                                                                                                                           Opinions of the United
1997 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


2-6-1997

Dresser Ind Inc v. Underwriters Lloyds
Precedential or Non-Precedential:

Docket 96-1044




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                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT

                          ___________

                          No. 96-1044
                          ___________


DRESSER INDUSTRIES, INC.; DRESSER CANADA, INC.,

                         Appellants,

                         vs.

UNDERWRITERS AT LLOYD'S OF LONDON, AND CERTAIN LONDON
          MARKET COMPANIES; BISHOPGATE INSURANCE
          COMPANY, LTD.; BISHOPGATE INSURANCE P.L.C.;
          BRITISH LAW INSURANCE COMPANY, LTD.; CORNHILL
          INSURANCE, P.L.C.; DAI-TOKYO INSURANCE
          COMPANY (U.K.) LIMITED; ENGLISH & SCOTTISH
          MARITIME & GENERAL INSURANCE COMPANY LTD.;
          EXCESS INSURANCE COMPANY, LIMITED; HANSA
          MARINE INSURANCE COMPANY (U.K.) LTD.; THE
          INDEMNITY MARINE ASSURANCE COMPANY, LTD.;
          INSURANCE COMPANY OF NORTH AMERICA (U.K.)
          LIMITED; ICAROM P.L.C. (FORMERLY KNOWN AS THE
          INSURANCE CORPORATION OF IRELAND LTD.); IRON
          TRADES MUTUAL INSURANCE COMPANY, LTD.; LONDON
          & HULL MARITIME INSURANCE COMPANY, LTD.;
          MINSTER INSURANCE COMPANY, LTD.; THE NATIONAL
          INSURANCE COMPANY OF NEW ZEALAND, LIMITED;
          NEW HAMPSHIRE INSURANCE COMPANY; THE NIPPON
          FIRE & MARINE INSURANCE COMPANY (UK) LIMITED;
          OCEAN MARINE INSURANCE COMPANY, LTD.; PEARL
          ASSURANCE PUBLIC LIMITED COMPANY; PHOENIX
          ASSURANCE PUBLIC LIMITED COMPANY; POLARIS
          ASSURANCE; PROVINCIAL INSURANCE PUBLIC
          LIMITED COMPANY; PRUDENTIAL ASSURANCE COMPANY
          LIMITED; SKANDIA U.K. INSURANCE P.L.C.;
          SPHERE DRAKE INSURANCE PUBLIC LIMITED COMPANY
          (FOR ITSELF AND AS SUCCESSOR TO SPHERE
          INSURANCE COMPANY, LIMITED AND THE DRAKE
          INSURANCE COMPANY, LIMITED); SUMITOMO MARINE
          & FIRE INSURANCE COMPANY, LIMITED;
          SWITZERLAND GENERAL INSURANCE COMPANY
          (LONDON), LTD.; TAISHO MARINE AND FIRE
          INSURANCE COMPANY, LTD.; THE THREADNEEDLE
          INSURANCE COMPANY LIMITED; THE TOKIO MARINE &
          FIRE INSURANCE COMPANY, LIMITED; VESTA (UK)
          INSURANCE COMPANY, LTD.; THE YASUDA FIRE &
          MARINE INSURANCE COMPANY (UK), LTD.; YASUDA



                               1
          FIRE & MARINE INSURANCE COMPANY, LTD.; THE
          YORKSHIRE INSURANCE COMPANY LIMITED

                            ___________


          APPEAL FROM THE UNITED STATES DISTRICT COURT
            FOR THE EASTERN DISTRICT OF PENNSYLVANIA

                      (D.C. No. 95-cv-04578)

                            ___________


                      ARGUED AUGUST 6, 1996

       BEFORE:   NYGAARD, LEWIS and McKEE, Circuit Judges.

