District of Columbia ex rel. American Combustion, Inc. v. Transamerica Ins. Co.

Decision Date08 August 1986
Docket NumberNo. 85-5866,85-5866
Citation797 F.2d 1041,254 U.S.App.D.C. 374
Parties, 5 Fed.R.Serv.3d 887 DISTRICT OF COLUMBIA, ex rel. AMERICAN COMBUSTION, INC. v. TRANSAMERICA INSURANCE COMPANY, Appellant.
CourtU.S. Court of Appeals — District of Columbia Circuit

Appeal from the United States District Court for the District of Columbia (Civil Action No. 83-00108).

Thomas G. Corcoran, Jr., Washington, D.C., for appellant.

James W. Taglieri, with whom Robert Cadeaux, Washington, D.C., was on brief, for appellees.

Before MIKVA, SCALIA and BUCKLEY, Circuit Judges.

Opinion for the Court filed by Circuit Judge MIKVA.

MIKVA, Circuit Judge:

This case arose from a public-works contract let by the District of Columbia. Pursuant to the so-called Little Miller Act, D.C. Code Secs. 1-1104-1-1107, the prime contractor was required to obtain performance and payment bonds. The bonds are furnished both to protect the District of Columbia should the contract not be satisfactorily completed and to ensure that all laborers and materialmen on the project will be paid regardless of the prime contractor's solvency. A subcontractor, American Combustion, Inc. (ACI), the plaintiff below, was not paid in full for its work. ACI sued defendant Transamerica Insurance Co., the provider of the bonds, for payment pursuant to the payment bond. The jurisdiction of the district court was based on diversity of citizenship. After a bench trial, the district court found Transamerica liable and ordered it to pay ACI $24,000.

On appeal Transamerica presents four related jurisdictional defenses. Transamerica argues that diversity of citizenship was not proved at trial; that the district court lacked subject matter jurisdiction because the Little Miller Act provides that suits under it shall be brought in D.C. Superior Court; that diversity of citizenship was absent because the District of Columbia is a party to the suit; and that diversity did not exist because Transamerica should be deemed to have assumed the citizenship of its insured (the prime contractor), a corporation not diverse to ACI. Although Transamerica's arguments are sometimes ingenious, we nevertheless find that the district court had jurisdiction over this matter and therefore affirm its opinion.

I.

Because appellant's challenges are confined to jurisdictional questions, the details of the contracts between the District of Columbia and the companies that performed work for it are not important to this appeal. In brief outline, the arrangement was as follows. The District of Columbia hired the Ronald Hsu Construction Company to repair and replace oil burners at three D.C. schools. Hsu subcontracted some work to ACI and other work to D & L Contractors. D & L in turn subcontracted some of its work to ACI. ACI was not paid for all the work it did at the schools.

Sections 1-1104 through 1-1107 of the D.C. Code require contractors hired by the District of Columbia to obtain certain surety bonds. These provisions of the D.C. Code are known as the "Little Miller Act" because of their similarity to the federal Miller Act, which governs contracts let by the United States. See 40 U.S.C. Sec. 270a-270d. Section 1-1104 requires that contractors engaged by the District post bonds both to guarantee the performance of the contract and to guarantee payment to subcontractors. In this case, both the performance bond and the payment bond were entered into by Hsu as principal and Transamerica as surety. Section 1-1105 of the Code in turn provides that "[e]very person who has furnished labor or material in the prosecution of the work provided for in [a government] contract ... shall have the right to sue on [the required] payment bond for the amount ... unpaid at the time of institution of such suit...." The section also provides that all such suits "shall be brought in the name of the District of Columbia for the use of the person suing, in the Superior Court of the District of Columbia...." In this case, however, ACI brought suit in federal district court pursuant to 28 U.S.C. Sec. 1332.

The district court determined that diversity jurisdiction was proper and found for the plaintiff. Transamerica now challenges the district court's jurisdiction.

II.
A.

Transamerica's first argument is that ACI did not properly prove that it and Transamerica were of diverse citizenship. For purposes of diversity jurisdiction, a corporation is deemed to be a citizen of any state in which it is incorporated and of the state where it has its principal place of business. 28 U.S.C. Sec. 1332(c); see generally 13B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Secs. 3623-3630 (2d ed. 1984). Thus, for diversity to exist between a corporate plaintiff and a corporate defendant there can be no overlap between them with respect to these places.

