children of Raghubir Dutt Law, all Indian nationals.

The general rule is that the citizenship of the real party in interest is determinative in deciding whether the district court has diversity jurisdiction.

The citizenship rule testing diversity in terms of the real party in interest is grounded in notions of federalism. It is based upon the principle that a primarily local controversy should be tried in the appropriate state forum and that nominal or formal parties, who do not have a significant interest in the outcome of the litigation, should not be able to use the federal courts.

C. Wright & A. Miller, Federal Practice & Procedure § 1556 at 711. Under Fed.R.Civ.P. 17(a) the plaintiff personal representative would be defined as the "real party in interest" in the sense that the action is properly maintained in his name, without need to join the beneficiaries. This rule, however, is merely procedural and does not extend or limit the subject matter jurisdiction of the district court. Fed.R.Civ.P. 82; Lester v. McFaddon, 415 F.2d 1101, 1105 & n.10 (4th Cir. 1969).

According to the defendant, however, the substantive rule for determining jurisdiction is identical, citing the decision of the Supreme Court in Mecom v. Fitzsimmons Drilling Co., 284 U.S. 183, 52 S. Ct. 84, 76 L. Ed. 233 (1931). In Mecom the plaintiff was an administrator appointed by a state court under the state wrongful death act. The plaintiff-administrator and the defendant were citizens of the same state. The defendant nevertheless attempted to remove the action to federal court on the basis of diversity between the defendant and the statutory beneficiaries under the wrongful death act, arguing that the survivors appointed the administrator for the sole purpose of defeating federal jurisdiction. Noting that state law designated the administrator as named plaintiff in a wrongful death action, the Supreme Court held that the federal court had no jurisdiction because the administrator and the defendant were citizens of the same state. According to the Court, it was "immaterial that the motive for obtaining his appointment and qualification was that he might thus . . . institute an action which could not be . . . removed on the ground of diversity of citizenship." 284 U.S. at 190, 52 S. Ct. at 87. The defendant in the present action argues that Mecom establishes a universal rule directing that the citizenship of an administrator, lawfully appointed by the state court for bringing a wrongful death action, be considered in determining diversity of citizenship jurisdiction. Applying this rule, Betar, the Illinois personal representative, would be considered the real party in interest.

The defendant's reliance on Mecom, however, fails to consider the decision in its proper statutory context and in light of subsequent developments in the law. The effect of the appointment of the personal representative in this case, at least on a prima facie basis, was to create diversity jurisdiction. The effect of the device in Mecom was to defeat jurisdiction. Devices to create federal jurisdiction have historically been limited by statute; devices to defeat jurisdiction have not. See Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 825-26, 89 S. Ct. 1487, 23 L. Ed. 2d 9 (1969). See generally Hart & Wechsler's The Federal Courts and the Federal System at 1100-01 (2d ed. 1973); 3A Moore's Federal Practice P 17.05(2) at 17-40; C. Wright & A. Miller, Federal Practice & Procedure § 1558 (1971). Thus, the plaintiff's argument against the creation of jurisdiction in this case is aided by 28 U.S.C. § 1359, which says:

A district court shall not have jurisdiction of a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court.

The early treatment of court-appointed wrongful death fiduciaries under section 1359 is typified by the literal reading of the statute in Corabi v. Auto Racing, Inc., 264 F.2d 784 (3d Cir. 1959). According to the Corabi rule, a device used to create jurisdiction fell within the prohibition of section 1359 only if the court found an illegal agreement or understanding between opponents. The court interpreted Mecom as making a motive to secure jurisdiction immaterial and not subject to inquiry by the court in the absence of collusion. See also McCoy v. Blakely, 217 F.2d 227 (8th Cir. 1954) (appointment of fiduciary violates statute only if it perpetrates a fraud). See generally C. Wright & A. Miller, Federal Practice & Procedure § 1557 (1971). The Third Circuit, sitting En banc, overruled Corabi in 1968, however, holding that an appointment of a representative with only nominal duties, motivated by a desire to create federal jurisdiction, violated section 1359. McSparren v. Weist, 402 F.2d 867 (3d Cir. 1968), cert. denied, 395 U.S. 903, 89 S. Ct. 1739, 23 L. Ed. 2d 217.

The decision of the Supreme Court in Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 89 S. Ct. 1487, 23 L. Ed. 2d 9 (1969), decided shortly after McSparren, buttresses the ruling in that case. In Kramer the Supreme Court ruled that an assignment of a claim for the sole purpose of creating diversity jurisdiction, although legal under state law, was insufficient under section 1359 to create diversity jurisdiction. According to the Court in Kramer, section 1359 must be read consistently with its broad purpose:

If federal jurisdiction could be created by assignments of this kind, which are easy to arrange and involve few disadvantages for the assignor, then a vast quantity of ordinary contract and tort litigation could be channeled into the federal courts at the will of one of the parties.

394 U.S. at 828-29, 89 S. Ct. at 1490.*fn1 The Court in Kramer expressly reserved decision, however, as to the effect of section 1359 on the appointment of representatives. The Court noted that the appointment of representatives varied in certain respects from assignments without deciding whether the variations were significant to the jurisdictional question. Briefly summarized, the suggested differences were: 1) state wrongful death laws typically require that a representative bring the suit; 2) the powers of representatives ...


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