Wisconsin Knife Works v. National Metal Crafters
| Decision Date | 19 February 1986 |
| Docket Number | No. 85-1801,85-1801 |
| Citation | 781 F.2d 1280 |
| Parties | 42 UCC Rep.Serv. 830 WISCONSIN KNIFE WORKS, Plaintiff-Appellant, v. NATIONAL METAL CRAFTERS, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Robert J. Kay, Geisler & Kay, Madison, Wis., for plaintiff-appellant.
Barrett J. Corncille, Bell, Metzner & Gierhart, Madison, Wis., for defendant-appellee.
Before CUMMINGS, Chief Judge, and POSNER and EASTERBROOK, Circuit Judges.
This is a diversity breach of contract case; and before getting to the merits we must decide, though neither party contests the point, whether the parties are indeed citizens of different states. The complaint alleges (and the answer admits) that the plaintiff, Wisconsin Knife Works, is a division of Black & Decker (U.S.), Inc., a corporation incorporated in Maryland and having its "principal offices other than in the State of Wisconsin," and that the defendant, National Metal Crafters, is a division of Keystone Consolidated Industries, Inc., which is incorporated in Delaware and has its principal place of business in Illinois. Although a division may, if state law permits, sue and be sued in its own name, see Fed.R.Civ.P. 17(b), the state of which it is a citizen for purposes of determining diversity is the state of which the corporation that owns the division is a citizen. The diversity statute deems a corporation a citizen of any state in which it is incorporated and also of the state in which it has its principal place of business. 28 U.S.C. Sec. 1332(c). Hence the complaint adequately alleges that the defendant is a citizen of Delaware and Illinois. An allegation of citizenship proper in form and not contested establishes a party's citizenship for purposes of diversity jurisdiction, Casio, Inc. v. S.M. & R. Co., 755 F.2d 528, 530 (7th Cir.1985), and the jurisdictional allegations were not contested here. So far so good. Regarding the plaintiff, however, also a division rather than a corporation, the complaint alleges that the corporation that owns it is a citizen of Maryland but fails to allege in what state it has its principal place of business. Assuming for the moment that "principal offices" is an inartful attempt to allege principal place of business, still all the complaint tells us is that Black & Decker is not a citizen of Wisconsin. That leaves open the possibility that it is a citizen of Illinois or Delaware, in which event the parties are not diverse and the suit must be dismissed.
The first thing a federal judge should do when a complaint is filed is check to see that federal jurisdiction is properly alleged. Because federal judges are not subject to direct check by any other branch of government--because the only restraint on our exercise of power is self-restraint--we must make every reasonable effort to confine ourselves to the exercise of those powers that the Constitution and Congress have given us. In this case, however, we are satisfied, despite the deficiency in the pleadings, that there is diversity of citizenship. The record shows and counsel confirmed at argument that Black & Decker's headquarters is in Maryland; and although the state in which a corporation has its headquarters is not always the state of the corporation's principal place of business (hence the complaint should not have used the term "principal offices"), usually it is. The test in this circuit for principal place of business is "nerve center," In re Air Crash Disaster Near Chicago, 644 F.2d 594, 620 (7th Cir.1981); Celanese Corp. of America v. Vandalia Warehouse Corp., 424 F.2d 1176, 1178 (7th Cir.1970); and, to continue the neurological metaphor, we look for the corporation's brain, and ordinarily find it where the corporation has its headquarters. In the absence of any reason to think that Black & Decker's principal place of business might be in Illinois or Delaware, the two states of which the defendant is a citizen, the fact that its headquarters is in Maryland warrants an inference that the parties are of diverse citizenship. Compare Casio, Inc. v. S.M. & R. Co., supra, 755 F.2d at 529-30.
