Burton v. United States Olympic Committee

• Decision Date: 01 November 1983
• Docket Number: No. CV 83-3088 MRP.,CV 83-3088 MRP.
• Citation: 574 F. Supp. 517
• Court: U.S. District Court — Central District of California
• Parties: Christopher L. BURTON and Robert L. Burton, d.b.a. CLB Productions, a partnership, Plaintiffs, v. UNITED STATES OLYMPIC COMMITTEE, a federally chartered corporation, Defendant.

574 F. Supp. 517

Christopher L. BURTON and Robert L. Burton, d.b.a. CLB Productions, a partnership, Plaintiffs, v. UNITED STATES OLYMPIC COMMITTEE, a federally chartered corporation, Defendant.

No. CV 83-3088 MRP.

United States District Court, C.D. California.

November 1, 1983.

Barash & Hill, Los Angeles, Cal., for plaintiffs.

Latham & Watkins, Thomas M. Mustin, Los Angeles, Cal., Beveridge, DeGrandi & Kline, Richard G. Kline, Edward T. Colbert, Joseph D. Lewis, Washington, D.C., for defendant U.S. Olympic Committee.

OPINION

PFAELZER, District Judge.

Plaintiffs initially filed this action in the Superior Court of the State of California for the County of Los Angeles, from which it was removed by defendant United States Olympic Committee ("USOC"). Thereafter, plaintiffs filed this motion to remand the matter to the state court pursuant to 28 U.S.C. § 1447(c).

The action arises out of a contract executed on or about October 26, 1979, between Christopher and Robert Burton, doing business as CLB Productions, and the USOC, a federally chartered corporation. The contract designated Christopher Burton as "An Official United States Olympic Committee Sculptor for the 1980 Quadrennial Olympic Games" and related to the production, sale and distribution of a sculpture created by CLB Productions. Plaintiffs allege causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and negligent infliction of emotional distress. They seek damages in excess of $10,000, exclusive of interest and costs, as well as equitable relief.

After having read and considered the papers filed and having heard the argument of the parties, the court has concluded that because the parties are not of diverse citizenship, and no federal question is presented, the court is without jurisdiction. The motion to remand must therefore be granted.

I. DIVERSITY JURISDICTION

The USOC, in removing this case pursuant to 28 U.S.C. § 1441, alleges that plaintiffs are citizens of California, and that the USOC has its principal place of business in Colorado Springs, Colorado. The USOC contends, as a consequence, that this court has original jurisdiction pursuant to 28 U.S.C. § 1332.¹ For the purpose of the motion, plaintiffs do not dispute that the USOC has its principal place of business in Colorado, but argue that the "principal place of business" criterion contained in 28 U.S.C. § 1332(c) does not apply to federally chartered corporations. They further contend that since the USOC is not "localized" in Colorado, it may not be deemed to be a citizen of that state. Plaintiffs conclude, accordingly, that the USOC has no state citizenship for jurisdictional purposes, and thus may not invoke the diversity jurisdiction of this court.

In 1958, Congress amended Section 1332 of Title 28, adding the following subsection (c):

For the purpose of this section and section 1441 of this title, 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.²

The overriding purpose of this amendment was to restrict the diversity jurisdiction of the federal courts by making it more difficult for corporations to attain complete diversity. Moore & Weckstein, Corporations and Diversity of Citizenship Jurisdiction: A Supreme Court Fiction Revisited, 77 Harv.L.Rev. 1426, 1431 (1964); Crum v. Veterans of Foreign Wars, 502 F.Supp. 1377, 1380 n. 6 (D.Del.1980). This purpose is reflected in the legislative history: "In adopting this legislation, the committee feels ... that it will ease the workload of our Federal courts by reducing the number of cases involving corporations which come into Federal district courts." S.Rep. No. 1830, 85th Cong., 2d Sess., reprinted in 1958 U.S.Code Cong. & Ad. News 3099, 3101.

Under a judicially created doctrine existing at the time of the 1958 amendment, a corporation organized under federal law, whose activities were confined, either in fact or by its charter, to a single state, was regarded as a citizen of that state for jurisdictional purposes. Such a "localized" corporation therefore could invoke the diversity jurisdiction of the federal courts. See, e.g., Elwert v. Pacific First Federal Savings & Loan Association, 138 F.Supp. 395, 399-402 (D.Or.1956); Feuchtwanger Corp. v. Lake Hiawatha Federal Credit Union, 272 F.2d 453, 454-56 (3d Cir.1959). On the other hand, a federal corporation which had been organized to do business in several states, and which in fact was doing business in several states, was viewed as having national citizenship only. See, e.g., Bankers Trust Co. v. Texas & Pacific Railway Co., 241 U.S. 295, 309, 36 S.Ct. 569, 572, 60 L.Ed. 1010 (1916). Diversity jurisdiction over such a "non-localized" corporation thus was precluded, unless Congress had enacted a specific statutory provision, such as 28 U.S.C. § 1348, providing for citizenship in a particular state, see id. at 310, 36 S.Ct. at 573,³ or the federal statute incorporating the entity characterized it as a "body corporate" of a particular state, see Patterson v. American National Red Cross, 101 F.Supp. 655 (S.D.Fla.1951).⁴

