Quality Refrigerated Services, Inc. v. City of Spencer, No. C 95-4061.

CourtUnited States District Courts. 4th Circuit. Northern District of West Virginia
Citation908 F. Supp. 1471
Docket NumberNo. C 95-4061.
Decision Date02 November 1995
PartiesQUALITY 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.

908 F. Supp. 1471

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.

No. C 95-4061.

United States District Court, N.D. Iowa, Western Division.

November 2, 1995.


908 F. Supp. 1472
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908 F. Supp. 1473
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908 F. Supp. 1474
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908 F. Supp. 1475
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.

ORDER REGARDING DEFENDANTS' MOTION TO DISMISS

BENNETT, District Judge.

908 F. Supp. 1476
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.

I. INTRODUCTION AND BACKGROUND

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

908 F. Supp. 1477
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.

908 F. Supp. 1478

II. FACTUAL BACKGROUND

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...

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30 practice notes
  • Claude v. United States, No. C00-3010-MWB (N.D. Iowa 4/12/2001), No. C00-3010-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • April 12, 2001
    ...(N.D.Iowa 1996); Slycord v. Chater, 921 F. Supp. 631, 634-37 (N.D.Iowa 1996); Quality Refrigerated Services, Inc. v. City of Spencer, 908 F. Supp. 1471, 1481-83 (N.D.Iowa 1995). In this case, because the United States has challenged whether this court has subject matter jurisdiction, the co......
  • Gunderson v. ADM Investor Services, Inc., No. C96-3148-MWB (N.D. Iowa 2/13/2001), No. C96-3148-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • February 13, 2001
    ...1404 (N.D.Iowa 1996); Powell v. Tordoff, 911 F. Supp. 1184, 1188 (N.D.Iowa 1995); Quality Refrigerated Servs., Inc. v. City of Spencer, 908 F. Supp. 1471, 1489 (N.D.Iowa 1995); Reynolds v. Condon, 908 F. Supp. 1494, 1502 (N.D.Iowa 1995); Dahl v. Kanawha Inv. Holding Co., 161 F.R.D. 673, 681......
  • Van Stelton v. Van Stelton, No. C11-4045-MWB
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • July 17, 2013
    ...conduct under color of state law could only proceed under § 1983."); see also Quality Refrigerated Servs., Inc. v. City of Spencer, 908 F. Supp. 1471, 1492 (N.D. Iowa 1995) ("There simply is no direct cause of action arising under the Constitution itself against municipal officials for alle......
  • Doe v. Hartz, No. C98-4084-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • May 5, 1999
    ...bears the burden of proof if diversity of citizenship is challenged. See, e.g., Quality Refrig. Servs., Inc. v. City of Spencer, 908 F.Supp. 1471, 1483 (N.D.Iowa 1995) (citing cases so b. Diversity here In this case, diversity of citizenship plainly existed at the time this action was filed......
  • Request a trial to view additional results
28 cases
  • Claude v. United States, No. C00-3010-MWB (N.D. Iowa 4/12/2001), No. C00-3010-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • April 12, 2001
    ...(N.D.Iowa 1996); Slycord v. Chater, 921 F. Supp. 631, 634-37 (N.D.Iowa 1996); Quality Refrigerated Services, Inc. v. City of Spencer, 908 F. Supp. 1471, 1481-83 (N.D.Iowa 1995). In this case, because the United States has challenged whether this court has subject matter jurisdiction, the co......
  • Gunderson v. ADM Investor Services, Inc., No. C96-3148-MWB (N.D. Iowa 2/13/2001), No. C96-3148-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • February 13, 2001
    ...1404 (N.D.Iowa 1996); Powell v. Tordoff, 911 F. Supp. 1184, 1188 (N.D.Iowa 1995); Quality Refrigerated Servs., Inc. v. City of Spencer, 908 F. Supp. 1471, 1489 (N.D.Iowa 1995); Reynolds v. Condon, 908 F. Supp. 1494, 1502 (N.D.Iowa 1995); Dahl v. Kanawha Inv. Holding Co., 161 F.R.D. 673, 681......
  • Van Stelton v. Van Stelton, No. C11-4045-MWB
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • July 17, 2013
    ...conduct under color of state law could only proceed under § 1983."); see also Quality Refrigerated Servs., Inc. v. City of Spencer, 908 F. Supp. 1471, 1492 (N.D. Iowa 1995) ("There simply is no direct cause of action arising under the Constitution itself against municipal officials for alle......
  • Doe v. Hartz, No. C98-4084-MWB.
    • United States
    • United States District Courts. 8th Circuit. Northern District of Iowa
    • May 5, 1999
    ...bears the burden of proof if diversity of citizenship is challenged. See, e.g., Quality Refrig. Servs., Inc. v. City of Spencer, 908 F.Supp. 1471, 1483 (N.D.Iowa 1995) (citing cases so b. Diversity here In this case, diversity of citizenship plainly existed at the time this action was filed......
  • Request a trial to view additional results
2 books & journal articles
  • Case List
    • United States
    • Bargaining for Development Case List
    • July 19, 2003
    ...of Tex. v. City Pub. Serv. Bd. of San Antonio , 53 S.W.3d 310 (Tex. 2001) Q Quality Refrigerated Serv., Inc. v. City of Spencer , 908 F. Supp. 1471 (N.D. Iowa 1995) R R.A. Vachon & Son, Inc., v. City of Concord , 112 N.H. 107, 289 A.2d 646 (1972) R.C. Hedreen Co. v. City of Seattle , 74 F.3......
  • Development Agreements
    • United States
    • Bargaining for Development Article
    • July 19, 2003
    ...tenant’s option, as an unconstitutional impairment of contractual rights. See also Quality Refrigerated Serv., Inc. v. City of Spencer, 908 F. Supp. 1471 (N.D. Iowa 1995) (granting city’s motion to dismiss, in part because plaintiff failed to state a cause of action under the Contracts Clau......

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