Handy v. Uniroyal, Inc.

• Decision Date: 26 March 1969
• Docket Number: Civ. A. No. 3667.
• Citation: 298 F. Supp. 301
• Parties: Charles L. HANDY and Bird-in-Hand Poultry Co., a Corporation of the Commonwealth of Pennsylvania, Plaintiffs, v. UNIROYAL, INC., a New Jersey Corporation, Defendant.
• Court: U.S. District Court — District of Delaware

298 F. Supp. 301

Charles L. HANDY and Bird-in-Hand Poultry Co., a Corporation of the Commonwealth of Pennsylvania, Plaintiffs, v. UNIROYAL, INC., a New Jersey Corporation, Defendant.

Civ. A. No. 3667.

United States District Court D. Delaware.

March 26, 1969.

William F. Taylor and Jack B. Jacobs, Wilmington, Del., for plaintiffs.

Howard L. Williams and Jay P. James, Wilmington, Del., for defendant.

OPINION

STEEL, District Judge.

Two motions are before the Court. One is a motion by plaintiffs to remand the case which defendant, a non-resident, has removed to this Court purportedly on the ground of diversity of citizenship and an amount in controversy exceeding $10,000, exclusive of interest and costs. The second motion is by defendant for leave to amend its petition for removal under Rule 15(a), Fed.R.Civ.P., and 28 U.S.C. § 1653.

MOTION BY PLAINTIFFS TO REMAND

The action was initially begun in the Superior Court of Delaware on January 10, 1969,¹ by filing a complaint and serving a copy thereof and a summons upon defendant to recover on causes of action having their source in state law. The complaint alleges that the individual plaintiff, Handy, is a "resident" (not "citizen") of Delaware; that the corporate plaintiff, Bird-in-Hand Poultry Co., is a corporation of the Commonwealth of Pennsylvania; and that corporate defendant, Uniroyal, Inc., is incorporated under the laws of New Jersey, is qualified to do business in Delaware, and has a registered agent located in Delaware. On February 3, 1969, defendant filed a timely petition to remove the action to this Court pursuant to 28 U.S.C. § 1446, and took all of the other actions required by § 1446(e).² The petition alleges that this Court has original jurisdiction under 28 U.S.C. § 1332(a), that defendant is not a citizen of Delaware, and does not have its principal place of business in Delaware. Beyond this, the petition to remove adds nothing to the allegations of citizenship in the complaint.

Although the complaint and the petition to remove, read together, allege that the plaintiff, Bird-in-Hand Poultry Co., is a Pennsylvania corporation and the defendant, Uniroyal, Inc., is a New Jersey corporation, with its principal place of business outside of Delaware, neither alleges where the principal place of business of either corporation is located. Such latter allegation is necessary to determine whether diversity of citizenship exists, inasmuch as a corporation has a dual citizenship, the state of its incorporation and the state where it has its principal place of business. This dual citizenship of a corporation exists not only for determining diversity of citizenship in an action initially commenced in a District Court, but also for determining whether a case may be removed from a State Court under 28 U.S.C. § 1446 because of diversity of citizenship. 28 U.S.C. § 1332(c). In an action initially begun by one corporation against another in the Eastern District of Pennsylvania in which jurisdiction was claimed because of diversity of citizenship, it was held that such jurisdiction was lacking where the complaint contained no allegation of the principal place of business of either party. Wymard v. McCloskey & Co., Inc., 342 F.2d 495 (3d Cir. 1965) (en banc), cert. denied, 382 U.S. 823, 86 S. Ct. 52, 15 L.Ed.2d 68 (1965). See also 2A Moore's Federal Practice ¶ 8.10 at pp. 1657-68 (2d ed. 1968); id., 1968 Cum.Supp. ¶ 8.10 at p. 1657; Form 2(a), Fed.R.Civ.P. Similarly, a petition to remove filed by a corporate defendant which alleged diversity of citizenship generally was held to be jurisdictionally defective because it failed to disclose the principal place of business of the defendant, or otherwise to show that its principal place of business was in a state other than that of the citizenship of the individual plaintiff. Hendrix v. New Amsterdam Cas. Co., 390 F.2d 299, 300 (10th Cir. 1968). See also 1A Moore's Federal Practice ¶ 0.168 3.-4 at pp. 1203-04 (2d ed. 1965).

It is, therefore, clear that the original petition to remove was jurisdictionally defective. Unless an amendment is permissible which cures the deficiency, plaintiffs' motion to remand must be granted.

