Advani Enterprises, Inc. v. Underwriters at Lloyds and Syndicate 735 at Lloyds of London, 140 F.3d 157, 2d Cir. (1998)

140 F.
3d 157
1998 A.M.C. 2045
ADVANI ENTERPRISES, INC., Plaintiff-Appellant,

v.
UNDERWRITERS AT LLOYDS and Syndicate 735 at Lloyds
of
London, Defendants-Appellees.
No. 726, Docket 97-7664.
United States Court of Appeals,

Second Circuit.
Argued Oct. 28, 1997.
Decided March 20, 1998.
Steven L. Barkan, Armand Mele, (Lambos & Junge, New York City), for
Plaintiff-Appellant.
James W. Carbin, (Donovan Parry Carbin McDermott & Radzik, New
York City), for Defendants-Appellees.
Before FEINBERG and WALKER, Circuit Judges, and GOLDBERG,*
Judge.
GOLDBERG, Judge:
This is an appeal from an order of the United States District Court for the
Southern District of New York, granting a motion for summary judgment in
favor of defendants-appellees Underwriters at Lloyd's and Syndicate 735 at
Lloyd's of London (collectively the "Underwriters"). Plaintiff-appellant Advani
Enterprises, Inc. ("Advani") commenced this action in the district court,
invoking diversity jurisdiction, to contest the Underwriters' denial of its claim
for losses under a marine cargo insurance policy. The district court granted
summary judgment in favor of the Underwriters after concluding that New
York insurance law governed the policy and that, as a matter of law, Advani
was barred from recovery because it breached an express warranty in the
policy. This appeal ensued.
Although we find that the basis for federal jurisdiction asserted in the complaint
is flawed, we nevertheless conclude that the complaint alleges facts sufficient
to invoke the court's admiralty jurisdiction. Therefore, pursuant to 28 U.S.C.
1653 (1994), we grant Advani's request for leave to amend its complaint to
assert federal jurisdiction under 28 U.S.C. 1333 (1994). We further conclude
that the district court erred in its choice-of-law analysis, finding instead that
English marine insurance law properly governs the policy. Thus, we vacate the
judgment of the district court and remand the case for further proceedings not
inconsistent with this opinion.
I.
3
The facts of this case are fairly straightforward. On September 13, 1994,
Advani obtained a marine cargo insurance policy underwritten by the
Underwriters to cover a shipment of porcelain dishware from the Far East to
Port Said, Egypt, via a bonded warehouse in New York. It appears from the
record that Advani purchased the policy through its insurance broker, Grifon
Insurance Agency, Inc. ("Grifon"), and that Grifon placed the insurance risk at
Lloyd's of London through a London broker, Houlder Insurance Services
(Marine) Limited. The terms of the insurance policy are evidenced by Cover
Note No. M3946215.000.1
Three provisions in the Cover Note are relevant here. First, the Cover Note
indicates that the policy insures "Porcelain Dishware in cartons in three full
container loads door to door." Second, the Cover Note specifies that the
shipment is "warranted full container loads Door to Door." And third, the Cover
Note incorporates certain Institute Cargo Clauses, which state, inter alia, that "
[t]his insurance is subject to English law and practice."
On October 24, 1994, cartons of porcelain dishware were loaded into three
containers and shipped to Port Said. Upon arrival in Port Said, pursuant to an
Egyptian regulation, Egyptian Customs officials opened the containers. At that
point, a Customs clearing agent noticed that some of the cartons were dented
and that their contents were rattling. Thereafter, the cartons were removed from
the containers, loaded onto trucks, and shipped one mile to a warehouse. Later,
when Advani surveyed the cartons, it found that their contents had sustained
damage in the amount of $150,000. Advani then presented a claim under the
policy for that amount. The Underwriters denied coverage on the ground that
the removal of the cartons from the containers at Port Said constituted a breach
of an express warranty in the policy that required the cartons to be shipped in
"full container loads Door to Door."Advani responded by initiating the instant
action in federal district court, asserting diversity jurisdiction. The Underwriters
countered by moving for summary judgment, arguing that the policy is

