Court Opinion

ID: 3003244
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:40:59.89505+00
Date Added: 2024-06-11T11:39:12.427764
License: Public Domain

In the

United States Court of Appeals
              For the Seventh Circuit

No. 07-3415

V RENI B ÜCHEL-R UEGSEGGER,
as the duly appointed personal
representative of the
E STATE OF G EORG B ÜCHEL,
                                              Plaintiff-Appellee,
                               v.

JOHN G. B ÜCHEL,
                                           Defendant-Appellant.

           Appeal from the United States District Court
               for the Eastern District of Wisconsin.
       No. 06 C 544—Aaron E. Goodstein, Magistrate Judge.

       A RGUED JUNE 5, 2009—D ECIDED A UGUST 6, 2009

 Before M ANION, R OVNER, and T INDER, Circuit Judges.
  M ANION, Circuit Judge. Two days before the plaintiff
Vreni Büchel-Ruegsegger’s husband died in Switzerland,
he transferred 200,000 Swiss francs to their son, John
Büchel, who lives in Wisconsin. A Swiss court con-
cluded that the husband’s estate was entitled to 150,000
of those Swiss francs. When John refused to remit the
2                                               No. 07-3415

money, the plaintiff filed suit against him in federal court
in Wisconsin. The district court concluded that the son’s
refusal to pay violated Wisconsin common law and
ordered him to pay. John Büchel appeals. Because we
conclude that the district court did not have subject-
matter jurisdiction over this lawsuit, we vacate the
lower court’s decision and remand so that the court
can dismiss the case without prejudice.

                             I.
  In 1951, Vreni Büchel-Ruegsegger and Georg Büchel
were married in Wisconsin, where they lived until the late
1980s. They had two children, John and Diane. In 1987,
Vreni and Georg sold their single-family home in
Hartland, Wisconsin, and bought a condominium in
Waukesha, Wisconsin, which they later sold in 1990. They
deposited the money from these sales in a bank account
in Lichtenstein under Georg’s name. Meanwhile, Vreni
had moved to Switzerland in 1988 or 1989, Georg
relocated there in August 1990, and at some time Diane
also moved to Switzerland. Vreni, Georg, and Diane
lived together in Thun, Switzerland, until Georg’s death
in June 2000. John lives with his family in Milwaukee,
Wisconsin. According to the joint stipulation of facts
signed by both parties, Georg was a citizen of the
United States and Lichtenstein; Vreni is a citizen of the
United States and Switzerland; and John is a citizen of
the United States.
  In early 2000, Georg began experiencing health prob-
lems and soon moved to a nursing home in Thun. In
April 2000, Georg executed his final will, indicating his
No. 07-3415                                               3

intent that his estate be divided according to Swiss law,
except for a gold tablecloth that he designated for John.
However, on June 1, 2000, he ordered the bank in
Lichtenstein to transfer 200,000 Swiss francs to John to
be used for John’s family. In particular, Georg specified
that the money should be used to pay for the education
of John’s children, who were his only grandchildren.
Two days later, on June 3, 2000, Georg died.
  Vreni began investigating the transfer of the 200,000
Swiss francs in the fall of 2000. In August 2002, she filed
a complaint with the circuit court in Thun, seeking ap-
pointment as personal representative to pursue a claim
against John to rescind the gift of the francs. The Swiss
circuit court appointed Vreni as personal representative
and concluded that Vreni was entitled to 100,000 Swiss
francs, and Diane was entitled to 50,000. John appealed
the decision of the Thun circuit court to the Court of
Appeals of Kantons Bern, which affirmed in 2004.
  When Vreni’s attorney attempted to collect the money
from John, he replied that he did not intend to honor
the Swiss court’s determination. Vreni then sued John
in federal court in Wisconsin claiming diversity juris-
diction. Vreni conceded in this action that the Swiss court
did not have personal jurisdiction over John and hence
the Swiss court could not enforce its judgment against
him. However, Vreni alleged that John’s refusal to
comply with the Swiss court’s judgment constituted
conversion under Wisconsin state law and she sought
the return of the 150,000 Swiss francs (approximately
$117,886 at the time the complaint was filed in 2006). Vreni
and John filed cross-motions for summary judgment. The
4                                               No. 07-3415

district court, applying Wisconsin common law, deter-
mined that “[t]he lawfulness of John’s possession of the
200,000 Swiss Francs depends upon the lawfulness of
Georg’s gift to John,” and that issue in turn hinged on
“whether Swiss or Wisconsin law governs the gift.” The
district court concluded that Swiss law should apply
and, according to the Swiss courts, John’s possession of
the 200,000 Swiss francs was unlawful. Accordingly, the
district court held that John had converted the funds
under Wisconsin common law. A final judgment was
entered from which John appeals.

