Iceland Seafood v. National Consumer Co-Op. Bank, 4:03CV98.

• Decision Date: 03 October 2003
• Docket Number: No. 4:03CV98.,4:03CV98.
• Parties: ICELAND SEAFOOD CORPORATION, Plaintiff, v. NATIONAL CONSUMER COOPERATIVE BANK d/b/a/ National Co-operative Bank, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

285 F.Supp.2d 719

ICELAND SEAFOOD CORPORATION, Plaintiff, v. NATIONAL CONSUMER COOPERATIVE BANK d/b/a/ National Co-operative Bank, Defendant.

No. 4:03CV98.

United States District Court, E.D. Virginia, Newport News Division.

October 3, 2003.

COPYRIGHT MATERIAL OMITTED

Dean T. Buckius, Vandeventer Black LLP, Norfolk, VA, for Plaintiff.

John S. Wilson, Daniel T. Campbell, Willcox & Savage PC, Norfolk, VA, for Defendant.

ORDER

FRIEDMAN, District Judge.

Pending before the court is plaintiff Iceland Seafood Corporation's Motion for Remand and Award of Fees and Costs, filed on August 19, 2003. The defendant, National Consumer Cooperative Bank, filed its Brief in Opposition on September 2, 2003, and the plaintiff responded in a Reply Memorandum on September 5, 2003. The court has considered the briefs submitted by the parties and, finding that a hearing would not aid in the court's resolution of the issues, DENIES the parties' request for a hearing on this matter. For the reasons articulated fully below, the court GRANTS the plaintiff's Motion for Remand, and ORDERS this case remanded to the Circuit Court for the City of Newport News, Virginia. The plaintiff's Motion for Award of Fees and Costs is DENIED.

I. Procedural and Factual History

On June 12, 2003, the plaintiff filed a Bill of Complaint in the Circuit Court for the City of Newport News, Virginia, alleging breach of contract and other issues stemming from the plaintiff's relationship with the defendant. The defendant was served through the Secretary of the Commonwealth, via certified mail, on July 9, 2003. On July 25, 2003, within the thirty (30) days provided for under 28 U.S.C. § 1446(b), the defendant filed a Notice of Removal to federal court. As grounds for removal, the defendant claimed diversity of citizenship, averring that the plaintiff is a Pennsylvania corporation, with its principal place of business in Newport News, Virginia, and that the defendant is a federally organized corporation, with its principal place of business in Washington, D.C. The defendant further averred that it is a non-resident of Virginia.

Plaintiff's Motion to Remand argues that this court does not have diversity jurisdiction over this matter, as the defendant, being a federally chartered corporation, has national citizenship. Defendant's Brief in Opposition argues that this court does have subject matter jurisdiction, on both diversity and federal question grounds, and that the case was properly removed.

The defendant invites this court, however, to postpone its consideration of the issue of remand until it considers the issue of personal jurisdiction raised in defendant's First Amended Answer and Counterclaim on August 21, 2003. The defendant has also raised the issue of personal jurisdiction in a Motion for Judgment on the Pleadings, filed on September 11, 2003. The plaintiff filed its response to this on September 25, 2003. The parties have also exchanged motions concerning a motion by the plaintiff to dismiss defendant's counterclaim.

While the court recognizes that it is not prohibited from addressing the possibly less onerous question of personal jurisdiction first, the court believes that "both expedition and sensitivity to state courts' coequal stature" impels the court to first consider whether it has authority over the "category of claim in suit." See Ruhrgas, AG v. Marathon Oil Co., 526 U.S. 574, 577, 588, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) (finding that it was not abuse of discretion for district court to first consider personal jurisdiction challenge when subject matter jurisdiction challenge was difficult, but noting that district courts customarily first resolve doubts over subject matter jurisdiction).

II. Discussion

The issues presented in the Motion for Remand, while perhaps not novel, are not of the typical variety raised in removal proceedings. The court must determine if the defendant, a federally chartered corporation, can claim diversity jurisdiction based on its citizenship. In its Brief in Opposition, the defendant has also argued that its organizing statute provides for an independent grant of federal jurisdiction, thus allowing removal of any actions brought in the state courts on this basis. Before the court addresses this argument, however, it must, as an initial matter, determine whether the defendant may amend its Notice of Removal to include this ground.