Some courts use a vaguer standard. They look not just to where the corporation has its headquarters but also to the distribution of the corporation's assets and employees. See 13B Wright, Miller & Cooper, Federal Practice and Procedure Sec. 3625 (2d ed. 1984). We prefer the simpler test. Jurisdiction ought to be readily determinable. There are cases where a corporation's headquarters may be divided between states and cases where the nominal headquarters isn't really the directing intelligence of the corporation, and those cases could give trouble even under a simple We come, then, to the merits of the appeal. Wisconsin Knife Works, having some unused manufacturing capacity, decided to try to manufacture spade bits for sale to its parent, Black & Decker, a large producer of tools, including drills. A spade bit is made out of a chunk of metal called a spade bit blank; and Wisconsin Knife Works had to find a source of supply for these blanks. National Metal Crafters was eager to be that source. After some negotiating, Wisconsin Knife Works sent National Metal Crafters a series of purchase orders on the back of each of which was printed, "Acceptance of this Order, either by acknowledgment or performance, constitutes an unqualified agreement to the following." A list of "Conditions of Purchase" follows, of which the first is, There were six purchase orders in all, each with the identical conditions. National Metal Crafters acknowledged the first two orders (which had been placed on August 21, 1981) by letters that said, "Please accept this as our acknowledgment covering the above subject order," followed by a list of delivery dates. The purchase orders had left those dates blank. Wisconsin Knife Works filled them in, after receiving the acknowledgments, with the dates that National Metal Crafters had supplied in the acknowledgments. There were no written acknowledgments of the last four orders (placed several weeks later, on September 10, 1981). Wisconsin Knife Works wrote in the delivery dates that National Metal Crafters orally supplied after receiving purchase orders in which the space for the date of delivery had again been left blank.
"nerve center" test, but we are satisfied that this is not such a case.
Delivery was due in October and November 1981. National Metal Crafters missed the deadlines. But Wisconsin Knife Works did not immediately declare a breach, cancel the contract, or seek damages for late delivery. Indeed, on July 1, 1982, it issued a new batch of purchase orders (later rescinded). By December 1982 National Metal Crafters was producing spade bit blanks for Wisconsin Knife Works under the original set of purchase orders in adequate quantities, though this was more than a year after the delivery dates in the orders. But on January 13, 1983, Wisconsin Knife Works notified National Metal Crafters that the contract was terminated. By that date only 144,000 of the more than 281,000 spade bit blanks that Wisconsin Knife Works had ordered in the six purchase orders had been delivered.
Wisconsin Knife Works brought this breach of contract suit, charging that National Metal Crafters had violated the terms of delivery in the contract that was formed by the acceptance of the six purchase orders. National Metal Crafters replied that the delivery dates had not been intended as firm dates. It also counterclaimed for damages for (among other things) the breach of an alleged oral agreement by Wisconsin Knife Works to pay the expenses of maintaining machinery used by National Metal Crafters to fulfill the contract. The parties later stipulated that the amount of these damages was $30,000.
The judge ruled that there had been a contract but left to the jury to decide whether the contract had been modified and, if so, whether the modified contract had been broken. The jury found that the contract had been modified and not broken. Judgment was entered dismissing Wisconsin Knife Works' suit and awarding National Metal Crafters $30,000 on its counterclaim. Wisconsin Knife Works has appealed from the dismissal of its suit. The appeal papers do not discuss the counterclaim, and the effect on it of our remanding the case for further proceedings on Wisconsin Knife Works' claim will have to be resolved on remand.
The principal issue is the effect of the provision in the purchase orders that forbids the contract to be modified other than by a writing signed by an authorized representative Section 2-209(2) of the Uniform Commercial Code provides that "a signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party." (As several other subsections of section 2-209 are relevant to the appeal, we have printed the entire section as an Appendix to this opinion.) The meaning of this provision and its proviso is not crystalline and there is little pertinent case law. One might think that an agreement to exclude modification except by a signed writing must be signed in any event by the party against whom the requirement is sought to be enforced, that is, by National Metal Crafters, rather than by the party imposing the requirement. But if so the force of the proviso ("but except as between merchants ...") becomes unclear, for it contemplates that between merchants no separate signature by the party sought to be bound by the requirement is...
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