Kramer v. Caribbean Mills, Inc.

PETITIONER: Kramer
RESPONDENT: Caribbean Mills, Inc.
LOCATION: Surface Transportation Board at the United States Department of Transportation

DOCKET NO.: 156
DECIDED BY: Warren Court (1967-1969)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 394 US 823 (1969)
ARGUED: Jan 23, 1969
DECIDED: May 05, 1969

Facts of the case

Question

Media for Kramer v. Caribbean Mills, Inc.

Audio Transcription for Oral Argument - January 23, 1969 in Kramer v. Caribbean Mills, Inc.

Earl Warren:

Caribbean Mills, Incorporated.

Mr. Gressman.

Eugene Gressman:

Mr. Chief Justice and may it please the Court.

This case is here on a Writ of certiorari to the Court of Appeals for the Fifth Circuit and raises the general question of whether federal diversity jurisdiction can be created by a lawful assignment of a contract or a money claim to a plaintiff.

More specifically, the question is whether the assignment of a contract or a money claim is improper or collusive within the meaning of Section 1359 of the Judicial Code where the assignment itself is legal under state law, where one motive or the assignment is to gain access to the federal court like creating diversity of citizenship specified in Section 1330 (a) (2).

And thirdly, where part of the consideration or the transaction was a percentage of the recovery obtained on the assigned claim.

Now counsel --

I don't really know if it's a federal question.

Eugene Gressman:

Yes, Your Honor.

It's solely a federal question as to whether the court itself has jurisdiction or whether it has lost jurisdiction.

Well, is it the meaning of the federal statute?

Eugene Gressman:

Yes, Your Honor.

Now counsel as candidly conceded and the court below and we repeated to this Court while it is not a matter of the record but one of the major motives in the establishment of this transaction was a desire or the to create the basis for invoking the diversity jurisdiction of the Federal District Court.

Now that motivation however, has to be viewed in light of the realities of the situation that was confronting the various parties in this case.

Now the brief where the respondent has sought to paint a rather bleak and sinister picture of the events in this case that I suggest are not justified by the record and certainly not by the facts as we know them, there was no senator or secret efforts made to defraud any party or to secrete any documents from the court or from anyone else.

What happened in this case of course as we see it is a classic illustration of a desire to avoid what one of these parties the Panama and Venezuela Finance Company viewed as prejudice in the state courts and to avoid that prejudice or possibility of prejudice is really the constitutional raise on debtor of federal diversity jurisdiction.

The major, indeed the sole justification that has ever been suggested for diversity jurisdiction is to permit state causes of action to bid, tried and heard in the federal courts where the parties have any choice in the matter for one reason or another may fear or some degree or some element of prejudice may follow them if they invoke the jurisdiction of the state court rather than the Federal Court.

Potter Stewart:

Your client is a citizen a resident of Texas?

Eugene Gressman:

That is right, Your Honor.

Potter Stewart:

The defendant is a corporation of Haiti, is that right?

Eugene Gressman:

Right, it's an alien corporation.

Potter Stewart:

Why would there be more prejudice in the federal courts than the state court vis-à-vis the parties of that derivation.

Eugene Gressman:

Well, I think you have first to look back to the original situation under which this arose.

The original situation you will recall was essentially a contract entered into in 1959 between two alien corporations in effect whereby the Caribbean Mills the respondent here agreed to pay over a period of years $165,000.00 to Panama and Venezuela Finance Company which was also an alien corporation having been incorporated in Panama.

Now, when several years later Caribbean Mills defaulted on that contract and indeed repudiated the contract, Panama Finance Company was faced with a situation out of which this whole transaction arose to with Panama could not have sued Caribbean Mills in the federal court by virtue of the fact that both were aliens.

Now, the only recourse Panama had to a court action was to sue presumably in Haiti or in the Texas State Court.

Now --

Potter Stewart:

I guess suppose, it go apparently there the defendant is personally present in Texas --

Eugene Gressman:

That is right, Your Honor more --

Potter Stewart:

-- into a sufficient extent you get personal service --