de Walker v. Pueblo International, Inc.

• Decision Date: 27 January 1978
• Docket Number: No. 77-1022,77-1022
• Citation: 569 F.2d 1169
• Parties: Candida Merino de WALKER et al., Plaintiffs, Appellees, v. PUEBLO INTERNATIONAL, INC., Defendant and Third-Party Plaintiff, Appellant, v. Angel NEGRON et al., Third-Party Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1169

569 F.2d 1169

Candida Merino de WALKER et al., Plaintiffs, Appellees, v. PUEBLO INTERNATIONAL, INC., Defendant and Third-Party Plaintiff, Appellant, v. Angel NEGRON et al., Third-Party Defendants, Appellees.

No. 77-1022.

United States Court of Appeals, First Circuit.

Argued Oct. 6, 1977.

Decided Jan. 27, 1978.

William L. Patton, Boston, Mass., with whom John M. Harrington, Jr., Ropes & Gray, Boston, Mass., David Rive Rivera, and Calderon, Rosa, Silva & Vargas, Hato Rey, P. R., were on brief, for defendant and third-party plaintiff, appellant.

Gabriel Hernandez Rivera, San Juan, P. R., with whom Feldstein, Gelpi, Toro & Hernandez, San Juan, P. R., were on brief, for Candida Merino de Walker, et al., plaintiffs, appellees.

Ernesto F. Rodriguez-Suris, Hato Rey, P. R., with whom Miranda Cardenas & De Corral, Hato Rey, P. R., was on brief, for Market Ins. Co., plaintiff, appellee.

Before COFFIN, Chief Judge, CAMPBELL, Circuit Judge, CRARY, District Judge. ^*

LEVIN H. CAMPBELL, Circuit Judge.

The plaintiff-appellee in this diversity case obtained a $25,000 jury verdict for damages suffered when she was falsely accused of shoplifting at one of Pueblo's stores in San Juan. Her husband received $2,500 for his damages suffered as a consequence of the injury to his wife. The only issue presented in this appeal is whether the district court lacked subject matter jurisdiction, appellant claiming that there was no diversity of citizenship. ¹

Plaintiff and her husband are citizens of Puerto Rico. Defendant Pueblo International, Inc., is incorporated under the laws of Delaware. However, the place of incorporation is not necessarily determinative of citizenship, because corporations for purposes of diversity jurisdiction have dual citizenship:

"(A) corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business".

28 U.S.C. § 1332(c). The present case turns on whether the district court erred in ruling that Pueblo's "principal place of business" is other than Puerto Rico.

Defendant moved to dismiss for lack of diversity and the district court decided the issue on the basis of affidavits and documentary materials submitted by both parties. Pueblo's Executive Vice President averred that Pueblo's principal place of business was Puerto Rico. In support of this, he stated that all of Pueblo's operations, including supermarkets, retail stores and a bread factory, were conducted in Puerto Rico. He further claimed that "(m)ore than 90% Of the annual gross income and net income of Pueblo, as such corporate entity, in the past and at present, is derived from business (in) Puerto Rico." The principal officers of Pueblo, including its president, treasurer and executive vice president, had their offices in Puerto Rico and all of the corporation's fiscal, accounting and operational offices were in Puerto Rico.

Pueblo's Vice President also stated that Pueblo was a holding company, owning a number of wholly owned subsidiaries, including Hills Supermarkets, Inc., a New York corporation. Hills, it was claimed, has its own board of directors and officers. Furthermore,

"(t)he day to day operating decisions of Hills are taken by its operating Officers at the headquarters and principal office of that corporation located at Brentwood, Long Island, where Hills owns and operates its Distribution Center."

For accounting and tax purposes, Hills was said to maintain its own separate books and file its own tax returns.

