394 U.S. 823 (1969)
In May 1959, Caribbean Mills, Inc., a Haitian corporation, entered into a contract with an individual named Kelly and the Panama and Venezuela Finance Company, a Panamanian corporation.1 The agreement provided that Caribbean would purchase from Panama 125 shares of corporate stock, in return for payment of $85,000 down and an additional $165,000 in 12 annual installments.2
No installment payments ever were made, despite requests for payment by Panama.3 In 1964, Panama assigned its entire interest in the 1959 contract to petitioner Kramer, an attorney in Wichita Falls, Texas.4 The stated consideration was $1.5 By a separate agreement dated the same day, Kramer promised to pay back to Panama 95% of any net recovery on the assigned cause of action, solely as a Bonus.6
Kramer soon thereafter brought suit against Caribbean for $165,000 in the United States District Court for the Northern District of Texas, alleging diversity of citizenship between himself and Caribbean.7 The District Court denied Caribbean’s motion to dismiss for want of jurisdiction.8 The case proceeded to trial, and a jury returned a $165,000 verdict in favor of Kramer.9
On appeal, the Court of Appeals for the Fifth Circuit reversed.10 The Supreme Court granted certiorari to review the jurisdictional question.11
Whether the Federal District Court in which the action was brought had jurisdiction over the cause, or whether that court was deprived of jurisdiction by 28 U.S.C. § 1359?12
28 U.S.C. § 1359 provides that a district court shall not have jurisdiction of a civil action in which any party, by assignment or otherwise, has been improperly or collusively made or joined to invoke the jurisdiction of such court.13 The purpose of the statute is to prevent the manufacture of federal jurisdiction by the device of assignment.14 Precedent establishes that an assignment is collusive when made for collection purposes with the assignee retaining only a small interest and motivated by a desire to create diversity jurisdiction.15
No. The Federal District Court was deprived of jurisdiction by 28 U.S.C. § 1359.16 In 1964 Panama assigned its entire interest in the 1959 contract to Kramer for a stated consideration of $1.17 By a separate agreement dated the same day Kramer promised to pay back to Panama 95% of any net recovery on the assigned cause of action solely as a bonus.18 Kramer had no previous connection with the matter.19
Kramer brought suit against Caribbean in the United States District Court for the Northern District of Texas alleging diversity of citizenship between himself and Caribbean.20 These facts show that the assignment was for purposes of collection with Kramer to retain only 5% of the net proceeds for the use of his name and trouble in collecting.21 If the suit had been unsuccessful Kramer would have been out only $1 plus costs.22 The arrangement is indistinguishable from that in Farmington v. Pillsbury where a similar transfer was held to be a collusive contrivance to create federal jurisdiction.23
The district court lacked jurisdiction because the assignment was improperly or collusively made within the meaning of 28 U.S.C. § 1359.24