Johnson v. Smithkline Beecham Corp., Civ. No. 11–5782.

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Writing for the CourtDIAMOND
Citation853 F.Supp.2d 487
PartiesGlenda JOHNSON et al., Plaintiffs, v. SMITHKLINE BEECHAM CORPORATION et al., Defendants.
Docket NumberCiv. No. 11–5782.
Decision Date29 March 2012

853 F.Supp.2d 487

Glenda JOHNSON et al., Plaintiffs,
v.
SMITHKLINE BEECHAM CORPORATION et al., Defendants.

Civ. No. 11–5782.

United States District Court,
E.D. Pennsylvania.

March 29, 2012.


[853 F.Supp.2d 489]


Craig R. Spiegel, Nick Styant–Browne, Steve W. Berman, Hagens Berman LLP, Seattle, WA, Jeffrey L. Kodroff, John A. Macoretta, Spector Roseman Kodroff & Willis, P.C., Mary Ann Giorno, Spector Roseman Kodroff & Willis, P.C., Philadelphia, PA, Kay Gunderson Reeves, Gordon & Reeves LLP, Dallas, TX, for Plaintiffs.

Michael T. Scott, Melissa A. Wojtylak, Melissa A. Wojtylak, Reed Smith LLP, Kenneth A. Murphy, Drinker Biddle & Reath LLP, Adam S. Tolin, Dechert LLP, Albert G. Bixler, Rachel Castillo Rosser, Eckert Seamans Cherin & Mellott LLC, Philadelphia, PA, Bruce R. Kelly, Anand Agneshwar, Arnold & Porter, New York, NY, Daniel S. Pariser, Arnold & Porter LLP, Washington, DC, Sara J. Gourley, Sidley Austin LLP, Chicago, IL, for Defendants.


MEMORANDUM

DIAMOND, District Judge.

Plaintiffs Glenda Johnson (a Louisiana citizen) and Steven Lucier (a Pennsylvania citizen) brought this action in Philadelphia Common Pleas Court, alleging that thalidomide—a drug developed, produced, and distributed by Defendants—caused Plaintiffs to suffer severe birth defects. (Doc. No. 1, Ex. A.) Invoking diversity jurisdiction, Defendants removed to this Court. (Doc. No. 1.) See28 U.S.C. §§ 1332(a)(1), 1441(a). Plaintiffs now ask me to remand, arguing that: 1) Defendants GlaxoSmithKline LLC, GlaxoSmithKline Holdings (Americas) Inc., SmithKline Beecham Corporation, and Avantor Performance Materials are Pennsylvania citizens, thus defeating complete diversity; and 2) SmithKline Beecham Corporation did not consent to removal. (Doc. No. 17.) See28 U.S.C. § 1332(a)(1); Balazik v. County of Dauphin, 44 F.3d 209, 213 (3d Cir.1995). For the reasons that follow, I will not remand. Because members of this

[853 F.Supp.2d 490]

Court have made contrary determinations as to the GlaxoSmithKline Defendants' citizenship and will continue to do so absent appellate guidance, I conclude that this important jurisdictional issue is “a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from [my] order may materially advance the ultimate termination of the litigation.” 28 U.S.C. § 1292(b).

I. LEGAL STANDARDS

For diversity jurisdiction to exist, no defendant in a civil action may be a citizen of the same state as any plaintiff. See28 U.S.C. § 1332(a)(1); Grand Union Supermarkets of the V.I., Inc. v. H.E. Lockhart Mgmt., Inc., 316 F.3d 408, 410 (3d Cir.2003) (citing Carden v. Arkoma Assocs., 494 U.S. 185, 187, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990)). Because this matter began in state court, diversity must have existed both when the Complaint was filed and when the matter was removed. 14B Charles A. Wright, Arthur R. Miller, Edward H. Cooper & Joan E. Steinman, Federal Practice and Procedure § 3723 & n. 15 (4th ed. 2009) (collecting cases).

The removing party must establish federal jurisdiction. Hertz Corp. v. Friend, ––– U.S. ––––, 130 S.Ct. 1181, 1194, 175 L.Ed.2d 1029 (2010).

In determining whether diversity exists, the court “may demand” that ... “jurisdictional facts” be established by an evidentiary preponderance.... “When challenged on allegations of jurisdictional facts, the parties must support their allegations by competent proof.”

Greenberg v. Macy's, No. 11–4132, 2011 WL 4336674, at *2 (E.D.Pa. Sept. 15, 2011) (quoting Hertz, 130 S.Ct. at 1194–95;Frederico v. Home Depot, 507 F.3d 188, 194 (3d Cir.2007)).


