MERCURY FIN. CORP. OF ALA. v. Aetna Cas. Co., Civ. No. 94-D-1617-N.

• Decision Date: 22 August 1995
• Docket Number: Civ. No. 94-D-1617-N.
• Citation: 900 F. Supp. 390
• Parties: MERCURY FINANCE CORPORATION OF ALABAMA, an Alabama Corporation, Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY OF ILLINOIS, an Illinois Corporation; Aetna Casualty and Surety Company, a Connecticut Corporation; and Federal Insurance Company, an Indiana Corporation, Defendants.
• Court: U.S. District Court — Middle District of Alabama

900 F. Supp. 390

MERCURY FINANCE CORPORATION OF ALABAMA, an Alabama Corporation, Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY OF ILLINOIS, an Illinois Corporation; Aetna Casualty and Surety Company, a Connecticut Corporation; and Federal Insurance Company, an Indiana Corporation, Defendants.

Civ. No. 94-D-1617-N.

United States District Court, M.D. Alabama, Northern Division.

August 22, 1995.

Dennis R. Bailey, Robert A. Huffaker, Thomas H. Keene, Montgomery, AL, for plaintiff.

Cooper C. Thurber, Caroline L. McCarthy, William E. Shreve, Jr., Mobile, AL, for defendant AETNA.

Bibb A. Allen, Deborah Alley Smith, Susan S. Hayes, Birmingham, AL, for defendant Federal Insurance.

MEMORANDUM OPINION AND ORDER

DE MENT, District Judge.

Before the court is plaintiff Mercury Finance Corporation of Alabama's motion to remand filed March 24, 1995, the numerous replies and surreplies thereto. After careful consideration of the arguments of counsel, the relevant case law and the record as a whole, the court finds that the plaintiff's motion is due to be denied.

PROCEDURAL HISTORY AND FINDINGS OF FACT

On November 16, 1994, the plaintiff filed a declaratory judgment action in the Circuit Court of Barbour County, Alabama. Thereafter, the defendants timely removed this lawsuit to the United States District Court for the Middle District of Alabama. The defendants predicate removal on diversity-of-citizenship jurisdiction pursuant to 28 U.S.C. §§ 1332 and 1441.¹

In its motion to remand, the plaintiff asserts that complete diversity does not exist between it and the defendants, and, thus, the court cannot properly exercise subject matter jurisdiction over this lawsuit. While it is undisputed that the plaintiff is incorporated in Alabama, the parties hotly debate the state in which the plaintiff has its principal place of business. The plaintiff insists that its principal place of business is in Illinois, and the defendants contend that Alabama should be considered the principal place of business.

The following chart outlines the state where each party is incorporated and maintains its principal place of business:

                ===============================================================================
                   DEFENDANTS                              Principal Place       State of
                                                           of Business           Incorporation
                _______________________________________________________________________________
                Aetna Casualty & Surety Co. of Illinois      Illinois              Illinois
                _______________________________________________________________________________
                Aetna Casualty & Surety Co.                  Connecticut           Connecticut
                _______________________________________________________________________________
                Aetna Life & Casualty Co.                    Connecticut           Connecticut
                _______________________________________________________________________________
                Federal Insurance Co.                        Indiana               Indiana
                ===============================================================================
                   PLAINTIFF
                _______________________________________________________________________________
                Mercury Finance Corporation                  ?????                 Alabama
                ===============================================================================
                

In determining the plaintiff's principal place of business, the court deems the following facts controlling:

1) The plaintiff is a finance company which purchases retail installment contracts, primarily from automobile dealers located in Alabama. The plaintiff also extends personal loans to Alabama borrowers and finances the purchase of certain credit-related insurance coverage. James Doyle's ("Doyle") Dep. at ¶¶ 13, 14.

2) The plaintiff is a wholly-owned subsidiary of Mercury Finance Company, a Delaware Corporation that maintains its principal place of business in Illinois. Mercury Finance Company owns twenty-five subsidiaries including the plaintiff, each of which is separately incorporated and conducts similar operations in different states. Mark Dapier's ("Dapier") Aff. at ¶ 2.²

3) The officers and directors of Mercury Finance Company, with one exception, live in Illinois. Id. at ¶ 8.

4) Mercury Finance Company, together with its subsidiaries, has approximately 1,300 employees. The plaintiff employs thirty-one workers, and all its salaried employees live in Alabama. Id. at ¶ 9; Doyle's Dep. at ¶¶ 33, 100.

5) The plaintiff maintains four branch offices in Alabama, located in Birmingham, Mobile, Enterprise and Dothan. Dapier's Aff. at ¶ 9.

6) The plaintiff leases all its office space and does not own any real estate in Alabama.

Id. at ¶ 9. The plaintiff's personal effects in Alabama consist of approximately $30,000 in office furniture and equipment. Pl.'s Reply Mem. Supp. of Remand at 17.