governed by New York insurance law, which bars recovery under a marine
cargo insurance policy if the assured breaches an express warranty contained
therein. Advani opposed the motion. It argued first that the wording of the
warranty was ambiguous, and second, in the alternative, that if it breached the
warranty, English law should govern the effect of the breach. In particular,
Advani argued that under English law a breach only precludes recovery of
those losses causally related to the breach. In order to establish a genuine issue
of material fact on the extent to which the porcelain dishware was damaged
before it reached Port Said, Advani submitted an affidavit from an Egyptian
Customs agent who noticed that the contents of some of the cartons were
rattling before the cartons were removed from their containers. Concluding that
New York insurance law both governs the policy and precludes recovery, the
district granted summary judgment in favor of the Underwriters, and entered
judgment accordingly.
II.
A. Jurisdiction
6
Before we address whether the district court correctly decided the issues before
it, we consider sua sponte whether the district court had subject-matter
jurisdiction to decide the case, focusing on whether the facts contained in the
pleadings establish diversity jurisdiction.2 Leveraged Leasing Admin. Corp. v.
PacifiCorp Capital, Inc., 87 F.3d 44, 47 (2d Cir.1996); Baer v. United Servs.
Auto. Ass'n, 503 F.2d 393, 397 (2d Cir.1974). Having done so, we find that the
district court lacked subject-matter jurisdiction over this case under 28 U.S.C.
1332 because Advani's pleadings do not demonstrate that the parties are
completely diverse. We also find, however, that the pleadings clearly satisfy the
requirements of admiralty jurisdiction under 28 U.S.C. 1333; thus, we grant
Advani's request for leave to amend its complaint accordingly.
Diversity jurisdiction exists in a civil action between citizens of different states,

or between citizens of the United States and citizens or subjects of a foreign
state when the matter in controversy exceeds $ 50,000.3 28 U.S.C. 1332(a).
The party seeking to invoke jurisdiction under 28 U.S.C. 1332 bears the
burden of demonstrating that the grounds for diversity exist and that diversity is
complete. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56
S.Ct. 780, 785, 80 L.Ed. 1135 (1936); Strawbridge v. Curtiss, 7 U.S. (3 Cranch)
267, 2 L.Ed. 435 (1806). In other words, federal subject-matter jurisdiction
based on diversity is unavailable unless Advani's pleadings demonstrate that it
does not share citizenship with any of the defendants-appellees. John Birch
Soc'y v. National Broad. Co., 377 F.2d 194, 197 (2d Cir.1967).
8
Advani attempted to satisfy the requirements of 28 U.S.C. 1332 by alleging

that this action is between a citizen of the United States and citizens or subjects
of the United Kingdom. See Compl. at pp 1-3 (describing itself as a United
States corporation, Underwriters at Lloyd's as a United Kingdom consortium,
and Syndicate 735 as a syndicate at Lloyd's of London operating under the laws
of the United Kingdom). In doing so, Advani overlooked the legal status of the
defendants-appellees. Both Underwriters at Lloyd's and Syndicate 735 are
unincorporated associations. Consequently, for jurisdictional purposes, they do
not have legal identities separate from their members. Carden v. Arkoma
Assocs., 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). Thus, courts
faced with the task of determining the citizenship of a Lloyd's syndicate have
done so in one of two ways. Under the first, and more popular, approach a
Lloyd's syndicate is a citizen of every state in which its individual investors,
known as "Names," are citizens. See, e.g., Humm v. Lombard World Trade,
Inc., 916 F.Supp. 291 (S.D.N.Y.1996); Chase Manhattan Bank, N.A. v.
Aldridge, 906 F.Supp. 870 (S.D.N.Y.1995); Lowsley-Williams v. North River
Ins. Co., 884 F.Supp. 166 (D.N.J.1995); Transamerica Corp. v. Reliance Ins.
Co., 884 F.Supp. 133 (D.Del.1995); Bath Iron Works Corp. v. Certain Member
Cos. of Inst. of London Underwriters, 870 F.Supp. 3 (D.Me.1994). Under the
second approach, a Lloyd's syndicate is only a citizen of the state in which its
managing/lead underwriter is a citizen. See Certain Interested Underwriters at
Lloyd's, London, Eng. v. Layne, 26 F.3d 39 (6th Cir.1994).
We do not decide today which approach best determines the citizenship of a

