Mennen Co. v. Atlantic Mut. Ins. Co.

• Decision Date: 26 June 1998
• Docket Number: No. 97-5266,97-5266
• Citation: 147 F.3d 287
• Parties: The MENNEN COMPANY, Appellant, v. ATLANTIC MUTUAL INSURANCE COMPANY, Centennial Insurance Company, Aetna Casualty & Surety Company Federal Insurance Company.
• Court: U.S. Court of Appeals — Third Circuit

Page 287

147 F.3d 287

The MENNEN COMPANY, Appellant, v. ATLANTIC MUTUAL INSURANCE COMPANY, Centennial Insurance Company, Aetna Casualty & Surety Company Federal Insurance Company.

No. 97-5266.

United States Court of Appeals Third Circuit.

Argued Nov. 20, 1997.

Decided June 26, 1998.

Gita F. Rothschild (Argued), McCarter & English, Newark, New Jersey, for Appellant.

Kevin E. Wolff, McElroy, Deutsch & Mulvaney, Morristown, New Jersey, for Appellees, Atlantic Mutual Insurance Company, Centennial Insurance Company.

Peter E. Mueller, Harwood Lloyd, Hackensack, New Jersey, for Aetna Casualty and Surety Company.

John J. Gibbons (Argued), Kevin J. McKenna, Crummy, Del Deo, Dolan, Griffinger & Vecchione, Newark, New Jersey, David L. Menzell, Cuyler, Burk & Matthews, Parsippany, New Jersey, for Federal Insurance Company.

Before: SCIRICA and LEWIS, ^* Circuit Judges, and POLLAK, ^** District Judge.

OPINION OF THE COURT

POLLAK, District Judge.

Mennen, Inc. appeals the district court's dismissal, for lack of subject matter jurisdiction, of its complaint against Federal Insurance Company. For the reasons set forth below, we affirm.

I.

This litigation commenced in 1993 when Mennen, a New Jersey corporation, brought suit in the District Court for the District of New Jersey against several of its insurers--all of them incorporated and having their principal places of business outside of New Jersey--seeking indemnity under state law for environmental clean-up liabilities. Mennen's complaint based federal jurisdiction on the diversity statute. 28 U.S.C. § 1332. Mennen did not initially name appellee Federal Insurance Co. ("Federal") as a defendant because Mennen believed that Federal--a company incorporated in Indiana--had its principal place of business in New Jersey, thus precluding diversity jurisdiction. Moreover, when Mennen filed suit, New Jersey insurance law was governed by a joint and several liability regime--a regime which appeared to permit Mennen to seek full recovery from its other insurers without suing Federal. While the suit was pending, however the New Jersey Supreme Court decided Owens-Illinois v. United Insurance Co., 138 N.J. 437, 650 A.2d 974 (1994), which eliminated joint and several liability in cases involving several insurers and substituted a pro rata contribution scheme. The practical effect of the Owens-Illinois decision with respect to this litigation was that, if Mennen was to have the complete recovery it sought, it would be necessary for Mennen to secure the joinder of Federal as a party defendant.

Mennen's first step was to move to compel the defendants to implead Federal. But this stratagem proved unsuccessful; the motion was denied. Then Mennen discovered pleadings that Federal had filed in other actions--pleadings in which Federal stated that its principal place of business was in Indiana, its state of incorporation. Armed with this new understanding of Federal's business operations, Mennen filed an amended complaint joining Federal as a defendant. Federal responded by moving that it be dismissed as a defendant for lack of subject matter jurisdiction. Federal contended that its principal place of business was in New Jersey, and hence that, for the purposes of diversity jurisdiction, it was a citizen of New Jersey as well as of Indiana; this meant, so Federal argued, that there was a New Jersey plaintiff (Mennen) and a New Jersey defendant (Federal), a configuration fatal to diversity jurisdiction. Mennen opposed the motion to dismiss, arguing that Federal was a citizen of Indiana only. ¹ The district court, concluding that Federal's principal place of business was indeed New Jersey, granted Federal's motion. This appeal followed.

II.

The facts bearing on jurisdiction are undisputed. Federal is a corporation wholly owned by the Chubb Corporation. For the first approximately ninety years of its existence, Federal was incorporated in New Jersey. Since 1990, however, Federal has been incorporated in Indiana. The corporation has an office in Indiana designated as its "Statutory Home Office" in fulfillment of a requirement of Indiana law.

