724 F.3d 337 (3rd Cir. 2013), 12-2561, Johnson v. Smithkline Beecham Corp.

Docket Nº:12-2561, 12-2562, 12-2563, 12-2564, 12-2565
Citation:724 F.3d 337
Opinion Judge:JORDAN, Circuit Judge.
Party Name:GLENDA JOHNSON; STEVEN LUCIER, Appellants in 12-2561 v. SMITHKLINE BEECHAM CORPORATION, doing business as GLAXOSMITHKLINE; GLAXOSMITHKLINE, LLC; GLAXOSMITHKLINE HOLDINGS LLC; SANOFI-AVENTIS, U.S., L.L.C.; AVANTOR PERFORMANCE MATERIALS; GRUNENTHAL U.S.A.; GRUNENTHAL GMBH, SmithKline Beecham Corporation; GlaxoSmithKline, LLC; and GlaxoSmithKline Hold
Attorney:For Appellants/Cross-Appellees: Steve W. Berman, Craig R. Spiegel [ARGUED], Nick Styant-Browne, Hagens Berman Sobol Shapiro, Seattle, WA; Mary A. Geppert, Jeffrey L. Kodroff, John A. Macoretta, Spector, Roseman, Kodroff & Willis, Philadelphia, PA; Kay G. Reeves, Dallas, TX. For Appellees/Cross-Ap...
Judge Panel:Before: AMBRO, JORDAN, and VANASKIE, Circuit Judges. AMBRO, Circuit Judge, concurring in part and concurring in the judgment. AMBRO, Circuit Judge, concurring in part and concurring in the judgment
Case Date:June 07, 2013
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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724 F.3d 337 (3rd Cir. 2013)

GLENDA JOHNSON; STEVEN LUCIER, Appellants in 12-2561

v.

SMITHKLINE BEECHAM CORPORATION, doing business as GLAXOSMITHKLINE; GLAXOSMITHKLINE, LLC; GLAXOSMITHKLINE HOLDINGS LLC; SANOFI-AVENTIS, U.S., L.L.C.; AVANTOR PERFORMANCE MATERIALS; GRUNENTHAL U.S.A.; GRUNENTHAL GMBH, SmithKline Beecham Corporation; GlaxoSmithKline, LLC; and GlaxoSmithKline Holdings, LLC, Appellants in 12-2562, Avantor PerformanceMaterials, Appellant in 12-2563, Sanofi-Aventis U.S., LLC, Appellant in 12-2564, Grunenthal U.S.A., Appellant in 12-2565

Nos. 12-2561, 12-2562, 12-2563, 12-2564, 12-2565

United States Court of Appeals, Third Circuit

June 7, 2013

Argued: March 5, 2013.

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[Copyrighted Material Omitted]

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On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. No. 2-11-cv-05782). District Judge: Hon. Paul S. Diamond.

For Appellants/Cross-Appellees: Steve W. Berman, Craig R. Spiegel [ARGUED], Nick Styant-Browne, Hagens Berman Sobol Shapiro, Seattle, WA; Mary A. Geppert, Jeffrey L. Kodroff, John A. Macoretta, Spector, Roseman, Kodroff & Willis, Philadelphia, PA; Kay G. Reeves, Dallas, TX.

For Appellees/Cross-Appellants, SmithKline Beecham Corp., GlaxoSmithKline, and GlaxoSmithKline Holdings LLC: Lisa S. Blatt [ARGUED], Sarah M. Harris, R. Stanton Jones, Arnold & Porter, Washington, DC; Michael T. Scott, Melissa A. Wojtylak, Reed Smith, Philadelphia, PA.

For Appellees, Sanofi-Aventis U.S. Inc., and Avantor Performance Materials: Anand Agneshwar, Bruce R. Kelly, Arnold & Porter, 399 Park Avenue, New York, NY; Kenneth A. Murphy, Drinker, Biddle & Reath, Philadelphia, PA; Daniel S. Pariser, Arnold & Porter, Washington, DC.

For Appellees/Cross-Appellants Grunenthal USA and Grunenthal GmbH: Albert G. Bixler, Rachel C. Rosser, Eckert, Seamans, Cherin & Mellott, Philadelphia, PA; Sara J. Gourley, Eugene A. Schoon, Sidley Austin, Chicago, IL.

Before: AMBRO, JORDAN, and VANASKIE, Circuit Judges. AMBRO, Circuit Judge, concurring in part and concurring in the judgment.

OPINION

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JORDAN, Circuit Judge.

Plaintiffs Glenda Johnson and Steven Lucier appeal an order of the United States District Court for the Eastern District of Pennsylvania denying their motion to remand this action to Pennsylvania state court. They contend that the District Court lacks subject matter jurisdiction over their claims because the parties do not have complete diversity of citizenship. We conclude that the District Court's assessment of citizenship was correct, and that none of the Defendants is a citizen of the same state as either Plaintiff. Accordingly, we will affirm.

I. Background1

Johnson, a Louisiana citizen, and Lucier, a Pennsylvania citizen (collectively, " Plaintiffs" ), suffer from birth defects allegedly caused by their mothers' use of the drug thalidomide during pregnancy in the 1960s.2 Defendants, described in more depth below, are drug companies (and their successors-in-interest) that developed, designed, manufactured, and distributed thalidomide. According to Plaintiffs, " newly-accessible evidence reveals" that Defendants were aware of the drug's risks even while marketing it to pregnant women, and that for the last 60 years they have been engaged in an elaborate cover-up to avoid liability for those actions. (Appellants' Opening Br. at 8.)

