Harris v. Black Clawson Co.

• Decision Date: 29 May 1992
• Docket Number: No. 91-4804,91-4804
• Citation: 961 F.2d 547
• Parties: Bobby HARRIS, et al., Plaintiffs-Appellants, v. BLACK CLAWSON COMPANY, et al., Defendants, Intervenors-Defendants-Appellees, Riverwood International Corp., formerly known as Manville Forest Products Corp., Defendant, Intervenor-Plaintiff-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 547

961 F.2d 547

Bobby HARRIS, et al., Plaintiffs-Appellants, v. BLACK CLAWSON COMPANY, et al., Defendants Intervenors-Defendants-Appellees Riverwood International Corp., formerly known as Manville Forest Products Corp., Defendant Intervenor-Plaintiff-Appellant.

No. 91-4804.

United States Court of Appeals Fifth Circuit.

May 29, 1992.

John E. Morton, Fuhrer, Flournoy, Hunter & Morton, Alexandria, La., for B. Harris, et al.

William S. Watkins, St. Martin, Lirette & Shea, Houma, La., Friedman, McKernan, & Gold, Houston, Tex., for Ruthie A. Roy Ellard, et al.

C.A. Martin, III, Shotwell, Brown & Sperry, Monroe, La., for Riverwood (f/k/a Manville).

Richard C. Raymond, Braunschweig, Rachlis, Fishman & Raymond, New York City, Mike C. Sanders, Thomas Davenport, Jr., Davenport, Files & Kelly, Monroe, La., for Black Clawson.

Kimberly O. Golden, L. Michael Ashbrook, Shafto & Ashbrook, Monroe, La., for Ford, Bacon and Davis.

Appeals from the United States District Court for the Western District of Louisiana.

Before SMITH and EMILIO M. GARZA, Circuit Judges, and KENT, ^* District Judge.

SAMUEL B. KENT, District Judge.

I.

This case arises out of an industrial accident that occurred on October 20, 1987, at the West Monroe, Louisiana plant of the Manville Forest Products Corporation ("MFPC"). The accident occurred when steam was injected into a concrete hydrapulper. ¹ At that time, Bobby Harris, Travis Ellard, and Robert Sanderson were working inside the hydrapulper as part of a maintenance team replacing internal parts. Ellard and Sanderson were killed and Harris was severely burned.

Plaintiffs below filed suit against several defendants in Louisiana state court on September 23, 1988. Defendants removed to federal court on October 31, 1988. Of those defendants originally sued, only Black Clawson Company remains; the rest were dismissed by the district court on its own motion. ²

Subsequently, Plaintiffs were given leave to add Ford, Bacon & Davis ("FB & D") and Ford, Bacon & Davis Construction Company ("FB & DCC") as defendants. Thereafter, Plaintiffs filed two Motions to Remand, both based on the ground that FB & D or FB & DCC or both were citizens of Louisiana and that, therefore, complete diversity was lacking. These motions were denied. Additionally, Plaintiffs filed Motions for Reconsideration, Second Motions for Reconsideration, and Motions for Leave to Appeal, all of which were denied. Finally, Plaintiffs twice petitioned this court for a writ of mandamus; both petitions were denied.

All of the Defendants moved for summary judgment. These motions were granted on the ground that all of Plaintiffs' claims are barred by the Louisiana statute of repose. This appeal followed.

II.

It is undisputed that all of the Plaintiffs below are citizens of Louisiana. Appellants argue that FB & DCC is also a citizen of Louisiana, and that, therefore, complete diversity does not exist between the parties. ³

A corporation is a citizen of both its state of incorporation and the state in which it has its principal place of business. 28 U.S.C. § 1332. FB & DCC was incorporated in New York. This circuit applies the "total activity" test to determine a corporation's principal place of business for diversity purposes. J.A. Olson Co. v. City of Winona, 818 F.2d 401, 406 (5th Cir.1987). This test includes both of the traditional tests for determining principal place of business: the "nerve center" test and the "place of activities" test. ⁴ Under the "total activity" test, the court considers

the general rules of the two tests in light of the particular circumstances of a corporation's organization [and] balance[s] the facts [of the particular case before it] to determine ... the location of the corporation's principal place of business. ⁵

Whether diversity jurisdiction exists is determined by examining the citizenship of the parties at the time suit was filed. Smith v. Sperling, 354 U.S. 91, 93 n. 1, 77 S.Ct. 1112, 1113 n. 1, 1 L.Ed.2d 1205 (1957). In the instant case, FB & DCC was inactive at the time suit was filed and had been so for over five years. Thus, at that time, FB & DCC's total activities in Louisiana were zero: it had no business office, no employees or service personnel, and no other ongoing business activities.