7) The annual reports submitted by the plaintiff to the Alabama State Banking Department identify Northbrook, Illinois as the plaintiff's home office. Dapier's Aff. at ¶ 10.

8) Payroll and administrative services for the plaintiff are performed in Illinois. Mercury Finance Company also provides benefit plans for the plaintiff's employees. The plaintiff compensates Mercury Finance Company for services performed and expenses incurred on its behalf. Id. at ¶ 11. The plaintiff performs its own book-keeping tasks.

9) The plaintiff's corporate policy is established in the Illinois office, along with its business forms and policy and procedure manuals. Moreover, "major business decisions" affecting the operation of the plaintiff are made at the Illinois office. Id. at ¶ 12.

10) The financial reporting and major accounting functions are performed in the Illinois office. Also, the plaintiff's federal income tax returns and state income tax returns are prepared at the Illinois office. The Alabama state tax returns, of course, are filed in Alabama. Id. at ¶ 13.

11) The plaintiff submits its own Alabama franchise and financial institution excise tax returns, as well as Alabama personal property tax returns. All of these tax returns are prepared in and paid from the Illinois office. The tax returns list the plaintiff's address as Northbrook, Illinois. Doyle's Dep. at 117-118.

12) The plaintiff's branch manager's job description is prepared in the Illinois office. Id. at 116. The branch manager cannot unilaterally fire anyone without consent of the director in Illinois and is vested with the broad power of executing the plaintiff's policies. Pl.'s Reply Mem. Supp. of Mot. Remand at 21; Doyle's Dep. at 44.

13) The plaintiff's annual license renewal applications are prepared in and submitted from the Illinois office. Id. at 124-125.

14) All of the plaintiff's income is derived from operations in Alabama. Id. at 41.

15) The plaintiff maintains four depository bank accounts in Alabama. Id. at 50.

16) The plaintiff is a member of trade organizations within the state of Alabama. Id. at 56-7.

17) The branch managers of the plaintiff report directly to regional directors in Georgia and Florida. Id. at 104-105.

STANDARD OF REVIEW

It is well-settled that the defendants, as the parties removing an action to federal court, have the burden of establishing federal jurisdiction. Sullivan v. First Affiliated Secs., 813 F.2d 1368 (9th Cir.1987), cert. denied, 484 U.S. 850, 108 S.Ct. 150, 98 L.Ed.2d 106 (1987). Because the removal statutes are strictly construed against removal, generally speaking, all doubts about removal must be resolved in favor of remand. See Shamrock Oil and Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); Butler v. Polk, 592 F.2d 1293 (5th Cir.1979); Paxton v. Weaver, 553 F.2d 936 (5th Cir.1977).

DISCUSSION

The sole dispute is whether for diversity jurisdiction purposes, the plaintiff maintains its principal place of business in Alabama or Illinois. 28 U.S.C. § 1332 sets forth the diversity requirements and provides, in pertinent part, that "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."³ 28 U.S.C. § 1332(c)(1). Under the statute, a corporation has dual citizenship and is deemed a citizen of every state where incorporated and also of the one state in which it has its principal place of business. Village Fair Shopping Center Co. v. Sam Broadhead Trust, 588 F.2d 431, 433 (5th Cir.1979); J.A. Olson Co. v. City of Winona, Miss., 818 F.2d 401 (5th Cir.1987).

Whether the plaintiff maintains its principal place of business in Alabama or Illinois is dispositive of the forum in which this litigation will proceed: If the plaintiff maintains its principal place of business in Illinois, as it contends, then complete diversity is destroyed because defendant Aetna Casualty & Surety Co. of Illinois also is a citizen of this state. If the defendants are correct in their assertion that Alabama is the appropriate state of the principal place of business, then the requisite diversity exists and this action is properly in federal court.

The Eleventh Circuit has adopted the "total activities" test for determining a corporation's principal place of business. See Anniston Soil Pipe Co. v. Central Foundry Co., 216 F.Supp. 473 (N.D.Ala.1963), aff'd 329 F.2d 313 (5th Cir.1964)⁴; J.A. Olson Co., 818 F.2d at 411. The "total activities" test involves a fact-sensitive inquiry and is a hybrid of two tests: the "nerve center" and "place of activities" tests. Vareka Inv., N.V., v. American Inv. Properties, Inc., 724 F.2d 907, 909-10 (11th Cir.1984).

A. "Nerve Center" Test

The "nerve center" test originated in Scot Typewriter Co. v. Underwood Corp., 170 F.Supp. 862 (S.D.N.Y.1959) and provides that if a corporation is involved in dispersed and multi-state operations, the principal place of business is the state where the executive and administrative decisions take place. In Scot, the corporation had manufacturing facilities in three states and its executive...