Lloyd's syndicate because under either approach the pleadings are lacking; they
identify neither the citizenship of the individual investors nor the citizenship of
the managing/lead underwriter. Consequently, we cannot discern whether the
Underwriters are, in fact, citizens or subjects of the United Kingdom, or any
other foreign state for that matter. As a result, the complaint does not establish
that this action is between a citizen of the United States and a citizen or subject
of a foreign state.
10
Furthermore, the complaint fails to demonstrate that this action is between

citizens of different states because it does not identify Advani's citizenship. For
jurisdictional purposes, a corporation is deemed to be a citizen both of the state
in which it has been incorporated and the state in which it has its principal place
of business. 28 U.S.C. 1332(c). In its complaint, however, Advani, although it
describes itself as a corporation, has failed to include either. Instead, it merely
pleads that it is a United States corporation with an office in New York. Compl.
at p 1. Under 28 U.S.C. 1332(c), this is clearly insufficient. Moreover, as
discussed previously, whether we choose to evaluate the citizenship of

Syndicate 735's individual investors or only its lead/managing underwriter, the
complaint is still silent on the citizenship of the Underwriters. Consequently,
based on the pleadings we cannot find that this is an action between citizens of
different states, and jurisdiction under 28 U.S.C. 1332 is therefore
unavailable.
11
Nevertheless, Advani's failure to allege the facts necessary to invoke diversity

jurisdiction does not prove fatal to its complaint. In its supplemental letter brief
on this issue, Advani asks the court for leave to amend its pleadings to assert
admiralty jurisdiction. Appellant's Supplemental Letter Br. at 3-4. In doing so,
it draws on 28 U.S.C. 1653 for support, which provides that "defective
allegations of jurisdiction may be amended, upon terms, in the trial or appellate
courts." 28 U.S.C. 1653. We have consistently recognized that section 1653
should be construed "liberally to permit the action to be maintained if it is at all
possible to determine from the record that jurisdiction does in fact exist." John
Birch Soc'y, 377 F.2d at 198-99. Accord Pressroom Unions-Printers League
Income Sec. Fund v. Continental Assurance Co., 700 F.2d 889, 893 (2d
Cir.1983) (citation omitted); Cox v. Livingston, 407 F.2d 392, 393 (2d
Cir.1969). However, section 1653, even liberally construed, does not allow a
plaintiff to amend its complaint to substitute a new cause of action over which
there is subject-matter jurisdiction for one in which there is not. See Pressroom
Unions-Printers, 700 F.2d at 893 (holding that section 1653 does not allow a
plaintiff without statutory standing to amend its complaint to add a party with
standing).
12
Here, admiralty jurisdiction is apparent from the face of the complaint. From
the outset, Advani has repeatedly indicated that it is seeking to recover under a
marine cargo insurance contract. Compl. pp 5, 11, 15. It is well established that
cases involving marine cargo insurance policies fall within the federal court's
admiralty jurisdiction, especially when, as here, the policy's provisions
exclusively relate to maritime commerce. See 28 U.S.C. 1333; New England
Mut. Marine Ins. Co. v. Dunham, 78 U.S. (11 Wall) 1, 20 L.Ed. 90 (1870);
Sirius Ins. Co. (UK) v. Collins, 16 F.3d 34, 36 (2d Cir.1994); Atlantic Mut. Ins.
Co. v. Balfour Maclaine Int'l Ltd., 968 F.2d 196, 199 (2d Cir.1992). Hence, we
allow the amendment even though it asserts a new theory of subject-matter
jurisdiction because both the pleadings and judicial economy support it. See In
re Balfour MacLaine Int'l Ltd., 85 F.3d 68, 76 (2d Cir.1996) (exercising
subject-matter jurisdiction based on unpleaded theory after finding that the
original theory was insufficient); Curley v. Brignoli, Curley & Roberts Assocs.,
915 F.2d 81, 84-85 (2d Cir.1990) ("This court must liberally construe plaintiffs'
complaint 'to determine whether the facts set forth justify taking jurisdiction on
grounds other than those most artistically pleaded.' ") (quoting New York State
Waterways Ass'n v. Diamond, 469 F.2d 419, 421 (2d Cir.1972)).
B. Choice-of-Law
13
We now turn our attention to the central issue on appeal: whether New York or
English insurance law should govern the policy. Applying a "grouping of
contacts" choice-of-law analysis, the district court determined that New York
law properly governs the policy because (1) Advani maintains a place of
business in New York; (2) Advani obtained the policy through a New York
broker; and (3) Advani received the Cover Note in New York. Advani Enters.
v. Underwriters at Lloyds, 962 F.Supp. 415, 419 (S.D.N.Y.1997). We review
the district court's findings of law de novo, and its factual conclusions under a
clearly erroneous standard. Ciaramella v. Reader's Digest Ass'n, 131 F.3d 320,
322 (2d Cir.1997). Because we find that the district court's analysis overlooked
several critical points of contact between the policy and England and that
English law governs the issue of liability in this case, we vacate and remand for
further proceedings.
14
This policy is a maritime contract. Therefore, general federal maritime law,

