Lancer Industries, Inc. v. American Insurance Company

• Citation: 197 F. Supp. 894
• Decision Date: 25 September 1961
• Docket Number: 8099.,Civ. A. No. 8098
• Parties: LANCER INDUSTRIES, INC. v. AMERICAN INSURANCE COMPANY et al.
• Court: U.S. District Court — Western District of Louisiana

197 F. Supp. 894

LANCER INDUSTRIES, INC. v. AMERICAN INSURANCE COMPANY et al.

Civ. A. Nos. 8098, 8099.

United States District Court W. D. Louisiana, Shreveport Division.

September 25, 1961.

T. Haller Jackson, Jr., Tucker, Bronson & Martin, Shreveport, La., for plaintiff.

Richard H. Switzer, Lunn, Irion, Switzer, Trichel & Johnson, Shreveport, La., for defendants.

BEN C. DAWKINS, Jr., Chief Judge.

On July 6, 1960, a fibre glass swimming pool manufacturing plant, owned by the Town of Coushatta, Louisiana, and leased and operated by Lancer Industries, Inc., was partially destroyed by fire. After unsuccessful attempts to obtain indemnity from more than a dozen of its fire insurers, Lancer filed three separate suits on November 29, 1960, against three groups of insurers, in the Tenth Judicial District Court for Red River Parish, Louisiana.

One of the suits, an action for recovery of inventory losses, has been settled. The remaining two suits, however, which bear docket numbers 8098 and 8099 in this Court, are still pending. The first numbered is for indemnity under various policies insuring plaintiff against the risk of loss of the use and occupancy of the premises at Coushatta, Louisiana, and the other is for indemnity under various policies insuring plaintiff against the risk of damage to or loss of machinery, equipment, tools, molds, and other business property.

In both actions, plaintiff alleged that it is a Florida corporation with its principal place of business in Mineola, New York, and that it is authorized to do business in the State of Louisiana. In suit number 8098 plaintiff alleged that five of the defendant-insurers are incorporated in New York, and in suit number 8099 it is alleged that four of the defendant-insurers are incorporated in New York.

On December 16, 1960, the defendants in both cases removed them to this Court on the ground that the plaintiff maintains its principal place of business in Coushatta, Louisiana, not Mineola, New York. They contend, therefore, that under 28 U.S.C. § 1332(c), there is diversity of citizenship between Lancer and all of the defendants in both suits so as to vest this Court with jurisdiction. Defendants also have joined in motions to transfer the actions, from this Court to the United States District Court for the Southern District of New York, as a more convenient forum. For its part Lancer timely moved to remand both actions to the State Court on the ground that there is not complete diversity of citizenship present, since some of the defendants in each action are corporate citizens of New York, where Lancer has its "principal place of business," and hence its citizenship.

The issues, therefore, are (1) whether plaintiff's "principal place of business," when the suits were commenced, was in New York, Louisiana, or elsewhere, within the meaning of 28 U.S.C. § 1332(c), and (2) if plaintiff's "principal place of business" is found to have been in New York, whether plaintiff has set forth "a separate and independent claim or cause of action, which would be removable if sued upon alone," against some or all of the defendants in either of the two suits. 28 U.S.C. § 1441(c).

At the threshold we must determine who carries the burden of proving the required diversity of citizenship where the Court's jurisdiction has been challenged by a motion to remand. We find from the authorities that a defendant who has removed a case from a State Court has the burden of proving that the Federal Court has jurisdiction, if the allegations of the petition for removal are contested. Rick v. Hedrick, D.C.W.D.Mo. 1958, 167 F.Supp. 491; Harrisville Co. v. Home Insurance Co. et al., D.C.S.D.N. Y.1954, 129 F.Supp. 300; Welsh v. American Surety Co. of N. Y., 5 Cir., 1951, 186 F.2d 16; Mason v. Salter, D.C.W.D.La. 1950, 92 F.Supp. 627; Carson v. Dunham, 1887, 121 U.S. 421, 7 S.Ct. 1030, 30 L.Ed. 992.

In order for an action to be removed from a State to a Federal Court on grounds of diversity, such must have existed at the time of commencement of the suit and this determination is made, at least in part, by looking to the pleadings on the date of filing the petition for removal. Thompson v. Mobil Producing Co., D.C.Mont.1958, 163 F.Supp. 402; Gray v. Stanford Research Institute, D. C.N.D.Tex.1952, 108 F.Supp. 636; Rick v. Hedrick, D.C.W.D.Mo.1958, 167 F. Supp. 491; Pacific Gas & Electric Co. v. Fibreboard Products, Inc., D.C.N.D.Cal. 1953, 116 F.Supp. 377; State of Colorado ex rel. Land Acquisition Commission v. American Machine & Foundry Co., D.C. Colo.1956, 143 F.Supp. 703; and Greenshields v. Warren Petroleum Corp., 10 Cir., 1957, 248 F.2d 61, certiorari denied 355 U.S. 907, 78 S.Ct. 334, 2 L.Ed.2d 262.

