American National Red Cross v. S. G.
1992 U.S. LEXIS 3691, 505 US 247, 120 L. Ed. 2d 201 (1992)
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Rule of Law:
A 'sue and be sued' provision in a congressional charter confers federal court jurisdiction if, but only if, it specifically mentions the federal courts, thereby extending beyond a mere grant of general corporate capacity to sue.
Facts:
- In 1988, respondents (including S.G.) filed a state-law tort action in a New Hampshire state court, alleging that one of them had contracted AIDS from a transfusion of contaminated blood during surgery.
- The initial defendants named in the suit were the surgeon and the manufacturer of a piece of medical equipment used during the procedure.
- Respondents later discovered that the American National Red Cross had supplied the tainted blood.
- Respondents then sued the Red Cross separately in the same New Hampshire state court and moved to consolidate this new action with the original tort suit.
Procedural Posture:
- S.G. (respondents) initiated a state-law tort action in New Hampshire state court against a surgeon and a medical equipment manufacturer.
- S.G. subsequently filed a separate state-law action against the American National Red Cross in the same New Hampshire state court and moved to consolidate it with the first action.
- Before the state court ruled on the consolidation motion, the American National Red Cross invoked the federal removal statute, 28 U. S. C. § 1441, to move the suit against it to the United States District Court for the District of New Hampshire, claiming federal jurisdiction.
- The District Court denied S.G.'s motion to remand the case to state court, holding that the Red Cross charter's 'sue and be sued' provision conferred original federal jurisdiction.
- On interlocutory appeal, the United States Court of Appeals for the First Circuit reversed, concluding that the charter provision did not grant federal jurisdiction.
- The Supreme Court of the United States granted certiorari.
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Issue:
Does the 'sue and be sued' provision in the American National Red Cross Charter, which authorizes it to sue and be sued in "State or Federal" courts, confer original jurisdiction on federal courts over all cases to which the Red Cross is a party, thereby allowing removal of state-law actions?
Opinions:
Majority - Justice Souter
Yes, the 'sue and be sued' provision in the American National Red Cross Charter confers original jurisdiction on federal courts over all cases to which the Red Cross is a party. The Court based its decision on a consistent line of precedents interpreting such clauses in federal corporate charters. In Bank of the United States v. Deveaux (1809), the Court held that a general 'sue and be sued' clause did not confer federal jurisdiction because it merely granted corporate capacity and did not specifically mention federal courts. Conversely, in Osborn v. Bank of United States (1824), a clause authorizing suit 'in any circuit court of the United States' was held to confer federal jurisdiction. This distinction was reaffirmed in Bankers Trust Co. v. Texas & Pacific R. Co. (1916). Crucially, in D'Oench, Duhme & Co. v. Federal Deposit Ins. Corp. (1942), the Court found federal jurisdiction based on the FDIC's charter, which authorized it to sue or be sued 'in any court of law or equity, State or Federal.' The Red Cross Charter's 1947 amendment added 'State or Federal' to its 'sue and be sued' provision, making it functionally identical to the FDIC's charter as interpreted in D'Oench, Duhme. The Court rejected arguments that the 'well-pleaded complaint' rule applied, noting it's for statutory 'arising under' jurisdiction, not independent jurisdictional grants. It also dismissed comparisons to other charters as distinguishable and found legislative history (an Advisory Report expressing concern with federal courts' 'limited jurisdiction') supportive of a jurisdictional grant. The Court further affirmed that Article III's 'arising under' jurisdiction is broad enough to permit Congress to confer federal court jurisdiction over actions involving federally chartered corporations.
Dissenting - Justice Scalia
No, the 'sue and be sued' provision in the Red Cross Charter only grants the organization the capacity to sue and be sued, not federal court jurisdiction. Justice Scalia argued that the majority's interpretation created a 'wonderland of linguistic confusion' by treating certain 'sue and be sued' clauses as 'magic words' conferring jurisdiction, departing from ordinary English usage. The provision is found amidst other standard corporate powers, suggesting it merely establishes the Red Cross as a legal entity capable of participating in lawsuits. He contended that conferring corporate authority is an illogical means of granting court jurisdiction, and that the parallel treatment of state and federal courts further undermines a jurisdictional reading, as granting jurisdiction to state courts would raise serious constitutional questions. Scalia reinterpreted the precedents, arguing that Deveaux distinguished between a general capacity grant and a specific provision allowing a particular cause of action in federal court, not simply whether 'federal courts' were mentioned. He asserted that Osborn focused on the grant to 'particular federal courts' and its contrast with state courts 'having competent jurisdiction' as indicating a jurisdictional grant, without establishing a broad 'magic words' rule. Bankers Trust also focused on the 'natural import' of the language rather than the lack of specific federal court mention. He dismissed the D'Oench, Duhme reference as a passing comment on a conceded point, with the actual jurisdictional basis being a 'deemer' clause not the 'sue and be sued' provision. Finally, he argued the 1947 amendment adding 'State or Federal' was not superfluous but clarified the Red Cross's capacity to sue in federal courts, especially given ambiguity in the original language, and cited legislative history suggesting a concern with state court capacity.
Analysis:
This case is significant for clarifying the interpretive standard for 'sue and be sued' clauses in federal corporate charters, establishing a clear rule that explicit mention of federal courts confers jurisdiction. It underscores the U.S. Supreme Court's long-standing view that Congress can grant federal question jurisdiction to federally chartered corporations, affirming the breadth of Article III. The dissent highlights a fundamental disagreement over statutory interpretation, weighing plain meaning against the precedential creation of 'terms of art,' which is a recurring theme in legal analysis. The decision provides certainty for federally chartered entities regarding their access to federal courts and their ability to remove cases, influencing future legislative drafting of corporate charters.
