Where the transfer of a claim is absolute, with the transferor retaining no interest in the subject matter, then the transfer is not "improperly or collusively made," regardless of the transferor's motive.
Petitioner assignee appealed an order of the Court of Appeals which reversed a verdict entered in his favor. The assignee brought the action against respondent stock purchaser to recover on a contract the purchaser made with the assignor, a financing corporation. The assignor had entered into a contract with the stock purchaser. The agreement provided for an initial payment and annual installments in return for the stock. No installment payments were made, and the assignor transferred its entire interest in the contract to the assignee for one dollar. The assignee by a separate agreement promised to pay back to the assignor 95 percent of any net recovery on the assigned cause of action. The assignee alleged diversity of citizenship between himself and the stock purchaser. The district court denied the stock purchaser's motion to dismiss for want of jurisdiction, and a judgment was entered in favor of the assignee. The court of appeals reversed.
Whether the assignment was improperly or collusively made the invoke the jurisdiction of the federal district court within the meaning of 28 U.S.C.S. 1359.
The court affirmed the reversal, holding that the assignment was improperly or collusively made to invoke the jurisdiction of the federal district court within the meaning of 28 U.S.C.S. § 1359. The assignment was for purposes of collection, and the assignee had no previous connection with the matter. The court noted that the assignee candidly admitted that the assignment was in substantial part motivated by a desire to make diversity jurisdiction available. The court affirmed the reversal of the judgment granted to the assignee, holding that the district court did not have jurisdiction over the action because the assignment was improperly or collusively made for the purpose of invoking the jurisdiction of the federal district court.