Lorraine Motors, Inc. v. Aetna Casualty & Surety Co., Civ. No. 18892.

• Court: United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
• Citation: 166 F. Supp. 319
• Decision Date: 16 September 1958
• Parties: LORRAINE MOTORS, INC., Plaintiff, v. The AETNA CASUALTY AND SURETY COMPANY, Defendant. The AETNA CASUALTY AND SURETY COMPANY, Third-Party Plaintiff, v. Frederick J. BENES, Third-Party Defendant.
• Docket Number: Civ. No. 18892.

166 F. Supp. 319

LORRAINE MOTORS, INC., Plaintiff,
v.
The AETNA CASUALTY AND SURETY COMPANY, Defendant.
The AETNA CASUALTY AND SURETY COMPANY, Third-Party Plaintiff,
v.
Frederick J. BENES, Third-Party Defendant.

Civ. No. 18892.

United States District Court E. D. New York.

September 16, 1958.

166 F. Supp. 320

David M. Engelson, New York City, for plaintiff.

Maurice, McNamee & White, New York City, for defendant and third-party plaintiff, Robert B. White, New York City, of counsel.

Thomas W. Fleckenstein, Bellmore, N. Y., for third-party defendant.

ZAVATT, District Judge.

This motion calls for an interpretation of the Act of Congress, Public Law No. 85-554, 85th Congress (July 25, 1958), 72 Stat. 415, which amended Title 28 U.S.C.A. § 1332 so as to increase the jurisdictional requirement as to amount in controversy in diversity of citizenship cases. Section 1332, as so amended, now gives this court jurisdiction in diversity cases only where the amount in controversy exceeds the sum of $10,000, exclusive of interest and costs. However, Section 3 of the Act provides:

"Sec. 3. This Act shall apply only in the case of actions commenced after the date of the enactment of this Act."

In the instant case, the action was "commenced" in the City Court of the City of New York, Queens County, New York, prior to July 25, 1958, the effective date of the Act, to wit, on July 16, 1958. The complaint seeks damages in the sum of $5,000 plus interest and costs. The action was removed by the defendant to this Court after the effective date of the Act, to wit, on or about July 29, 1958. The independent research of the Court reveals no reported case in which the specific question now before the Court has been raised or determined. The plaintiff moves to remand the case to the City Court upon the ground that the $10,000 requirement was not met at the time the action was removed to this Court. The defendant opposes remanding on the ground that, since the action met the $3,000 amount in controversy requirement of 28 U.S.C.A. § 1332 as that section provided when the action was "commenced" in the City Court, this case comes within the scope of Section 3 of the Act and, therefore, the $10,000 requirement does not apply.

The plaintiff moves to remand upon an additional ground based upon 28 U.S.C.A. § 1332(c), as amended by the Act. A corporation is now deemed "a citizen of any State by which it has been incorporated and of the State where it has its principal place of business". Upon this motion to remand the contention is made by the plaintiff, and controverted by the defendant, that the defendant has its principal place of business in the State of New York. Plaintiff, a citizen of New York, contends that there is no diversity of citizenship because under 28 U.S.C.A. § 1332, as amended, the defendant is to be deemed a citizen of New York where, it is claimed, it has its principal place of business. It is unnecessary to consider this added ground upon which plaintiff moves to remand, in view of the Court's determination as to the effect of Section 3 of the Act.

166 F. Supp. 321

Section 3 of the Act provides that it "shall apply only in the case of actions commenced after the date of the enactment" thereof, and here lies the nub of the problem presented by the instant motion. Section 1441 of Title 28 U.S. C.A. provides that except as otherwise provided, "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending". If the action instituted in the City Court on July 16, 1958 was an action "commenced" within the meaning of Section 3 of Public Law 85-554 so as to render said Act inapplicable, the controversy is one over which this Court has original jurisdiction, and was properly removed subsequent to July 25, 1958. If, on the other hand, an action is not commenced within the meaning of Section 3 until it is actually commenced in the District Court, by removal or otherwise, Public Law 85-554 applied when the removal from the City Court was effected and the proceeding is not one of which this Court has original jurisdiction, being for an amount less than $10,000, exclusive of interest and costs.

The Committee Reports which accompanied H.R. 11102, subsequently enacted as Public Law 85-554, do not indicate whether Section 3 of the Act is to be construed to refer only to cases "commenced" in the District Courts or is meant to embrace cases "commenced" in the State courts which were potentially removable to the federal courts prior to July 25, 1958. See H.Rept.No. 1706, S.Rept.No. 1830, 85th Cong., 2d Sess. (1958); 1958 U.S.Code Cong. and Admin. News, p. 2593 et seq. However, it is known that the Act itself was passed in an effort to meet a heavy increase in the caseload of the United States District Courts. The committees reporting on the bill felt that it would bring the minimum amount in controversy in diversity of citizenship and "federal question" cases "up to a reasonable level by contemporary standards and that it will ease the workload of our Federal courts by reducing the number of cases involving corporations which come into Federal district courts on the fictional premise that a diversity of citizenship exists". 1958 U. S. Code Cong. and Admin. News, pp. 2593, 2595. Of course, the purpose of making the amount in controversy in a case determinative of jurisdiction has always been to prevent the dockets of the federal courts from being overcrowded with small cases which should be brought in the State courts which are fully equipped to decide such...