Plaintiff's attorney filed his own affidavit in opposition which summarized data concerning Pueblo and Hills taken from documents such as Pueblo's reports to shareholders, minutes of directors' meetings, and filings with the Securities & Exchange Commission. After Pueblo moved to strike this affidavit, plaintiff's attorney filed a supplementary affidavit to which were attached copies of the SEC and corporate reports which the prior affidavit had purported to summarize. The district court denied the motion to strike and admitted into the record the affidavits and documents. ²

The reports relied on by the plaintiff establish that from 1971 through 1975 Pueblo International, Inc., regarded Hills as a "division" of the parent company. Hills was consistently referred to as such. Moreover, in representing Pueblo's financial picture in its reports, the company routinely included Hills' figures in its calculations of overall profits, losses, expenses, numbers of employees, real estate, etc. The statistics indicate that, in terms of sales and assets, Hills accounted for about 60% Of the consolidated entity's activities. Pueblo's minutes of Board of Directors' meetings reveal that the affairs of Hills were routinely the subject of scrutiny and reports and that the directors participated in such major decisions as the hiring and replacement of Hills' president.

While the documents thus indicate that Pueblo was ultimately the sole beneficiary and director of Hills' corporate activities, there is nothing in the record to undermine Pueblo's claim that the two corporations were separately incorporated, had separate boards of directors, kept separate accounting and tax records, and had separate facilities and operational personnel. And, leaving aside the activities of Hills Supermarkets Inc., there is next to nothing in the record to establish that Pueblo, in its corporate capacity, conducted any business outside Puerto Rico. Pueblo's annual reports to shareholders list "executive offices" in Carolina, Puerto Rico, and New York City. The directors' minutes also establish that several meetings were held in the New York executive offices. However, the documents do not reveal who was employed at the New York City office, what corporate affairs other than occasional directors' meetings were held there, or how much was spent annually in maintaining the office. It is not even possible to draw the inference that New York City was the regular situs of directors' meetings inasmuch as these meetings were also routinely held in Hills' headquarters on Long Island, several of Pueblo's offices in Puerto Rico and in Venezuela. No other evidence in the record, either cited by plaintiff or discovered by us, sheds further light on the character of the New York City "executive offices".

Three distinct, but not necessarily inconsistent, tests have been developed for determining where a corporation's "principal place of business" is located. See generally 1 J. Moore, Federal Practice, P 0.77(3) (2d ed. 1977). Scot Typewriter Co. v. Underwood Corp., 170 F.Supp. 862, 865 (S.D.N.Y.1959), established the "nerve center" test, i. e., the center "from which (a multifaceted corporation's) officers direct, control and coordinate all activities without regard to locale, in the furtherance of the corporate objective." Later cases have suggested that this inquiry should be limited to a "large corporate enterprise with complex and farflung activities" where only the "nerve center" can actually be termed the "principal place of business." See Epstein v. Guilford Industries, Inc., 218 F.Supp. 286, 288-89 (S.D.N.Y.1963); Anderson v. Southern Bell Telephone & Telegraph Co., 209 F.Supp. 921, 927 (M.D.Ga.1962). Even were we to assume that Pueblo is the type of corporation for which the "nerve center" test would be most appropriate, ³ we could not say that plaintiff has carried her burden of establishing that Pueblo has its nerve center outside Puerto Rico. ⁴ From the documents which plaintiff submitted, it does appear that two "executive offices" exist, one in Puerto Rico and the other in New York City. But little more can be gleaned about the New York office. In contrast, Pueblo's Executive Vice Presidents' affidavit stated that,

"Pueblo, as such corporate entity has its own accounting system, records, operating, purchasing and sales staffs at its (executive offices) at Carolina, Puerto Rico.

"The Minutes Books of Pueblo and of its predecessor corporation are kept at the above said principal offices of the Corporation . . . .

"All stock certificates of Pueblo cancelled as a result of transactions in the trading of its common stock . . . are kept and stored at the principal offices located at Carolina, Puerto Rico."

The most that can be deduced from this incomplete evidence is that a "nerve center", if one exists, is located in Puerto Rico. Certainly there is nothing to establish that the "nerve center" is in New York.

However, we need not rest our decision solely on the "nerve center" test, for under the other inquiries recognized for purposes of § 1332(c) jurisdiction, Pueblo's principal place of business must also be recognized as Puerto Rico. Kelly v. United States Steel Corp., 284 F.2d 850, 854 (3d Cir. 1960), suggested that the "principal place of business" of a corporation is "the center of corporate activity," i. e., where the corporation's day-to-day management takes place. A somewhat different test focuses on "the locus of the operations of the corporation." Inland Rubber Corp. v. Triple A Tire Service, Inc., 220 F.Supp. 490, 496 (S.D.N.Y.1963). The information...