                     (Filed February 6, 1997)

                            ___________


Mary M. O'Day
Donald E. Seymour
John K. Baillie
Michael G. Zanic (ARGUED)
Kirkpatrick & Lockhart
1500 Oliver Building
Pittsburgh, PA 15222

          Attorneys for Appellants


Edward R. Dunham, Jr.
Miller, Dunham & Doering
1515 Market Street
13th Floor
Philadelphia, PA 19102

Martin R. Baach
James P. Davenport (ARGUED)
Nussbaum & Wald
One Thomas Circle, N.W.
Suite 200
Washington, DC 20005

          Attorneys for Appellees

                            ___________

                      OPINION OF THE COURT
                          ___________


                                2
LEWIS, Circuit Judge.

          The principal question we are asked to decide in this

appeal is whether federal courts have jurisdiction to entertain a

suit between diverse citizens when, in addition to those

citizens, aliens appear as both plaintiffs and defendants.       We

conclude they do, pursuant to 28 U.S.C. § 1332(a)(3), and will

reverse the district court's decision to the contrary.

                                I.

          Dresser Industries, Inc. ("Dresser"), a publicly held

company incorporated in the State of Delaware with its principal

place of business in Texas, and its subsidiary, Dresser Canada,

Inc. ("Dresser Canada"), a corporation organized under Canadian

law with its principal place of business in Ontario, Canada

brought this action in the United States District Court for the

Eastern District of Pennsylvania against the London Market

Insurers for insurance coverage.     Dresser alleged that the

district court had subject matter jurisdiction under 28 U.S.C.

§ 1332(a)(3).   The London Market Insurers are comprised of

underwriting syndicates at Lloyd's of London and companies

participating in the London insurance market.     One of the

Insurers, New Hampshire Insurance Company, is a corporation

organized under the laws of the Commonwealth of Pennsylvania with

its principal place of business in the State of New York.       The

remaining London Market Insurers are aliens.

          The underlying dispute involves seven insurance

policies that provide for $150,000,000 in excess liability


                                3
coverage.   The policies in question were not issued by a single

insurer.    Each policy was "subscribed to" by a number of entities

with each assuming a set percentage of the risk (and receiving a

set percentage of the premium).       The percentages ranged from

approximately 0.03% to 5.5%.   In addition, under the terms of the

policies each of the insuring entities was to be severally liable

for the particular percentage of the risk that it assumed.       New

Hampshire Insurance had a 0.564% share of one of the policies at

issue, which represented $282,000 in potential liability.

            The London Market Insurers moved to dismiss the action

for lack of subject matter jurisdiction, arguing that the

presence of an alien as one of the plaintiffs and aliens as

several of the defendants destroyed complete diversity.       The

district court agreed and granted the motion to dismiss.       Relying

upon dicta in two opinions of this Circuit interpreting 28 U.S.C.

§ 1332(a)(2), the court concluded:
Under the rule of complete diversity, there is no
          federal subject matter jurisdiction over
          claims between the alien plaintiff and the
          alien defendants. Moreover, the reference in
          § 1332(a)(3) to aliens as "additional
          parties" does not apply to the instant
          action. The dispute is between Dresser and
          Dresser Canada and a lengthy list of insurers
          only one of which is a citizen, and whose
          exposure is limited to 0.564% of one of the
          three policies at issue. The alien insurers
          in this case cannot be considered additional
          parties.


Dresser Industries, Inc. & Dresser Canada, Inc. v. Underwriters

at Lloyd's, London, No. 95-4578, slip op. at 4 (E.D. Pa. Dec. 22,

1995) (interpreting Field v. Volkswagenwerk AG, 626 F.2d 293 (3d
Cir. 1980) and Singh v. Daimler-Benz AG, 9 F.3d 303 (3d Cir.



                                  4
1993) as requiring complete diversity among all parties).    This

appeal followed.

                                II.

           The district court's jurisdiction was predicated upon

28 U.S.C. § 1332(a)(3).   We have jurisdiction over the appeal

from the final order of the district court pursuant to 28 U.S.C.

§ 1291.   Our review of the district court's decision to dismiss

for lack of subject matter jurisdiction is plenary.   Singh v.

Daimler-Benz AG, 9 F.3d 303, 305 (3d Cir. 1993).

                               III.

                                A.

          Section 1332(a) provides in pertinent part that:
The district courts shall have original jurisdiction of
          all civil actions where the matter in
          controversy exceeds the sum or value of
          $50,000, exclusive of interests and costs,
          and is between --

(1)        citizens of different States;

(2)        citizens of a State and citizens or subjects
                of a foreign state;

(3)        citizens of different States and in which
                citizens or subjects of a foreign state
                are additional parties . . . .