including federal choice-of-law rules apply. Sundance Cruises Corp. v.
American Bureau of Shipping, 7 F.3d 1077, 1080 (2d Cir.1993). Federal
maritime law requires us to determine "the scope and validity of the [marine
insurance] policy provisions [ ] involved and the consequences of breaching
them" by using state law. Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348
U.S. 310, 316, 75 S.Ct. 368, 371, 99 L.Ed. 337 (1955). Under federal choiceof-law rules, we determine which state law to use by "ascertaining and valuing
points of contact between the transaction [giving rise to the cause of action] and
the states or governments whose competing laws are involved." Lauritzen v.
Larsen, 345 U.S. 571, 582, 73 S.Ct. 921, 928, 97 L.Ed. 1254 (1953); accord
Romero v. International Terminal Operating Co., 358 U.S. 354, 79 S.Ct. 468, 3
L.Ed.2d 368 (1959); Sundance Cruises, 7 F.3d at 1081-82; State Trading Corp.
of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409, 416-17 (2d
Cir.1990). More concretely, this choice-of-law analysis should include an
assessment of the following contacts: (1) any choice-of-law provision contained
in the contract; (2) the place where the contract was negotiated, issued, and
signed; (3) the place of performance; (4) the location of the subject matter of
the contract; and (5) the domicile, residence, nationality, place of incorporation,
and place of business of the parties. See e.g., Sundance Cruises, 7 F.3d at 1082;
State Trading, 921 F.2d at 417; Siegelman v. Cunard White Star Ltd., 221 F.2d
189, 193-95 (2d Cir.1955). See also Aqua-Marine Constrs., Inc. v. Banks, 110
F.3d 663, 674 (9th Cir.) cert. denied, --- U.S. ----, 118 S.Ct. 339, 139 L.Ed.2d
263 (1997); Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763, 767
(D.C.Cir.1992).
15
Applying these factors, we conclude that English law properly governs the
policy. The policy expressly provides that "[t]his insurance is subject to English
law and practice." Although this contact alone is not dispositive, we give it
considerable weight in this case for two reasons. First, Advani, the party
seeking to enforce the choice-of-law provision, did not draft the policy. The
Underwriters did. Second, the Underwriters relied on English marine insurance
law when they originally denied coverage. See Letter from Waltons & Morse to
Lilly Sullivan Barkan & Junge P.C. of Apr. 2, 1995 at 1 ("Circumstances where
a breach of warranty is excused are provided for at Section 34(1) of the Marine
Insurance Act 1906....").
16
Moreover, Advani obtained the policy by participating in the underwriting

