QUAKER STATE DYEING & FINISH. CO. v. ITT Terryphone Corp.

• Citation: 461 F.2d 1140
• Decision Date: 01 June 1972
• Docket Number: 71-1502.,No. 71-1501,71-1501
• Parties: QUAKER STATE DYEING & FINISHING CO., INC., and John Realty Co., Inc., Appellant in No. 71-1501, v. ITT TERRYPHONE CORPORATION and International Telephone and Telegraph Corporation. Appeal of JOHN REALTY CO., Inc., in No. 71-1502.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

461 F.2d 1140 (1972)

QUAKER STATE DYEING & FINISHING CO., INC., and John Realty Co., Inc., Appellant in No. 71-1501, v. ITT TERRYPHONE CORPORATION and International Telephone and Telegraph Corporation Appeal of JOHN REALTY CO., Inc., in No. 71-1502.

Nos. 71-1501, 71-1502.

United States Court of Appeals, Third Circuit.

Argued April 14, 1972.

Decided June 1, 1972.

COPYRIGHT MATERIAL OMITTED

Stephen A. Cozen, Orlofsky, Cozen & Begier, Philadelphia, Pa., for appellants.

Lynn L. Detweiler, Swartz, Campbell & Detweiler, Philadelphia, Pa., for appellees.

Before McLAUGHLIN, ALDISERT and HUNTER, Circuit Judges.

OPINION OF THE COURT

McLAUGHLIN, Circuit Judge.

This action concerns the liability of ITT Terryphone Corporation (hereinafter, Terryphone) for both common law negligence, and for strict liability in tort as the manufacturer of a modular control system which allegedly caused a fire in appellant Quaker State's plant. The fire was said to have originated in the system which had been manufactured by appellee Terryphone and installed in appellant's plant by appellee and resulted in almost $350,000 damages. ITT was joined in the action since Terryphone was its wholly owned and closely run subsidiary.

The instant appeal is taken from an order of the district court granting the motion of Terryphone to dismiss the action for lack of diversity jurisdiction. The question here presented is then, whether or not the finding that no true diversity existed, was proper.

To meet the jurisdictional requirements of the Federal courts in an action such as this, the diversity must be complete. That is, no plaintiff can be a citizen of the same state as any of the defendants. For this reason our problem is whether or not Terryphone was a citizen of Pennsylvania at the time of the commencement of the action. If Terryphone was so a citizen of Pennsylvania, which appellant Quaker State Co. also is, no complete diversity would exist.

The jurisdictional statute, 28 U.S.C.A. § 1332(c) states "For the purposes of this section * * * 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.'" It follows that the determination of Terryphone's "principal place of business" is of primary importance.

Appellants assert that perhaps the principal place of business of ITT should be the pertinent factor or standard, relying on the assumption that Terryphone is really an agent of ITT or even that they should be deemed one entity. However, "a subsidiary corporation which is incorporated as a separate entity from its parent corporation is considered to have its own principal place of business." 1 Moore's Fed.Practice 717.10, § 0.77 1.-2. Appellants have attempted to show an integral relationship between parent and subsidiary here, such as to deprive them of the benefit of separate entity construction. However, the case law strongly shows that "where the corporate separation between a parent and subsidiary, `though perhaps merely formal,' is `real' and carefully maintained, the separate place of business of the subsidiary is recognized in determining jurisdiction, even though the parent corporation exerts a high degree of control through ownership or otherwise." Lurie Co. v. Loew's San Francisco Hotel Corp., 315 F.Supp. 405, 410 (N.D.Cal., 1970); Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925). In the situation before us, although there is much interworking between ITT and Terryphone, the latter beyond doubt maintains its separate corporate identity. Corporate books are separately kept and all transactions between the two are represented by appropriate book entries which allows Terryphone to be accepted as having its own "principal place of business."

The establishment of the location of Terryphone's "principal place of business" is appellants' task. "Since plaintiff invoked diversity jurisdiction, the burden is upon it to prove all the facts by which it could be sustained." McSparran v. Weist, 402 F.2d 867, 875 (3 Cir. 1968). Quaker State must show that Terryphone was not a citizen of Pennsylvania. That issue is factual, upon which all relevant evidence must be considered. The dispositive criteria are soundly stated in Kelly v. United States Steel Corp., 284 F.2d 850 (3 Cir. 1960) where the court emphasized that there is no single, simple test. See also Judge Gibbons recent opinion in Tanzymore v. Bethlehem Steel Corp., 457 F.2d 1320 (3 Cir. 1972). Appellants attempt to distinguish Kelly because there the principal place of business determination was made for a parent corporation and not a wholly owned subsidiary. However, it seems obvious that these analytical tests are to be applied to any corporation in question regardless of its ownership makeup. Relying on Lurie and Cannon, supra, we know that Terryphone's distinct principal place of business is to be determined. The most significant factor upon which Kelly depends is the headquarters of the day to day corporate activities and management decisions. It also attaches value to secondary considerations which include where the Board decisions concerning overall corporate functions are reached, and also where a number of the basic corporate functions are maintained. (e. g. pension plans, insurance, loans.)

Some of the facts upon which the district court relied in granting appellees' motion to dismiss are contained in a supplemental affidavit submitted by Mr. Eaton, one of the officers and directors of Terryphone. Appellants contested the use of this affidavit, claiming it conclusory, self-serving, and contradictory to earlier sworn testimony. The district judge accepted it as fact and so treated it. Appellants designate this as "clear error" on the judge's part.

A closer look at appellees' supplemental affidavit (105a-109a) will serve to settle this question. The difference between a conclusion and a fact according to strict dictionary terminology is that a conclusion is a thing believed in consequence of investigation or reasoning (that is, an opinion derived from or founded on other factors). A...