At the outset, the court recognizes that there exists a policy of strictly construing the removal statute, particularly when based upon diversity grounds. See Thompson v. Gillen, 491 F.Supp. 24, 26 (E.D.Va.1980). This policy is intended to secure state sovereignty by not removing cases that properly belong in state court. Any doubts as to the propriety of the removal are to be resolved in favor of remand to state court. See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); Creekmore v. Food Lion Inc., 797 F.Supp. 505, 508 (E.D.Va.1992). Additionally, the party seeking removal bears the burden of establishing federal jurisdiction. See Mulcahey v. Columbia Organic Chem. Co., 29 F.3d 148, 151 (4th Cir.1994).

A. Diversity Jurisdiction

In its Notice of Removal, the defendant claimed that this court has original jurisdiction over this matter because of diversity jurisdiction, which requires that the matter in controversy exceed $75,000 and be between citizens of different states. 28 U.S.C. § 1332(a). The citizenship provision relating to corporations, section 1332(c), was added by amendment in 1958. It provides that "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." 28 U.S.C. § 1332(c)(1). The purpose of this amendment was to reduce the number of cases, involving corporations, brought in the federal courts by making it more difficult for corporations to attain complete diversity. See Burton v. United States Olympic Comm., 574 F.Supp. 517, 519 (C.D.Cal.1983) (citations omitted).

There is no dispute concerning the amount in controversy, nor in determining the plaintiff's citizenship. At issue, then, is the citizenship of the defendant. As is discussed below, the typical test for determining the citizenship of a corporation does not apply to federally chartered corporations.

The National Consumer Cooperative Bank ("NCB") was created by Congress in 1978 for the purpose of making available "necessary financial and technical assistance to cooperative self-help endeavors as a means of strengthening the Nation's economy." 12 U.S.C. § 3001; see also 12 U.S.C. 3001-3051 ("the Bank Act"). The Bank Act provides that "[t]he principal office of the Bank shall be in Washington, District of Columbia, and, for the purpose of venue, shall be considered a resident thereof." 12 U.S.C. § 3011. Until 1981, when Congress privatized NCB, its Class A stock was owned entirely by the United States. Accordingly, pursuant to 28 U.S.C. § 1349, the federal courts had jurisdiction over NCB during these first three years. There was, thus, no need for Congress to address diversity jurisdiction when NCB was covered under 28 U.S.C. § 1349. NCB first argues that the venue provision in 12 U.S.C. § 3011 reveals the anticipation of Congress that NCB would have a federal forum available to it, even absent the federal jurisdiction afforded by 28 U.S.C. § 1349.

The court rejects the suggestion that venue is equivalent to citizenship for the purposes of jurisdiction. See Monsanto Company v. Tennessee Valley Authority, 448 F.Supp. 648, 650 (N.D.Ala.1978) (finding that statutes that created federally chartered corporation and established venue situs did not serve to confer citizenship in same situs for purposes of diversity jurisdiction.) Principal office, as used in the chartering statutes, is not the same as principal place of business as used in determining jurisdiction. Id. Accordingly, the venue provision of the chartering statutes does not suffice to establish citizenship for NCB in the District of Columbia.

The citizenship of a federally chartered corporation is determined by the express language of the chartering statutes and the geographic scope of activities authorized in those statutes. See Bankers' Trust Co. v. Texas Pacific Rw. Co., 241 U.S. 295, 308-309, 36 S.Ct. 569, 60 L.Ed. 1010 (1916); Little League Baseball v. Welsh Publishing Group, Inc., 874 F.Supp. 648, 651 (M.D.Pa.1995); Burton v. United States Olympic Committee, 574 F.Supp. 517, 519 (C.D.Cal.1983). If the chartering statutes expressly provide for citizenship in a particular state, or incorporate the entity as a "body corporate" of a particular state, then a federally chartered corporation, even with wide spread actual and authorized activities, may have state citizenship for diversity purposes. Little League, 874 F.Supp. at 651. There is no disagreement that the Bank Act does not contain any such language locating NCB in the District of Columbia.

If this express provision is absent from the statutes, however, a federally chartered corporation may still be a citizen of a particular state if its activities, either factually or by charter, are limited to a particular state. Burton, 574 F.Supp. at 517, 519 (citing Feuchtwanger Corp. v. Lake Hiawatha Fed. Credit Union, 272 F.2d 453, 454-456 (3d Cir.1959)). Otherwise, if the corporation is organized to do business in several states, and in fact does so, it has national citizenship and cannot base removal on the ground of diversity jurisdiction. Id. (citing Bankers' Trust, 241 U.S. at 309, 36 S.Ct. 569).

Courts that have considered the question of the citizenship of a federally chartered corporation inquire into whether the corporation's activities can be said to be "localized." Little League, 874 F.Supp. at 652; Burton, 574 F.Supp. at 519. Unlike the test for a state corporation, which compares the operations of the corporation in various states to...