28 U.S.C. § 1332(a).   To determine whether the district court had

jurisdiction over this matter, we must interpret section

1332(a)(3), which grants jurisdiction in cases between citizens

of different states in which aliens are "additional parties."

Toward that end, we begin with the plain language of the statute.

See Commissioner v. Engle, 464 U.S. 206, 214 (1984); Health




                                5
Maintenance Org. of New Jersey, Inc. v. Whitman, 72 F.3d 1123,

1128 (3d Cir. 1995).

          The language of section 1332(a)(3) grants federal

jurisdiction when aliens are additional parties.     The statute

makes no distinction based upon which side of the controversy --

plaintiff, defendant, or both -- the aliens appear.     Although the

statute plainly requires that the dispute be between citizens of

different states, it includes the phrase "additional parties"

without any such limitation.    Dresser and the London Market

Insurers disagree over how this language, or lack thereof, should

be interpreted.

          Dresser contends that the words "additional parties,"

which are unaccompanied by any limiting language, unequivocally

vest federal courts with jurisdiction over disputes in which

aliens appear on both sides of the controversy.     In other words,

Dresser suggests that we need look no further than the language

of the statute to answer the jurisdictional question.

          London Market Insurers maintains, however, that the

statute as written is ambiguous.      They contend that the statute's

failure to limit the phrase "additional parties" cannot be

plainly interpreted to allow aliens on both sides of a

controversy.   In support of this view, London Market Insurers

offers two hypothetical constructions of the statute.     They claim

that, had the statute contained language to qualify "additional

parties," such as:     (1) "on either side of the controversy but

not on both sides"; or (2) "on either or both sides of the

controversy," then the statute would be unambiguous, but the


                                  6
words "additional parties" standing alone render the statute as

currently written subject to two interpretations.   Accordingly,

they suggest, we must look to the statute's legislative history.

 We disagree.   Because we find that the language of § 1332(a)(3)

is plain, we need not consider the legislative history.1

1.    Nevertheless, assuming arguendo that the legislative
history is relevant to our analysis, we disagree with London
Market Insurers' contention that a review of section 1332(a)(3)'s
legislative history confirms that Congress intended this section
to allow aliens on one side of the controversy only. At best,
the legislative history is incomplete and does little to
illuminate the statute. See James W. Moore, Moore's Judicial
Code: Commentary 64 n.3 (1949). Although we agree with London
Market Insurers that the Reviser's Notes to the statute indicate
a specific congressional intention to allow for suits by a
citizen against a diverse citizen and an alien, the Notes do not
explicitly disallow suits between diverse citizens and aliens on
both sides of the controversy. Moreover, other parts of the
legislative history indicate that Congress was motivated by a
desire to provide diverse citizens with a federal forum despite
the presence of alien parties. K&H Business Consultants Ltd. v.
Cheltonian, Ltd., 567 F. Supp. 420, 422-23 (D.N.J. 1983) (noting
that the legislative history of § 1332(a)(3) indicates that it
was enacted to provide a federal forum for suits among diverse
citizens in which aliens were also parties). (For an interesting
discussion of this point, see Nancy M. Berkley, Note, Federal
Jurisdiction Over Suits Between Diverse United States Citizens
With Aliens Joined to Both Sides of the Controversy Under 28
U.S.C. § 1332(a)(3), 38 Rutgers L. Rev. 71, 94 (1985)
[hereinafter Federal Jurisdiction] (noting that the purpose of
§ 1332(a)(3) was to provide a federal forum for diverse United
States citizens irrespective of their involvement with alien
parties)). We believe that allowing a case to proceed in federal
court even though aliens are present on both sides of the
controversy is consistent with this intent. As one commentator
put it: "[I]t seems clear that the statute allows joinder of
aliens on both sides of a controversy in which there is an
underlying dispute between citizens of different American
states." 1 James W. Moore, Moore's Federal Practice
¶ 0.75[1.-2-4], at 800.44 (2d ed. 1996); see also 13B Charles A.
Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and
Procedure: Jurisdiction 2d § 3604, at 390 (1984) ("[T]he language
of Section 1332(a)(3) is broad enough to allow aliens to be
additional parties on both sides of the dispute."); Federal
Jurisdiction, supra at 87-89 ("[B]y not specifying where the
`additional' foreign parties are located within the suit, [§
1332(a)(3)] permits a suit with aliens on both sides of the
controversy . . . .").