In essence, the USOC's argument is that in enacting the 1958 amendment, Congress intended to apply the "principal place of business" criterion to federally chartered corporations as well as to corporations organized under state law, thus permitting non-localized federal corporations previously not citizens of any particular state for jurisdictional purposes to assert diversity jurisdiction pursuant to § 1332(c). The difficulty with this argument is that there is no evidence that Congress ever considered the applicability of the 1958 amendment to federal corporations. Moore & Weckstein, supra, at 1438; 1 J. Moore, Moore's Federal Practice, ¶ 0.772.-4 at 717.50 (2d ed. 1964) ("In brief, the amendatory Act of 1958 ... does not deal with a corporation chartered by an act of Congress."). Rather, "Congress probably intended the 1958 amendment to affect the jurisdictional status of state-incorporated companies only, leaving the status of federal corporations to receive further elaboration by the federal courts." Moore & Weckstein, supra, at 1438.

Few courts have considered the precise question presented here. In Federal Deposit Insurance Corp. v. National Surety Corp., 345 F.Supp. 885 (S.D.Iowa 1972), the court expressly declined to apply § 1332(c) to the Federal Deposit Insurance Corporation ("F.D.I.C."), in holding that the F.D. I.C., which has its principal place of business in Washington, D.C., has no citizenship in any particular state for diversity of citizenship purposes. The court reasoned:

... although the Court feels there is some merit to the argument that the F.D.I.C. has a principal place of business in Washington, D.C. and could be considered a citizen of the District of Columbia under Title 28 U.S.C., Section 1332(c), ... when Congress passed the amendment to Section 1332(c) in 1958 which made a corporation a citizen of the State of its principal place of business, the intention was to limit jurisdiction of the federal courts. Here the defendant is trying to use this same amendment to expand federal jurisdiction for cases involving federal corporations.

If federal corporations whose principal place of business is located in the District of Columbia were to be considered citizens of that District, diversity jurisdiction would be expanded to almost all suits involving federally chartered corporations. This would be a result not intended by Congress. Before 1948 all suits by or against any federally chartered corporation were deemed to involve a federal question. In 1948 Title 28 U.S.C., Section 1349 was passed by Congress providing that a federal question is involved only in suits where over one-half of the stock of the federal corporation is owned by the United States. This Congressional attempt to limit federal court jurisdiction would be nullified by defendant's interpretation of diversity jurisdiction which would give federal jurisdiction to almost all suits involving federally chartered corporations. Without clearer authority, this court declines to expand its jurisdiction into this new area.

Id. at 887-88 (remanding for lack of subject matter jurisdiction). Two years later, the Ninth Circuit found this "reasoning to be persuasive," in concluding that the Federal Savings and Loan Insurance Corporation ("FSLIC"), which also has its principal place of business in Washington, D.C., similarly has no citizenship in any particular state for diversity purposes. Hancock Financial Corp. v. Federal Savings & Loan Insurance Corp., 492 F.2d 1325, 1329 (9th Cir.1974) (affirming a dismissal for lack of subject matter jurisdiction).

Only one court actually has applied § 1332(c) to a federal corporation. In what has been described as "a rather cryptic opinion," Crum v. Veterans of Foreign Wars, 502 F.Supp. at 1380, the court in Enterprise Electric Co. v. Blackfeet Tribe of Indians, 353 F.Supp. 991 (D.Mont.1973), assigned Montana citizenship to a federally incorporated Indian tribe whose principal and "only place of business" was in that state. The Enterprise court reached this result by concluding, without citing any supporting authority, that, "the jurisdictional problems presented in cases involving localized federal corporations citations omitted prior to the passage of Public Law 85-554 were eliminated by that law which added the present subsection "c" to 28 U.S.C. § 1332." Id. at 992, n. 5.

Like the Crum court — which avoided reaching the issue presented here by holding that the record before it was inadequate to determine the location of the defendant's principal place of business — this court does not find Enterprise persuasive authority for the proposition that Congress intended § 1332(c) to apply to federal corporations. Since the application of § 1332(c) to federal corporations would increase the number of...