Nutter v. New Rents, Inc.

• Decision Date: 01 October 1991
• Docket Number: No. 90-2493,90-2493
• Citation: 1991 WL 193490,945 F.2d 398
• Parties: NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. Carl NUTTER, Plaintiff-Appellant, v. RENTS, INCORPORATED, a Kentucky corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 398

945 F.2d 398

NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit.

Carl NUTTER, Plaintiff-Appellant, v. RENTS, INCORPORATED, a Kentucky corporation, Defendant-Appellee.

No. 90-2493.

United States Court of Appeals, Fourth Circuit.

Argued May 6, 1991.

Decided Oct. 1, 1991.

Appeal from the United States District Court for the Southern District of West Virginia, at Charleston. John T. Copenhaver, Jr., District Judge. (CA-90-24-2)

Argued: Paul Anthony Ryker, Huntington, W.Va., for appellant; Steven Leftridge Thomas, Kay, Casto, Chaney, Love & Wise, Charleston, W.Va., for appellee.

On Brief: Tracy L. Webb, Kay, Casto, Chaney, Love & Wise, Charleston, W.Va., for appellee.

S.D.W.Va.

AFFIRMED.

Before PHILLIPS, Circuit Judge, CHAPMAN, Senior Circuit Judge, and RICHARD B. KELLAM, United States District Judge for the Eastern District of Virginia, sitting by designation.

OPINION

PHILLIPS, Circuit Judge:

Carl Nutter appeals the district court's dismissal without prejudice of his declaratory judgment action against New Rents Incorporated (New Rents) on the basis of a forum selection clause in a contract which was the subject of the action. He challenges both the court's upholding of its diversity removal jurisdiction, and the enforceability of the forum selection clause. We affirm.

I

Nutter was the president and 20% shareholder in Electronic Rental Services Corporation (Electronic). Electronic is a Louisiana corporation that operated rent-to-own business in Kentucky and West Virginia. In September 1988, Nutter discussed the possibility of selling Electronic's assets with Carlos Sardinia, the president and principal shareholder of New Rents. After obtaining information he needed about Electronic, Sardinia told Nutter of his interest in purchasing Electronic's assets. Nutter then informed Robert Guidry, the 80% shareholder in Electronic, of New Rents' wish to purchase Electronic. Guidry and Sardinia then negotiated an acceptable purchase price. According to Sardinia's affidavit, these negotiations took place mostly in Kentucky and Louisiana. On December 12, 1988, Electronic (as seller, by Robert Guidry), New Rents (as purchaser), Guidry, Nutter, and Sardinia signed an agreement for the sale of all of Electronic's assets to New Rents.

The agreement contained an anti-competition clause under which Electronic, Guidry, and Nutter covenanted not to "conduct[ ] a rent-toown business similar to that involved in this transaction" in the four cities in which Electronic operated the stores it was selling to New Rents. This provision was valued at $50,000. The consideration for the entire sale of assets was $825,000.

The agreement contained a choice of law and choice of forum clause which provided in relevant part:

Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana. If a claim under this Agreement is asserted in any legal proceedings, all parties irrevocably submit to the jurisdiction of the Civil District Court of the Parish of Orleans, State of Louisiana, and the United States District Court, Eastern District of Louisiana, and irrevocably agree that venue for any such action shall be in New Orleans, Louisiana.

J.A. at 28. The parties agree that this clause was included at Guidry's request.

After the signing of the agreement, Nutter worked for New Rents until April 1989, when his employment was terminated. Nutter was unemployed until August 1989, when he accepted a job with another furniture and appliance rental company called National TV & Appliance. National hired Nutter as a supervisory employee to help it open an outlet in Charleston, West Virginia. This new store was opened in September 1989, about a mile from the New Rents store in Charleston. Because of Nutter's activities, New Rents contacted counsel in Louisiana, who sent Nutter and Electronic a letter stating that Nutter had violated the anti-competition clause and demanding that Nutter pay New Rents $50,000 (described in the letter as "a reduced estimate of the damages New Rents has suffered as a result of your conduct"). J.A. at 35. New Rents informed Nutter that if it did not receive compensation in the form of a payment or a setoff from the remainder of the contract price, it would file legal action against Nutter. Id.