In a properly pleaded diversity action between corporations the plaintiff will not only allege that there is diversity of citizenship, but will also advert to the factors set out by Sec. 1332(c) that establish corporate citizenship. Form 2 of the Federal Rules of Civil Procedure provides that allegations of diversity in cases where corporations are parties should track the requirements of Sec. 1332 and include a statement of both the corporations' states of incorporation and their principal places of business. See F.R.C.P. Rule 84 & Advisory Committee Notes (forms contained in appendix to the Federal Rules of Civil Procedure intended as a guide for simple, brief, but complete pleading). See also 2A J. Moore & J. Lucas, Moore's Federal Practice Sec. 8.10 (2d ed. 1985).

Whether or not diversity existed in fact, the complaint in this case was defective in that it failed to properly allege such diversity. Although the complaint stated that "jurisdiction is vested in this Court in that there is diversity of citizenship between the parties," Complaint p 3, the requisite underlying facts were not properly alleged. The complaint merely stated that the respective parties were "bod[ies] corporate with [their] principal place[s] of business in" different states. Complaint paragraphs 1, 2. No mention of the parties' states of incorporation was made in the complaint. Thus, we must determine the effect of the defective complaint.

In general, a "[d]efective allegation[ ] of jurisdiction may be amended, upon terms, in the trial or appellate courts." 28 U.S.C. Sec. 1653. Section 1653's liberal amendment rule permits a party who has not proved, or even alleged, that diversity exists to amend his pleadings even as late as on appeal. If the amended allegations are not contested, and nothing appears to the appellate court that would bar jurisdiction, jurisdiction is deemed proper, despite the plaintiff's usual burden of alleging and proving jurisdiction. See, e.g., Local No. 1 (ACA) Broadcast Employees v. International Brotherhood of Teamsters, 614 F.2d 846, 852-53 (3d Cir.1980); Kaufman v. Western Union Telegraph Co., 224 F.2d 723, 724-25 (5th Cir.1955), cert. denied, 350 U.S. 947, 76 S.Ct. 321, 100 L.Ed. 825 (1956); Illinois Terminal R Co. v. Friedman, 208 F.2d 675, 677 (8th Cir.1953); 13B C. Wright, A. Miller & E. Cooper, supra, Sec. 3611 at 518-20; 3 J. Moore, Moore's Federal Practice p 15.09 (2d ed. 1985).

This lenient approach to unchallenged amendments alleging diversity--taking them as true despite the strictly limited nature of all federal jurisdiction--follows from the general approach to pleading diversity adopted by the federal courts. As early as 1904 the Supreme Court, in a case where the complaint alleged that the defendant was a resident rather than a citizen of a particular state, said that

[t]he whole record, however, may be looked to, for the purpose of curing a defective averment of citizenship, where jurisdiction in a Federal court is asserted to depend upon diversity of citizenship, and if the requisite citizenship, is anywhere expressly averred in the record, or facts are therein stated which in legal intendment constitute such an allegation, that is sufficient.

Sun Printing and Publishing Ass'n v. Edwards, 194 U.S. 377, 382, 24 S.Ct. 696, 697-98, 48 L.Ed. 1027 (1904) (emphasis added).

Thus, ACI's failure to initially plead the elements necessary to make out a showing of diversity does not in and of itself deprive us of jurisdiction. The whole record may be searched to determine if diversity existed. If the record supports a finding that diversity was present, we need not vacate the district court's judgment. Amended allegations of diversity made on appeal, if not contested, will also support the district court's judgment.

In this case, such an amendment has been made. On January 3, 1986, ACI filed with this court a motion relating to its jurisdictional allegations. In that motion ACI averred that it was diverse to Transamerica and spelled out all the requisite details of incorporation and principal places of business to support that allegation. On February 11, 1986, in response to ACI's motion, this court issued an order relating to the existence of diversity jurisdiction. In that order we said that there did not appear to be any dispute between the parties that all the factual predicates to diversity jurisdiction existed, but added that "[i]f any of the parties to this appeal does, in fact, dispute the states of incorporation of either appellant or appellee, or the location of their principal places of business, a pleading to that effect shall be filed within fifteen (15) days from the date of this order." Order (D.C.Cir. Feb. 11, 1986). Transamerica did not respond to our order. Similarly, at oral argument counsel for Transamerica stated that he did not doubt that ACI and Transamerica were of diverse citizenship.

Thus, unless Transamerica denied ACI's allegations of diversity, triggering the requirement that ACI affirmatively prove the facts necessary to support a finding of diversity, the amended allegations here...

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