Teal Energy Usa, Inc. v. Gt, Inc.
| Decision Date | 11 May 2004 |
| Docket Number | No. 03-20849.,03-20849. |
| Citation | 369 F.3d 873 |
| Parties | TEAL ENERGY USA, INC., Plaintiff-Appellant, v. GT, INC., Defendant-Appellee. GT, Inc., Plaintiff-Appellee, v. Teal Energy USA, Inc.; et al., Defendants, Teal Energy USA, Inc., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Harry Arthur Herzog, David Anderson Cap, Herzog, Carp & McManus, Houston, TX, for Plaintiff-Appellant.
Warren Jay Fields, Sloan & Moyer, Houston, TX, for Defendant-Appellee.
Appeal from the United States District Court for the Southern District of Texas.
Before GARWOOD, WIENER, and DeMOSS, Circuit Judges.
Plaintiff-Appellant Teal Energy USA, Inc. ("Teal USA") appeals from an order dismissing for lack of subject matter jurisdiction its suit against Defendant-Appellee GT, Inc. ("GT"). We affirm.
Teal USA, a Delaware corporation, is a wholly-owned subsidiary of Teal Energy, Inc., a Canadian corporation based in Calgary. Teal USA conducts oil and gas investment activities in the United States. Its only domestic office is located in Houston, Texas. GT is a Nevada corporation that supplies seismic information and funding for land acquisition. It conducts its business from an office located in Houston, Texas.
In January 1999, Teal USA entered into a joint venture with GT to develop an oil and gas area in southern Texas known as the East Mission Prospect. The joint venture agreement required GT to supply seismic information and funding for land acquisition. It required Teal USA to acquire leases for the property and to arrange farm-out agreements with third parties to drill wells on the property.
In November 2001, GT filed suit in the state district court of Hidalgo County, Texas seeking a temporary restraining order and temporary injunction related to a farm-out agreement executed between Teal USA and a third party. The following day, Teal USA filed suit in the United States District Court for the Southern District of Texas against GT for breach of the joint venture agreement, asserting diversity of citizenship under 28 U.S.C. § 1332 as the basis for federal jurisdiction. Teal USA timely removed the Hidalgo County action to federal court pursuant to 28 U.S.C. § 1441(a), also on the basis of diversity. The two cases were then consolidated into a single action. The case was assigned to a magistrate judge after both parties consented to trial before her.
Early the next year, GT filed a motion to dismiss Teal USA's action and to remand the removed action on the grounds that complete diversity of citizenship did not exist between the parties so that the district court lacked subject matter jurisdiction over the action.1 Specifically, GT alleged that, as both GT and Teal USA had their principal places of business in Texas, both were citizens of Texas for diversity purposes. The district court agreed, and, in a written Memorandum and Order, severed the two actions, dismissed Teal's claims against GT without prejudice, and remanded the removed action to state court. Teal USA timely filed a notice of appeal. As the portion of the court's order remanding the Hildago County action is non-reviewable,2 we review the order only insofar as it dismisses Teal USA's federal action for lack of subject matter jurisdiction.
The district court found that both Teal USA's and GT's principal places of business were in Texas. We review these factual determinations for clear error.3
Section 1332(a) provides that a corporation is a citizen of both its state of incorporation and the state of its principal place of business for purposes of diversity jurisdiction.4 Teal USA argues that the court erred in finding that the situs of its principal place of business was Texas rather than Canada. Additionally, it argues that the court erred in determining that GT's principal place of business was Texas, as GT was not authorized to transact business in Texas at the time that Teal filed its federal lawsuit.5
We apply the "total activity" test to determine a corporation's principal place of business.6 This test requires us to consider two "focal points:" the location of the corporation's "nerve center" and its "place of activities."7 We must examine the totality of the facts, including the corporation's organization and the nature of its activities, to determine which of these focal points predominates.8 Generally, "when considering a corporation whose operations are far flung, the sole nerve center of that corporation is more significant in determining principal place of business ..., when a corporation has its sole operation in one state and executive offices in another, the place of activity is regarded as more significant..., but when the activity of a corporation is passive and the `brain' of the corporation is in another state, the situs of the corporation's `brain' is given greater significance...."9
Teal USA asserts that the situs of its principal place of business is not Texas, as determined by the district court, but Canada, where its executive offices are located. To this end, Teal USA notes that its shareholders and directors meetings are held in Calgary, its president and corporate accountants reside in Calgary, and all major decisions related to the corporation are made in Calgary. Teal USA also notes that its corporate minutes reflect that Calgary was established as the headquarters and official office of Teal USA, and that, according to the deposition testimony of Allen Knight, Teal USA's president, Calgary was chosen as the corporation's principal office out of a desire to avoid what its officers' perceived to be an unjust Texas state court system.
