The Court held that the "sue and be sued" language was a grant of jurisdiction, and found that Congress had the authority to grant it.
The Court's reasoning was based on the premise that federal incorporation by Congress was enough to create jurisdiction. Therefore, any suit involving the bank that arose under the federal Charter arose under federal law.
However, the Supreme Court has since questioned the validity of this decision. See Gully v. First National Bank, 299 U.S. 109, 112, 81 L. Ed. 70, 57 S. Ct. 96 (1936) and Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 492, 76 L. Ed. 2d 81, 103 S. Ct. 1962 (1983). Since district courts no longer have jurisdiction on the basis of federal incorporation alone, the Osborn decision is less persuasive. In addition, Osborn interpreted the broad language of Article III "arising under" jurisdiction rather than the narrower, statutorily created jurisdiction under 28 U.S.C. § 1331.
The Supreme Court later backed away from the statutory interpretation of Osborn. It concluded, in Bankers Trust Co. v. Tex. & Pac. Ry., 241 U.S. 295, 60 L. Ed. 1010, 36 S. Ct. 569 (1916) that the "sue and be sued" language did not establish "an exceptional or privileged jurisdiction," but merely created the capacity to litigate. Id. at 304. Rather than applying a mechanical rule, the Court determined that the better interpretation was to look instead to the intent of Congress.
Many district courts have recently interpreted the "sue or be sued" language in the Red Cross Charter. The decisions are inconsistent. Some federal courts favor remand, while others permit the Red Cross to remove from state court.
In Anonymous Blood Recipient v. Beaumont Hospital, 721 F. Supp. 139 (E.D. Mich. 1989), the court referred to seven federal district court decisions holding that 36 U.S.C. § 2 confers original jurisdiction, and six federal district court decisions holding that it does not. Since Anonymous Blood Recipient in 1989, at least one other district court chose to remand for want of jurisdiction. See John and Jane Doe v. American Red Cross, No. 91-3114 (E.D. Penn. 1991).
In addition, two cases have been considered by the United States Court of Appeals for the First and Eighth Circuits. However, even the appellate courts split on the issue. S.G. and A.E. v. American National Red Cross, 938 F.2d 1494 (1st Cir. 1991) held that the Charter did not confer jurisdiction, while Kaiser v. Memorial Blood Center, 938 F.2d 90 (8th Cir. 1991) held that the Charter did confer jurisdiction.
B. Legislative Intent of 36 U.S.C. § 2
Defendants assert that the grant of original jurisdiction is supported by legislative intent. Specifically, they rely on the Harriman Committee Report, which recommended that the Charter for the Red Cross "should make it clear that the Red Cross can sue and be sued in Federal Courts. . . . In view of the limited nature of the jurisdiction of the Federal Courts it seems desirable that the right be clearly stated in the charter." Report of the Advisory Committee on Organization at 35-36 (June 11, 1946). This report, however, was not adopted in the legislative history, nor is there any express grant of jurisdiction in the Charter, as was recommended.
In addition, defendants rely on D'Oench, Duhme & Co. v. Federal Deposit Insurance Corporation, 315 U.S. 447, 86 L. Ed. 956, 62 S. Ct. 676 (1942), in which the Court held that the FDIC Charter, which authorized the FDIC to sue and be sued "in any court of law or equity, State or Federal," conferred original jurisdiction. Defendants fail to note, however, that the FDIC Charter contained an express grant of jurisdiction. It stated that all suits of which the Corporation shall be a party "shall be deemed to arise under the laws of the United States." Id. at 455 n. 2 (emphasis added).
The statutory language of 36 U.S.C. § 2 does not expressly grant federal jurisdiction to the Red Cross. Had the legislature intended to confer jurisdiction, it would have followed the recommendations of the Harriman report and included express language providing for this grant. A Congressional Charter for an organization which empowers the organization to sue or be sued in state or federal court does not constitute a special grant of original jurisdiction to district courts over actions against the organization. Accordingly, this court lacks original jurisdiction over this action against the Red Cross.
For the foregoing reasons, the Court hereby REMANDS this action to state court for want of jurisdiction.
IT IS SO ORDERED.
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