A federal court in New York recently dismissed a case for lack of diversity subject matter jurisdiction where the franchisee plaintiff and a franchisor defendant were both foreign entities, even though they both maintained principal places of business in the United States. Four S Inv. Grp., Inc v. Hilton Worldwide Manage Ltd., 2026 WL 396099 (S.D.N.Y Feb. 12, 2026).
Four S, a Panamanian company with a principal place of business in Illinois, entered into a franchise agreement with Hampton Inns International, a limited liability company organized in Delaware, to operate a hotel in Panama City, Panama. Hampton Inns subsequently assigned and transferred all rights under the agreement to Hilton Worldwide Manage Limited (“Hilton”), a UK limited partnership with a principal place of business in Virginia. The U.S. District Court in the Southern District of New York granted an emergency motion for a TRO by Four S after Hilton terminated the franchise agreement. Hilton subsequently moved to dissolve the TRO and have the case dismissed for lack of diversity subject matter jurisdiction. The court granted Hilton’s motion and dismissed the case without prejudice, holding that diversity was lacking where foreign entities were present on both sides. Importantly, the court held that Four S and Hilton were still “alien corporations” for the purpose of diversity jurisdiction, even with dual United States citizenship by virtue of their principal places of business. Four S’s addition of Hampton Inns as a defendant to the case was not enough to create diversity where there was no non-alien plaintiff in the case.
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