United States 2nd Circuit Court of Appeals Reports
KOEHLER v. BANK OF BERMUDA (NEW YORK) LTD., 229 F.3d 187
(2nd Cir. 2000) Lee N. KOEHLER, Plaintiff-Appellant, v. The
BANK OF BERMUDA (NEW YORK) LIMITED, a New York Corporation,
the Bank of Bermuda Limited, a Bermuda Corporation, Reefs
Beach Club Limited, a Bermuda Corporation, and A. David
Dodwell, a Bermuda citizen, No. 98-9624. United States
Court of Appeals, Second Circuit. Argued: August 30, 1999.
Decided: April 10, 2000. On Reconsideration by the Court In
Banc Dissent: September 28, 2000.
A request for a vote as to whether the panel decision
should be reconsidered sua sponte by the Court in banc
having been made by a judge of the Court, and a poll of the
judges in regular active service having been taken, a
majority of the Court has voted not to reconsider the
decision in banc. The mandate shall therefore issue. Judges
Leval, Calabresi and Sotomayor dissent.
Judge CALABRESI dissents in a separate opinion.
SOTOMAYOR, Circuit Judge, with whom Judge LEVAL concurs,
dissenting from the denial of rehearing in banc:
Federal courts may, under their alienage jurisdiction,
hear controversies between “citizens of a State and
citizens or subjects of a foreign state.” 28 U.S.C.
§ 1332(a)(2) (1994). Based upon a prior holding of
this Court in Matimak Trading Co. v. Khalily, 118 F.3d 76
(2d Cir. 1997), cert. denied, 522 U.S. 1091, 118 S.Ct. 883,
139 L.Ed.2d 871 (1998), the panel in this case concluded
that Bermuda corporations and a Bermuda citizen were not
“citizens or subjects of a foreign state,” and, therefore,
that a controversy involving such parties was not within
the alienage jurisdiction of the federal courts. Koehler v.
Bank of Bermuda (New York) Ltd., 209 F.3d 130, 139 (2d Cir.
2000). Because a rehearing in banc would provide a
much-needed opportunity for the full Court to reexamine the
flawed and internationally troublesome position that
corporations and individuals from territories of the United
Kingdom do not fall within the alienage jurisdiction of the
federal courts, I dissent from the denial of the petition
for rehearing in banc.
I.
This is a question of “exceptional importance.”
Fed.R.App.P. 35(a)(2). Its import reaches well beyond our
government, to our relations with foreign nations, and the
access of foreign entities and individuals to the federal
courts. Both the Executive Branch and the government of the
United Kingdom of Great Britain and Northern Ireland have
asked that we reconsider the reasoning we employed in
Matimak. This Circuit’s understanding of the scope of
alienage jurisdiction is squarely in conflict with that of
the other circuit courts that have addressed this question.
When issues of such enduring significance are presented, I
believe that the Court in banc should reexamine the merits
of its conclusion to ensure that substantial numbers of
individuals and corporations are not erroneously deprived
of access to our federal courts.
The defendants in this case include Bermuda corporations
and a Bermuda citizen. Bermuda is not recognized by our
State Department as an independent state. It is, rather, a
“British Overseas Territory.”[fn1] Page 188 Essential to
this case is the fact that despite the myriad ways in which
the United Kingdom exercises dominion over Bermuda, British
law terms Bermudan citizens and corporations “nationals,”
but not “subjects,” of the United Kingdom. See United
Kingdom Government’s Diplomatic Service Procedure Manual,
Vol. 7, Annex 1, Rules 1(b), 2(a) (1996). Previously, this
Court in Matimak held that a corporation organized under
the laws of Hong Kong could not sue New York defendants in
federal court because Hong Kong was, at the time, a
Dependent Territory of the United Kingdom, and therefore
the plaintiff corporation was not a “citizen or subject” of
a foreign “state.”[fn2] Relying on Matimak, the panel here
concluded that Bermuda corporations and a Bermuda citizen
were not “citizens or subjects of a foreign state,” 28
U.S.C. § 1332(a)(2) (1994), and therefore not within
our alienage jurisdiction.
