Crum v. Veterans of Foreign Wars, Civ. A. No. 80-231.

• Decision Date: 30 December 1980
• Docket Number: Civ. A. No. 80-231.
• Citation: 502 F. Supp. 1377
• Parties: Irven L. CRUM and F. Alfred Fleischut, Plaintiffs, v. VETERANS OF FOREIGN WARS, Defendant.
• Court: U.S. District Court — District of Delaware

502 F. Supp. 1377

Irven L. CRUM and F. Alfred Fleischut, Plaintiffs,
v.
VETERANS OF FOREIGN WARS, Defendant.

Civ. A. No. 80-231.

United States District Court, D. Delaware.

December 30, 1980.

502 F. Supp. 1378

William H. Uffelman, Biggs & Battaglia, Wilmington, Del., for plaintiffs.

Thomas J. Allingham, II, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for defendant.

OPINION

MURRAY M. SCHWARTZ, District Judge.

This is a motion to remand an action removed pursuant to 28 U.S.C. § 1441 from the Court of Chancery of the State of Delaware in and for New Castle County. Because this Court agrees with plaintiffs' claims that neither a federal question nor diversity of citizenship exists, the motion to remand will be granted.

The action stems from a dispute about the voting procedures needed to effect a major change in the composition of defendant organization, Veterans of Foreign Wars of the United States ("VFW").¹ In August, 1978, the VFW voted to amend its bylaws to permit admission of women. Passage of the amendment required a two-thirds majority of members present at the National Convention. Plaintiffs contend that the change should have been proposed in the form of a referendum on the organization's constitution, a procedure that demands a three-fourths vote of all of VFW's active members. They assert that rejection of the referendum format denied them a right to vote guaranteed by the VFW's constitution. Defendant, in removing the case, describes the issue as a federal one because the VFW is a federally chartered corporation whose governing rules are authorized by federal statute (36 U.S.C. § 114) and should be interpreted by federal courts. The VFW further asserts that it should be regarded as a Missouri citizen because its principal place of business is in Kansas City. For purposes of federal jurisdiction, Missouri citizenship would yield complete diversity with the named plaintiffs, Irven L. Crum of New Jersey and F. Alfred Fleischut of Delaware.

Diversity Jurisdiction

The VFW was organized by act of Congress as a non-stock federal corporation devoted to veterans assistance and other patriotic goals. See 36 U.S.C. § 113 (statement of purposes). The organization operates Posts and subsidiary corporations in many states and has over 1.6 million members. Although its reach is national, its headquarters have been, for more than twenty-five years, in the VFW building at Kansas City, Missouri. Defendant describes the site as its "principal place of business." This Court must decide whether the VFW's

502 F. Supp. 1379

headquarters' long-term residence constitutes citizenship in the State of Missouri for purposes of original federal jurisdiction under 28 U.S.C. § 1332, the general diversity statute. If it does, then removal jurisdiction may be exercised under 28 U.S.C. § 1441(a).²

Throughout most of this century, the general rule regarding the diversity status of federally chartered corporations has held them to be citizens of the United States, but not of any particular state.³ See Bankers Trust Co. v. Texas & Pacific Ry. Co., 241 U.S. 295, 309, 36 S.Ct. 569, 572, 60 L.Ed. 1010 (1916); Monsanto Co. v. TVA, 448 F.Supp. 648 (N.D.Ala.1978); Rice v. Disabled American Veterans, 295 F.Supp. 131 (D.D.C.1968); Harris v. American Legion, 162 F.Supp. 700 (S.D.Ind.), aff'd, 261 F.2d 594 (7th Cir. 1958). The VFW argues, however, that judicial and legislative innovations have created exceptions to this doctrine that permit it to adopt Missouri citizenship.

In principle, caselaw can support the notion of judicially-created state citizenship. Defendant points to cases where state citizenship was granted to federal corporations whose activities were "localized" in one state. Most notable is a ruling by the Third Circuit Court of Appeals, Feuchtwanger Corp. v. Lake Hiawatha Federal Credit Union, 272 F.2d 453 (3d Cir. 1959). In that case diversity jurisdiction was held proper because a federally-created local credit union could be a New Jersey citizen. This organization escaped the rule of national citizenship because its essential nature was local. The governing statute described credit unions as "limited to groups having a common bond of occupation or association, or to groups within a well-defined neighborhood, community, or rural district." 12 U.S.C. § 1759. A federal forum was found proper because localization could provoke the biases that are the standard rationale for federal diversity jurisdiction. Lake Hiawatha, supra, 272 F.2d at 454-56. Accord Elwert v. Pacific First Federal Savings & Loan Assoc., 138 F.Supp. 395 (D.Or.1956) (statute and charter "localized" federal savings and loan bank).

These cases are not persuasive on this issue for the facts are, in essential points, quite at variance with those of the instant case. In the Lake Hiawatha and Elwert statutes, Congress had recorded its intention to create local organizations. By contrast, the statute authorizing creation of the VFW conveys a picture of a national organization. The original incorporators represented 15 different states and the District of Columbia. 36 U.S.C. § 111. The statute grants the federal parent corporation the power to regulate "subordinate State and Territorial subdivisions." 36 U.S.C. § 114 emphasis supplied. The designation of corporate purposes further sounds the national theme; the VFW will "maintain true allegiance to the Government of the United States of America." 36 U.S.C. § 113. Defendant has also failed to offer facts concerning its operations which might permit the Court to characterize the organization as "a peculiarly local institution." Lake Hiawatha, supra, 272 F.2d at 455. On the contrary, what appears in the parties' submissions establishes that there is a major office in Kansas City and Posts or chapters in New Jersey and Delaware where plaintiffs reside. This information highlights the nation-wide...