market at Lloyd's of London in England. Advani addressed a letter requesting
payment under the policy to Lloyd's Underwriters c/o Houlder Insurance
Services (Marine) Limited in England, Letter from Lilly Sullivan Barkan &
Junge P.C. to Lloyds Underwriters c/o Houlder Ins. Servs. (Marine) Ltd of Mar.
21, 1995 at 1, and the response came from English solicitors. Letter from
Waltons & Morse. Furthermore, although the record does not contain enough
information to definitively establish the citizenship of the Underwriters, it
reveals that they are authorized to underwrite marine cargo insurance policies in
the United Kingdom and that they have a place of business in England.
17
On the other hand, we find the connections with New York to be considerably
less compelling. They include the delivery of the Cover Note to Advani in New
York; the loading of cargo for shipment from a bonded warehouse in New
York; and an office that Advani maintains New York. With respect to the Cover
Note, its importance is undercut because the record does not indicate who
delivered it to Advani in New York. For instance, had the record established
that the Underwriters or their agent delivered it, the argument in favor of the
application of New York law would have been stronger. Similarly, Advani's
office in New York, albeit important, carries less weight because the record
does not show that Advani's principal place of business or state of incorporation
is New York. Assessed in this light, and when compared to the contacts with
England, the contacts with New York are fewer and less important. Hence, we
conclude that English law should govern the policy.
III.
18
For the foregoing reasons, we allow the plaintiff to amend its complaint to
assert admiralty jurisdiction instead of diversity jurisdiction. Having confirmed

that subject-matter jurisdiction over this case exists, we conclude that English
marine insurance law should govern the interpretation of the policy. Thus, the
summary judgment order of the district court is vacated, and the case is
remanded for further proceedings to determine whether under English law
Advani is entitled to recover on its claim.
Honorable Richard W. Goldberg, of the United States Court of International

Trade, sitting by designation
Because there is usually a significant delay between the time when an insurance
risk is fully subscribed and when the policy is actually issued, it is customary
for a broker placing an insurance risk at Lloyd's of London to furnish the
assured with a Cover Note. The Cover Note serves as evidence that the broker
charged with placing the insurance risk has actually obtained insurance. The
language and terms of the Cover Note mirror the language and terms of the
policy. 2 Thomas J. Schoenbaum, Admiralty And Maritime Law 404-05 (2d
ed.1994) (citation omitted)
At oral argument, we raised this issue sua sponte and requested the parties to
submit supplemental letter briefs on the matter. In its letter brief, Advani
conceded that "it cannot be stated conclusively whether diversity of citizenship
exists" and requested leave to amend its complaint under 28 U.S.C. 1653 to
assert admiralty jurisdiction. Appellant's Supplemental Letter Br. at 3
In 1997, Congress increased the amount-in-controversy requirement to $

75,000. Federal Courts Improvement Act of 1996, Pub.L. No. 104-317, Title II,
205(a), 110 Stat. 3850

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140 F.

ADVANI ENTERPRISES, INC., Plaintiff-Appellant,

United States Court of Appeals,

countered by moving for summary judgment, arguing that the policy is

Diversity jurisdiction exists in a civil action between citizens of different states,

Advani attempted to satisfy the requirements of 28 U.S.C. 1332 by alleging

We do not decide today which approach best determines the citizenship of a

Furthermore, the complaint fails to demonstrate that this action is between

discussed previously, whether we choose to evaluate the citizenship of

Nevertheless, Advani's failure to allege the facts necessary to invoke diversity

This policy is a maritime contract. Therefore, general federal maritime law,

Moreover, Advani obtained the policy by participating in the underwriting

assert admiralty jurisdiction instead of diversity jurisdiction. Having confirmed

Honorable Richard W. Goldberg, of the United States Court of International

In 1997, Congress increased the amount-in-controversy requirement to $

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