The people of Bermuda would undoubtedly be surprised to
learn that they are “stateless.” But this is precisely the
conclusion upon which these decisions rest. See Matimak,
118 F.3d at 86 (“[Plaintiff-Hong Kong corporation] is thus
stateless. And a stateless person-the proverbial man
without a country-cannot sue a United States citizen under
alienage jurisdiction.”). Having found such entities or
individuals “stateless,” the panels in this case and in
Matimak had no difficulty denying these litigants access to
the federal courts because “[t]he raison d’etre of alienage
jurisdiction is to avoid entanglements with other
sovereigns that might ensue from failure to treat the legal
controversies of aliens on a national level.” Matimak, 118
F.3d at 82 (internal quotation omitted). These panels
implicitly reason that absent a “state,” there is no
sovereign to offend and therefore no cause to provide
federal alienage jurisdiction.
This assurance is undermined by the strong reaction to our
decisions by the United Kingdom.[fn3] Whatever other
intention the panels here and in Matimak may have had,
there can be no doubt that the fundamental purpose of
alienage jurisdiction — to void offense to foreign
nations — is frustrated by the Matimak decision and
its further application by this panel. Paradoxically, Page
189 the country we offend by these holdings is not only a
strong ally, but the very country the drafters of the
alienage jurisdiction provision had in mind more than two
hundred years ago when they sought to open the federal
courts to foreign litigants. See Kevin R. Johnson, Why
Alienage Jurisdiction? Historical Foundations and Modern
Justifications over Disputes Involving Noncitizens, 21 Yale
J. Int’l L. 1, 7-8 (1996) (noting the failure of state
courts to enforce debts owed to British creditors following
the Revolutionary War).
This Court, in Matimak, attempted to shift responsibility
for the disturbing consequences of its reasoning to the
Executive Branch. Because the Department of State maintains
that British Overseas Territories are not independent
“states,” the Matimak court reasoned that it was forced to
conclude that Bermuda corporations were stateless. See
Matimak, 118 F.3d at 83 (commenting that “it is for the
Executive Branch, not the courts, to anticipate where
potential `entanglements’ with such entities are
appreciable enough to recognize sovereign status”). The
Executive Branch, however, has urged us not to use the
definition of “statehood” taken from the context of
diplomatic recognition as a basis for denying British
Overseas Territories the benefit of federal alienage
jurisdiction. The Executive Branch has emphasized that to
do so may cause the United States to “face an international
controversy with British authorities for failure to provide
a neutral forum” for individuals or corporations of a
British Overseas Territory in federal court. Brief Amicus
Curiae for the United States at 8, Matimak Trading Co. v.
Khalily (96-9117).
Our Circuit is alone in concluding that federal alienage
jurisdiction does not extend to citizens and corporations
of British Overseas Territories. The Third Circuit, largely
out of deference to the Executive Branch’s position that
Hong Kong corporations were considered, at the time,
“subject to British sovereignty,” found that they fell
within the federal courts’ alienage jurisdiction. Southern
Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group
Ltd., 181 F.3d 410, 413 (3rd Cir. 1999). The Seventh
Circuit has held that a Cayman Islands corporation could be
sued in federal court under alienage jurisdiction,
explaining that, “[c]ertainly, the exercise of American
judicial authority over the citizens of a British Dependent
Territory implicates this country’s relationship with the
United Kingdom-precisely the raison d’etre for applying
alienage jurisdiction.” Wilson v. Humphreys (Cayman) Ltd.,
916 F.2d 1239, 1243 (7th Cir. 1990), cert. denied, 499 U.S.
947, 111 S.Ct. 1415, 113 L.Ed.2d 468 (1991). The Fourth
Circuit, without discussion of the issue, has found that a
Bermuda resident-apparently the same individual defendant
sued in this case — was a “citizen” or “subject” of
a foreign state for alienage jurisdiction purposes. Koehler
v. Dodwell, 152 F.3d 304, 308 (4th Cir. 1998).
Owing to the fact that our characterization of corporations
and citizens of British Overseas Territories as “stateless”
has given rise to precisely the sort of damage to foreign
relations the statute was meant to avoid, it is
questionable that this distinction has its origins in the
statute. Nor is this dubious characterization imposed upon
us by the Executive Branch, which has advocated a contrary
rule. Neither has this distinction been accepted by our
sister circuits. Moreover, this Circuit has previously
concluded, albeit without discussion, that “[t]here is no
question” that alienage jurisdiction existed between
citizens of the United States and a Bermuda corporation.