The Third Circuit has held that as with “partnerships and other unincorporated associations,” the citizenship of a limited liability company “is determined by the citizenship of its members.” Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420 (3d Cir.2010). A corporation is a citizen of the state in which it is incorporated and the state where its principal place of business or “nerve center” is located. 28 U.S.C. § 1332(c)(1); Hertz, 130 S.Ct. at 1192. Accordingly, a business incorporated in one state with a nerve center in another state is a citizen of both states. See Davis v. Union Pac. Ry. Co., 224 Fed.Appx. 190, 191 (3d Cir.2007). A corporation may have only one nerve center, however. Hertz, 130 S.Ct. at 1193. It is “the place where a corporation's officers direct, control, and coordinate the corporation's activities.” Id. at 1192. This is not necessarily where a business's bylaws or government filings suggest “nerve center activities” will take place. See id. at 1195 (SEC filing does not establish nerve center); Buethe v. Britt Airlines, Inc., 787 F.2d 1194, 1196 (7th Cir.1986) (registered office provided in articles of incorporation does not establish nerve center); Guitar Holding Co. v. El Paso Natural Gas Co., No. 10–214, 2010 WL 3338550, at *5 (W.D.Tex. Aug. 18, 2010) (address provided in tax filings does not establish nerve center).

The Supreme Court has cautioned that

if the record reveals attempts at manipulation—for example, that the alleged “nerve center” is nothing more than a mail drop box, a bare office with a computer, or the location of an annual executive retreat—the courts should instead take as the “nerve center” the place of actual direction, control, and coordination, in the absence of such manipulation.

[853 F.Supp.2d 491]

Hertz, 130 S.Ct. at 1195. The Hertz Court recognized that “there may be no perfect test that satisfies all administrative and purposive criteria,” and that “there will be hard cases” under the nerve center test. Id. at 1194;see also id. (“We understand that ... seeming anomalies will arise. However, in view of the necessity of having a clearer rule, we must accept them.”).


II. RECORD

The Parties have agreed to proceed on the jurisdictional record made before Judge Savage in Brewer v. SmithKline Beacham Corp., 774 F.Supp.2d 720 (E.D.Pa.2011). (Doc. No. 17, Exs. 4–6; Doc. No. 34, Exs. 1–2, 5.) The Parties have supplemented this record with documents related to the Defendants' principal places of business, including Defendants' business records, information from their websites, and four affidavits. (Doc. No. 17, Exs. 1–3, 7–14; Doc. No. 34, Exs. 3–4, 6–9; Doc. No. 39, Exs. A–F.)

III. DISCUSSION

My ruling as to jurisdiction turns largely on the differences between a “holding company” and an “operating company.” A holding company is typically described as a business that exists solely to own and manage its investments in other companies, and does not engage in its subsidiaries' operations. See, e.g., Holland Am. Line Inc. v. Wartsila N. Am., Inc., 485 F.3d 450, 454 (9th Cir.2007); Corley v. Rosewood Care Ctr., Inc. of Peoria, 388 F.3d 990, 994 (7th Cir.2004). An operating company, however, produces goods or provides services to customers. See, e.g., Boyer v. Crown Stock Distrib., Inc., 587 F.3d 787, 790, 791 (7th Cir.2009); Boase v. Lee Rubber & Tire Corp., 437 F.2d 527, 528 n. 1 (3d Cir.1970).

A. Diversity Jurisdiction

Plaintiffs argue that I must remand because, like Mr. Lucier, GSK LLC and Holdings are Pennsylvania citizens. They base their argument principally on Brewer, in which Judge Savage ruled that both LLC and Holdings are Pennsylvania citizens. 774 F.Supp.2d at 732. Because I respectfully disagree with Judge Savage's reasoning, I am compelled to reject Plaintiffs' contention and deny their Motion. Because, as I have noted, this jurisdictional issue has divided and will continue to divide this Court, I have concluded that the issue meets 28 U.S.C. § 1292(b)'s requirements.

GSK LLC

LLC is a pharmaceutical and consumer healthcare company with its principal place of business in Philadelphia. Once again, however, a limited liability company's citizenship is determined solely by the citizenship of its members, not by the state in which it is legally organized or has its nerve center. See Zambelli, 592 F.3d at 420;Hicklin Eng'g, L.C. v. Bartell, 439 F.3d 346, 347–48 (7th Cir.2006); Brewer, 774 F.Supp.2d at 725.

Because GSK LLC's sole member is Holdings, its citizenship is determined by that of Holdings. (Doc. No. 17, Ex. 4 at 18.) As I will explain, Holdings—and by extension, GSK LLC—are citizens of Delaware, not Pennsylvania.

GSK Holdings

Holdings is a citizen of its state of incorporation and the state where its nerve center is located. 28 U.S.C. § 1332(c)(1); Hertz, 130 S.Ct. at 1192. It is undisputed that Holdings is incorporated in Delaware. (Doc. No. 17–1 at 19.)

