Company's Dual Citizenship Defeats Diversity

Company's Dual Citizenship Defeats Diversity

By: Forrest Guedry

In Vantage Drilling Co. v. Hsin-Chi Su, the Fifth Circuit addressed the foreign citizenship requirement of 28 U.S.C.§ 1332 regarding a multi-national corporation with both American and foreign citizenship.Vantage, a worldwide offshore drilling contractor, sued one of its former board of director members, Hsin-Chi Su, a Taiwanese citizen, for breaching fiduciary duties, fraud, and unjust enrichment. Vantage’s original action was filedin Texas state court based on various state law claims. Su successfully removed the case to federal court on the basis of diversity and the district court denied Vantage’s motion to remand. The issue on appeal was whether a companypossessing both American and foreign citizenship and who is sued by a foreign party satisfies the requirements of diverse citizenship?Here, Vantage is incorporated in the Cayman Islands but conducts the vast majority of its business operations in Texas. Su is an individual with Taiwanese citizenship. The district court concluded that Vantage’s foreign incorporation could not displace Vantage’s dominant personality as a U.S. company. The Fifth Circuit disagreed, holding that diversity could not exist between an alien and an alien corporation with its principal place of business in the U.S. because the dispute would entail two alien parties on either side of the litigation.Addressing bias, the court noted that the possibility of one party or the other receiving preferential treatment in a state forum was not, in and of itself, enough to justify removal to federal court.