Fellers v. Atchison, Topeka and Santa Fe Railway Co.

• Decision Date: 16 July 1971
• Docket Number: Civ. A. No. T-4878.
• Citation: 330 F. Supp. 1334
• Parties: John L. FELLERS and Linda D. Fellers, Plaintiff, v. The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, Defendant.
• Court: U.S. District Court — District of Kansas

330 F. Supp. 1334

John L. FELLERS and Linda D. Fellers, Plaintiff, v. The ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, Defendant.

Civ. A. No. T-4878.

United States District Court, D. Kansas.

July 16, 1971.

Reginald LaBunker, Topeka, Kan., for plaintiffs.

W. E. Treadway, Topeka, Kan., for defendants.

MEMORANDUM OF DECISION

TEMPLAR, District Judge.

This is a personal injury action based upon negligence brought by the plaintiffs in the U.S. District Court for the District of Kansas. The plaintiffs allege the court has jurisdiction because of diversity of citizenship under 28 U.S. C.A. 1332. In plaintiffs' original complaint they alleged only that they were citizens of Kansas and that defendant was incorporated in Delaware. They were allowed to amend their complaint so as to allege also that defendant's "principal place of business," was other than Kansas. The defendant has made a motion to dismiss on the grounds that there is no diversity of citizenship as the defendant's "principal place of business" is in Kansas.

The plaintiffs first point out that the court may reserve judgment as to whether defendant corporation has its principal place of business in a certain state so as to destroy diversity of citizenship until all the evidence has been taken, as in Collins v. New York Central System, 117 U.S.App.D.C. 182, 327 F.2d 880 (1963). However in the cases reviewed by this court, this is not the usual practice. Lurie Company v. Loew's San Francisco Hotel Corp., 315 F.Supp. 405 (D.C.1970). It is "advisable generally to decide such defenses as * * * lack of jurisdiction * * * promptly after they are raised, and not defer them to trial." 2A Moore's Federal Practice 2354, ¶ 12.16. Also such procedure of deferring jurisdictional questions to trial would defeat the purpose of the 1958 Amendment of § 1332, which was to narrow the federal courts jurisdiction and ease their workload. U. S. Congressional & Administrative News, 1958, pages 3099, 3100.

It is undisputed by either party and is a fact that defendant in 1969 changed the State of its incorporation from Kansas to Delaware. The issue as to jurisdiction arises because defendant maintains that its "principal place of business" within the meaning of 28 U.S.C.A. § 1332(c) is Kansas, and therefore, since plaintiffs are citizens of Kansas as alleged in their complaint, the court does not have diversity jurisdiction under 28 U.S.C.A. § 1332. There is no federal constitutional question involved.

The relevant part of 28 U.S.C.A. § 1332 involved here is:

"(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between —

"(1) citizens of different States;

* * * * * *

"(c) For the purposes 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 * * *."

Whether the "principal place of business" is in a particular state is a question of fact to be decided on a case by case method. Briggs v. American Flyers Airline Corporation, 262 F.Supp. 16 (D.C.1966), Kelly v. United States Steel Corp., 284 F.2d 850 (3rd Cir. 1960), Scot Typewriter Co. v. Underwood Corp., (S.D.N.Y.1959) 170 F.Supp. 862. The Tenth Circuit subscribed to this view in United Nuclear Corp. v. Moki Oil and Rare Metals Co., 364 F.2d 568 (10th Cir. 1966), and said "Where the corporation has its principal place of business is a question of fact to be determined by the character of the corporation, its purposes, the kind of business in which it is engaged and the situs of its operations."

The plaintiff has shown by affidavit the following facts in favor of defendant's principal place of business being other than Kansas: that defendant applied to the Secretary of State of the State of Kansas for authority to engage in business in the State of Kansas as a foreign corporation on December 3, 1969; that defendant was a regularly and properly organized corporation under the laws of the State of Delaware; that in April 1970 the A. T. & S. F., Inc. filed an amendment which changed the name to The Atchison, Topeka, and Santa Fe Railway Co.; that on April 6, 1970 Atchison, Inc. merged into A. T. & S. F., Inc.; and that of 3 directors and 10 officers of defendant only one officer's residence is in Topeka, Kansas, the rest residing in Chicago, Illinois.

The facts in favor of defendant's principal place of business being in Kansas submitted in defendant's affidavit are: the company was organized and originally incorporated in Kansas; it was organized originally to do business exclusively in Kansas; since 1895 most of the executive officers have lived in Chicago, Illinois for the convenience of certain officers in conducting business with a minimum of travel to and from the financial-commercial centers of Chicago, New York and Washington; one officer and various other supervisory and department head personnel reside in Topeka, Kansas; the general office building in Topeka, Kansas has, at all times, been owned by defendant or its corporate predecessors and is occupied exclusively by defendant for railroad business and is the largest building in the world devoted to the exclusive occupation of a single railroad; the general office building in Topeka, Kansas occupies more than 350,000 square feet, whereas by comparison its offices in Chicago, are located among public rental occupants in the Railway Exchange Building, and occupy only 130,000 feet; the defendant maintains only a registered office in the State of Delaware; the function of the executive offices in Chicago is to control intercorporate affairs, while the function of defendant's offices in Topeka is to control day-today management of the railroad business and the business dealings with the public in general; the defendant is authorized to do business in twelve states; that defendant's income tax return was always, until 1968, filed in Wichita, Kansas, while since its incorporation in 1968 in Delaware as a subsidiary of Santa Fe Industries, Inc., they have been permitted to file a consolidated tax return, but Internal Revenue Service has informed defendant that the income tax returns for its corporate railway system as well as for its parent will be audited at Topeka, Kansas; in 1969, the last year which these statistics are available, 15.3% of the gross revenue of the defendant was earned in Kansas whereas only 5.75% was derived from Illinois; in 1969 the operating revenue in Kansas was $110,013,319.73 compared to $41,344,375.50 for Illinois; defendant's operating expenses in 1969 amounted to $93,046,308.25 for Kansas compared to $36,118,957.42 for Illinois; in March of 1970, 9,929 people were employed by defendant in Kansas compared to 2,925 in Illinois; defendant's Topeka office...