Netherlands Shipmortgage Corp. v. Madias, 717 F.2d 731, 735
(2d Cir. 1983). Finally, two respected senior circuit
judges from the panel in this case, Judge Jon O. Newman and
Judge Richard J. Cardamone, have expressed disagreement
with the merits of our precedent in Matimak. See Koehler v.
Bank of Bermuda (New York) Ltd., 209 F.3d 130, ___ n. ___
(2d Cir. 2000). All this being the case, it seems Page
190 incumbent upon us, as a full Court, to reexamine the
basis upon which our panels both here and in Matimak
reached their conclusions.
II.
An examination of the merits leads to the conclusion that
Matimak misapplied the terms “citizens or subjects of a
foreign state” in a fashion inconsistent with both the
historical understanding of these terms and a contemporary
understanding of the relationship between the United
Kingdom and its Overseas Territories.
The panel in Matimak began its analysis with the
unremarkable proposition that “a foreign state is entitled
to define who are its citizens or subjects.” Matimak, 118
F.3d at 85 (citing, inter alia, United States v. Wong Kim
Ark, 169 U.S. 649, 18 S.Ct. 456, 42 L.Ed. 890 (1898)). The
court then concluded that a British Overseas Territory
corporation did not fall within the scope of alienage
jurisdiction because British law did not designate the
corporation a “citizen” or “subject” of the United Kingdom
or indicate that the corporation was under the control of
the United Kingdom. Matimak, 118 F.3d at 85-86.[fn4]
None would argue with the notion that a foreign state is
entitled to define what persons or entities fall into its
categories of “citizen” or “subject,” or any other of a
variety of legal forms that exist under its own domestic
immigration, nationality, and commercial law. The domestic
meaning that any particular country may give to the terms
“citizen” or “subject” does not, however, bind our courts
in determining whether an individual or entity falls within
the statutory meaning of such terms as provided by our law
of alienage jurisdiction. The wide disparity in meaning
that exists among countries concerning such terms requires
that our alienage jurisdiction be determined not according
to the appearance of the words “citizen” or “subject” (or
translation thereof) in the pages of a country’s domestic
code, but according to whether United States law deems such
persons or entities to be “citizens or subjects” under our
Constitution and statutes for the purpose of alienage
jurisdiction. To proceed otherwise would be to “allow
foreign law to deny privileges afforded under the
Constitution . . . [and perhaps] unintentionally promote
discrimination against certain classes of people or
entities.” Matimak, 118 F.3d at 89-90 (Altimari, J.,
dissenting).[fn5] Page 191
As an historical matter, the drafters of the Constitution
chose the words “citizens” or “subjects” to refer to the
broad category of those under the authority of a foreign
power. See Bank of the United States v. Deveaux, 9 U.S. (5
Cranch) 61, 87, 3 L.Ed. 38 (1809) (Marshall, C.J.)
(recognizing that the Constitution “established national
tribunals for the decision of controversies between aliens
and a citizen [of the United States]”), overruled in part
on other grounds by Louisville, Cincinnati & Charleston R.
Co. v. Letson, 43 U.S. (2 How.) 497, 11 L.Ed. 353 (1844).
The Judiciary Act of 1789 used the word “alien” apparently
as an equivalent term to “citizens” or “subjects” in the
first rendering of the statutory grant of authority to
exercise federal alienage jurisdiction. Compare U.S. Const.
