Quality Refrigerated Services, Inc. v. City of Spencer
| Decision Date | 02 November 1995 |
| Docket Number | No. C 95-4061.,C 95-4061. |
| Court | U.S. District Court — Northern District of West Virginia |
| Parties | QUALITY REFRIGERATED SERVICES, INC., Plaintiff, v. CITY OF SPENCER, and the City Council for the City of Spencer, and its Members, Steve Waller, Ed Krebs, Reynold Peterson, Mary Huston, Jim Roling, Ron Sears and David Scott, Defendants. |
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Michael W. Ellwanger of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, Sioux City, Iowa, and Steve P. DeVolder of Lewis, Webster, Johnson, Van Winkle & DeVolder, Des Moines, Iowa, for plaintiff.
John D. Ackerman of Heidman, Redmond, Fredregill, Patterson, Schatz & Plaza, L.L.P., Sioux City, Iowa, for defendants.
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUND ..................................................... 1476
II. FACTUAL BACKGROUND .............................................................. 1478
III. LEGAL ANALYSIS .................................................................. 1479
A. Subject Matter Jurisdiction And Failure To State A Claim ..................... 1479
B. Facial Or Factual Challenge Pursuant To Rule 12(b)(1) ........................ 1481
C. The Existence Of Diversity Between Quality Refrigerated and Defendants ....... 1483
1. Tests Employed to Determine Corporation's Principal Place of Business ..... 1484
2. Quality Refrigerated's Principal Place of Business ........................ 1485
D. Quality Refrigerated's Taking Clause Claim ................................... 1486
E. Motion to Amend .............................................................. 1488
1. Standards for Motions to Amend ............................................ 1488
2. Futility of Amendment ..................................................... 1489
3. Standard For Dismissal Pursuant To Rule 12(b)(6) .......................... 1490
4. The Viability of the Proposed Contract Clause Claim ....................... 1490
a. Substantial Impairment ................................................. 1492
b. Public Purpose ......................................................... 1493
IV. CONCLUSION ...................................................................... 1493
The present motion to dismiss before this court requires it, as a court of limited jurisdiction, to assure itself that the threshold requirement of subject matter jurisdiction has been met. Defendants, Iowa citizens, challenge Plaintiff's invocation of diversity of citizenship jurisdiction under 28 U.S.C. § 1332. Resolution of this issue is controlled by the question of whether Plaintiff's principal place of business is in Iowa, or Nebraska. If Plaintiff's principal place of business is Iowa, Plaintiff is a citizen of Iowa under 28 U.S.C. § 1332(c)(1), and does not have citizenship diverse from that of Defendants. Thus, the court would not have subject matter jurisdiction pursuant to section 1332. If, on the other hand, Plaintiff's principal place of business is Nebraska, complete diversity of citizenship exists between Plaintiff and Defendants, and the court has diversity of citizenship jurisdiction. Defendants also contend that Plaintiff's Taking Clause claim does not serve as the basis for federal question jurisdiction in this case because its Taking Clause claim is not ripe for adjudication. Defendants further assert that Plaintiff's proposed amendment to its complaint, to assert a claim under the Contract Clause, Article 1, Section 10 of the United States Constitution and federal question jurisdiction pursuant to 28 U.S.C. § 1331, should be denied as futile. However, if the amendment is granted, an alternative basis for subject matter jurisdiction would exist in this matter.
On June 23, 1995, Plaintiff Quality Refrigerated Services, Inc. ("Quality Refrigerated") filed this lawsuit against Defendants the City of Spencer, the City Council for the City of Spencer, and its members Steve Waller, Ed Krebs, Reynold Peterson, Mary Huston, Jim Roling, Ron Sears, and David Scott, following the denial of a rezoning request made by Quality Refrigerated concerning its Spencer, Iowa, facility.