                                7
          Our holding is consistent with the circuits that have

squarely addressed this issue and have uniformally concluded that

jurisdiction exists when diverse citizens are joined with aliens

even if they appear on both sides of the dispute.       See Goar v.

Compania Peruana de Vapores, 688 F.2d 417, 420 n.6 (5th Cir.

1982); Allendale Mutual Ins. Co. v. Bull Data Sys., Inc., 10 F.3d

425, 428 (7th Cir. 1993); Transure, Inc. v. Marsh & McLennan,

Inc., 766 F.2d 1297, 1299 (9th Cir. 1985); see also Bank of New

York v. Bank of America, 861 F. Supp. 225, 228-229 (S.D.N.Y.

1994); Timco Eng'g, Inc. v. Rex & Co., Inc., 603 F. Supp. 925,

929-30 (E.D. Pa. 1985); K&H Business Consultants, 567 F. Supp. at

422-24.   But see Jet Traders Inv. Corp. v. Tekair, Ltd., 89

F.R.D. 560, 566 (D. Del. 1981).       As the Seventh Circuit noted,

when citizens of states are on both sides of the litigation and

are completely diverse, the presence of aliens on one or both

sides of the controversy "fits section 1332(a)(3) to a t."

Allendale, 10 F.3d at 428.

          In dismissing this case for lack of jurisdiction, the

district court concluded that the "complete diversity"

requirement announced in Strawbridge v. Curtiss, 7 U.S.
(3 Cranch) 267 (1806), precludes such a result.        We disagree.     In

Strawbridge, the Supreme Court concluded that the precursor to 28

U.S.C. § 1332(a)(1) required that "each distinct interest should

be represented by persons, all of whom are entitled to sue, or

may be sued, in the federal courts."       Id.   As the Supreme Court

later noted, however, the requirement of complete diversity is

derived from "the words of the act of Congress," and not the


                                  8
Constitution.   State Farm Fire & Casualty Co. v. Tashire, 386

U.S. 523, 531 (1967).     Article III of the Constitution requires

only minimal diversity.     Id.; Verlinden B.V. v. Central Bank of

Nigeria, 461 U.S. 480, 492 n.18 (1983).

          Again, the plain language of 28 U.S.C. § 1332(a)(3)

grants federal courts jurisdiction over controversies between

diverse citizens joined with aliens.     Strawbridge's complete

diversity requirement is, therefore, inapplicable.    As such,

section 1332(a)(3) can best be understood as a congressional

abrogation of the complete diversity rule.    1 Moore's Federal

Practice ¶ 0.75[1.-2-4], at 800.44.    First, in addition to the

plain language of the statute, this conclusion is supported by

the fact that section 1332(a)(3) was added in the 1948 revision

and codification of the Judicial Code, Title 28.     While the

general diversity and alienage jurisdiction provisions had

existed previously, section 1332(a)(3) was new.     As Strawbridge

was decided long before Congress created this new provision, we

must assume that Congress was well aware of the complete

diversity requirement when it adopted section 1332(a)(3).

          Second, the language used by section 1332(a)(3) differs

from the language used in both section 1332(a)(1) and section

1332(a)(2).   1 Moore's Federal Practice ¶ 0.75[1.-2-4], at 800.44
("The language of the additional provision for aliens mirrors the

language of neither the diversity provision in § 1332(a)(1) nor

the general alienage provision in § 1332(a)(2).").    Taken

together, because Congress was well aware of the judicial

interpretation of the diversity statute requiring complete


                                  9
diversity, specifically used language that differs from the

sections in which complete diversity had been applied, and used

language which encompasses situations such as this, we must

conclude that "complete diversity" of alien parties is not

required under section 1332(a)(3).

