US SUPREME COURT DECISIONS

Respondent, a Haitian corporation, contracted with a Panamanian corporation to purchase some of the latter's stock for an $85,000 downpayment and $165,000 in 12 annual installments. No installment payments were made, despite demands by the Panamanian company, which thereafter assigned its interest in the contract to petitioner, a Texas attorney, for $1. By a separate agreement, petitioner promised to pay the Panamanian company 95% of any net recovery "solely as a Bonus." Petitioner filed a diversity action against respondent in the District Court and obtained a jury verdict for $165,000. That court denied respondent's motion to dismiss for want of jurisdiction. The Court of Appeals reversed, finding that the assignment was "improperly or collusively made" within the meaning of 28 U.S.C. § 1359.

Held: The assignment was "improperly or collusively made" within the meaning of § 1359, as the "manufacture of Federal jurisdiction" was the very thing Congress intended to prevent by the enactment of § 1359 and its predecessors. Pp. 394 U. S. 825-830.

(a) The legality of the assignment under Texas law does not render it valid for purposes of federal jurisdiction, as the existence of federal jurisdiction is a matter of federal, not state, law. P. 394 U. S. 829.

(b) Section 1359 applies to diversity jurisdiction arising from the alienage of a party as well as that based on residence in different States. Pp. 829-830.

392 F.2d 387, affirmed.