Limitations On Federal Court Jurisdiction: The Complexities Of Complete Diversity When Foreign Parties Are Involved And FSIA Removal

by Cozen O'Connor

In the context of transnational litigation, diversity jurisdiction in a U.S. federal court can be difficult to demonstrate.  This is because the typical parties in transnational litigation may include U.S. citizens, U.S. citizens who are residents of a foreign country, foreign parties who are residents of a U.S. State and foreign parties who are residents of a foreign country.  When all of these parties are mixed together, the requirements of 28 U.S.C. § 1332 may not be met, or complete diversity may not exist, thus eliminating federal court jurisdiction over the action.

In addition, when litigation has been commenced in a state court and one of the parties is a sovereign, although federal question jurisdiction exists in a U.S. federal court under the Foreign Sovereign Immunities Act of 1976 (FSIA), the issue arises: who may remove the lawsuit from the state court to the U.S. federal court?  Any party, or only the sovereign?

Recently, the U.S. District Court for the Northern District of California issued a decision that is instructive on both points, Guan and Wang v. Bi et al., Case No.  13-CV-05537 (WHO), 2014 WL 953757 (N.D. Cal. March 6, 2014).  This case is fully “transnational” in the sense that it was brought by a foreign party and a U.S. citizen, as plaintiffs, against all foreign party defendants, including a local governmental department of the  People’s Republic of China (PRC), Dalian Customs Anti-Smuggling Bureau.

The only defendant to appear in the case, however, was Bi, a foreign party who is a resident of a foreign country.  Bi removed the action to federal court, arguing that there was subject matter jurisdiction in diversity pursuant to 28 U.S.C. § 1332(a)(2) and under the FSIA.  The Plaintiff filed a motion to remand the case to state court, maintaining that there was no diversity jurisdiction and even though the federal court may theoretically have federal question jurisdiction over the case under the FSIA, a non-sovereign party, such as Bi, is not permitted to remove the action to a U.S. federal court under 28 U.S.C. § 1441, the statute governing removal.


The Court first noted that in the context of this lawsuit, U.S. District Courts have jurisdiction in diversity pursuant to 28 U.S.C. § 1332 over all civil actions in which the amount in controversy requirement is satisfied and the case is between “citizens of a State and citizens or subjects of a foreign state.”  Further, complete diversity is required, meaning that diversity confers jurisdiction on the federal court only with regard to cases “in which the citizenship of each plaintiff is diverse from the citizenship of each defendant.” 

In this vein, the court discussed the 2011 amendments to the diversity jurisdiction statute, Section 1332, and noted that “diversity jurisdiction does not exist when a foreign plaintiff sues a foreign defendant,” including actions between a U.S. citizen and an alien on one side (both plaintiffs, for example) and all aliens on the other side (all defendants, for example). Because there is a foreign plaintiff and a foreign defendant, complete diversity is ruined and the presence of a U.S. citizen in such an action “does not salvage jurisdiction because diversity must be complete.”  The court further found that the 2011 amendments eliminated the language in section 1332(a)(2) stating that a permanent resident alien is categorically deemed a citizen of the state in which he or she is domiciled, but added that “district courts shall not have original jurisdiction under this subsection of an action between citizens of a State and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same State.”

The Court noted however that complete diversity may exist in cases with foreign parties on both sides of the litigation under section 1332(a)(3) so long as there are “citizens of [the] United States on both sides who satisfy diversity requirements.”  For example, in a case where the only plaintiffs are a U.S. citizen residing in New York and a foreign party, and the only defendants are a U.S. citizen residing in New Jersey and a foreign party, the presence of the foreign parties on both sides (plaintiff-defendant) will not ruin the complete diversity of the U.S. citizens.

In Guan and Wang case, however, the  Court found no diversity jurisdiction because one of the plaintiffs was a PRC citizen currently living in California” and the other plaintiff was “a United States citizen living in California” while “[a]ll of the defendants are foreign residents either living in the PRC or the United States for limited purpose.”  Therefore, the court held that, “[a]nalyzed properly, this case involves an alien and a United States citizen on one side and aliens on the other side” and thus “no complete diversity of citizenship” exists pursuant to 28 U.S.C. § 1332.  Interestingly, had the PRC citizen plaintiff (Guan in this case) not been added as a plaintiff in the case, the result would have been different.


As a second basis for federal jurisdiction, Bi argued that he could also remove the case because the federal court had federal question jurisdiction under the FSIA, that is, jurisdiction granted under a U.S. statute.  Bi based his argument on the fact that under the FSIA, federal courts “have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state.”  28 U.S.C. § 1330(a).  While this is true, the court also noted that the FSIA provides that any civil action brought in state court against a foreign state “may be removed by the foreign state” to federal court pursuant to 28 U.S.C. § 1441(d). 

Analyzing these two sections together, the court found that 28 U.S.C. § 1441(d) does not provide for any party other than the sovereign to remove the action.  Further, the court found that allowing any defendant to remove an action involving a foreign state would render section 1441(d) superfluous, because section 1441(a) and (b) would always allow any defendant to remove an action against a foreign state. 

Based on this statutory interpretation analysis, the court found that section 1441(a) does not enable the defendant to remove.  Since section 1441(d) does not reference a non-sovereign defendant, the court reasoned that the FSIA’s removal provision is designed solely to assure foreign states access to a federal forum and to guarantee foreign states the right to remove an action from state court to a federal court.  That is, 28 U.S.C. § 1441(d) is the exclusive basis for removal in actions against foreign states pursuant to the FSIA even where other non-sovereign defendants are named. 

In practical terms, although perhaps an unlikely scenario, this also means that if a sovereign brings a lawsuit against a non-sovereign in a state court, the non-sovereign defendant will not be able to remove the lawsuit to federal court.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Cozen O'Connor | Attorney Advertising

Written by:

Cozen O'Connor

Cozen O'Connor on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.