          Likewise, the cases in which courts have stated that

complete diversity is required among aliens when interpreting

section 1332(a)(2) are simply inapplicable here.   See, e.g.,

Singh, 9 F.3d at 305 ("Other circuits have also construed the

diversity statute to apply the complete diversity requirement to

aliens.").   See also Field v. Volkswagenwerk AG, 626 F.2d 293,

296 (3d Cir. 1980) ("[The complete diversity] requirement

pertains to suits between aliens as well as to suits between

citizens."); Ed & Fred, Inc. v. Puritan Marine Ins. Underwriters

Corp., 506 F.2d 757, 758 (5th Cir. 1975) ("There is no indication

-- legislative or judicial -- that a deviation from the rule

applied in ordinary diversity cases would or ought obtain in a

suit brought by an alien."); Eze v. Yellow Cab Co. of Alexandria,

Va., Inc., 782 F.2d 1064, 1065 (D.C. Cir. 1986) ("A diversity

suit in line with the Strawbridge rule, may not be maintained in
federal court by an alien against a citizen of a state and a

citizen of some other foreign country.").   These cases all

addressed whether jurisdiction exists in suits between aliens on

one side of the controversy and aliens and citizens on the other.

 Applying the complete diversity rule under these circumstances

makes sense for two reasons.   First, the language of section

1332(a)(2) parallels the language used in section 1332(a)(1).     As


                                10
such, applying the complete diversity requirement to that section

represents a judicial attempt to interpret similar provisions in

a similar manner.   Second, section 1332(a)(2) only grants

jurisdiction in cases between aliens and citizens.   Cases between

aliens on one side and aliens and citizens on the other,

therefore, do not fit the jurisdictional pigeonhole.2

Consequently, while a conclusion that the presence of aliens on

both sides of the controversy defeats jurisdiction may be sound

under section 1332(a)(2) as discussed above, such a conclusion is

inconsistent with the plain language of section 1332(a)(3).

          Finally, our conclusion that the presence of aliens on

both sides of the controversy does not defeat federal

jurisdiction under section 1332(a)(3) is consistent with the

policy considerations that form the foundation for diversity and

alienage jurisdiction.   As one commentator has noted, "[i]t is

the generally accepted view that diversity jurisdiction was

established to provide access to a competent and impartial

tribunal, free from local prejudice or influence . . . ."    1

Moore's Federal Practice ¶ 0.71[3.-1], at 709.   Whether this

prejudice or influence does in fact exist is not the question.

As Chief Justice Marshall observed:
However true the fact may be, that the tribunals of the
          states will administer justice as impartially
          as those of the nation, to parties of every
          description, it is not less true that the
          Constitution itself either entertains
          apprehensions on this subject, or views with
          such indulgence the possible fears and
2.    They also do not fit the pigeonhole created by section
1332(a)(3) because section 1332(a)(3) requires citizens to be
present on both sides of the controversy.



                                11
          apprehensions of suitors, that it has
          established national tribunals for the
          decision of controversies between aliens and
          a citizen, or between citizens of different
          states.


Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61, 87

(1809).

          In addition to fears of prejudice and bias, alienage

jurisdiction is also based upon significant foreign policy

concerns, which are exclusively within the province of the

federal government. As Alexander Hamilton explained:
As the denial or perversion of justice by the sentences
          of courts, as well as in any other manner, is
          with reason classed among the just causes of
          war, it will follow that the federal
          judiciary ought to have cognizance of all
          causes in which the citizens of other
          countries are concerned. This is not less
          essential to the preservation of the public
          faith, than to the security of the public
          tranquility.


The Federalist No. 80, at 536 (Alexander Hamilton) (Jacob E.

Cooke ed., 1961).   Alienage jurisdiction, therefore, reflects a

national concern over our relations with foreign governments and

how they may be affected by the resolution of controversies

involving their citizens.

          Given the justification for diversity jurisdiction,

there is a reasonable basis for the complete diversity rule.     If

diversity jurisdiction exists because of a fear that the state

tribunal would be prejudiced towards the out-of-state plaintiff

or defendant, that concern is understandably allayed when that

party is joined with a citizen from the forum state.   Indeed,

when members from the forum state are present on both sides of



                                12
the controversy, it becomes more difficult to imagine that a

state tribunal would favor one side based upon biases in favor of

its own citizens.   Bank of New York v. Bank of America, 861 F.

Supp. 225, 229 (S.D.N.Y. 1994).