As a holding company, Holdings does not operate GSK LLC. (Doc. No. 17, Ex. 4 at 59, 147–48, 150, 166.) Rather, it manages United States investments—including

[853 F.Supp.2d 492]

assets other than GSK LLC—within the group of companies headed by Holdings's and LLC's “ultimate parent,” London-based GlaxoSmithKline plc. (Id., Ex. 4 at 14–15, 17, 59–60, 191–92, Ex. 5 at 115, 117, Ex. 6 at 20.) In this investment role, Holdings's three-person Board of Directors decides whether to make investments, pay out dividends, and approve restructurings. (Id., Ex. 4 at 132, 165–66, Ex. 5 at 136, 140, Ex. 6 at 26–28.)

To carry out these extremely limited activities, Holdings has six officers (three of whom also serve as its Directors) and only one employee, who works in Wilmington and devotes about 20 hours a year to the Company's affairs. (Id., Ex. 4 at 92, Ex. 5 at 35, 138.) Holdings's office is a ten-by-ten-foot room in Wilmington that it subleases from Wilmington Trust. (Id., Ex. 5 at 19.) Dozens of holding companies have similar one-room offices in the same building. (Id., Ex. 5 at 22–23.) The room contains filing cabinets, a desk, Holdings's books and records, a chair, and computer equipment. (Id., Ex. 5 at 19, 53.) The office is rarely used. (Ex. 5 at 19, 25, 53–54.) Although the office has a telephone, its calls are routed to an answering service in the same building. (Id., Ex. 5 at 50–52, 61–62.) The Directors rarely visit the office, and one testified that he did not recall...

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24 practice notes
  • Johnson v. Smithkline Beecham Corp., Nos. 12–2561
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • June 7, 2013
    ...and denied Plaintiffs' motion, but it certified that order for interlocutory [724 F.3d 341]review.4Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 498 (E.D.Pa.2012). Plaintiffs then requested permission to appeal, which we granted on May 22, 2012. On appeal, Plaintiffs repeat their ......
  • In re Suntech Power Holdings Co., Case No.: 14-10383SMB
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • November 17, 2014
    ...where day-to-day-operations are conducted.”), and the same rule applies to a holding company. See Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 495 (E.D.Pa.2012), aff'd, 724 F.3d 337 (3d Cir.2013). The record does not support a finding that the Debtor conducted any 520 B.R. 415bus......
  • In re Suntech Power Holdings Co., Case No.: 14-10383(SMB)
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • November 17, 2014
    ...where day-to-day-operations are conducted.”), and the same rule applies to a holding company. See Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 495 (E.D.Pa.2012), aff'd, 724 F.3d 337 (3d Cir.2013). The record does not support a finding that the Debtor conducted any [520 B.R. 415] ......
  • In re Suntech Power Holdings Co., Case No.: 14-10383(SMB)
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • November 17, 2014
    ...where day-to-day-operations are conducted.”), and the same rule applies to a holding company. See Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 495 (E.D.Pa.2012), aff'd,724 F.3d 337 (3d Cir.2013). The record does not support a finding that the Debtor conducted any [520 B.R. 415]bu......
  • Request a trial to view additional results
24 cases
  • Johnson v. Smithkline Beecham Corp., Nos. 12–2561
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • June 7, 2013
    ...and denied Plaintiffs' motion, but it certified that order for interlocutory [724 F.3d 341]review.4Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 498 (E.D.Pa.2012). Plaintiffs then requested permission to appeal, which we granted on May 22, 2012. On appeal, Plaintiffs repeat their ......
  • In re Suntech Power Holdings Co., Case No.: 14-10383SMB
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • November 17, 2014
    ...where day-to-day-operations are conducted.”), and the same rule applies to a holding company. See Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 495 (E.D.Pa.2012), aff'd, 724 F.3d 337 (3d Cir.2013). The record does not support a finding that the Debtor conducted any 520 B.R. 415bus......
  • In re Suntech Power Holdings Co., Case No.: 14-10383(SMB)
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • November 17, 2014
    ...where day-to-day-operations are conducted.”), and the same rule applies to a holding company. See Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 495 (E.D.Pa.2012), aff'd, 724 F.3d 337 (3d Cir.2013). The record does not support a finding that the Debtor conducted any [520 B.R. 415] ......
  • In re Suntech Power Holdings Co., Case No.: 14-10383(SMB)
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • November 17, 2014
    ...where day-to-day-operations are conducted.”), and the same rule applies to a holding company. See Johnson v. SmithKline Beecham Corp., 853 F.Supp.2d 487, 495 (E.D.Pa.2012), aff'd,724 F.3d 337 (3d Cir.2013). The record does not support a finding that the Debtor conducted any [520 B.R. 415]bu......
  • Request a trial to view additional results

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