Holston Invs., Inc. B.V. I. v. Lanlogistics Corp.

• Decision Date: 17 April 2012
• Docket Number: Nos. 10–13442,11–11122.,s. 10–13442
• Citation: 677 F.3d 1068
• Parties: HOLSTON INVESTMENTS, INC. B.V. I., Albert P. Hernandez, Plaintiffs–Appellees, v. LANLOGISTICS CORP., Defendant–Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

677 F.3d 1068

HOLSTON INVESTMENTS, INC. B.V. I., Albert P. Hernandez, Plaintiffs–Appellees,

v.LANLOGISTICS CORP., Defendant–Appellant.

Nos. 10–13442

11–11122.

United States Court of Appeals, Eleventh Circuit.

April 17, 2012.

Jamie Zysk Isani, Marty Steinberg, Thomas Richard Julin, Hunton & Williams, LLP, Adriana Riviere–Badell, Kobre & Kim, Christopher N. Johnson, Gray Robinson, PA, Miami, FL, for Plaintiffs–Appellees.

Christopher N. Bellows, Jose A. Casal, Michael Edward Garcia, Rebecca M. Plasencia, Holland & Knight, LLP, Miami, FL, for Defendant–Appellant.

Before TJOFLAT, PRYOR and FAY, Circuit Judges.

PER CURIAM:

LanLogistics Corp. raises two issues on appeal. The first issue requires us to determine the citizenship of a dissolved corporation for purposes of diversity jurisdiction. The second issue involves whether summary judgment was appropriately entered where there may have been a genuine issue of material fact. We affirm the district court's holding as to the first issue, but reverse and remand for factual findings on the second issue.

I.

LanLogistics owned a company named LanBox Inc., which facilitates delivery of consumer purchases between customers in the United States, Latin America, and Europe. In 2007, LanLogistics sold LanBox and two other companies to Paul Gartlan ("Gartlan"). Gartlan paid $3.5 million for the three companies. The parties allocated $450,000 of the purchase price to LanBox.

LanLogistics's sale of LanBox breached a contract it previously formed with Holston Investments Inc. B.V.I. ("Holston"). In 2004, LanLogistics had promised Holston a right of first refusal, but LanLogistics never gave Holston an opportunity to match Gartlan's offer to purchase LanBox.

Alleging diversity jurisdiction, Holston sued in federal court. Holston is a citizen of Florida. LanLogistics was incorporated in Delaware and maintained its corporate headquarters in Miami, Florida, but by the time Holston filed suit, LanLogistics had dissolved and formally forfeited its authority to conduct business in Florida.¹

After two years of litigation and final judgment had been entered on behalf of Holston, LanLogistics challenged the district court's subject-matter jurisdiction and moved to vacate the judgment. In support, LanLogistics asserts it is a citizen of Florida, like Holston, and that the parties are therefore not diverse under 28 U.S.C. § 1332.

II.

Whether a court has subject-matter jurisdiction to hear a matter is a question of law that we review de novo. Molinos Valle Del Cibao, C. por A. v. Lama , 633 F.3d 1330, 1340 (11th Cir.2011). A court's application of law to facts also receives de novo review. United States v. Frank , 599 F.3d 1221, 1228 (11th Cir.2010), cert. denied, ––– U.S. ––––, 131 S.Ct. 186, 178 L.Ed.2d 112 (2010). Similarly, "[w]e review the district court's grant of summary judgment de novo, applying the same legal standards as the district court." McCormick v. City of Fort Lauderdale , 333 F.3d 1234, 1242–43 (11th Cir.2003) (citation omitted). "Summary judgment is appropriate if the evidence establishes ‘no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’ " Id. at 1243 (citing Fed.R.Civ.P. 56(c) ).

III.

Federal courts have subject-matter jurisdiction over civil actions in which: (1) "the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs"; and (2) the action is between "citizens of different States." 28 U.S.C. § 1332(a)(1). Congress extends the benefits and safeguard of federal courts to "provide a separate forum for out-of-state citizens against the prejudices of local courts and local juries." S.REP. NO. 1830, at 3 (1958), reprinted in 1958 U.S.C.C.A.N. 3099, 3101–02.