           The same cannot be said, however, for applying the

complete diversity rule to cases involving aliens.    The mere

presence of aliens on both sides of the controversy does nothing

to allay concerns that the in-state party will receive more

favorable treatment.   While the bias towards aliens may be

somewhat abated due to the presence of aliens on both sides of a

case, the bias in favor of an in-state resident is not.
Consider a case brought in New York state court where a
          citizen of New York and a citizen of
          Lithuania sue a Texan and a co-defendant. If
          the co-defendant is a New Yorker, the Texan's
          fear of bias will be allayed -- for in order
          to penalize the Texan the judge will have to
          harm one of his or her neighbors. On the
          other hand, if the co-defendant is a
          Lithuanian, the nervous Texan will be little
          comforted -- he or she has no reason to think
          that the judge will be any less willing to
          penalize a Texan and a Lithuanian than to
          penalize a Texan alone. For diversity
          purposes, an alien is an alien is an alien.


Id. at 229.   More important, the international relations concerns

remain.   Indeed, the presence of aliens on both sides of the

controversy heightens those federal concerns.

           Thus, while the need for diversity jurisdiction has

been questioned, see 1 Moore's Federal Practice ¶ 0.71[3.-2], at

713-19, the need for alienage jurisdiction has not.    In fact,

while legislation passed by the House of Representatives in 1978

would have abolished diversity jurisdiction, it left the alienage



                                  13
jurisdiction sections, 28 U.S.C. § 1332(a)(2) and (3), intact.

Id. at 800.31 n.7.    Given the globalization of the United States

economy, and the fact that citizens of the United States are

becoming increasingly involved in international transactions, the

need for impartial national tribunals remains unchanged.

                                 B.

          The London Market Insurers alternatively argue, and the

district court agreed, that even if section 1332(a)(3) grants

jurisdiction when aliens are present on both sides of a case,

they cannot be considered "additional parties."      The thrust of

their argument is that because New Hampshire Insurance is only

responsible for 0.564% of a single policy, the alien defendants

are the principal parties.    As such, the main suit is between

Dresser and the alien defendants -- not New Hampshire Insurance,

which serves merely as "window dressing."      In effect, the London

Market Insurers argue that section 1332(a)(3) requires us to

weigh the relevant interests at stake.      We disagree.

          In support of this argument, the London Market Insurers

rely upon L'Europeenne de Banque v. La Republica de Venezuela,

700 F. Supp. 114, 126 (S.D.N.Y. 1988).      In that case, the

district court held, without explanation, that under section

1332(a)(3) the United States citizens must be the "principal

adverse parties."    We are unconvinced by this conclusion and can

find no authority to support it.      The authority upon which the

district court relied in turn rely only upon cases construing

section 1332(a)(2).   As discussed earlier, however,

section 1332(a)(2) and section 1332(a)(3) differ in both language


                                 14
and form.    Because the statute's language does not demand such a

weighing requirement and because the London Market Insurers

cannot offer any reasoned authority to support its

interpretation, we refuse to engraft such a requirement onto the

statute.

            Under the plain language of the statute, we conclude

that so long as there is a legitimate dispute between the

citizens involved, jurisdiction exists under 28 U.S.C.

§ 1332(a)(3).    Bank of New York, 861 F. Supp. at 229; 1 Moore's

Federal Practice ¶ 0.75[1.-2-5], at 800.47 ("[W]e stress that

§ 1332(a)(3) requires a legitimate dispute between citizens of

different states to which the aliens are joined. . . . [T]he

United States citizens [cannot be] merely window dressing for the

principal dispute between aliens.").    The use of the term

"additional" does not reference the level of involvement of the

parties or the interests at stake.    Rather, it merely indicates

that the jurisdictional hook upon which the case hangs is the

existence of a legitimate controversy between diverse citizens,

and unless that requirement is satisfied, jurisdiction will not

exist.   As there is no dispute that the controversy between

Dresser and New Hampshire Insurance is legitimate, we conclude

that section 1332(a)(3) is satisfied.

                                IV.

            For the foregoing reasons, the decision of the district

court will be reversed, and the case will be remanded for further

consideration.
_________________________



                                 15
TO THE CLERK:

          Please file the foregoing opinion.




                               _______________________________
                               Circuit Judge




                               16
