Case of the Day: Chen v. Sun

The case of the day is Chen v. Sun (S.D.N.Y. 2016). Hsin-Cheng Chen sued Kelvin Sun and Jia Liu, seeking recognition and enforcement of a Chinese judgment. The complaint alleged that Chen was a Chinese citizen domiciled in Taiwan, that Sun was an American citizen whose “principal residence” was in New York, and that Liu, whose citizenship was not alleged, has a “principal residence” in New York. Chen moved to dismiss for want of subject matter jurisdiction.

The U.S. District Court (the federal court of first instance) is a court of limited jurisdiction, which means that any time you bring a lawsuit in federal court, you have to show that the Constitution and a statute vest the court with jurisdiction. The two most usual bases for jurisdiction are, first, federal question jurisdiction (does the action arise under the law of the United States rather than under the law of some state of the United States?) and, second, diversity of citizenship jurisdiction (does the District Court have jurisdiction on account of the citizenships of the parties?) The law governing recognition and enforcement of foreign judgments is state law, not federal law, in the United States. Therefore, a plaintiff seeking recognition and enforcement in a U.S. District Court generally has to show that the requisite diversity of citizenship exists. The Constitution permits the courts to exercise jurisdiction when there is minimal diversity, i.e., where the requisite diversity exists between at least one plaintiff and at least one defendant. But Congress has not vested the full diversity jurisdiction in the District Courts. Under 28 U.S.C. § 1332, jurisdiction exists only if there is complete diversity, i.e., where the requisite diversity exists between each plaintiff and each defendant.

Here, there was no question that diversity existed between Chen (an alien) and Liu (an American citizen domiciled in New York). So minimal diversity existed. But Sun and Liu argued that Sun was domiciled in China. The orthodox rule is that an American citizen domiciled abroad destroys diversity because he is neither an alien nor a citizen of any state of the United States. On the evidence the parties presented, the court held that Chen had failed to carry his burden to prove that Sun’s domicile was in New York, and accordingly, the case had to be dismissed.

There is a simple answer for parties in Chen’s position: sue in the state court rather than the federal court. The state courts of first instance are, generally speaking, courts of general jurisdiction. So it is back to the drawing board for Chen.

The case is reminiscent of a recent case in Maine that attracted some press attention. It’s tangentially related to a case I’m working on, though I wasn’t involved in the Maine litigation. In that case, Michael Geilenfeld, an American missionary working in Haiti, and Hearts With Haiti, an American nonprofit that supported his work, sued Paul Kendrick, a Maine resident, for defamation after Kendrick publicly asserted that Geilenfeld was a pedophile who had abused the Haitian children in his care. The case was fully litigated, and a jury found Kendrick liable for $14 million in damages. It is now on appeal, and on appeal, Kendrick has asserted that the court lacked jurisdiction because Geilenfeld was domiciled in Haiti and was, like Sun, an American domiciled abroad. Geilenfeld and Hearts With Haiti argued that while Geilenfeld may have resided in Haiti, his domicile remained in Iowa. The matter has not yet been decided, and I think a court will do what it can to save several years of litigation and a jury’s verdict. But subject matter jurisdiction is a non-waivable defense that can be raised even after judgment. Again, such problems can be avoided by suing in the state court.

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