Diversity jurisdiction is determined at the time the complaint was filed. See Smith v. Sperling , 354 U.S. 91, 93 n. 1, 77 S.Ct. 1112, 1 L.Ed.2d 1205 (1957) ("[J]urisdiction, once attached, is not impaired by a party's later change of domicile."). To meet the jurisdictional requirements of § 1332(a), the citizenship of each plaintiff must be different from that of each defendant. Owen Equip. & Erection Co. v. Kroger , 437 U.S. 365, 373, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). "[A] corporation shall be deemed to be a citizen of every State and foreign state by which it has been incorporated and of the State or foreign state where it has its principal place of business ...." 28 U.S.C. § 1332(c)(1). The issue here is whether a dissolved or inactive corporation has a principal place of business. The Eleventh Circuit has not decided this issue, and the circuits that have disagree.

The Second Circuit has held that, for purposes of analysis under § 1332, a corporation's principal place of business must be identified regardless of whether the corporation is defunct. Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc. , 933 F.2d 131, 141 (2d Cir.1991). The rule recognizes that when a corporation closes its doors and winds up its business, it might still have a local presence that would alleviate concerns about local bias. Finding citizenship in the state where a corporation last conducted business ensures federal jurisdiction will not be extended to corporations to which Congress had no intention of providing the benefit. Id.

The Third Circuit has also adopted a bright-line rule, but it rejects the idea that a court should strain to identify a principal place of business when one may not exist. In the Third Circuit, a dissolved or inactive corporation is a citizen only of the state in which it was incorporated. Midlantic Nat'l Bank v. Hansen , 48 F.3d 693, 696 (3d Cir.1995).

The Fourth and Fifth Circuits prefer the flexibility of a facts and circumstances test. Harris v. Black Clawson Co. , 961 F.2d 547, 551 (5th Cir.1992) ; see also Athena Auto., Inc. v. DiGregorio , 166 F.3d 288, 291 (4th Cir.1999). In those circuits, the extent of a corporation's local character drives the determination as to whether a principal place of business exists for purposes of federal jurisdiction. There, a corporation's last place of business is instructive but not dispositive. "[W]here a corporation has been inactive in a state for a substantial period of time ... that state is not the corporation's principal place of business ...." Harris , 961 F.2d at 551 (footnotes omitted).

A recent decision by the Supreme Court is also relevant to this determination. In Hertz Corp. v. Friend, the Supreme Court held that simple jurisdictional tests are preferable even if application of the rule occasionally cuts against the basic rationale of § 1332. 559 U.S. 77, 130 S.Ct. 1181, 1193–94, 175 L.Ed.2d 1029 (2010).

Complex jurisdictional tests complicate a case, eating up time and money as the parties litigate, not the merits of their claims, but which court is the right court to decide those claims. Complex tests produce appeals and reversals, encourage gamesmanship, and, again, diminish the likelihood that results and settlements will reflect a claim's legal and factual merits.

Id. at 1193 (citations omitted). The Court also reasoned that, because courts have an independent obligation to determine whether subject-matter jurisdiction exists, courts require "straightforward rules under which they can readily assure themselves of their power to hear a case." Id. Accordingly, the Court announced a simple rule wherein a corporation's principal place of business is determined based on where the corporation's "nerve center" is located.

Considering the jurisdictional tests in the various circuits and the guidance of the Supreme Court in Hertz , we join the Third Circuit in holding a dissolved corporation has no principal place of business. This bright-line rule may open federal courts to an occasional corporation with a lingering local presence, but undeserved access to a fair forum is a small price to pay for the clarity and predictability that a bright-line rule provides. Moreover, in our opinion, the Third Circuit rule aligns most closely with the Supreme Court's analysis in Hertz . By contrast, for example, the Second Circuit's rule focuses not on a corporation's nerve center but where business was last conducted. Conceivably, under that rule a corporation could be considered a citizen of a state in which it was not a citizen before dissolution.

Here, LanLogistics dissolved and formally withdrew from business before Holston filed suit. Under the rule we adopt today, LanLogistics is therefore only a citizen of Delaware, and this court has subject-matter jurisdiction.

IV.

In a supplemental summary judgment order the district court held as a matter of law that the purchase...