art. III, sec. 2, cl. 1 (extending jurisdiction to
controversies “between a State, or the Citizens thereof,
and foreign States, Citizens or Subjects”) with Judiciary
Act of 1789, ch. 20, § 11, 1 Stat. 73, 78 (extending
jurisdiction to suits in which “an alien is a party”).[fn6]
Oliver Ellsworth, the principal architect of the Judiciary
Act of 1789 that contained the alienage jurisdiction
provision, referred to the need to provide a federal forum
for controversies between United States citizens and
“foreigners.” See Charles Warren, New Light on the History
of the Federal Judiciary Act of 1789, 37 Harv. L. Rev. 49,
60 (1932) (quoting Letter of Oliver Ellsworth to Judge
Richard Law, Apr. 30, 1789). “[T]he Framers often referred
to [non-U.S.] citizens, subjects and foreigners
interchangeably,” and “while foreign modes of government
are hardly `technicalities’ in any other sense, the Framers
apparently did not consider them relevant to the exercise
of federal jurisdiction.” Southern Cross Overseas, 181 F.3d
at 416 (internal quotation marks and citations
omitted).[fn7]
In 1875, the alienage jurisdiction provision was amended,
replacing the term “alien” with the current reference to
“citizens” or “subjects.” Act of Mar. 3, 1875, 18 Stat. 470,
470. This change, causing the statute to mirror the
language of the Constitution, was motivated by the need to
clarify that an alien could not sue another alien in
federal court, and not from dissatisfaction with the
original statutory term “alien” as impermissibly broader
than the terms “citizens” or “subjects” found in the
Constitution. See Johnson, 21 Yale J. Int’l L. at 21.
Although early cases did not explore the precise boundaries
of the terms “citizen” and “subject” as used in alienage
jurisdiction, Page 192 the Supreme Court did have the
opportunity to interpret these same terms in other
contexts. Their general use confirmed that these terms
referred to a range of relationships characterized by the
acceptance of the authority and protection of a sovereign
and an offer of allegiance. In 1830, Justice Story,
addressing the issue of United States citizenship for
expatriates noted that “[t]he rule commonly laid down in
the books is, that every person who is born within the
ligeance of a sovereign is a subject; and, e converso, that
every person born without such allegiance is an alien.”
Inglis v. Trustees of Sailor’s Snug Harbor, 28 U.S. (3
Pet.) 99, 155, 7 L.Ed. 617 (1830) (Story, J).[fn8] In
construing the terms of the Spanish Treaty of 1795, the
Supreme Court in The Pizarro, 15 U.S. (2 Wheat) 227, 4
L.Ed. 226 (1817), rejected the claim that the term
“subject” in the treaty applied “only to persons who, by
birth or naturalization owe a permanent allegiance to the
Spanish government,” holding more simply that, “in the
language of the law of nations . . . a person domiciled in
a country, and enjoying the protection of its sovereign, is
deemed a subject of that country.” Id., 15 U.S. (2 Wheat.)
at 245-46.
It has long been established that “a corporation created by
the laws of a foreign state may, for the purposes of suing
and being sued in the courts of the Union, be treated as a
`citizen’ or `subject’ of such a foreign state.” National
Steamship Co. v. Tugman, 106 U.S. 118, 121, 1 S.Ct. 58, 27
L.Ed. 87 (1882). The defendant-Bermuda corporations in this
suit were created under the laws of two different
countries-Bermuda and the United Kingdom-but under the laws
of only one recognized “state,” the United Kingdom.[fn9]
While the Bermuda’s Companies Act of 1981 provides
procedures for incorporating companies in Bermuda, 6
Revised Laws of Bermuda, Title 17, Item 5, Part II (1989 &
Update 1996), Bermuda and its government exist “under the
sovereignty of the Crown.” 6 Halsbury’s Laws of England,
para. 803 (4th ed. reissue, 1992).[fn10] All authority to
make laws for the “peace, order, welfare and good
government” of Bermuda is granted to the Bermuda
legislature solely by the United Kingdom, which regulates
Bermuda lawmaking. Id. at para. 1027.[fn11]
Despite this, the panel in this case stated simply that
“[b]ecause Bermuda is also Page 193 a British Dependent
Territory, Matimak governs . . . [and t]he district court
therefore lacked subject matter jurisdiction over the state
law claims against the Bermuda defendants.” Koehler, 209
F.3d at 139. In such cases, when our Department of State
determines that a country is not a sovereign state, the
more reasonable conclusion is not that its corporations
are “stateless,” but rather that they are subject to some
other sovereign. Dependent upon the law of the United
Kingdom, Bermuda corporations exist under the sovereignty
of the United Kingdom. They are, for purposes of 28 U.S.C.
