Hamilton Reserve Bank Ltd. v. The Democratic Socialist Republic of Sri Lanka

Background

Hamilton Reserve Bank Ltd. sued The Democratic Socialist Republic of Sri Lanka to recover principal and accrued interest on bonds issued by Sri Lanka. Hamilton alleges that it is the beneficial owner of more than $250 million in those bonds, purchased between August 2021 and April 2022. Sri Lanka defaulted on the bonds. The case was stayed during sovereign debt restructuring negotiations, and the stay was extended to August 1, 2024.

On February 29, 2024, Jesse Guzman, Ultimate Concrete, LLC, and Intercoastal Finance Ltd. moved to intervene—that is, to become parties in the existing lawsuit. They sought intervention as of right under Federal Rule of Civil Procedure 24(a), or, alternatively, permissive intervention under Rule 24(b).

The intervenors described Intercoastal Finance Ltd. as the account holder, Guzman as the account signatory, and Ultimate Concrete, LLC as the source of the funds. They alleged that they deposited $50 million with Hamilton in December 2021. Hamilton returned $200,000 in June 2022, but, according to the intervenors, refused to return the remaining deposited funds. They claimed an equitable interest in the bonds through a constructive trust theory because Hamilton purchased the bonds close in time to receiving their funds. Hamilton opposed intervention.

Jurisdiction

The court held that it lacked supplemental jurisdiction over the intervenors’ claims. Supplemental jurisdiction is a court’s power to hear additional claims that are sufficiently connected to claims already within the court’s original jurisdiction. The court explained that claims are part of the same case or controversy when they arise from a common set of important facts.

The court found that Hamilton’s claims against Sri Lanka arose from Sri Lanka’s default on sovereign debt and the related international debt-restructuring effort. By contrast, the intervenors’ claims against Hamilton arose from their deposit of funds and Hamilton’s alleged refusal to repay those funds. The court held that the intervenors’ attempt to connect these disputes through a constructive-trust theory did not establish the required factual connection.

The court also rejected Hamilton’s argument that a statutory limit on supplemental jurisdiction barred the intervenors’ claims because one intervenor is foreign. It explained that this limit did not apply because the original jurisdiction over Hamilton’s claims against Sri Lanka was based on 28 U.S.C. § 1330.

Disposition

The court denied the intervenors’ February 29, 2024 motion to intervene. The opinion did not resolve the merits of Hamilton’s bond claims, the intervenors’ deposit-related claims, or the constructive-trust theory.