DEFENDANT'S MOTION TO AMEND PETITION FOR REMOVAL

On February 20, 1969, the same date on which plaintiffs moved for a remand of the case to the State Court, defendant filed a motion, purportedly under Rule 15(a), Fed.R.Civ.P., and 28 U.S.C. § 1653, for leave to amend its petition for removal to cure the jurisdictional deficiencies in the original removal petition. Without going into detail, it is sufficient to say that if the motion is granted, all of the allegations needed to establish diversity will be satisfied. The critical question is whether leave to amend should be granted.

28 U.S.C. § 1446(b) (insofar as relevant) provides that a petition for removal of a civil action shall be filed within 30 days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading. Since the complaint in the State Court was served upon the defendant on January 10, 1969, the time for filing the petition to remove expired on February 10, 1969.³ Although the original petition was filed before this date, defendant's motion to amend the original petition was not filed until 10 days after the 30-day period fixed by § 1446(b) had expired.

American Home Assur. Co. v. Pacific Nat'l Ins. Co., Civ.A. No. 2454 (D.Del., Dec. 18, 1964), an unpublished opinion by the present judge, holds that no significant distinction existed between the filing after the statutory time of a petition for removal which properly pleaded diversity and the filing of a petition within the period which failed properly to allege diversity, and that in either case § 1446(b) was a bar to the removal. On this basis, it was held that the corporate defendant would not be permitted, after the time specified in § 1446(b) for the filing of an original petition, to amend its petition in order to cure its failure to allege the principal place of its business.⁴ Plaintiffs rely heavily upon the American Home Assur. Co. decision which, if followed, requires a denial of defendant's motion to amend its petition to remove.

Defendant, on the other hand, urges that American Home Assur. Co. be reconsidered, particularly in the light of the later decision in Hendrix v. New Amsterdam Cas. Co., supra, which, if followed, would permit the amendment which defendant seeks. Because of the diverse views of the Courts which have considered the issue, (see the decisions pro and con referred to in American Home Assur. Co. v. Pacific Nat'l Ins. Co., supra, Hendrix v. New Amsterdam Cas. Co., supra, and Wright, Federal Courts § 40 (1963)), the Court has concluded that the problem should be reexamined at this time.

28 U.S.C. § 1653 provides:

"Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts."

On its face, this statute gives no indication whether it authorizes an amendment to cure a jurisdictionally defective removal petition which has been filed within the 30-day period fixed by § 1446 (b) when the amendment is sought after the expiration of the statutory deadline. The legislative history of § 1653, however, is highly significant. The Historical and Revision Notes which follow § 1653 state that § 1653 is based upon Title 28 U.S.C., 1940, ed., § 399, Mar. 3, 1911, c. 231, § 274c, as added Mar. 3, 1915, c. 90, 38 Stat. 956. This latter statute provided:

"Where, in any suit brought in or removed from any State court to any district of the United States, the jurisdiction of the district court is based upon the diverse citizenship of the parties, and such diverse citizenship in fact existed at the time the suit was brought or removed, though defectively alleged, either party may amend at any stage of the proceedings and in the appellate court upon such terms as the court may impose, so as to show on the record such diverse citizenship and jurisdiction, and thereupon such suit shall be proceeded with the same as though the diverse citizenship had been fully and correctly pleaded at the inception of the suit, or, if it be a removed case, in the petition for removal."

This forerunner of § 1653 states in the clearest terms that when an action is sought to be removed from a State to a Federal Court upon the ground of diversity of citizenship and such diversity is defectively alleged but in fact exists, either party may amend "at any stage of the proceedings and in the appellate court" to show such diverse citizenship and jurisdiction. Were this section in effect today, there could be no question about the power of the Court to grant defendant's motion to amend.

The Historical and Revision Notes to § 1653 state that the statute which preceded it "was extended by § 1653 to permit amendment of all jurisdictional allegations instead of merely allegations of diversity of citizenship as provided by the former section." Since this extension was the only purpose of enacting § 1653, it should be interpreted in the present context to have the same meaning as 28 U.S.C. § 1940, ed. § 399, and to authorize the amendment of a jurisdictionally defective petition after the time-period fixed by § 1446(b).

Another approach supports this conclusion. When all steps specified in § 1446(e) have been taken, as was done in the instant case on February 3, 1969, the removal is thereby effected, § 1446(e), and thereafter the procedure in the Federal Court is governed by the Federal Rules of Civil Procedure. Rule 81(c), Fed.R.Civ.P. Rule 4(h), Fed.R.Civ.P., provides:

"At any time in its discretion and upon such terms as it deems just, the court may allow any process or proof of service thereof to be amended, unless it clearly appears that material prejudice would result to the substantial rights of the party against whom the process issued."

This authorizes the Court to allow "any process" to be amended at "any time"...