Zhang v. Han
- Gregory Woods
- 1:21-cv-01625
- U.S. District Court · Southern District of New York
- 7
In Zhang v. Han, Judge Woods dismissed the case without prejudice because foreign citizenship on both sides defeated diversity jurisdiction.
Jing Zhang’s action against Xueyuan Han and the other named defendants was dismissed without prejudice for lack of diversity jurisdiction; the court also denied Zhang leave to amend and denied jurisdictional discovery.
What happened
In Zhang v. Han, Jing Zhang alleged that the defendants violated obligations connected to her purchase of stock and asserted claims including breach of contract, unjust enrichment, conversion, and breach of fiduciary duties. She relied on diversity jurisdiction, which allows certain disputes between citizens of different states or countries to be heard in federal court.
The court ruled that diversity jurisdiction was unavailable because Zhang is a Chinese citizen, even though she is a lawful permanent resident of the United States, and some defendants are also Chinese citizens. The court therefore did not reach the merits of her claims. It also denied Zhang’s request to amend the complaint and denied her request for jurisdictional discovery.
Judge Woods granted the defendants’ motion to dismiss, dismissed the action without prejudice, directed the clerk to enter judgment for the defendants, and closed the case.
The detailed version
- Zhang v. Han · No. 1:21-cv-01625
- Gregory Woods
- Jan. 5, 2022
Background
Jing Zhang alleged that she purchased $2 million worth of stock in HF Holdings Limited in 2017. The operative complaint asserted claims for breach of contract, unjust enrichment, conversion, and breach of fiduciary duties against Xueyuan Han and the other named defendants. The complaint did not include the federal claims asserted in earlier versions. Zhang alleged that the court had diversity jurisdiction under 28 U.S.C. § 1332.
Jurisdiction
The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which allows dismissal when a federal court lacks authority to hear a case. The court explained that diversity jurisdiction generally requires complete diversity, meaning that no plaintiff may share the relevant citizenship with any defendant.
The court held that Zhang is treated as an alien for diversity purposes because she is a citizen of China, even though she is a lawful permanent resident of the United States. Defendants Xueyuan Han and Junjun Feng are also citizens of China. The court therefore found that aliens were present on both sides of the case, defeating diversity jurisdiction. The court added that the other corporate defendants were also foreign entities, and that HFRE LLC took the citizenship of its member or members. Because Han allegedly owned and managed HFRE and was a Chinese citizen, the court concluded that HFRE could not create diversity jurisdiction either.
The court rejected Zhang’s argument that her permanent-resident status made her a citizen of California for diversity purposes. It stated that binding Second Circuit precedent required treating her as an alien. The court also declined to allow jurisdictional discovery because Han’s Chinese citizenship already defeated diversity, regardless of the citizenship of any additional HFRE members.
Leave to Amend
The court denied Zhang leave to amend the complaint. It found that she had not alleged facts showing that she could cure the lack of subject-matter jurisdiction and concluded that further amendment would be futile.
Disposition
The court granted the defendants’ motion to dismiss and dismissed the action without prejudice. It directed the clerk to enter judgment for the defendants, terminate the pending motions, and close the case. Because the dismissal was based on lack of subject-matter jurisdiction, the opinion did not decide whether Zhang’s underlying claims were legally valid.
Date Note
The supplied case information lists a filing date of January 5, 2022, while the opinion itself is dated January 5, 2021. This summary uses the date stated in the opinion.
Read the full 7-page opinion on CourtListener, the free public archive maintained by the Free Law Project.