Gavin v. Read Corporation

• Decision Date: 21 March 1973
• Docket Number: Civ. A. No. 70-164.
• Citation: 356 F. Supp. 483
• Parties: James GAVIN and Theresa Gavin, his wife, v. READ CORPORATION, a Division of Teledyne, Incorporated, et al. v. JOHN WOOD COMPANY and J. A. Cunningham Equipment, Inc., Third-Party Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

356 F. Supp. 483

James GAVIN and Theresa Gavin, his wife, v. READ CORPORATION, a Division of Teledyne, Incorporated, et al. v. JOHN WOOD COMPANY and J. A. Cunningham Equipment, Inc., Third-Party Defendants.

Civ. A. No. 70-164.

United States District Court, E. D. Pennsylvania.

March 21, 1973.

Galfand, Berger, Senesky & Lurie, by Joseph Lurie, Philadelphia, Pa., for plaintiffs.

F. Hastings Griffin, Jr., Philadelphia, Pa., for defendants.

MEMORANDUM

CLIFFORD SCOTT GREEN, District Judge.

Plaintiff, James Gavin who is a Pennsylvania citizen and resident, has filed suit on theories of negligence and strict liability for personal injuries alleged to have resulted from the breach of a duty owed to him by defendant Read Corporation (hereinafter referred to as "Read"), and defendant Cleveland Machine Controls. Plaintiff alleges that both defendants are corporations "incorporated under the laws of a state other than Pennsylvania and have their principal place of business in states other than Pennsylvania." The Court is presently called upon to rule on Read's motion to dismiss pursuant to Rule 12(b) (1) of the Federal Rules of Civil Procedure. In support of its motion, Read, which is incorporated in the State of Delaware, avers that there is no complete diversity of citizenship as required by 28 U.S.C. § 1332, because it has its principal, and only place of business within Pennsylvania, the same state of which plaintiff is a citizen.

To satisfy the jurisdictional requisites of the federal court in a diversity suit, none of the plaintiffs can be a citizen of the same state as any of the defendants. Quaker State Dyeing & Finishing Co. v. ITT Terryphone Corp., 461 F.2d 1140 (3rd Cir. 1972); Mission Insurance Company v. Mackey, 340 F.Supp. 824 (W.D.Mo.1971); Potter's Photographic Applications Co. v. Ealing Corporation, 292 F.Supp. 92 (E. D.N.Y.1968). By virtue of the 1958 amendment to 28 U.S.C. § 1332, a corporation has dual citizenship of both its state of incorporation and its principal place of business. Where plaintiff is a citizen of the same state as the principal place of business of one of the defendant corporations, diversity jurisdiction does not exist. Wymard v. McCloskey & Co., 342 F.2d 495 (3rd Cir. 1965), cert. denied, 382 U.S. 823, 86 S.Ct. 52, 15 L.Ed. 2d 68 (1965); Taussig v. Wellington Fund, Inc., 187 F.Supp. 179 (D.Del. 1960); aff'd, 313 F.2d 472 (3rd Cir. 1963), cert. denied, 374 U.S. 806, 83 S.Ct. 1693, 10 L.Ed.2d 1031 (1963). A party who seeks to establish jurisdiction, has the burden of proving all of the facts required to sustain it. Thomson v. Gaskill, 315 U.S. 442, 62 S.Ct. 673, 86 L.Ed. 951 (1942); McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135 (1935). Thus, plaintiff has to establish that Read did not have its principal place of business in Pennsylvania. See Hoffman v. Lenyo, 433 F.2d 657 (3rd Cir. 1970); Joyce v. Seigel, 429 F.2d 128 (3rd Cir. 1970); Siegel v. Slaney, 419 F.2d 176 (3rd Cir. 1969); Law v. Converse, 419 F.2d 38 (3rd Cir. 1969); McSparran v. Weist, 402 F.2d 867 (3rd Cir. 1968), cert. denied, 395 U.S. 903, 89 S.Ct. 1739, 23 L.Ed.2d 217 (1969).

On February 19, 1968, the plaintiff was injured during the course of his employment allegedly as a result of an improperly manufactured and designed power roll. According to plaintiff, several years prior to the accident, Read had manufactured and sold the power roll to John Wood Company (third-party defendant), the employer of the plaintiff. Subsequently, on August 6, 1968, Read and Teledyne, Inc., a Delaware corporation, executed a contract (Plan and Agreement of Reorganization) whereby Read agreed to convey, transfer, assign and deliver to Teledyne ". . . all of the assets, properties, business and good will of Transferor of every kind and description . . ." After August 6, 1968, the only assets that were retained by Read consisted of the Agreement itself, the shares of Teledyne, Inc., which Read received and which it completely distributed to its shareholders and cash not in excess of $10,000 to pay the costs and expenses of carrying out the Agreement "including the subsequent dissolution and liquidation of transferor." For sometime after August 6, 1968, the entire activities of Read essentially consisted of one officer forwarding correspondence and preserving the books and records of Read. Since August 6, 1968, there have been no formal meetings of officers or directors in Pennsylvania.

On January 14, 1970, plaintiff instituted this action. In an apparent attempt to counter Read's contention that it had its principal place of business in York, Pennsylvania, plaintiff initially alleged that as a result of the "Agreement" between Read and Teledyne, Inc., there had been either a merger or a de facto merger of the two corporations and that Teledyne, Inc., as the surviving corporation is the proper defendant, and is liable for the injuries due to the defects in the products manufactured by the extinguished corporation, Read, before the transfer of assets. However, plaintiff's present position as a result of recent discoveries, is that Read has never dissolved but is still in existence. This is not disputed by Read. Indeed, Read admits that "since August 6, 1968, it has remained a corporation incorporated and in good standing in Delaware."

In the fifth paragraph of its motion to dismiss, Read, declares that ". . . at all times relevant to this action it has had its principal place of business within Pennsylvania for the purposes of 28 U.S.C. § 1332(c)." (Emphasis ours.) Read urges that when only the events prior to the August 6, 1968 sale of assets are considered, its principal place of business was clearly York, Pennsylvania. Moreover, Read directs our attention to the fact that since that date its offices have remained there (in York, Pa.), and that as of October 28, 1971, it became a division of Vasco Metals, Inc., which is incorporated in Pennsylvania, and which has its only office at Latrobe, Pennsylvania. Read's assertions are of no consequence, since, as plaintiff correctly indicates, the significant date for the Court's consideration is January 14, 1970. Contrary to the mistaken position of Read, a party's citizenship is determined at the time the action is commenced and subsequent events cannot affect jurisdiction once it has attached. Gaines v. Dixie Carriers, Inc., 434 F.2d 52 (5th Cir. 1970); Television Reception Corp. v. Dunbar, 426 F.2d 174 (6th Cir. 1970); McNello v. John B. Kelly, Inc., 283 F.2d 96 (3rd Cir. 1960); Herpst v. S. B. I. Liquidating Corp., 279 F.Supp. 928 (E.D.Pa. 1968); Hamlin v. Holland, 256 F.Supp. 25 (E.D.Pa.1966); Barron & Holtzoff (Wright ed.) Sec. 26, n. 91.

The traditional tests for determining a corporation's principal place of business, such as the "operating assets", and the "nerve center" or "center of gravity" tests, see e. g. National Spinning Company v. City of Washington, N. C., 312 F.Supp. 958 (E.D.N.C.1970); Inland Rubber Corp. v. Triple A Tire Service, Inc., 220 F.Supp. 490 (D.C.N.Y. 1963); ...