• May 18, 2010

Two off-shore investment funds (incorporated in the British Virgin Islands, with principal place of business in Connecticut) sued hedge fund defendants and PricewaterhouseCoopers (as outside auditor to the hedge funds) (Minnesota, Delaware and Bermuda citizens) in connection with plaintiffs’ losses from the hedge funds, which, in turn, suffered losses due to their investments in the Petters’ schemes.

U.S. District Court Judge James R. Rosenbaum (D. Minn.) dismissed the suit for lack of subject matter jurisdiction because the plaintiffs sought federal jurisdiction based on diversity of citizenship but, as Judge Rosenbaum points out, diversity of citizenship is about “citizens from different states” of the United States.  This case, Judge Rosenbaum concluded, does not involve “citizens from different states” in that sense because plaintiffs are deemed citizens of BVI.

”[Plaintiffs] have filed suit against citizens of Minnesota, Delaware, and Bermuda.  This Court cannot exercise diversity jurisdiction over these foreign plaintiffs’ suit against foreign and U.S. citizens.”

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