Chemical Transportation Corp. v. Metropolitan Petro. Corp.
| Decision Date | 13 November 1964 |
| Citation | 246 F. Supp. 563 |
| Parties | CHEMICAL TRANSPORTATION CORPORATION, Plaintiff, v. METROPOLITAN PETROLEUM CORPORATION and George H. Rohrs, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Foley & Grainger, New York City, for plaintiff. William F. Norton, Jr., Walter A. Darby, Jr., New York City, of counsel.
Donovan, Leisure, Newton & Irvine, New York City, for defendants. Robert M. Loeffler, New York City, of counsel.
Defendants move to dismiss the complaint for lack of subject matter jurisdiction under F.R.Civ.P. 12(h) and 41 (b) on the ground that there is no diversity of citizenship between the parties.
The amended complaint, served on January 26, 1960, asserts seven claims for relief based upon breach of contract, negligence and fraud.1 The sole jurisdictional basis is the alleged diversity of citizenship of the parties.
The amended complaint alleges that plaintiff is a corporation organized and existing under the laws of the Republic of Liberia (Par. 1); defendant Metropolitan Petroleum Corporation (hereinafter "Metropolitan") is a corporation organized and existing under the laws of the State of New York (Par. 2); and defendant George H. Rohrs is a resident of the State of New York (Par. 40).
The amended complaint is silent as to the principal place of business of either plaintiff or Metropolitan, or as to the citizenship of defendant Rohrs. By their amended answer, defendants are deemed to admit the truth of the allegations of the aforementioned paragraphs 1, 2 and 40 of the amended complaint.
Defendants contend that Section 1332 (c) of the Judicial Code 28 U.S.C. § 1332(c) applies to plaintiff; plaintiff and defendants have their principal place of business in New York;2 and this Court thus lacks subject matter jurisdiction in that all of the parties are New York citizens within the meaning of Section 1332 of the Judicial Code.
Plaintiff argues that as an alien it can sue "defendants of the United States" in this district; Section 1332(c) does not apply to alien corporations; and even if it does, as a matter of fact, its principal place of business is in Liberia.
The threshold issue is whether § 1332 (c), added to the diversity statute in 1958,4 applies to corporations incorporated in foreign countries (hereinafter "alien corporations") as well as those organized and existing under the laws of a State in the United States (hereinafter "domestic corporations").
For more than a century, the rule prevailed that the state of incorporation was the conclusive factor in determining corporate citizenship for diversity purposes. See Hart and Wechsler, The Federal Courts and the Federal System 914-6 (1953); 1 Moore, Federal Practice, ¶ 0.608.-4; Wright, Federal Courts, § 27 (1963). First established with respect to domestic corporations in Louisville, Cincinnati & Charleston Ry. Co. v. Letson, 2 How. 497, 11 L.Ed. 353 (1844), cf. St. L. & S. F. Ry. Co. v. James, 161 U.S. 545, 16 S.Ct. 621, 40 L.Ed. 802 (1896), the rule was applied to alien corporations in National Steamship Co. v. Tugman, 106 U.S. 118, 121, 1 S.Ct. 58, 27 L.Ed. 87 (1882); Barrow Steamship Co. v. Kane, 170 U.S. 100, 18 S.Ct. 526, 42 L.Ed. 964 (1897).
Growing dissatisfaction with abuses and inequities arising out of the development of diversity jurisdiction, particularly with respect to corporations,5 led to the enactment of § 1332(c). It provided that, for diversity purposes, "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."
The application of 28 U.S.C. § 1332 (c) to an alien corporation is an unresolved issue. Moore and Weckstein, Corporations and Diversity of Citizenship Jurisdiction: A Supreme Court Fiction Revisited, 77 Harv.L.Rev. 1426, 1435. No explicit consideration was given by Congress to the effect of the amendment upon alien corporations, and the only reported opinion dealing with the problem indicates, by a scholarly analysis of the provision's wording, that its scope is limited to domestic corporations. Eisenberg v. Commercial Union Assur. Co., 189 F.Supp. 500 (S.D.N.Y.1960).
In Eisenberg, Judge Dimock noted (at p. 502):
* * * the statute differentiates between States of the United States and foreign states by the use of a capital S for the word when applied to a State of the United States. Subdivision (c), therefore, in dealing with the place of incorporation refers only to a corporation incorporated in a State of the United States. When subdivision (c) goes on to deal with principal place of business it refers to the same corporation and thus only to a corporation incorporated in a State of the United States. The subdivision is not susceptible of the construction as if it read "all corporations shall be deemed citizens of the States by which they have been incorporated and of the States where they have their principal places of business." Unless a corporation is incorporated by a State of the United States it will not be deemed a citizen of the State where it has its principal place of business.6
Defendants urge, however, that in § 1332(c), no clear purpose existed, as in § 1332(a), to distinguish between foreign "states" and "States" of the United States. They claim the distinction in subsection (a) was necessary to provide for various classes of diversity jurisdiction. The contention is that "even though the drafters intended the word `States' in § 1332(c) to apply to both foreign states and States of the United States, they necessarily could use only one form of the word or the other, not both, in drafting * * *"
We find no explicit legislative history supporting such an intent, and cannot agree the drafters "necessarily could use only one form of the word * * *" (emp. added)
Congress was evidently aware when it enacted § 1332(c) that it had previously utilized the words "States" and "states" differently in § 1332(a). None of the various proposals before Congress explicitly took cognizance of this factor. Had Congress wished to have § 1332(c) apply to alien corporations, it could have provided that a corporation be deemed a citizen of the in which it was incorporated or had its principal place of business.7 Significantly, a similar proposal was recently presented to the American Law Institute.8
Our decision, however, does not rest on technical construction of the statute alone.
We think that if § 1332(c) is to apply to alien corporations, it is for Congress and not this Court to so provide. In making such a determination, Congress may not consider the policy reasons supporting the enactment of § 1332 (c) controlling.9 Congress, for example, might wish to determine whether diversity jurisdiction should be withdrawn from alien corporations which might not have standing to institute suits in state courts; whether applicability of § 1332 (c) to alien corporations would have a negative effect on foreign trade or commerce; or whether the alien corporation should retain a status similar to the alien individual who may invoke diversity jurisdiction despite prolonged residence in the state of which his adversary is a citizen10 see Breedlove v. Nicolet, 32 U.S. (7 Pet.) 413, 8 L.Ed. 731 (1833).
This Court recognizes that the purpose of § 1332(c) was to restrict, and not to expand, diversity jurisdiction. Harker v. Kopp, 172 F.Supp. 180 (N.D. Ill.1959); Nayer v. Sears, Roebuck & Co., 200 F.Supp. 319 (D.N.H.1961); Diesing v. Vaughn Wood Prods., Inc., 175 F.Supp. 460 (W.D.Va.1959); Cf. Brown v. Bodak, 188 F.Supp. 532, 533 (S.D.N.Y.1960). But in determining the scope of the restriction, the wording of the amendment, the absence of explicit Congressional consideration of the issue here involved and the absence of guiding Congressional policy on the factors outlined above, compel us to hold that § 1332(c) does not apply to alien corporations.
Although the parties do not raise the...
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