Scot Typewriter Co. v. Underwood Corp.

• Citation: 170 F. Supp. 862
• Parties: SCOT TYPEWRITER CO., Inc., Plaintiff, v. UNDERWOOD CORP., Defendant.
• Decision Date: 04 March 1959
• Court: U.S. District Court — Southern District of New York

170 F. Supp. 862

SCOT TYPEWRITER CO., Inc., Plaintiff, v. UNDERWOOD CORP., Defendant.

United States District Court S. D. New York.

March 4, 1959.

Bass & Friend, New York City, Solomon H. Friend, New York City, of counsel, for plaintiff.

Simpson, Thacher & Bartlett, New York City, Whitney North Seymour, Jr., New York City, of counsel, for defendant.

WEINFELD, District Judge.

This action, originally commenced in the Supreme Court of the State of New York, was removed to this Court on the defendant's petition alleging diversity of citizenship between it and the plaintiff, a New York corporation.

The plaintiff now moves to remand the action to the State Court on the ground that there is no diversity and that accordingly the requisite federal jurisdiction is lacking.

The motion is based upon the recent amendment to 28 U.S.C. § 1332 which provides that for purposes of diversity jurisdiction, a corporation

"* * * shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business."

The plaintiff contends that the defendant, incorporated in the State of Delaware, is in the contemplation of the amended section, also a citizen of the State of New York, where it maintains its executive offices.

The defendant, on the other hand, contends that while its executive offices are in New York, its "principal place of business" is in Connecticut, where its largest production plant is located and where it carries on research and development as well as operational activities.

Congress, in attempting to delimit diversity jurisdiction by decreeing that a corporation was to be deemed a citizen not only of the state of its incorporation but also of the state where it has its "principal place of business", did not define the latter phrase. It did suggest, however, that the Courts were to be guided by decisional law, construing the same language as used in the Bankruptcy Act and other federal statutes.¹

The question essentially is one of fact, "to be determined in each particular case by taking into consideration such factors as the character of the corporation, its purposes, the kind of business in which it is engaged, and the situs of its operations."² As is not unusual in this type of situation, one side emphasizes, while the other minimizes, significant factors.

The defendant is a leading manufacturer of typewriters and business machines, as well as other products which are distributed nationally and internationally. It maintains research laboratories for the improvement of its products.

It has three manufacturing plants, the largest of which is at Hartford, Connecticut. All facilities for the production of typewriters and business machines, from original research to the shipping department, are located there. At Burlington, New Jersey, it produces supplies, and its third plant in California is devoted almost exclusively to manufacturing missile and radar components pursuant to Government contracts. The manufactured products are distributed and serviced through branch offices located in over one hundred cities throughout the United States. Its international business is carried on through subsidiaries which handle production operations outside the United States.

The plaintiff, to support its position that the defendant's principal place of business is in New York City, stresses its executive activities there in over-all supervision and coordination of all functional operations. The executive offices of the defendant are located in New York; its President and Chairman of the Board, three of five Vice-Presidents,³ its Treasurer and Assistant Treasurer, Secretary, Comptroller, Director of Dealer Sales and Director of Installment Sale Collections all maintain offices there. Basic policy decisions are made in the New York office. The personnel, industrial relations, public relations, purchasing, rental and general service, general office sales, international, advertising and sales promotion departments are all headquartered in New York. Customer relations with respect to service, credit, and accounting, affecting sales wherever made, are administered from New York. The corporation's last federal income tax return, for 1957, was filed there.⁴

The activities in New York are such that defendant concedes its New York City office functions on the executive level in the determination of policy and the co-ordination of all of its various activities.

In spite of this, the defendant disclaims New York as its principal place of business. Its basic position is that its principal business is the development and manufacture of typewriters and business machines; that all other phases of its operations are incidental to the primary function. Accordingly, it contends that since its major function, production of typewriters and business machines, is concentrated almost entirely in Connecticut, its principal place of business is located there. It stresses that in Connecticut it has the largest number of employees and the largest payroll, as well as most of its tangible property. It also points out that most of its shipments are made from Connecticut and that most purchases are made within the state.

Where a corporation is engaged in multistate activities, with offices, facilities or...