§ 1332(a)(2), “subjects” of the United
Kingdom.[fn12]
The people of Bermuda, because they live under the
sovereignty of the United Kingdom, are “citizens or
subjects” of the United Kingdom for purposes of alienage
jurisdiction. The individual defendant in this case, like
other Bermudians, is a national of the United Kingdom for
purposes of its own laws. The status of being a “national”
of the United Kingdom, conferred by virtue of birth in a
British Overseas Territory, fits comfortably within the
original meaning of “citizen” or “subject” for the purposes
of alienage jurisdiction. The United Kingdom continues to
function as sovereign over Bermuda, ruling over its
affairs, protecting it, and enjoying the allegiance of its
citizens. The narrowness with which the panels in this case
and in Matimak attempted to apply the terms “citizen” and
“subject” is uncharacteristic of the history of their use
and the principles underlying their adoption.[fn13]
CONCLUSION
Alienage jurisdiction was established by our Constitution
and early statutes to strengthen our relations-particularly
our commercial relations — with foreign nations. The
importance of these goals has only increased with time as
both international relations and global trade have become
more complex and our nation has assumed a central role in
both. Having deprived a considerable number of foreign
entities and individuals of an opportunity to adjudicate
their claims in a federal forum, the full Court should
consider whether the reasoning of the panels here and in
Matimak is sound. Because these panel decisions have caused
a clear split in authority Page 194 with the other circuit
courts, and in light of the potential damage to relations
between the United States and the United Kingdom and other
nations, it can only be hoped that the Supreme Court
chooses to address the resolution of this issue
expeditiously.
[fn1] The British Overseas Territories (also referred to as
“Dependent Territories”) include Anguilla, Bermuda, British
Indian Ocean Territory, the British Virgin Islands, the
Cayman Islands, the Falkland Islands, Gibralter,
Montserrat, the Pitcairn Islands, Saint Helena and
dependencies, South Georgia and the South Sandwich Islands,
and the Turks and Caicos Islands. See Brief Amicus Curiae
of the Government of the United Kingdom of Great Britain
and Northern Ireland in Support of Matimak Trading Co. as
Petitioner for Writ of Certiorari at 6 n. 5, Matimak
Trading Co. v. Khalily (97-893) (hereinafter U.K. Matimak
Brief).
Some of the British Overseas Territories have become
important commercial centers. As of 1997, 563 banks and
34,169 other companies were incorporated in the Cayman
Islands, at least 8,224 businesses were incorporated in
Bermuda, at least 100,000 companies were incorporated in
the British Virgin Islands, and 12,911 companies were
incorporated in the Turks and Caicos. See id. at 10-11.
Several of these territories, including the Cayman Islands
and Bermuda, are considered significant tax havens. See
Mark Baker, Lost in the Judicial Wilderness: The Stateless
Corporation After Matimak Trading, 19 Nw. J. Int’l L. &
Bus. 130, 132 n. 8 (1998) (noting that the holding in
Matimak adds an “element of unpredictability” to the world
of tax structuring).
[fn2] The Matimak decision has been extensively criticized
by commentators. See III Finance Ltd. v. Aegis Consumer
Funding Group, Inc., No. 99 Civ. 2579, 1999 WL 1080371, at
*2 (S.D.N.Y. Nov. 30, 1999) (collecting sources).
[fn3] See U.K. Matimak Brief at 9 (“The United Kingdom is
keenly concerned that the citizens and corporations of its
Dependent Territories be able to bring and defend suits in
neutral foreign fora concerning their global commerce.”);
Brief Amicus Curiae of the Government of the United Kingdom
of Great Britain and Northern Ireland in Support of
Appellant at 2, III Finance Ltd. v. Aegis Consumer Funding
Group (No. 00-7016) (hereinafter U.K. Aegis Brief) (“The
United Kingdom Government submits that it would not be in
the interest of its trading relationship with the United
States for the corporations of the United Kingdom Overseas
Territories to be excluded from United States federal
courts.”); Diplomatic Note No. 13/2000 from the British
Embassy in Washington, D.C. to the United States Department
of State, Feb. 2, 2000 at 1 (“The United Kingdom [] views
with great concern the potential application of the Matimak
rationale to individual Overseas Territories residents, as
well as to commercial enterprises.”).