The court accepted these facts as uncontroverted and found that Calgary was indeed the "nerve center" of Teal USA. This evidence was not enough, however, to satisfy the court that Calgary was also Teal USA's principal place of business. Citing the affidavit of Teal USA's former vice-president and current director, John Glenn, the court noted that all of the revenue Teal USA earned in 2001, the year in which suit was filed, was derived from Teal USA's Texas oil and gas operations. The court further observed that, despite Glenn's statement that Teal USA "reviewed, investigated, and seriously considered" proposals involving land development in several other states, the corporation put forth no evidence that it actually engaged in operations in any state other than Texas. As Teal USA did not establish that it engaged in "far-flung" and varied activities in different states, the court reasoned that the "nerve center" did not predominate in determining its principal place of business.11
Turning to Teal USA's "place of activity," the court considered first the deposition testimony of Gordon Andrus, a shareholder of Teal Canada.12 Andrus testified that Teal USA was established to pursue Texas oil and gas prospects and that its only oil and gas operations were located in Texas. Additionally, Andrus testified that all of Teal USA's business assets and accounting records were in Texas, its day-to-day operations were conducted in Texas, and the only two wells that Teal USA had arranged to have drilled were located in Texas.
The district court also noted that Glenn was one of Teal USA's two principal officers, and he resided in Houston, Texas, as did two of the corporation's three directors and all of its employees. Finally, the court observed that Teal USA's filings with the Secretary of State of Delaware and with the Internal Revenue Service specified the Houston office address as the corporation's principal place of business. Considering the weight of this evidence, as well as Teal USA's failure to produce any substantial controverting evidence, the court concluded that the place of corporate activity was Texas. It then held that the situs of Teal USA's principal place of business was Texas, noting that, "[u]nder the total activity test, a corporation ... with significant administrative authority and activity in one state and lesser executive offices but principal operations in another state has its principal place of business in the latter."13
We hold that the district court's determination was not clearly erroneous. Although Teal USA argues that the court erred in finding that its activities were not "far-flung" and widely dispersed across several states, it cites to only one consummated business transaction that occurred outside of Texas — its acquisition of a two-percent overriding royalty interest from a natural gas company in Louisiana. This is not enough, in our view, to warrant a finding that Teal USA's operations were "far-flung" for purposes of application of the total activity test.14 Accordingly, we conclude that the court did not "misapply" that test as Teal USA contends.
We are equally unpersuaded by Teal USA's evidentiary challenges to the court's discrete factual findings. Specifically, Teal USA argues that Andrus's deposition testimony was not credible, citing two passages of his deposition in which he admits that he might be wrong about the location of some of the corporation's activities. It suffices to say that these concessions, viewed in context, do not render the district court's reliance on Andrus's testimony clearly erroneous. Besides, credibility calls are the unique province of the trial judge.
Teal USA also argues that the court erred in relying on the corporation's filings with the Secretary of State of Delaware and the IRS, as these documents were unauthenticated. Although our review of the record confirms Teal USA's assertion that these documents were not authenticated, we are convinced that enough evidence exists to support the court's determination of Teal USA's principal place of business, so that any reliance on these filings does not render that ultimate determination clearly erroneous.15
In sum, Teal USA's evidentiary challenges are...
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...§31:181 TCA Bldg. v. Northwestern Resources , 890 SW2d 175 (TexApp — Waco 1994, no writ), §17:48 Teal Energy USA, Inc. v. GT, Inc. , 369 F3d 873, 876-78 (5th Cir. 2004), §9:434.2 Tectonic Realty Inv. v. CNA Lloyd’s of Texas Ins. , 812 SW2d 647 (TexApp — Dallas 1991, writ denied), §§3:46, 3:......