Bianca v. Parke-Davis Pharmaceutical Div. of Warner-Lambert Co.

• Citation: 723 F.2d 392
• Decision Date: 23 January 1984
• Docket Number: WARNER-LAMBERT,PARKE-DAVIS,No. 83-4108,83-4108
• Parties: Madeline BIANCA, Administratrix of the Estate of Margaret Charlotta Young, Deceased, Plaintiff-Appellant, v.PHARMACEUTICAL DIVISION OFCO., Dr. George Moss, Leonard S. Pickle, d/b/a Pickle's Rexall Drugs, and Does 1-15, Defendants-Appellees. Summary Calendar.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 392

723 F.2d 392

Madeline BIANCA, Administratrix of the Estate of Margaret

Charlotta Young, Deceased, Plaintiff-Appellant, v. PARKE-DAVIS PHARMACEUTICAL DIVISION OF WARNER-LAMBERT CO.,

Dr. George Moss, Leonard S. Pickle, d/b/a Pickle's

Rexall Drugs, and Does 1-15, Defendants-Appellees.

No. 83-4108

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

Jan. 23, 1984.

Roland Lewis, Robert Brantley, Jackson, Miss., for plaintiff-appellant.

Varner Parker & Sessums, David M. Sessums, Vicksburg, Miss., for Dr. George Moss.

Upshaw & Ladner, Heber A. Ladner, Jr., Jackson, Miss., for Parke-Davis.

Daniel, Coker, Horton & Bell, Roger C. Clapp, Donald V. Burch, J. Price Coleman, Jackson, Miss., for L.S. Pickle.

Appeal from the United States District Court for the Southern District of Mississippi.

Before BROWN, TATE and HIGGINBOTHAM, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

We are called upon to determine when the citizenship of an administratrix is properly disregarded under 28 U.S.C. Sec. 1359 ¹ in a putative diversity case. We hold that an administratrix's citizenship will govern the diversity inquiry unless the administratrix was named with the motive of creating diversity where it would not otherwise exist. Because no such finding was made in this case, we reverse the district court's judgment dismissing this action for want of jurisdiction.

This lawsuit stems from the death of eleven year old Margaret Charlotta Young, who contracted aplastic anemia after taking a cold medication prescribed for her by defendant Moss and supplied her by defendant Pickle. Margaret Charlotta Young was a resident of Mississippi, as are her parents and as are Moss and Pickle.

Margaret's parents hired attorneys to sue Moss, Pickle, and Parke-Davis, maker of the drug. The trauma of losing their daughter, however, left them psychologically unable to deal with the many reminders of the tragedy encountered in the course of preparing the suit, and Mr. and Mrs. Young ultimately resolved that they would either have to find an administrator to manage the suit in their place or forgo suing at all. Of their many relatives and acquaintances, Mr. and Mrs. Young believed that only Mrs. Young's sister, Madeline Bianca, a resident of a nearby town in Louisiana, had sufficient ties to the family to be named administratrix of Margaret's estate. Accordingly, Bianca was named administratrix by order of the Mississippi Chancery Court.

Bianca, as administratrix, then filed this wrongful death suit against Moss, Pickle, and Parke-Davis in the United States District Court. Moss and Pickle, in answering the complaint, asserted a lack of jurisdiction because Bianca had been improperly named under Sec. 1359 and her citizenship consequently could not be used to support diversity. The district court determined that because Bianca had no stake in the outcome of the wrongful death action and had been appointed administratrix for the sole purpose of bringing this suit, she was a "straw fiduciary." The diversity inquiry would accordingly look to the citizenship of the beneficiaries of the wrongful death action, Margaret's parents, who as Mississippi residents are not diverse as to defendants Moss and Pickle. The district court concluded that it lacked jurisdiction to try this suit, and granted the defendants' motion to dismiss.

We begin our review of Sec. 1359 jurisprudence with the Third Circuit's durable opinion in McSparran v. Weist, 402 F.2d 867 (3d Cir.1968) (en banc), cert. denied, 395 U.S. 903, 89 S.Ct. 1739, 23 L.Ed.2d 217 (1969). The court dealt there with a growing practice of naming out-of-state administrators and guardians as a means of gaining access to the federal courts whose awards were notably more generous than those of the Pennsylvania state courts. The McSparran court rejected old decisions holding Sec. 1359 applicable only when the administrator or guardian was not properly appointed under state law, and ruled that "a nominal party designated simply for the purpose of creating diversity of citizenship, who has no real or substantial interest in the dispute or controversy, is improperly or collusively named." Id. at 873.

