Summary
The Third Circuit affirmed dismissal of claims by Southern Cross Overseas Agencies, Inc. and Transport International Pool Inc. against Wah Kwong Shipping Group Ltd. on statute-of-limitations grounds. The court held that a Hong Kong corporation was a subject of the United Kingdom for purposes of alienage diversity jurisdiction under 28 U.S.C. § 1332(a)(2), relying substantially on the State Department's position. The court also held that it could judicially notice a prior bankruptcy opinion establishing facts sufficient to trigger inquiry notice of the alleged fraud.
Topics
Practice areas
Questions Presented
- Whether a corporation organized under the law of Hong Kong, then a British Dependent Territory, was a citizen or subject of a foreign state for purposes of alienage diversity jurisdiction under 28 U.S.C. § 1332(a)(2).
- Whether the court could consider a published opinion from prior bankruptcy litigation on a Rule 12(b)(6) motion, including to determine when the plaintiffs should have discovered facts supporting their fraud claim.
- Whether the plaintiffs' fraud claims were barred by New Jersey's six-year statute of limitations.
Holdings
- A Hong Kong corporation was a subject of the United Kingdom for purposes of alienage diversity jurisdiction under 28 U.S.C. § 1332(a)(2), because Hong Kong was subject to ultimate British sovereignty and the State Department characterized Hong Kong corporations as subjects of United Kingdom sovereignty.
- On a Rule 12(b)(6) motion, a court may take judicial notice of the existence of a published opinion from prior litigation when the opinion is a public record and is relied on in the complaint; the court may consider the opinion to determine whether it gave notice of facts, but not for the truth of factual assertions contained in it.
- The plaintiffs' fraud claims were barred by New Jersey's six-year statute of limitations because the published 1988 Interpool opinion supplied sufficient information to put reasonable creditors on notice that Wah Kwong's creditor-only characterization was suspicious, more than six years before the plaintiffs filed suit on December 6, 1996.
Key quotations
“We therefore have jurisdiction of this case under 28 U.S.C. § 1332(a)(2).” (181 F.3d at 419)
“It follows that they should have known all the information sufficient to begin the running of the statute of limitations, which thus ran on the plaintiffs' fraud claims before the December 6, 1996, complaint was filed.” (181 F.3d at 424)
“The judgment of the District Court will be affirmed.” (181 F.3d at 424)
Factual background
KKL Kangaroo Lines, an Australian ocean-liner business, received approximately $6 million from Wah Kwong-related entities in a transaction characterized by Wah Kwong as a loan. Southern Cross and TIP provided services to KKL, which ceased operations in 1986 and entered liquidation and bankruptcy proceedings. The plaintiffs later alleged that Wah Kwong actually exercised partnership-like control over KKL, diverted funds, misrepresented its status as a creditor, and thereby caused losses to KKL's creditors. A published 1988 bankruptcy opinion described evidence suggesting a joint venture or partnership and possible insider misconduct.
Procedural history
The plaintiffs sued Wah Kwong in the United States District Court for the District of New Jersey seeking approximately $7.2 million for alleged fraudulent breach of contract. The District Court held that it had alienage diversity jurisdiction but dismissed the complaint under Rule 12(b)(6), concluding that New Jersey's six-year statute of limitations for fraud barred the claims. The Third Circuit affirmed.