                            II.
   The parties dispute whether the district court properly
held that John had converted Georg’s money under the
Wisconsin law of conversion. However, we must consider
first the preliminary issue of jurisdiction. Even if the
parties do not address the issue of subject-matter juris-
diction, “we are bound to evaluate our own jurisdiction,
as well as the jurisdiction of the court below, sua sponte
if necessary.” Int’l Union of Operating Eng’rs, Local 150
v. Ward, 563 F.3d 276, 282 (7th Cir. 2009). This duty arises
because federal courts “have only the power that is autho-
rized by Article III of the Constitution and the statutes
enacted by Congress pursuant thereto.” Bender v.
Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986).
When a lower federal court lacks jurisdiction to reach
the merits, a court of appeals possesses “jurisdiction on
appeal, not of the merits but merely for the purpose of
correcting the error of the lower court in entertaining
the suit.” Id.
No. 07-3415                                                    5

  The overarching question here is whether the district
court had subject-matter jurisdiction over this dispute.
We conclude it did not. Vreni brought this suit under
28 U.S.C. § 1332(a)(2), which grants a federal district court
original jurisdiction over claims between “citizens of a
State and citizens or subjects of a foreign state.” John is a
United States citizen and a citizen of Wisconsin, while
Vreni is a dual citizen of the United States and
Switzerland.1 This case thus raises the issue of whether a
dual citizen of the United States and a foreign country
may sue a United States citizen under § 1332(a)(2). We
previously decided this issue in Sadat v. Mertes, 615
F.2d 1176, 1178 (7th Cir. 1980), in which a dual citizen of
Egypt and the United States who was living in Egypt

1
   A preliminary issue is whether we should look to the citizen-
ship of Vreni or Georg. Although Vreni is the plaintiff, she
brought this suit as the personal representative of the estate of
Georg. Vreni cites § 1332(c)(2), which states that “the legal
representative of the estate of a decedent shall be deemed to
be a citizen only of the same State as the decedent.” By its
terms, § 1332(c)(2) makes a personal representative a citizen
only of the same “State” as the decedent. It does not indicate
that a personal representative should be deemed a citizen of
the same foreign country as the decedent. On the other hand,
it is not clear why the personal representative would be con-
sidered a citizen of the same state as the decedent but not of
the same country. However, it is unnecessary for us to resolve
this issue here because both Vreni and Georg were dual citizens:
Georg of the United States and Lichtenstein, Vreni of the
United States and Switzerland. For the sake of clarity, we
will refer to Vreni’s citizenship, but our analysis applies
equally to Georg.
6                                                    No. 07-3415

sued two American citizens and their insurers for negli-
gence arising out of a car accident. The defendants
moved to dismiss, alleging a lack of subject-matter juris-
diction under § 1332(a)(1) because the dual citizen
was not a citizen of any state, based on his Egyptian
residence. Id. After the district court dismissed the suit, the
dual citizen appealed, claiming that his domicile at the
time the suit was filed was in Pennsylvania and, alter-
natively, that jurisdiction arose under § 1332(a)(2)
because of his Egyptian citizenship. After concluding
that § 1332(a)(1) did not provide jurisdiction, Sadat
turned to the alienage provision in § 1332(a)(2). Sadat
noted that provision “does not establish the federal
courts as forums for all lawsuits with an international
flavor.” Id. Sadat argued that “the paramount consid-
eration should be whether the purpose of alienage juris-
diction to avoid international discord would be served
by recognizing the foreign citizenship of the dual na-
tional.” Id. at 1186-87. We held that, when a dual citizen
of the United States and a foreign country asserts the
subject-matter jurisdiction of the federal courts under
§ 1332(a)(2), “only the American nationality of the
dual citizen should be recognized.” Id. at 1187.2 Accord-

2
  Sadat discussed in dicta a hypothetical exception to this general
rule in which a dual citizen whose “dominant nationality is
that of a foreign country” might be considered a citizen of a
foreign state under § 1332(a)(2). 615 F.2d at 1187. Sadat based
this hypothetical exception on the R ESTATEMENT (S ECOND ) OF
THE F OREIGN R ELATIONS L AW OF THE U NITED S TATES § 171(c)
(1965). However, Sadat did not endorse the “dominant national-
                                                    (continued...)
No. 07-3415                                                      7

ingly, we concluded that § 1332(a)(2) did not provide
subject-matter jurisdiction for the plaintiff’s claim in
Sadat. Id. at 1189.
  Our holding in Sadat has since been favorably cited by
several circuit and district courts. 3 The Fifth Circuit
has explained the rationale behind this rule:

2
   (...continued)
ity” test, but merely said that it would consider the possibility
“arguendo.” Id. Moreover, no circuit court since Sadat has
adopted or considered this test.
   However, we need not decide the vitality of the possible
Sadat exception, because that exception would only apply if the
dual citizen “has taken all reasonably practicable steps to
avoid or terminate his status as a national of the [United
States].” Id. Here, Vreni and Georg lived for ten years outside
of the United States before Georg’s death and never renounced
their United States citizenship. Because they did not take
“all reasonably practicable steps” to divest their United States
citizenships, the possible exception in Sadat is inapplicable.
3
   See, e.g., Frett-Smith v. Vanderpool, 511 F.3d 396, 400 (3d Cir.
2008) (holding that “for purposes of diversity jurisdiction, only
the American nationality of a dual national is recognized”);
Coury v. Prot, 85 F.3d 244, 250 (5th Cir. 1996); Mutuelles Unies
v. Kroll & Linstrom, 957 F.2d 707, 711 (9th Cir. 1992); Action S.A.
v. Marc Rich & Co., 951 F.2d 504, 507 (2d Cir. 1991); Oteng
v. Golden Star Res., Ltd., 615 F. Supp. 2d 1228, 1235 (D. Colo.
2009); Ayenu v. Chevy Chase Bank, F.S.B., 496 F. Supp. 2d 607,
610 (D. Md. 2007); Falken Indus., Ltd. v. Johansen, 360 F. Supp. 2d
208, 210 (D. Mass. 2005); Las Vistas Villas, S.A. v. Petersen, 778
F. Supp. 1202, 1204 (M.D. Fla. 1991), aff’d, 13 F.3d 409 (11th
Cir. 1994).
8                                               No. 07-3415

    [T]he major purpose of alienage jurisdiction is to
    promote international relations by assuring other
    countries that litigation involving their nationals
    will be treated at the national level, and alienage
    jurisdiction is also intended to allow foreign subjects
    to avoid real or perceived bias in the state courts—a
    justification that should not be available to the dual
    citizen who is an American.
Coury v. Prot, 85 F.3d 244, 250 (5th Cir. 1996). Accordingly,
because Vreni was a dual citizen of the United States and
a foreign country, only her United States citizenship is
relevant for assessing whether jurisdiction arose under
§ 1332(a)(2). Under that statute, jurisdiction did not
arise because both Vreni and John were United States
citizens.
  Because the district court did not possess jurisdiction
under § 1332(a)(2), we must ascertain whether a different
source of jurisdiction exists. The only other possible
provision is § 1332(a)(1), which permits a district court
to hear cases between “Citizens of different States.” The
Supreme Court has held that an American citizen who
moves abroad is not a citizen of any state for purposes
of § 1332(a)(1). Newman-Green, Inc. v. Alfonzo-Larrain, 490
U.S. 826, 828 (1989); accord ISI Int’l, Inc. v. Borden Ladner
Gervais LLP, 316 F.3d 731, 733 (7th Cir. 2003). Because
she lived in Switzerland when she filed her complaint,
Vreni is not considered a citizen of any state. Accordingly,
she cannot assert subject-matter jurisdiction under
§ 1332(a)(1). See Frett-Smith v. Vanderpool, 511 F.3d 396,
400 (3d Cir. 2008) (stating that “if [a dual citizen] was
domiciled abroad at the time her Complaint was filed,
No. 07-3415                                              9

she would not be a citizen of any state and diversity
jurisdiction under § 1332(a)(1) would also fail”). Because
there is no other basis for jurisdiction, we must dismiss
this suit.

                            III.
  Because Vreni and the decedent were United States
citizens as well as citizens of foreign states, they are
unable to invoke subject-matter jurisdiction as citizens of
a foreign state under § 1332(a)(2). Moreover, because
they were Americans living abroad, they are also unable
to invoke subject-matter jurisdiction under § 1332(a)(1).
Because no other basis for subject-matter jurisdiction
exists, the district court did not have subject-matter
jurisdiction over this case. The judgment of the district
court is V ACATED and this case is R EMANDED with in-
structions for the district court to dismiss the suit
without prejudice.

                           8-6-09