Seeking redress for lifelong physical and emotional suffering, Plaintiffs filed this personal injury action against Defendants in the Philadelphia Court of Common Pleas on August 26, 2011. Within thirty days, on September 14, 2011, Defendants removed the case to federal court, asserting diversity jurisdiction. Plaintiffs then filed a motion to remand the action to state court, arguing that diversity jurisdiction is lacking and removal was improper because four of the Defendants -- GlaxoSmithKline Holdings (" GSK Holdings" ), GlaxoSmithKline LLC (" GSK LLC" ), SmithKline Beecham Corporation (" SmithKline Beecham" ), and Avantor Performance Materials (" Avantor" ) -- are Pennsylvania citizens, as is Plaintiff Steven Lucier.3 The District Court disagreed and denied Plaintiffs' motion, but it certified that order for interlocutory

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review.4 Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 498 (E.D. Pa. 2012). Plaintiffs then requested permission to appeal, which we granted on May 22, 2012. On appeal, Plaintiffs repeat their argument that the District Court lacks subject matter jurisdiction because GSK LLC, GSK Holdings, SmithKline Beecham, and Avantor are all citizens of Pennsylvania.

GSK LLC is a large pharmaceutical company that is responsible for operating the U.S. division of GlaxoSmithKline plc, the British entity that is the " global head" of the GlaxoSmithKline group of companies. (Appellees' Br. at 6.) It was formed on October 27, 2009, when its predecessor -- SmithKline Beecham -- was converted from a Pennsylvania corporation into a Delaware limited liability company (" LLC" ). More specifically, SmithKline Beecham underwent a two-step conversion, first becoming a Delaware corporation by filing a " certificate of conversion" with the Delaware Secretary of State, in accordance with Delaware Code Title 8, Section 265, and then converting into a Delaware LLC under Sections 18-201 and 18-214 of the Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, ch. 18. The LLC was formed under Delaware law because it " permits a corporation to convert to an LLC without any break in the continuity of the legal entity." ( Id. at 10.)

The purpose of that conversion was to obtain the tax benefits of LLC status and thus facilitate the formation of a joint entity with Pfizer, Inc. called " ViiV Healthcare," which was created to " develop critical treatments for HIV/AIDS at not-for-profit pricing." (Appellees' Br. at 9.) According to Defendants, " [i]f [SmithKline Beecham] had remained a corporation, it would have incurred hundreds of millions of dollars in unnecessary tax liability for transferring its existing HIV/AIDS assets to the new entity -- a 'prohibitive' obstacle that would have prevented the venture from being financially viable." ( Id.) Following the conversion, SmithKline Beecham dissolved under Pennsylvania law, which allows dissolution " [w]henever a domestic business corporation has domesticated itself under the laws of another jurisdiction." 15 Pa. Cons. Stat. Ann. § 1980.

Despite that change in entity form and domicile, SmithKline Beecham was, at least operationally, largely unaffected by its conversion to GSK LLC. The company's headquarters is still in Philadelphia, Pennsylvania, where it occupies 650,000 square feet of office space and employs 1,800 people. Its management is substantively intact. SmithKline Beecham's board of directors became GSK LLC's " board of managers," and those managers operate from the same offices they did before, with three located in Philadelphia and a fourth in North Carolina. The ownership structure of the business is also unchanged. SmithKline Beecham's sole shareholder had been Defendant GSK Holdings, a Delaware corporation founded in 1999 that holds GlaxoSmithKline plc's investments in the United States. Following the conversion, GSK Holdings became GSK LLC's sole member. Although the default rule under Delaware law provides that " the management of a limited liability company shall be vested in its members," Del. Code Ann. tit. 6, § 18-402, GSK LLC assigned that task to the board of managers, making it a " manager-managed," rather than a " member-managed," LLC.5 Therefore,

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both before and after the conversion, GSK Holdings acted solely as the owner, not as the operator, of the company.

Because it is a holding company, rather than an operating company, GSK Holdings' own activities are quite limited, consisting mostly of approving the financial statements from its investments.6 It also decides whether to pay dividends, make new investments, and approve proposed restructurings. GSK Holdings' three-member board of directors has the exclusive authority to control all of those activities, which it does through resolutions it adopts at quarterly and special board meetings. For most of the time relevant to this lawsuit, that board consisted of Michael Corrigan, a senior officer of GSK LLC based in Philadelphia, Julian Heslop, the chief financial officer of GlaxoSmithKline plc based in London, and Donald McLamb, a Wilmington-based employee of Wilmington Trust Services (" Wilmington Trust" ), a company that provides " corporate services to Delaware holding companies" (App. at 756).7 In his capacity as an employee of Wilmington Trust, McLamb also serves as a director or officer of 50 to 75 other companies.

Since 2001, GSK Holdings' board meetings have been held in Wilmington, Delaware at the Wilmington Trust headquarters.8 They typically last 15 to 30 minutes, and, although McLamb always attends them in person, directors Corrigan and Heslop often participate telephonically from other offices. The parties disagree about the extent of the actual decision-making that occurs at the meetings. Plaintiffs argue that GSK Holdings conducted its substantive work in Philadelphia and London, and that the board meetings served merely to " ratify decisions made somewhere other than Delaware." (Appellants' Opening Br. at 32.) Defendants, on the other hand, insist that GSK Holdings' directors " reached decisions about GSK Holdings'[] investments only at board meetings and based on their own independent judgment" (Appellees' Br. at 21), and that the board had exclusive " direction, control, and coordination" of GSK Holdings' activities ( id. at 40).

Apart from those meetings, GSK Holdings' presence in Wilmington is minimal.

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It subleases a small...

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