Moreover, under amendments intended to restrict rather than enlarge Federal jurisdiction, all doubts resulting from defective, ambiguous and inartful pleadings, as well as for other reasons, should be resolved against Federal and in favor of State Court jurisdiction. Greenshields v. Warren Petroleum Corp., supra, Maurer v. International Typographical Union et al., D.C.E.D.Pa.1956, 139 F. Supp. 337; Harrisville Co. v. Home Insurance Co. et al., D.C.S.D.N.Y. 1954, 129 F.Supp. 300; American Fire & Casualty Co. v. Finn, 1951, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702.

For purposes of diversity of citizenship, "a corporation shall be deemed 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). (Emphasis added.)

In contradiction of their present position, and perhaps due to inadvertence, defendants' motions for a change of venue affirmatively allege that plaintiff's principal place of business is in New York. When these suits were commenced in the State Court, November 29, 1960, and on the date defendants removed them to this Court, December 16, 1960, plaintiff, Lancer Industries, Inc., actually maintained its administrative or executive offices in Mineola, New York.

A registration statement filed with the Securities and Exchange Commission on April 28, 1961, reveals the following facts: Lancer Industries, Inc., was organized under the laws of Florida on December 23, 1955, by persons in no way related to or associated with the present management. After its acquisition by its present stockholders, from January 2, 1958, through July, 1960, the company was primarily interested in the manufacture of fibre glass swimming pools. Pools had been produced at plants in California, Louisiana, and Florida. In January, 1960, Lancer ceased operations at its original plant in Florida and at a plant in California and concentrated production of swimming pools at the Coushatta, Louisiana, plant.

During this same period, Lancer's management embarked on a program of expansion and diversification under which it subsequently acquired numerous wholly-owned subsidiaries, including companies manufacturing structural aircraft, missile components, electronic cabinetry and components, paints, enamels, steel forgings and castings.

Because of the fire at the Coushatta plant in July of 1960, Lancer's production of swimming pools has been brought virtually to a standstill. A plant at Boonesville, Mississippi, however, commenced operations in April of 1961 under an agreement with a non-associated company to supply Lancer with its products.

Under Lancer's expansion and diversification program, it acquired Missiles Dynamics Corporation on April 26, 1960. This wholly-owned subsidiary company operates three plants in California and produces structural aircraft, components, precision sheet metal, electronic cabinetry and control boxes. Its net worth on the date of acquisition was over $320,000.

On July 12, 1960, Lancer acquired all of the outstanding stock in Olympic Paint and Varnish Company, a Delaware corporation which had a net worth of $112,600 on the date of acquisition. This wholly-owned subsidiary manufactures and sells general purpose paints, varnishes, vehicles, industrial finishes, thinners and solvents. Olympic's principal plant and offices are located in Los Angeles, California.

In August of 1960, Lancer Industries, Inc., organized a subsidiary known as Lancer Survival Corporation, a New York corporation engaged in the production of bomb blast and fall-out shelters. This subsidiary now is being operated under a license agreement with American Survival Corporation and is paying royalties for the use of patented designs. Shelters are being manufactured by the Skyline Plastics Corporation, Diagonal, Iowa, for this subsidiary and production is considered to be still in the development stage.

In September, 1960, Lancer Industries, Inc., acquired ownership of Comet Industries, Inc., a Delaware corporation which had no assets, liabilities or business upon acquisition. Lancer has changed the name of this subsidiary to Chemonics Corporation and has financed the manufacture of printed circuits and other electronics equipment. Lancer plans to issue common stock and retain controlling interest in the company. Chemonics presently operates a plant in Pasadena, California, under a $1,150 per month lease with an option to purchase adjoining properties.

Lancer acquired the assets of Federal Steel Products Corporation and Zenith Steel Casting Company in December of 1960, and on January 6, 1961, Lancer transferred the assets of Federal and Zenith to Federal Steel Corporation, a newly organized Texas corporation, wholly-owned by Lancer Industries, Inc. The combined net worth of the two corporations upon acquisition was $330,000.

Benjamin Tessler, president of Lancer Industries, Inc., testified that all policy decisions were made at the home office in New York; that all executive committee and board of directors' meetings were held either in Mineola or New York City; that as a matter of company policy, the scope of activity of all officers of subsidiary companies was limited so that no important decision was made without...