PANCAN INTERN. MGT. CONSULTANTS v. STS MICROSCAN, 93-CV-72633-DT.
| Decision Date | 18 November 1993 |
| Docket Number | No. 93-CV-72633-DT.,93-CV-72633-DT. |
| Citation | 848 F. Supp. 1321 |
| Parties | PANCAN INTERNATIONAL MANAGEMENT CONSULTANTS, INC., Plaintiff, v. STS MICROSCAN, INC., Defendant. |
| Court | U.S. District Court — Western District of Michigan |
William S. Morrison, Troy, MI, for plaintiff.
Larry J. Saylor, Frederick A. Acomb, Detroit, MI, for defendant.
On August 16, 1993, the Defendant, STS MicroScan, Inc. (MicroScan), filed a Motion to Dismiss, contending that the Plaintiff, Pancan International Management Consultants, Inc. (Pancan), had "failed to plead any fact demonstrating that this Court possesses subject matter jurisdiction." (Motion to Dismiss at ¶ 1.) On September 16, 1993, Pancan filed an untimely pleading in opposition to MicroScan's motion, as well as its own Motion for Leave to Amend Complaint. Oral arguments were presented to the Court on September 28, 1993. Thereafter, the parties' motions were taken under advisement.
For the reasons that have been set forth below, MicroScan's Motion to Dismiss shall be granted, and Pancan's Motion for Leave to Amend the Complaint shall be denied.
Pancan initiated this lawsuit against MicroScan on the basis of an alleged breach of contract. During the first half of 1990, Pancan agreed to solicit business from the Canadian government on behalf of, and as an agent for, STS Information Services, Inc. (STS) pursuant to a "written commission plan." (Complaint at ¶¶ 6, 7.) On April 30, 1991, these two parties formed a Sales Representative Agreement (Agreement) in which STS allegedly "agreed to pay to Pancan 1½% of all revenues received" from a Canadian Post Office project, commonly known as the CPO Project. Id. at ¶ 9. Approximately fourteen months later, MicroScan "purchased substantially all of the assets of STS and took an assignment of the Agreement." Id. at ¶ 10. Pancan, believing that (1) all of its contractual obligations had been satisfied and (2) MicroScan had been fully paid by the Canadian government for the work that it performed in connection with the CPO project, made a demand for payment of its fees in December, 1992, Id. at ¶¶ 11, 12. When its demand was rejected by MicroScan, Pancan initiated this lawsuit.
In its Motion to Dismiss, MicroScan challenges Pancan's alleged failure to specifically plead any fact demonstrating that this Court possesses subject matter jurisdiction. (MicroScan's Brief at 1.) Although Pancan did not allege a basis for jurisdiction in its Complaint, this Court will examine the entire record — not merely the Complaint — in order to make its assessment of the MicroScan motion. See, e.g., Topp v. CompAir, Inc., 814 F.2d 830 (1st Cir.1987) (); Blakemore v. Missouri P.R. Co., 789 F.2d 616 (8th Cir.1986); Prakash v. American University, 727 F.2d 1174 (D.C.Cir.1984) (); Hawes v. Club Ecuestre El Comandante, 598 F.2d 698 (1st Cir.1979) (). In its opposition papers, MicroScan insists that this Court cannot exercise jurisdiction over this dispute. (MicroScan's Brief at 2-3.)
Federal district courts have original jurisdiction in those civil proceedings in which (1) the action relates to a federal question, or (2) there is a diversity of citizenship between the parties and the amount in controversy exceeds the value of $50,000, exclusive of interest and costs. 28 U.S.C. §§ 1331, 1332. Federal jurisdiction is proper only when an action "arises under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Here, the conflict between the parties is based upon a contract dispute. Hence, this Court cannot exercise jurisdiction over the subject matter on the basis of a federal question.
This leaves the issue of whether there is the requisite diversity of citizenship between the parties to be resolved by this Court. In the absence of federal question jurisdiction, the parties to a dispute must fall within one of the following categories in order for this Court to acquire jurisdiction:
28 U.S.C. § 1332(a).2 When the parties are domestic corporations, their citizenship is determined by the state (1) in which each corporate entity is formed, and (2) where the principal place of business is maintained. 28 U.S.C. § 1332(c). It is undisputed that both parties in this dispute were incorporated in Canada.
Section 1332(c) has been widely interpreted to be applicable to foreign corporations. Trans World Hospital Supplies, Ltd. v. Hospital Corp. of America, 542 F.Supp. 869 (M.D.Tenn.1982); Southeast Guaranty Trust Co. v. Rodman & Renshaw, Inc., 358 F.Supp. 1001 (N.D.Ill.1973); Jerguson v. Blue Dot Invest. Inc., 659 F.2d 31 (5th Cir. 1981), cert. denied 456 U.S. 946, 102 S.Ct. 2013, 72 L.Ed.2d 469 (1982); Schneider v. Bahama Cruise Line, Inc., 664 F.Supp. 80 (S.D.N.Y.1987); Rouhi v. Harza Engineering Co., 785 F.Supp. 1290 (N.D.Ill.1992).