[fn4] Aside from the substantial authority cited for the
proposition that a foreign state determines its own
citizenship and nationality law, and for the relationship
between the terms “citizen” and “subject,” the Matimak
opinion contains little authority to support its analysis
of the “citizenship” or “subjecthood” of corporations in
British Overseas Territories. See Matimak, 118 F.3d at
85-86. One unpublished district court opinion is cited to
support the suggestion that the corporate law of the Cayman
Islands, another British Overseas Territory, is “clearly
independent from the United Kingdom’s [law].” See id. at 86
(citing St. Germain v. West Bay Leasing, Ltd., No.
81-CV-3945 (E.D.N.Y. Sept. 30, 1982)). Another district
court opinion from 1979 is cited to argue that corporations
formed in Hong Kong were not given the benefit of British
nationality. See id. (citing Windert Watch Co. v. Remex
Elecs. Ltd., 468 F.Supp. 1242 (S.D.N.Y. 1979)). Although
the Matimak opinion cites also to a leading treatise, the
same treatise currently reaches the opposite conclusion
from the panel. See 15 James Wm. Moore, et al., Moore’s
Federal Practice § 102.76 (3d ed., 1999) (“A citizen
of a British dependent territory is deemed to be a citizen
of the United Kingdom and its Overseas Territory.
Consequently, federal courts may properly invoke diversity
jurisdiction over suits in which a citizen of the Cayman
Islands or Bermuda is a party.”).
The cases cited by the Matimak court in support of the
proposition that a stateless person cannot sue a United
States citizen in federal court regard an individual whose
citizenship has been revoked by a sovereign and nowhere
suggest that a British Overseas Territory’s people or
corporations could exist in a condition of perpetual
statelessness. See Matimak, 118 F.3d at 86.
[fn5] This task is analogous to that of deciding the state
of domicile of a party in a diversity action in federal
court. See 28 U.S.C. § 1332(a)(1) (1994) (providing
federal jurisdiction for suits between “citizens of
different States”). While a court may look to state law
definitions of domicile and state citizenship for guidance,
“[d]etermination of a litigant’s state of domicile for
purposes of diversity is controlled by federal common law,
not by the law of any state.” 15 James Wm. Moore, et. al.,
Moore’s Federal Practice § 102.34[3][a] (3d ed.,
1997).
[fn6] The legislative debates concerning the Judiciary Act
of 1789 referred to the alienage jurisdiction provision as
providing access to the federal courts for “foreigners” or
“aliens.” See 1 Annals of Congress (1st Cong.) 810, 814,
825 (Joseph Gales ed., 1834) (House debates).
[fn7] At the time the Constitution was written and the
first alienage jurisdiction statute was enacted, the term
“subject” referred to a person who lived under the control
of another. See Samuel Johnson, A Dictionary of the English
Language (1755) (defining a “subject” as “[o]ne who lives
under the dominion of another”). See also 2 Noah Webster,
American Dictionary of the English Language at 84 (1st ed.,
1828; facsimile ed. Foundation for American Christian
Education 1985) (defining a “subject” as “[o]ne that owes
allegiance to a sovereign and is governed by his laws. The
natives of Great Britain are subjects of the British
government. The natives of the United States, and
naturalized foreigners, are subjects of the federal
government. Men in free governments are subjects as well as
citizens; as citizens, they enjoy rights and franchises; as
subjects, they are bound to obey the laws.”) (emphasis in
original); 2 James Kent, Commentaries on American Law 258
n.b (6th ed., 1848) (“Subject and citizen are, in a degree,
convertible terms as applied to natives; and though the
term citizen seems to be appropriate to republican freemen,
yet we are equally with the inhabitants of all other
countries, subjects, for we are equally bound by allegiance
and subjection to the government and law of the land.”)
(emphasis in original).
[fn8] Justice Story continued, “[t]wo things usually concur
to create citizenship; first, birth locally within the
dominions of the sovereign; and secondly, birth within the
protection and obedience, or in other words, within the
ligeance of the sovereign. That is, the party must be born
within a place where the sovereign is at the time in full
possession and exercise of his power, and the party must
also at his birth derive protection from, and consequently
owe obedience or allegiance to the sovereign, as such, de
facto.” Inglis, 28 U.S. (3 Pet.) at 155.
