Chase Manhattan Bank v. South Acres Development Co.

Background

A private plaintiff sued in the District Court of Guam, arguing the court could hear the case because the parties were from different states or countries. The District Court denied the defendant’s motion to dismiss for lack of jurisdiction, and the Ninth Circuit affirmed. Congress created the District Court of Guam in the Organic Act and set out its jurisdiction in 48 U.S.C. §1424(a). That statute grants federal-question jurisdiction and original jurisdiction over local causes, but it does not mention diversity jurisdiction. In 1974 the Guam Legislature transferred most local cases away from the District Court to Guam’s local courts.

Reasoning

The Supreme Court asked whether the language giving the Guam court jurisdiction over causes “arising under” federal laws also includes diversity-of-citizenship cases. The Court explained that the phrase tracks federal-question jurisdiction and that the Constitution treats federal-question and diversity cases as distinct categories. It rejected the Ninth Circuit’s view that the diversity statute is simply another “law of the United States” that would fit under the federal-question phrase. The Court also rejected the argument that extending the Privileges and Immunities Clauses to Guam implicitly gave the District Court diversity jurisdiction, finding no supporting legislative history.

Real world impact

The decision means the District Court of Guam cannot hear cases based solely on diversity of citizenship. Parties seeking a federal forum in Guam must rely on federal-question jurisdiction. Because most local causes were moved to local courts in 1974, many disputes will proceed in Guam’s local courts rather than in the Guam federal court.