In Count I of its Complaint, Quality Refrigerated claims that Defendants actions intentionally interfered with a contract that Quality Refrigerated had to lease part of the Spencer facility. In Count II of its complaint, Quality Refrigerated asserts a claim of intentional interference with a contract, alleging that Defendants intentionally interfered with a loan agreement Quality Refrigerated had with the City of Spencer. In Count III of the complaint, Quality Refrigerated asserts another claim for intentional interference with a contract, alleging that Defendants intentionally interfered with an industrial agreement that Quality Refrigerated had with the City of Spencer. In Count IV of the complaint, Quality Refrigerated asserts a claim for intentional interference with prospective business advantage, alleging that Defendants' actions caused prospective tenants not to enter into contractual relationships with Quality Refrigerated. In Count V of the Complaint, Quality Refrigerated contends that Defendants made negligent misrepresentations to it. In Count VI of the Complaint, Quality Refrigerated asserts that Defendant City of Spencer breached an industrial development agreement with it. In Count VII, Quality Refrigerated asserts a claim for inverse condemnation, alleging that the Defendants' adoption of a zoning statute resulted in a taking of Quality Refrigerated's property. In Count VIII, Quality Refrigerated requests declaratory judgment that its Spencer facility is a nonconforming use which under the zoning ordinance can lawfully be used for meat fabricating and processing.
On July 17, 1995, Defendants filed a Motion to Dismiss, asserting five grounds. First, Defendants contend that complete diversity does not exist between the adverse parties in this case because Defendants are citizens of Iowa, and Quality Refrigerated's principal place of business is in Iowa, making Quality Refrigerated a citizen of Iowa under 28 U.S.C. § 1332(c)(1). If Plaintiff's principal place of business is in Iowa, not Nebraska, then complete diversity does not exist between Defendants, citizens of Iowa, and Plaintiff, a citizen of Iowa. Determining Quality Refrigerated's principal place of business requires the court to investigate the intricate details surrounding the nature or essence of its business and activities. This intense level of scrutiny is embodied in the tests which other courts have developed for determining a corporation's principal place of business for purposes of ascertaining the existence or lack of federal diversity jurisdiction.
Second, Defendants contend that the complaint fails to state a claim for monetary damages against the City of Spencer as a matter of law. Defendants assert that the industrial development agreement expressly prohibits the recovery of such damages in the event of a breach. Third, Defendants assert that Count V of the complaint fails to state a claim upon which relief may be granted because only economic damages are sought for Defendants' alleged negligence. Fourth, Defendants assert that Count VII of the complaint fails to state a claim upon which relief may be granted because the zoning ordinance does not deprive Quality Refrigerated of all economically productive uses for its Spencer facility. Finally, Defendants assert that Count VIII should be dismissed because it is duplicative of an action filed by Quality Refrigerated in Iowa State court.
Following the filing of the motion to dismiss, on September 1, 1995, Quality Refrigerated filed a motion to amend complaint in which it sought to amend its complaint to assert a contracts claim under Article 1, Section 10 of the United States Constitution. The amended complaint also asserts that the claim set forth in Count VII of the original complaint alleges a basis for federal question jurisdiction pursuant to 28 U.S.C. § 1331. Thus, if the amendment is granted, an alternative basis for subject matter jurisdiction would exist in this matter. First, Quality Refrigerated's Taking Clause claim would serve as the basis for federal question jurisdiction in this case if it is deemed ripe for adjudication. Similarly, Quality Refrigerated's proposed amendment asserting a claim under the Contract Clause claim would serve as a basis for subject matter jurisdiction if that claim is not futile.
A hearing on Defendants' Motion to Dismiss and Quality Refrigerated's Motion to Amend was held on October 13, 1995. At the hearing Plaintiff was represented by Michael W. Ellwanger of Rawlings, Nieland, Probasco, Killinger, Ellwanger, Jacobs & Mohrhauser, Sioux City, Iowa, and Steve P. DeVolder of Lewis, Webster, Johnson, Van Winkle & DeVolder, Des Moines, Iowa. Defendants were represented by John D. Ackerman of Heidman, Redmond, Fredregill, Patterson, Schatz & Plaza, L.L.P., Sioux City, Iowa. Counsel presented vigorous for oral arguments on behalf of their clients. The oral arguments were unusually spirited and of considerable assistance to the court in resolving the jurisdictional issues before the court. This matter is now deemed fully submitted.
The Defendants have supplied affidavits in support of their position with regard to the motions to dismiss from which, in addition to the complaint and the answer, the court has extracted the following facts.
Defendant, the City of Spencer, is a municipal corporation organized under the laws of the State of Iowa. Defendant, the City Council for the City of Spencer ("the City Council"), is a municipal council organized under the laws of the State of Iowa. Defendan...
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