[fn9] The characterization of such corporations as
“stateless” by the Matimak court is particularly jarring
considering that corporations are creations purely of law,
and, unlike individuals, exist only through an exercise of
sovereignty. See Matimak, 118 F.3d at 89 (Altimari, J.,
dissenting) (“A stateless corporation is an oxymoron.”).
[fn10] Similarly, a corporation formed under the local
Company law of Northern Ireland is not a “British” company
in the sense of being formed under the British Companies
Act 1985, but is nevertheless regarded by the British
government as a national of the United Kingdom and
therefore within the scope of § 1332(a)(2). See U.K.
Aegis Brief at 11.
[fn11] Bermuda was permitted to draft a constitution by the
British Parliament pursuant to the Bermuda Constitution Act
1967, 7 Halsbury’s Statutes of England and Wales, Bermuda
Constitution Act 1967 (4th ed., 1999 reissue), which can be
revoked by an Act of the British Parliament. 6 Halsbury’s
Laws of England, para. 1042 (4th ed. reissue, 1992).
Bermuda’s government is administered by a governor
appointed by the Crown, id. at para. 994, who has the power
to adjourn or dissolve Bermuda’s legislative assembly. Id.
at para. 1000. An act dissolving the legislative assembly
is deemed to be an executive act of the Queen. Id. at para.
1024 & n. 1. The United Kingdom maintains supreme control
over Bermuda’s external relations and national defense, id.
at para. 983, and has the power to alter Bermuda’s
boundaries. Id. at para. 992.
[fn12] This conclusion corresponds to the position taken by
the Department of State, see, e.g., Letter of Linda
Jacobson, Assistant Legal Adviser of the Department of
State to Alan W. Dunch (submitted in the Koehler
litigation) (“[I]t is the position of the United States . .
. that Bermuda residents and corporations are subjects of a
foreign state, i.e., Great Britain, for purposes of the
federal diversity statute, 28 U.S.C. § 1332.”);
Southern Cross, 181 F.3d at 417 (citing Department of
State’s view that “since the ultimate sovereign authority
over [a Hong Kong corporation was] the British Crown, [it]
should be treated as a subject of United Kingdom
sovereignty for purposes of alienage diversity
jurisdiction.”), the Department of Justice, see, e.g.,
Matimak, 118 F.3d at 86 (“The Justice Department concludes
that because the ultimate sovereign authority over the
plaintiff is the British Crown, Matimak should be treated as
a subject of United Kingdom sovereignty for purposes of
§ 1332.”), and the British government, see, e.g.,
U.K. Matimak Brief at 7 (“Corporations of the British
Dependent Territories should be considered `subjects’ of
the United Kingdom for purposes of the alienage
jurisdiction of 28 U.S.C. § 1332.”); U.K. Aegis
Brief at 4 (“The position of the United Kingdom Government
is that entities incorporated in any territory for which
the United Kingdom is internationally responsible are
regarded by the United Kingdom Government as United Kingdom
nationals and, therefore, are `citizens of subjects’ of the
United Kingdom for purposes of alienage jurisdiction.”).
[fn13] The reasoning of Matimak applied to all foreign
corporations would produce an absurd result. The term
“national” is often used instead of “citizen” or “subject”
to describe the identify of a foreign corporation. See
Restatement (Third) of Foreign Relations Law § 213
(1987) (“For purposes of international law, a corporation
has the nationality of the state under the laws of which
the corporation is organized.”). If indeed courts must rely
solely on the words found in the domestic codes of other
countries and there we discover that corporations are
referred to only as “nationals” and not as “subjects” or
“citizens” of a particular country, the Matimak analysis
would force us to deny them access to the federal courts.
CALABRESI, Circuit Judge, dissenting from the denial of a
rehearing in banc:
For the reasons ably stated by Judge Sotomayor in her
opinion dissenting from a denial of rehearing in banc, this
case involves an issue of exceptional importance. The
underlying question has divided any number of federal
judges. On that basis, if no other, review of the panel
opinion is warranted. Accordingly, I join Judges Leval and
Sotomayor in dissenting from the denial of rehearing in
banc. Page 344