Facts of the Case

Traffic Stream (BVI) Infrastructure Ltd. is a corporation organized under the laws of the British Virgin Islands (BVI), an Overseas Territory of the United Kingdom. In 1998, Chase Manhattan Bank, now JPMorgan Chase Bank, agreed to finance certain Traffic Stream ventures, with the contract to be governed by New York law and with Traffic Stream agreeing to submit to the jurisdiction of federal courts in Manhattan. Subsequently, Chase sued Traffic Stream for defaulting on its obligations. The District Court found subject-matter jurisdiction under the alienage diversity statute, 28 USC section 1332(a)(2), which gives district courts jurisdiction over civil actions where the controversy is "between citizens of a State and citizens or subjects of a foreign state," and granted Chase summary judgment. In reversing, the Court of Appeals found that, because Traffic Stream was a citizen of an Overseas Territory and not an independent foreign state, jurisdiction was lacking.

Question

Is a corporation organized under the laws of the British Virgin Islands a "citizen or subject of a foreign state" for the purposes of alienage diversity jurisdiction?

Conclusion

Yes. In a unanimous opinion delivered by Justice David H. Souter, the Court held that a corporation organized under the laws of the BVI is a "citizen or subject of a foreign state" for the purposes of alienage diversity jurisdiction. The Court reasoned that, because of the United Kingdom's retention and exercise of authority over the BVI, statutes permitting incorporation in the BVI are enacted in the exercise of the United Kingdom's political authority. "It is enough to hold that the United Kingdom's retention and exercise of authority over the BVI renders BVI citizens, both natural and juridic, 'citizens or subjects' of the United Kingdom," wrote Justice Souter. Thus, Traffic Stream was a citizen or subject of a foreign state for the purposes of alienage diversity jurisdiction.