After receiving this letter, Nutter commenced the present action against New Rents in the circuit court for Kanawha County, West Virginia, seeking a declaratory judgment that he was not in violation of the anti-competition clause. New Rents removed the action to federal district court asserting that the amount in controversy exceeded $50,000, and that there was diversity of citizenship between Nutter and New Rents. Nutter responded with a motion to remand challenging both prongs of New Rents' asserted basis for diversity jurisdiction. New Rents then filed a motion for leave to amend its notice of removal in order specifically to state that Kentucky was its principal place of business. In response, Nutter filed a motion to withdraw his motion to remand. The district court granted Nutter's motion to withdraw, finding that it did have jurisdiction over his declaratory judgment action. The court also granted New Rents' motion to dismiss, without prejudice to Nutter to file his action in the proper forum, based upon the forum-selection clause in the sales agreement.

This appeal by Nutter followed.

II

Nutter challenges the district court's ruling that removal diversity jurisdiction existed, and its holding that the action in West Virginia was barred by the forum selection clause.

A

Nutter contends preliminarily that New Rents' notice of removal was technically deficient because it failed to state that Kentucky was New Rents' principal place of business. He argues that since New Rents' motion to amend its notice of removal was not within the 30day time limit of 28 U.S.C. § 1446(b), removal jurisdiction was not established.

We disagree, and apply the majority rule that an amendment which merely perfects a technically defective jurisdictional allegation in a timely filed removal petition may be allowed after the 30-day removal period. Under 28 U.S.C. § 1653, "[d]efective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts." This was such an amendment. New Rents' original notice of removal identified diversity as the ground for removal, and stated that New Rents was a "Kentucky corporation." The amendment simply clarified this by specifying that Kentucky was New Rents' "principal place of business." To the extent amendment was required, the one made was properly allowed after expiration of the 30-day period. See Goforth v. Allstate Ins. Co., 213 F.Supp. 595 (W.D.N.C.1963) ("jurisdiction ought to depend more upon the truth of defendant's allegation of diversity than upon the ... choice of verbiage").

Furthermore, Nutter had been allowed to withdraw his remand motion before the court ruled on the jurisdictional challenge, and the case then proceeded to final judgment. Technical defects in a notice to remove can be waived, especially when a case proceeds to final judgment. See Able v. Upjohn Co., 829 F.2d 1330, 1333-34 (4th Cir.1987) ("Where a matter has proceeded to judgment on the merits and principles of federal jurisdiction and fairness to parties remain uncompromised, to disturb the judgment on the basis of a defect in the initial removal would be a waste of judicial resources."). Although Able involved waiver by a plaintiff who failed to pursue an interlocutory appeal under 28 U.S.C. § 1292(b) when his motion to remand was denied, the same principles are applicable here. We therefore conclude that any technical defect in the petition for removal was either properly amended to cure the defect, or in any event was waived. That leaves only the question whether the district court properly found the facts establishing diversity jurisdiction.

Nutter challenges the district court's finding that the diversity of citizenship and amount in controversy requirements were satisfied. He first contends that Kentucky was not shown to be New Rents' principal place of business. We disagree. We have held that there are

two divergent approaches to ascertaining the "principal place of business" of a corporation under § 1332(c) that may be found in the authorities. One approach makes the "home office," or place where the corporation's officers direct, control, and coordinate its activities, determinative [known as the "nerve center" test]. The other looks to the place where the bulk of corporate activity takes place [known as the "place of operations" test].... While intimating no view as to which of these positions this court will ultimately adopt, we suggest that, whichever line of authority the district court finds more convincing, it could advance the ultimate disposition of this question considerably by making findings of fact which are material to both theories.

Mullins v. Beatrice Pocahontas Co., 489 F.2d 260, 262 (4th Cir.1974) (citations omitted). Nutter cites the decision in Mitchell v. Monongahela Power Co., 602 F.Supp. 756 (S.D.W.Va.1985) for the proposition that the "place of operations" test is better suited for determining New Rents' principal place of business. In Mitchell, Judge Haden commented that "[t]he nerve center analysis, focusing attention on the decision making process within the corporation, is better suited where there is no clear center of corporate business activity." 602 F.Supp. at 759. Considering the facts (as described below) on the record about New Rents, under this standard the nerve center analysis would seem to be appropriate in the present case.

At the time New Rents removed the case to ...