In McSparran, the parties candidly admitted that the guardian had been named for the sole purpose of manufacturing diversity; there were no ties to the family, the guardian's sole function was to lend his name to the tort action, and the estate contained no assets save the tort claim. Though the guardian was unquestionably the "real party in interest" under state law, the court held that federal jurisdiction could not rest on so formalistic a base. Rather, the substantive considerations of motive and function would guide the inquiry:

While, of course, the desire to obtain diversity jurisdiction is not in itself improper, nevertheless it is not irrelevant in the determination of the question whether the fiduciary is in fact a straw fiduciary whose citizenship is to be disregarded. Moreover, it is difficult to see how motive can be entirely ignored in ascertaining the purpose for which the representative is selected in view of the language of Sec. 1359.... [T]he artificial selection of a straw representative who has no duty or function except to offer the use of his citizenship to create diversity in contemplated litigation is a violation of [Sec. 1359's] provisions.

Id. at 874-75.

The McSparran rule found support the following year in the Supreme Court's decision in Kramer v. Caribbean Mills, Inc., 394 U.S. 823, 89 S.Ct. 1487, 23 L.Ed.2d 9 (1969). Kramer involved the collusive--though valid under state law--assignment of a legal claim for purposes of creating jurisdiction in the federal courts, and the Court held that such conduct fell within Sec. 1359's proscription. Though the Court recognized that there are some differences between assignment cases and guardianship or administration cases, and explicitly reserved the question of Sec. 1359's role in the latter types of cases, id. at 828 n. 9, 89 S.Ct. at 1490 n. 9, Kramer has been consistently read as marking an end to the period in which citizenship of the formal "real party in interest" under state law was necessarily regarded for purposes of the diversity determination. Such a ruling, the Court noted, does not disparage the states' sovereign power to give effect to certain assignments and appointments made under their laws, but establishes only that "[t]he existence of federal jurisdiction is a matter of federal, not state, law." Id. at 829, 89 S.Ct. at 1490.

Bouyed by the Kramer decision, the "motive/function" rule of McSparran was quickly adopted in many other circuits. See, e.g., Lester v. McFaddon, 415 F.2d 1101 (4th Cir.1969); O'Brien v. AVCO Corp., 425 F.2d 1030 (2d Cir.1969). This court adopted that rule in Bass v. Texas Power & Light Co., 432 F.2d 763 (5th Cir.1970), cert. denied, 401 U.S. 975, 91 S.Ct. 1194, 28 L.Ed.2d 324 (1971), where the parties admitted that an administrator had been named for the sole purpose of creating diversity, and we accordingly dismissed the action for want of jurisdiction. The admission of improper motive made Bass an easy case, but we recognized there that ordinarily "[t]he question of whether a device is so lacking in substance as to be improper and collusive under Section 1359 is a question of fact." Id. at 766-67.

Such a factual determination had to be made almost immediately thereafter in Green v. Hale, 433 F.2d 324, 325 (5th Cir.1970), where there was no admission that the out-of-state administrator had been named deliberately to create diversity. We held that under such circumstances, "inquiry into the purpose of the appointment is essential," id. at 329, thus reaffirming that the motive underlying the naming of an out-of-state administrator is a determinative factor under Sec. 1359. Factors to be considered by the district court in making a Sec. 1359 inquiry include:

the relationship of the representative to the party represented; the scope of the representative's powers and duties; any special capacity or experience which the representative may possess with respect to the purpose of his appointment; whether there exists a nondiverse individual who might more normally be expected to represent the interests at stake; whether those seeking the appointment of the representative express any particular reasons for selecting an out-of-state person; and whether, apart from the appointment of an out-of-state representative, the suit is one wholly local in nature.

Id. at 329; accord, Groh v. Brooks, 421 F.2d 589, 595 (3d Cir.1970).

Hard on the heels of Bass and Green, we decided White v. Lee Marine Corp., 434 F.2d 1096 (5th Cir.1970), wherein the motive underlying the appointment of an out-of-state administrator was hotly contested, but we affirmed as not clearly erroneous the trial court's determination that the administrator had been improperly or collusively named in contravention of Sec. 1359. The inquiry, we stated, was "(1) whether there was an intent to manufacture diversity, and (2) whether there is sufficient substance to the appointment to allow it to be recognized in a diversity suit." Id. at 1098-99. Our inquiry into the substance of the appointment was spurred by McSparran's "heavy emphasis on its finding that the guardian there was only a straw party with no stake in the outcome of the litigation and no fiduciary relationship to the parties represented." Id. at 1098. Thus, we perceived a "requirement of substantive as well as formal validity of the representative's appointment." Id.

This language, regretably, has since been misconstrued to imply that we require an administrator to have some substantial stake in the outcome of the wrongful death action he brings for the estate, even in those cases where the administrator's appointment is not infected by any improper motive to manufacture diversity. Bishop v. Hendricks, 495 F.2d 289, 294 n. 23 (4th Cir.), cert. denied, 419...