The Trans World court explicitly held that jurisdictional issues relating to foreign corporations with a principal place of business in the United States are governed by § 1332(c). In Trans World, a British corporation brought an action against a Cayman Islands corporation which maintained its principal place of business in Tennessee. The court retained jurisdiction over the parties by invoking § 1332(c) when it recognized the Tennessee citizenship of the defendant:
While ... the recognition by other courts of such state citizenship for an alien corporation has generally resulted in the absence of complete diversity, ... the creation of diversity jurisdiction in a case such as this is not inconsistent with the fundamental purpose of section 1332(c) to bar purely local controversies from federal courts.
Trans World, 542 F.Supp. at 878. The Trans World court based its holding on Southeast Guaranty and its progeny. In Southeast Guaranty, the court held that there was an insufficient basis upon which to establish complete diversity where one party was a citizen of Illinois, and the other party was a Bahamian corporation with its principal place of business in Illinois. 358 F.Supp. at 1007. The court declared that the application of § 1332(c) to foreign corporations was consistent with the Congressional policy to limit the diversity jurisdiction of the federal courts. Id.
Although there are a few cases which have rejected this view,3 this Court concurs with the Trans World rationale, and declares the provisions in § 1332(c) to be applicable to those companies that have been incorporated outside of the United States.
This Court will now attempt to determine whether § 1332(c), as it is applied to foreign corporations, creates a single or a dual citizenship. Under the standard of a single citizenship, a foreign corporation with its principal place of business in the United States is a citizen only in that state. This interpretation allows diversity jurisdiction to form the basis of a lawsuit between two foreign-incorporated parties if their principal places of business are in different states within the United States.
With the recognition that "American law abhors the status of dual citizenship,"4 some courts have used § 1332(c) to create a single citizenship for the purpose of gaining diversity jurisdiction over foreign corporations with their principal place of business in the state in which the lawsuit was initiated. Mutuelles Unies v. Kroll & Linstrom, 957 F.2d 707, 711 (9th Cir.1992); see also Bergen Shipping Co. v. Japan Marine Services, Ltd., 386 F.Supp. 430, 433 (S.D.N.Y.1974) ();5 Action S.A. v. Marc Rich & Co., 951 F.2d 504, 507 (2d Cir.1991) ().6 After deciding that only the American nationality of dual citizens should be recognized when determining the existence of federal jurisdiction, the decisions from these courts reason that the application of § 1332(c) does not defeat diversity jurisdiction.
Although persuasive, these cases are not necessarily dispositive of the issue. Several courts have implicitly assumed that § 1332(c), if applicable to foreign corporations, would be implemented in the same manner as it is for domestic corporations. For example, in Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 790 (2nd Cir.1980), cert. denied, 449 U.S. 1080, 101 S.Ct. 863, 66 L.Ed.2d 804 (1981), after assuming that § 1332(c) applied in a dispute between a Swiss corporation with its principal place of business in New York and a Venezuelan corporation, the court held that the presence of "alien parties ... on both sides would destroy complete diversity." Id. at 790. See also International Shipping Co., S.A. v. Hydra Offshore, Inc., 875 F.2d 388, 392 (2d Cir.1989), cert. denied, Golub v. Hydra Offshore, Inc., 493 U.S. 1003, 110 S.Ct. 563, 107 L.Ed.2d 558 (1989) (); Giannakos v. M/V Bravo Trader, 762 F.2d 1295, 1298 (5th Cir.1985) (); Jagiella v. Jagiella, 647 F.2d 561, 563 (5th Cir.1981).7
The Fifth Circuit Court of Appeals, in Panalpina Welttransport GmBh v. Geosource, Inc., 764 F.2d...
To continue reading
Request your trial
-
Caribbean Telecomms. v. Guyana Tel. & Tel. Co.
...Simon Holdings PLC Group of Cos. U.K. v. Klenz, 878 F.Supp. 210, 212-13 (M.D.Fla. 1995); Pancan Int'l Mgmt. Consultants, Inc. v. STS Microscan, 848 F.Supp. 1321, 1325 (E.D.Mich.1993); Rouhi v. Harza Eng'g Co., 785 F.Supp. 1290, 1295 (N.D.Ill. 1992). Plaintiff relies on a pair of earlier dis......
- In re Compaq Securities Litigation
-
Simon Holdings PLC Group of Companies UK v. Klenz, 94-761-Civ-Orl-22.
...and Fifth Circuits have been cited with approval in two recent district court cases. See Pancan Int'l Management Consultants, Inc., v. STS Microscan, Inc., 848 F.Supp. 1321 (E.D.Mich. 1993); Rouhi v. Harza Engineering Co., 785 F.Supp. 1290 Only one district court that considered and discuss......