RH Bouligny, Inc. v. UNITED STEELWORKERS OF AMER.

• Decision Date: 06 August 1964
• Docket Number: No. 9326.,9326.
• Parties: R. H. BOULIGNY, INC., Appellant, v. UNITED STEELWORKERS OF AMERICA, AFL-CIO, an unincorporated association, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

336 F.2d 160 (1964)

R. H. BOULIGNY, INC., Appellant, v. UNITED STEELWORKERS OF AMERICA, AFL-CIO, an unincorporated association, Appellee.

No. 9326.

United States Court of Appeals Fourth Circuit.

Argued April 28, 1964.

Decided August 6, 1964.

Gaston H. Gage and Joseph W. Grier, Jr., Charlotte, N. C. (Grier, Parker, Poe & Thompson, Charlotte, N. C., on brief), for appellant.

Michael H. Gottesman, Washington, D. C. (David E. Feller, Elliot Bredhoff, Jerry D. Anker, Washington, D. C., James Ledford, Charlotte, N. C., and

Cooper, Mitch & Crawford, Birmingham, Ala., on brief), for appellee.

Before SOBELOFF, Chief Judge, and BOREMAN and J. SPENCER BELL, Circuit Judges.

J. SPENCER BELL, Circuit Judge.

This is an appeal from an order of the district court denying a motion to remand the case to the state court. The district court has certified the appeal under 28 U.S.C.A. § 1292(b) (1958). We exercised our discretion to permit the appeal.

The plaintiff, a North Carolina corporation, brought suit for libel growing out of an organizational campaign in the state court against the defendant, United Steelworkers of America, an unincorporated labor union having its headquarters and principal place of business at Pittsburgh, Pennsylvania. The defendant removed the case to the district court on the grounds both of diversity of citizenship and that the subject matter of the action arises under the laws of the United States. Plaintiff moved to remand the case to the state court. In contesting plaintiff's motion, the defendant contended that it was a citizen of Pennsylvania with its principal place of business in that state, conceding, however, that certain of its members were citizens of North Carolina. The district court found the defendant to be "a juridical person as fully and completely as if it were organized as a corporation * * * and that its principal office and place of business is in Pittsburgh, Pennsylvania." It thereupon entered an order denying the motion to remand and certified an appeal to this court. We conclude that the order of the district court must be reversed with instructions to grant the motion to remand.

We discuss first the question of diversity of citizenship. In Bank of the United States v. Deveaux, 9 U.S. (5 Cranch) 61, 3 L.Ed. 38 (1809), Chief Justice Marshall laid down the principle that a corporation is "* * * a mere creature of the law, invisible, intangible and incorporeal" which for purposes of diversity jurisdiction could not be treated as a citizen, notwithstanding the fact that the corporation could sue and be sued in its own name. In 1844, the Court departed from this doctrine in the case of Louisville, C. & C. R.R. v. Letson, 43 (2 Howard) 497, 11 L.Ed. 353 (1844), holding a corporation to be "deemed" a citizen of the chartering state. Pressure from the dissenters eventually forced the Court to return to Marshall's concept in Marshall v. Baltimore & Ohio R.R., 57 U.S. (16 Howard) 314, 14 L.Ed. 953 (1853), where it held that a corporation was not a citizen but an artificial being and that the citizenship of its stockholders must control. However, the Court achieved the same end result as in Letson (diversity jurisdiction) by creating a conclusive presumption that all of the stockholders were citizens of the chartering state. This doctrine remained unchanged until 1958 when 28 U.S.C.A. § 1332 was amended by adding section (c). Wright, Federal Courts 76 (1963). The doctrine has been criticized as an unjustifiable expansion of federal jurisdiction by means of a fiction; nevertheless, unincorporated associations have sought unsuccessfully to bring themselves within the rule.

In Chapman v. Barney, 129 U.S. 677, 9 S.Ct. 426, 32 L.Ed. 880 (1889), the Supreme Court laid down the rule with respect to unincorporated associations. It held that, for purposes of diversity jurisdiction, the actual citizenship of each of the members of an unincorporated association (in that case, a joint stock company) is controlling. In Great Southern Fireproof Hotel Co. v. Jones, 177 U. S. 449, 454-455, 20 S.Ct. 690, 692, 44 L. Ed. 842 (1900), the Court reaffirmed its holding:

"This court does not hold that either a voluntary association of persons, or an association into a body politic, created by law, is a citizen of a state within the meaning of the Constitution.

* * * * * *

"But the express company cannot be a citizen of New York, within the meaning of the statutes regulating jurisdiction, unless it be a corporation."