The issue of the location of an inactive corporation's principal place of business is one of first impression in this circuit. Appellants argue that despite FB & DCC's inactive status, its representations in annual reports and other documents filed with the Louisiana Secretary of State that its principal place of business was in Louisiana establish that Louisiana is FB & DCC's principal place of business. Appellants, however, cite no authority to support this proposition. Indeed, at least a few district courts have held that statements made to the secretary of state of a particular state are not binding for purposes of determining subject matter jurisdiction. Gautreau v. Central Gulf S.S., 255 F.Supp. 615 (E.D.La.1966); Overton v. Rainbo Baking Co., 239 F.Supp. 800, 801 (E.D.Tenn.1965). Also, it has been held that statements made to the Securities and Exchange Commission are likewise not binding. Uniroyal, Inc. v. Heller, 65 F.R.D. 83 (D.C.N.Y.1974). Similarly, even though the Internal Revenue Service requires that a corporate return be filed where the corporation has its principal place of business, the fact that a return was filed in a particular state in compliance with this requirement is not determinative for subject matter jurisdiction purposes. C. Wright, A. Miller & E. Cooper, supra, § 3625, at 639.

By contrast, Appellees argue that because FB & DCC is an inactive corporation, ⁶ it has no principal place of business and is a citizen only of its state of incorporation, New York. Thus, it is diverse from each of the Plaintiffs, all of whom are citizens of Louisiana.

This conclusion is consistent with the decisions of several district courts. For example, in Gavin v. Read Corp., ⁷ the district court held that where, as of the date suit was filed, the defendant corporation had no office, did not pay rent on any office, and had no employees, office equipment, or furniture, it was a citizen only of its state of incorporation, Delaware, notwithstanding that it maintained an agent for service of process in another state.

Similarly, in Kreger v. Ryan Bros., Inc., ⁸ suit was filed in Pennsylvania in 1966. The defendant had been engaged in business in Pennsylvania until 1963. Subsequently, however, it had conducted only insubstantial activities in the state and had become almost entirely inactive. The court held that while Pennsylvania might well have been its principal place of business prior to 1963, "[f]ollowing the general inactivity of the defendant in 1963, defendant's incorporation in Wisconsin and other indicia of its life there acquired new prominence as factors determining its principal place of business." 308 F.Supp. at 728. Thus, the court concluded, the defendant's principal place of business was in its state of incorporation.

There also exists, however, a small line of cases holding that the principal place of business of an inactive corporation is the place of its last business activity. This rule is apparently derived from the bankruptcy rule that venue for bankruptcy proceedings is properly laid in the jurisdiction in which a corporation conducted its last business activity. 28 U.S.C. § 1408. For example, in WM. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., ⁹ the Second Circuit held that an inactive corporation's citizenship is determined by both its state of incorporation and the place of its last business activity.

Both the state of incorporation and the principal place of business should be considered in deciding whether diversity jurisdiction is present. To allow inactive corporations to avoid inquiry into where they were last active would give them a benefit Congress never planned for them, since under such a rule a defunct corporation, no matter how local in character, could remove a case to federal court based on its state of incorporation.

Id. at 141. See also Comtec, Inc. v. National Technical Sch., 711 F.Supp. 522, 524-25 (D.Ariz.1989).

In both WM. Passalacqua and Comtec, however, there was substantial evidence that the corporation's last business activity took place in the state that was its last principal place of business. WM. Passalacqua, 933 F.2d at 141; Comtec, 711 F.Supp. at 525. Thus, although the WM. Passalacqua and Comtec courts did not purport to apply the "total activity" test, we believe that, based on the particular facts of each case, the same result would have been reached in each case had the "total activity" test been applied.

To adopt a rule that the place of an inactive corporation's last business activity is relevant to determining its citizenship for subject matter jurisdiction purposes, especially where that activity took place in its last principal place of business is perfectly consistent with the "total activity" test. A rule that the place of an inactive corporation's last activity is always determinative of its citizenship for diversity purposes, however, has the potential to produce the odd result that an inactive corporation may be held to have its principal place of business in a jurisdiction in which it would never have been held to have its principal place of business while it was active. Surely Congress cannot have intended to produce this result either. Thus, a wholesale adoption of the "last activity test" would appear to be at odds with the "total activity" test. Therefore, we hold that, while the place of an inactive corporation's last business activity is relevant to determine its principal place of business, it is not dispositive.

In the instant case, however, we do not reach the question of the weight to be given to the place of FB & DCC's last business activity. Instead, we hold that, as a matter of law,...