Transure, Inc. v. Marsh and McLennan, Inc.

• Decision Date: 22 July 1985
• Docket Number: No. 84-2144,84-2144
• Citation: 766 F.2d 1297
• Parties: TRANSURE, INC., a California corporation; Transure, Ltd., a British corporation, Plaintiffs-Appellants, v. MARSH AND McLENNAN, INC., a corporation, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1297

766 F.2d 1297

TRANSURE, INC., a California corporation; Transure, Ltd., a British corporation, Plaintiffs-Appellants, v. MARSH AND McLENNAN, INC., a corporation, et al., Defendants-Appellees.

No. 84-2144.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 9, 1985.

Decided July 22, 1985.

John I. Alioto, Gary D. Elion, Alioto & Alioto, San Francisco, Cal., for plaintiffs-appellants.

Walter R. Allan, Gary H. Anderson, Donald J. Putterman, Pillsbury, Madison & Sutro, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before SCHROEDER, NELSON, and REINHARDT, Circuit Judges.

SCHROEDER, Circuit Judge.

Transure, Inc., a California corporation, and Transure, Ltd., a British corporation, (collectively referred to as "Transure") originally filed this action in the California Superior Court, Marin County. The defendants are Marsh and McLennan, Inc. (Marsh, Inc.), Marsh and McLennan Companies, Inc. (Companies), both Delaware corporations, and Crusader Insurance Company, Ltd. (Crusader), a South African Corporation.

The defendants removed the action to the federal district court. Transure subsequently moved to remand the action to the state court on the ground that the presence of alien corporations on both sides of the controversy defeated diversity jurisdiction. The district court denied the motion.

After several months of discovery regarding personal jurisdiction, all the defendants moved to dismiss. Crusader and Companies argued that the court lacked in personam jurisdiction over them because they lacked contacts with California. Marsh, Inc. acknowledged that it did business in California but argued that venue in the state court was improper and required dismissal of the action. The district court granted all of these motions. On appeal, Transure challenges each of these rulings. We hold that dismissal was proper as to Crusader and Companies but not as to Marsh, Inc.

Diversity Jurisdiction

The principal legal issue affecting subject matter jurisdiction as to all parties is whether diversity jurisdiction is defeated by the presence of alien corporations on both sides of the controversy. Transure asserts that complete diversity is negated by the presence of the two alien corporations, and, therefore, the district court should have remanded the matter to the state court.

Pursuant to 28 U.S.C. Sec. 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States...." Further, "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy ... is between ... citizens of different states and in which citizens or subjects of a foreign state are additional parties...." 28 U.S.C. Sec. 1332(a)(3) (emphasis added).

The presence of an alien corporation on one side as an additional party does not defeat diversity jurisdiction, for the statute contemplates it. This Circuit has not considered whether jurisdiction is affected when aliens are on both sides. All of the authorities that have considered that question agree that federal diversity jurisdiction is not defeated where (1) there is a legitimate controversy between diverse citizens and aliens are additional parties; and (2) there is complete diversity as to the citizens. See Goar v. Compania Peruana de Vapores, 688 F.2d 417, 420 n. 6 (5th Cir.1982) ("Sec. 1332(a)(3) may also have the effect of retaining federal jurisdiction when there is complete diversity between the United States citizens involved in an action but there are foreign subjects among the parties on both sides."); K & H Business Consultants, Ltd. v. Cheltonian, Ltd., 567 F.Supp. 420, 422-24 (D.N.J.1983); Samincorp., Inc. v. Southwire Co., 531 F.Supp. 1, 2-3 (N.D.Ga.1980); Lavan Petroleum Co. v. Underwriters at Lloyds, 334 F.Supp. 1069, 1071 (S.D.N.Y.1971).

[T]he language of section 1332(a)(3) is broad enough to allow aliens to be additional parties on both sides of the dispute. Under this interpretation, jurisdiction would exist if a New Yorker, and a Canadian, sued a Californian, and a German, assuming, of course, that there was a legitimate dispute between the two Americans.

13B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure: Jurisdiction 2d Sec. 3604 at 390. Neither party argues that the dispute between Transure, Inc. on the one hand and Companies and Marsh, Inc. on the other is not legitimate. We affirm the district court's holding that the presence of alien corporations on both sides of the controversy did not defeat its jurisdiction. Transure is not entitled to a remand to state court. ¹

Personal Jurisdiction

The district court dismissed the action as to Companies and Crusader on the ground that it lacked in personam jurisdiction over these non-resident corporations. We affirm the district court's dismissal as to these parties.

Transure first argues that the district court can exercise general jurisdiction over Companies, a Delaware corporation which does not do business in California, because it is the parent of Marsh, Inc., a Delaware Corporation which does business in California.

The existence of a parent-subsidiary relationship is insufficient to establish personal jurisdiction over Companies. See Cannon Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 333, 336, 45 S.Ct. 250, 251, 69 L.Ed. 634 (1925); see also Uston v. Grand Resorts, Inc., 564 F.2d 1217, 1218 (9th Cir.1977) (per curiam). While Transure has pointed to various factors which indicate that Companies exercises some control over Marsh, Inc., "[t]he corporate separation, though perhaps merely formal, [is] real." Canon Manufacturing, 267 U.S. at 337, 45 S.Ct. at 251, 69 L.Ed. 634. Additionally, Companies' California contacts are insufficient to permit the district court's exercise of general in personam jurisdiction over Companies.

Transure's claims are principally contractual in nature and have little or nothing to do with California. Transure argues, however, that its claim for defamation in connection with a press release establishes a sufficient nexus to California to confer jurisdiction. The most that Transure is able to allege, however, is that one of the defendants, outside California, issued a defamatory press release to business and insurance publications. The party allegedly defamed was plaintiff Transure, Ltd., an English Corporation, which, according to this record, has little or no connection to California. Although the information in the press release was reported in publications distributed in California, neither defendant is a publisher, and neither has "continuously and deliberately exploited" the California market in any sense. Contrast Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 1481, 79 L.Ed.2d 790 (1984). Neither Crusader nor Companies could reasonably have anticipated being haled into court in California as a result of any activities related to California. See World Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297-298, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Transure's allegation that Transure, Inc., a California corporation, was acting "on behalf of" Crusader in California lacks any competent foundation in the record. We therefore agree with the district court's dismissal as to Companies and Crusader for lack of in personam jurisdiction.

Venue

We do not agree, however, with the district court's dismissal as to Marsh, Inc., a Delaware corporation which undisputably does business in California and is subject to the general jurisdiction of the California courts. The corporation's principal place of business in California is in Los Angeles County rather than in Marin. Marsh successfully maintained before the district court that, under California venue statutes, proper venue was in Los Angeles rather than Marin County and that the federal court therefore lacked jurisdiction. The conclusion of lack of jurisdiction is incorrect.

Jurisdiction in the federal court on removal is derivative of the jurisdiction of the state court where the case was pending. If the state court lacked jurisdiction, then the federal court on removal lacks jurisdiction as well. Minnesota v. United States, 305 U.S. 382, 389, 59 S.Ct. 292, 295, 83 L.Ed. 235 (1939); Lambert Run Coal Co. v. Baltimore and Ohio Railroad Co., 258 U.S. 377, 382, 42 S.Ct. 349, 351, 66 L.Ed. 671 (1922).

We therefore...