Federal is in the business of providing property and casualty insurance in the United States and abroad. Although a great deal of the company's activity is carried on domestically, Federal itself has no employees in the United States. ² Rather, Federal's business in the United States is conducted by employees of Chubb & Son, another wholly-owned subsidiary of the Chubb Corporation, under a management services contract. Pursuant to similar arrangements, many of these employees also handle the business of other Chubb Corporation affiliates.

In New Jersey, some two thousand Chubb & Son employees conduct Federal's business. Specifically, Federal's national underwriting and claims-handling functions are administered by Chubb & Son personnel at an office complex in Warren, New Jersey. As the district court found and the record reflects, the Warren office also (1) houses Federal's accounting, treasury, marketing, investment, human resources, and loss-control departments; (2) is the location of the majority of Federal's "senior executives;" ³ and (3) is the situs for the filing of Federal's tax returns, policy forms, and annual reports.

In Indiana, forty-five Chubb & Son employees carry out Federal's business. As Indiana law requires of companies incorporated in the state, Federal's primary books and records are maintained at the Indiana office. However, the Indiana office functions largely as a local claims and underwriting office, similar to other such local offices throughout the country; no national corporate-wide authority over such functions is exercised in Indiana.

Mennen does not undertake to challenge the district court's factual findings. Rather, Mennen argues that--given that Federal has no employees in New Jersey--Federal is only a citizen of Indiana, its state of incorporation, and that the district court therefore erred in concluding that subject matter jurisdiction is absent. We exercise plenary review over this issue. Mellon Bank v. Farino, 960 F.2d 1217, 1220 (3d Cir.1992).

III.

A.

Section 1332(a)(1) of the diversity statute requires complete diversity between the parties--that is, jurisdiction is lacking if any plaintiff and any defendant are citizens of the same state. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). The determination of a corporation's citizenship was a matter of some doubt until Congress in 1958 amended 28 U.S.C. § 1332 by adding a sub-section (c)(1), which provided, in relevant part, 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." ⁴ Act of July 25, 1958, Pub.L. No. 85-554, 72 Stat. 415 (codified at 28 U.S.C. § 1332(c)(1)).

One of Congress's main purposes in enacting § 1332(c)(1) was to curtail the availability of diversity jurisdiction. See S.Rep. No. 1830, 85th Cong., 2d Sess. (1958), reprinted in 1958 U.S.C.C.A.N. 3099, 3101 ("In adopting this legislation, the committee feels ... 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.").

Mennen is a citizen of New Jersey. Federal, incorporated in Indiana, was determined by the district court to have its principal place of business in New Jersey, making Federal a citizen of New Jersey as well. The district court thus found complete diversity lacking and dismissed the complaint with respect to Federal. Consequently, this appeal turns on whether the district court erred as a matter of law in concluding that Federal's principal place of business is in New Jersey.

B.

In this circuit, the key authority interpreting § 1332(c)(1) is Kelly v. United States Steel Corp., 284 F.2d 850 (3d Cir.1960). The Kelly articulation of standards for determining a company's principal place of business has come to be known as the "center of corporate activities" test for corporate citizenship. See generally 13B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3625 (2d. ed.1984 & Supp.1998)(hereinafter "Federal Practice and Procedure "). The Kelly inquiry, reaffirmed and refined in subsequent cases, requires courts to ascertain "the headquarters of day-to-day corporate activity and management." 284 F.2d at 854; see also Midlantic Nat. Bank v. Hansen, 48 F.3d 693, 696 (3d Cir.1995); Quaker State Dyeing & Finishing Co. v. ITT, 461 F.2d 1140, 1143 (3d Cir.1972).

In Kelly, this court was called on to determine the principal place of business of the "giant" (284 F.2d at 854) United States Steel Corporation, which approximately forty years ago had fourteen divisions and eleven subsidiaries and whose "various manufacturing activities spread over practically all the United States and extend[ed] to foreign countries." Id. at 853. The plaintiffs in Kelly--seeking to overturn dismissals for lack of diversity jurisdiction--had urged a " 'nerve center' " approach, according to which the locus of the board of directors' final decision-making authority would be determinative of the defendant corporation's principal place of business. Speaking through Judge Goodrich, the court characterized plaintiffs' proposed test as "a pleasant and alluring figure of speech," but then turned "to a consideration of the facts of the Steel Corporation's life." Id. Applying that pragmatic approach, the court noted that final authority over "corporate policy, including its financing," rested with the board in New York, but that the board had delegated "the duty of conducting the business of the corporation relating to manufacturing, mining, transportation and general operation" to an "Operation Policy Committee," consisting of the board chairman, the president, the seven executive...