The Court, referring to the rule with respect to corporations, made it clear that the rule was not to be extended:

"That a limited partnership association created under the Pennsylvania statute may be described as a `quasi corporation,\' having some of the characteristics of a corporation, or as a `new artificial person,\' is not a sufficient reason for regarding it as a corporation within the jurisdictional rule heretofore adverted to. That rule must not be extended. We are unwilling to extend it so as to embrace partnership associations." (Emphasis added.) 177 U.S. at 457, 20 S.Ct. at 693.

We find no subsequent decision of the Court which would justify us in concluding that the rule has been extended. The Court did not do so in United Mine Workers of America v. Coronado Coal Co., 259 U.S. 344, 42 S.Ct. 570, 66 L.Ed. 975 (1922). In that case the Coronado Coal Company brought suit against the international, district and local unions of the United Mine Workers for damages under section 7 of the Sherman Anti-Trust Act for conspiracy to restrain interstate commerce and to damage plaintiff's property. The unions moved to dismiss on the ground that as unincorporated associations they were not subject to suit. Since there was federal question jurisdiction, the diversity of citizenship issue was not involved. In an extended discussion the Court held that unions were suable as such, but the Court was careful to limit the application of the rule it was laying down.

"Though such a conclusion as to the suability of trades unions is of primary importance in the working out of justice and in protecting individuals and society from possibility of oppression and injury in their lawful rights from the existence of such powerful entities as trade unions, it is after all in essence and principle merely a procedural matter. As a matter of substantive law, all the members of the union engaged in a combination doing unlawful injury are liable to suit and recovery * * *." (Emphasis added.) 259 U.S. at 390, 42 S.Ct. at 576.

We now come to the case which purportedly has furnished the principal support for those who contend that the rule has been weakened. We think that the case furnishes no support whatsoever for such a position. In People of Puerto Rico v. Russell & Co., 288 U.S. 476, 53 S.Ct. 447, 77 L.Ed. 903 (1933), the petitioner, People of Puerto Rico¹ brought suit in the insular court of Puerto Rico against Russell & Co. to collect a Puerto Rican tax assessment. Russell & Co. was an unincorporated association organized under Puerto Rican law as a Sociedad en Comandita (S. en C.). In the tradition of the civil law, a Sociedad en Comandita has many of the characteristics which both corporations and limited partnerships have under the common law, although those of the former predominate. The individual members of the Sociedad were not named as parties. They appeared specially and removed the case to the United States District Court for the District of Puerto Rico. The Supreme Court reversed and directed the district court to remand the case to the Puerto Rican insular court. The petition to remove and the decision of the Court were expressly based upon sections 41 and 42 of the Organic Act of Puerto Rico, now 48 U.S.C.A. §§ 863, 864 (1948). Section 41 provided that in addition to the jurisdiction possessed by the United States District Courts generally, the United States District Court for the District of Puerto Rico should have jurisdiction of "all controversies where all of the parties on either side of the controversy are citizens or subjects of a foreign State or States, or citizens of a State, Territory, or District of the United States not domiciled in Puerto Rico * * *."² (Emphasis added.) Section 42 provided for removal of any case in which the court had original jurisdiction under section 41. Although in view of the character of the plaintiff, the suit could on no theory be entertained as a diversity suit by an Article III court, the Supreme Court said that "admittedly, if the individual members of the Sociedad are `parties' within the meaning of the Organic Act * * * the suit is one within the jurisdiction of the District Court because of their nonresidence, diversity of citizenship being unnecessary." 288 U.S. at 478, 53 S.Ct. at 448. (Emphasis added.) Thus the question before the Court was simply one of the interpretation of the statute — not a question of constitutional diversity jurisdiction. The Court by analogy to a common law corporation held that the defendant, a civil law Sociedad, had a domicil in Puerto Rico and thus could not claim the domicil of its individual members to acquire the nonresident status required by the Organic Act. Clearly the case does not by any stretch of the imagination hold that the Sociedad was a citizen of Puerto Rico for purposes of diversity jurisdiction under Article III. Nor can the Court's analogy between the civil law Sociedad and the common law corporation justify a contention that it was consciously expanding federal diversity jurisdiction.

American Federation of Musicians v. Stein, 213 F.2d 679 (6 Cir.), cert. denied, 348 U.S. 873, 75 S.Ct. 108, 99 L.Ed. 687 (1954), since it rested upon Puerto Rico v. Russell & Co., supra, can furnish no support for defendant's contention. Furthermore, although it expressed sympathy with the argument, the case did not hold that a labor union was a citizen for diversity purposes. It merely held that the district...