Nerco Delamar Co. v. North American Silver Co., Civ. No. 88-1328.

• Citation: 702 F. Supp. 809
• Decision Date: 19 January 1989
• Docket Number: Civ. No. 88-1328.
• Parties: NERCO DELAMAR COMPANY, an Oregon corporation, Plaintiff, v. NORTH AMERICAN SILVER COMPANY, an Idaho corporation, Defendant.
• Court: U.S. District Court — District of Idaho

702 F. Supp. 809

NERCO DELAMAR COMPANY, an Oregon corporation, Plaintiff, v. NORTH AMERICAN SILVER COMPANY, an Idaho corporation, Defendant.

Civ. No. 88-1328.

United States District Court, D. Idaho.

January 19, 1989.

Randolph C. Foster, Kevin Q. Davis, Stoel, Rives, Boley, Jones & Grey, Portland, Or., Thomas A. Banducci, Eberle, Berlin, Kading, Turnbow & Gillespie, Boise, Idaho, for plaintiff.

A.L. Lyons, Lyons and Noack Associates, Boise, Idaho, for defendant.

MEMORANDUM OPINION AND ORDER

RYAN, Chief Judge.

I. FACTS & PROCEDURE

Currently before the court is Defendant North American Silver Company's (North American) Motion to Dismiss for Lack of Federal Jurisdiction. The motion to dismiss is filed pursuant to 28 U.S.C. § 1332 which requires complete diversity of jurisdiction between parties. If Nerco Delamar Company's (Delamar) principal place of business is Idaho, then complete diversity is lacking and this court must dismiss for lack of subject matter jurisdiction. Homestead Log Co. v. Square D Co., 555 F.Supp. 1056 (Idaho 1983).

II. ANALYSIS

A corporation is, for purposes of Section 1332, a citizen of both its place of incorporation and its principal place of business. As the court noted in Homestead, "there are two tests available to this court by which to determine the location of the principal place of business of a corporation. These are: the `nerve center' approach and the `place of operations' approach." Id. at 1057. The court, in determining which test to apply, considers both the character of the subject corporation and the scope of its activities. Id.

Once the court determines which test to apply, it weighs several factors. The factors vary, however, depending upon which test is adopted. Under the "nerve center" approach the court looks to the place:

Where the directors and stockholders meet; where the executives live, have their offices, and spend their time; where the administrative and financial offices are located and records kept; where the corporate income tax return is filed; and by the place which is designated in the charter or other corporate documents as the official headquarters of the company.

Homestead Log Co. v. Square D Co., 555 F.Supp. at 1057 (citation omitted). Under the "place of operations" approach, the court examines:

The location of the real property, equipment, inventory and any other tangible assets, the distribution of employees and payroll, the allocation of gross income, the situs of production, sales, shipping and other physical activities, and the location of the operational offices.

Id.

North American has urged the court to apply the "place of operations" approach. North American, accordingly, has offered evidence tending to show that the bulk of Delamar's mining activities are conducted within Idaho. North American, in support of its motion to dismiss, asserts that Plaintiff Nerco Delamar Company (Delamar) is solely and primarily in the business of mining; that the bulk, if not the entirety, of Delamar's mining operations are conducted at Delamar Silver Mine and Florida Mountain, both of which are located entirely in Idaho; that Delamar, in furtherance of its mining operations, owns, maintains, and operates machinery, equipment, supplies, buildings and structures worth an estimated $38 million and employs approximately 180 people at the Delamar mine in Idaho.

Neither the Complaint filed by Delamar nor the affidavit submitted in opposition to North American's motion to dismiss dispute these assertions. Delamar has, instead, encouraged the court to adopt the "nerve center" approach. Consequently, Delamar has offered evidence tending to establish that the bulk of its administrative and executive operations are conducted out of Oregon and Washington, not in Idaho. Delamar, relying on this evidence, concludes that either Oregon or Washington is its principal place of business.

The affidavit of Mr. John B. Eichenauer, Assistant Secretary of Delamar, offered in opposition to North American's motion to dismiss, establishes that Delamar's headquarters and principal offices are located in Washington; that the sole stockholder of Delamar is Nerco Minerals Co., a subsidiary of Nerco, Inc., an Oregon corporation; that the officers and directors of Delamar live and work in either Oregon or Washington; that Delamar owns real estate and mineral rights in Oregon, Nevada, and Idaho; that Delamar owns residential real estate in Oregon; that Delamar employs approximately 200 people of which over one-half reside in Oregon; that Delamar's administrative, financial, and accounting offices and records are maintained in Washington; that Delamar's corporate federal income tax returns are consolidated with Pacificorp, an Oregon corporation; that Delamar's accounting and income tax returns are prepared in Oregon; that shipment of "dore" is controlled from Washington; that the dore is refined in Utah, New Jersey, and France; that marketing of the refined dore is conducted from Washington; that land acquisition decisions for Delamar are made in Washington; that Delamar's insurance needs are managed by Nerco, Inc.; that, with one exception, all exploration geologists who provide services for Delamar are located in Washington; and that capital acquisitions are purchased and paid for out of Washington.

The majority of courts that have reached the issue have held that the principal place of business of a mining corporation is not determined by the "nerve center" test, but rather by a "place of operations" test. Riggs v. Island Creek Coal Co., 542 F.2d 339, 341 (6th Cir.1976) (citing Mattson v. Cuyuna Ore Co., 180 F.Supp. 743 (D.Minn.1960); Hodges v. Georgia Kaolin Co., 207 F.Supp. 374 (M.D.Ga.1962); Potocni v. Asco Mining Co., 186 F.Supp. 912 (W.D.Pa.1960); Continental Coal Corp. v. Roszelle Bros., 242 F. 243 (6th Cir.1917)).

The Sixth Circuit, in Island Creek, although agreeing with the lower court that the principal place of business for a mining corporation was generally its "place of operations," reversed the district court where it found that the court had summarily dismissed the corporation's headquarters as irrelevant for purposes of subject matter jurisdiction. The court in Island Creek adopted the "nerve center" test only because it found that the "bulk" of the mining corporation's activities were divided in an unknown proportion between three states.

The fact that the Sixth Circuit reversed the lower court, however, should not be construed as a departure from the rule that a mining corporation's principal place of business is generally determined using the "place of operations" test; the reversal is not an adoption of the "nerve center" test. To the contrary, the court in Island Creek...