Kramer v. Caribbean Mills, Inc. – Case Brief
Kramer v. Caribbean Mills, Inc., 394 U.S. 823 (1969).
Facts: Caribbean Mills, Inc. (D) entered into an agreement to purchase corporate stock in the Panama and Venezuela Finance Company with a down payment of $85,000 and $165,000 in twelve installments. Caribbean Mills paid the down payment but did not pay any of the installments. Panama then assigned its interest in the payments to Kramer (P) for $1 and Kramer’s promise to pay Panama 95% of any net recovery. Kramer brought an action in diversity against D in Texas and D moved for dismissal for lack of jurisdiction. The jury entered a verdict in favor of P and D appealed. The Court of Appeals reversed and the Supreme Court granted certiorari.
Issue: May a collusive assignment be used to create diversity of citizenship?
Holding and Rule (Harlan): No. A collusive assignment may not be used to create diversity of citizenship. The court reasoned that if federal jurisdiction could be created by assignments of this kind a vast quantity of ordinary contract and tort litigation could be channeled into federal courts. Section 1359 was enacted to prevent the manufacture of federal jurisdiction.
Notes: It is clear from the record that the specific purpose of assigning the rights to suit to Kramer was to create diversity.