United States District Court, Northern District of Illinois, E.D
January 7, 1959
ALBERT BROWNE AND FRANK S. RYSKIEWICZ D/B/A PARK BOWLING ALLEY, PLAINTIFFS,
HARTFORD FIRE INSURANCE COMPANY, A CORPORATION, SPRINGFIELD FIRE & MARINE INSURANCE COMPANY, A CORPORATION, DEFENDANTS.
The opinion of the court was delivered by: Campbell, District Judge.
On August 14, 1958, plaintiffs filed a complaint seeking
recovery under their contract of insurance for claimed loss from
windstorm in the Circuit Court of Lake County, Illinois, against
defendants, Hartford Fire Insurance Company and Marine Insurance
Company. Summons was served on the defendants on August 22, 1958,
and on September 10, 1958, a petition for removal of the cause
from the Circuit Court of Lake County, Illinois, was filed in
this Court and the cause was removed.
Petitioners set forth in their grounds for removal that there
is involved an amount in excess of $10,000 exclusive of interest
and costs and that the named defendants, Hartford Fire Insurance
Company and Springfield Fire and Marine Insurance Company were
incorporated in and therefore are citizens of the states of
Connecticut and Massachusetts respectively whereas the plaintiffs
are citizens of the county of Lake, State of Illinois. There is
no mention in any of the pleadings of the principal place of
business of either of the defendants. The only allegations with
respect to the business of either defendant are contained in the
complaint which alleges that both of these defendants are
qualified, authorized, and are in fact doing business in the
State of Illinois and that all the dealings between the parties
in this case took place in the City of Waukegan, County of Lake,
and State of Illinois.
On September 25, 1958, plaintiffs filed a motion to remand this
cause to the Circuit Court of Lake County, Illinois, on the
ground that jurisdiction does not exist in this Court as alleged.
The petition for removal bases jurisdiction upon the general
diversity section (Title 28 U.S.C. § 1332) of the United States
Code which section was amended effective July 28, 1958.
Subsection (c) of the Amended section 1332 provides as follows:
"For the purposes of this section and section 1441 of this title,
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."
The plaintiffs contend that the defendants in their petition
for removal, have failed to allege that defendant corporations do
not have their principal places of business in the State of
Illinois as required by the amended Sec. 1332 and that therefore,
there is a fatal defect in the petition since it contains no
proper allegation of diversity of citizenship. Accordingly they
assert there are no grounds for removal (28 U.S.C. § 1332;
28 U.S.C. § 1441) and that the cause should be remanded.
28 U.S.C. § 1447 (c).
The underlying purpose of diversity of citizenship legislation
is to provide a separate forum for out-of-State citizens against
supposed local prejudices. The purpose of removal legislation is
to give a non-resident defendant who has been unwillingly brought
into a State court, the right to remove to the presumably
unprejudiced forum of the Federal court.
There is no question but that the recent trend in legislation
has been to restrict jurisdiction in regard to removal causes in
order to reduce the high volume of State cases that have been
pouring into the United States Courts. Also, removal sections
been strictly construed and all doubts have always been resolved
The latest amendment to Sec. 1332 continues this policy. The
legislative purpose of Sec. 1332 is discussed in the
Congressional Record, June 30, 1958, at pages 11502-11509 and is
set out in the U.S.Code Congressional and Administrative News,
1958, at pages 2595, 2596, as follows:
"It is now established doctrine that a corporation,
for the purposes of jurisdiction is deemed a citizen
of the State in which it is incorporated * * * It is
by virtue of this rule, which is now long standing
and thoroughly imbedded in our jurisdiction, that
so-called out-of-State corporations may sue and be
sued under the diversity jurisdiction where it is
sued or being sued by a citizen of a State other than
the State of its incorporation. This fiction of
stamping a corporation a citizen of the State of its
incorporation has given rise to the evil whereby a
local institution, engaged in a local business and in
many cases locally owned, is enabled to bring its
litigation into the Federal courts simply because it
has obtained a corporate charter from another State *
* * This circumstance can hardly be considered fair
because it gives the privilege of a choice of courts
to a local corporation simply because it has a
charter from another State, an advantage which
another local corporation that obtained its charter
in the home State does not have. The underlying
purpose of diversity of citizenship legislation * * *
is to provide a separate forum for out-of-State
citizens against the prejudices of local courts and
local juries by making available to them the benefits
and safeguards of the Federal courts. Whatever the
effectiveness of this rule, it was never intended to
extend to local corporations which, because of a
legal fiction, are considered citizens of another
State. It is a matter of common knowledge that such
incorporations are primarily initiated to obtain some
advantage taxwise in the State of incorporation or to
the obtain the benefits of the more liberal
provisions of the foreign State's corporation laws.
Such incorporations are not intended for the prime
purpose of doing business in the foreign State. It
appears neither fair nor proper for such a
corporation to avoid trial in the State where it has
its principal place of business by resorting to a
legal device not available to the individual citizen.
Because of these circumstances, and others, the
Judicial Conference of the United States has
recommended that the law be amended so that a
corporation shall be regarded not only as a citizen
of the State of its incorporation but also a citizen
of the State in which it maintains its principal
place of business. This will eliminate those
corporations doing a local business with a foreign
charter but will not eliminate those corporations
which do business over a large number of States, such
as railroads, insurance companies, and other
corporations whose businesses are not localized in
one particular State. Even such a corporation,
however, would be regarded as a citizen of that one
of the States in which was located its principal
place of business."
It is clearly seen from this statement of purpose that amended
Sec. 1332(c) is not specifically directed at corporations such
as defendants in the case at bar, nor is it specifically directed
at a case of this nature. However, this knowledge does not solve
the problem at hand since it is plain from the Statute that the
defendants must each allege their principal place of business in
their petition for removal in order to establish diversity of
citizenship so that the cause is properly removable.
In arguing to the contrary defendants refer to page 2497 of the
1958 U.S.Code Congressional and Administrative News where the
following statement appears:
"With regard to the matter of a corporation's
principal `place of business' the Federal Rules do
not require that such information appear in the
pleadings and the information is seldom mentioned."
This statement might seem very much in point but a reading of
its source reveals that it is taken out of context. The
Congressional Record June 30, 1958, containing remarks by
Representative Keating, clarifies the above statement:
"The exclusion of cases from the Federal courts
brought by or against corporations having their
principal place of business in the same State of
which the other party was a resident would aid
substantially in relieving congestion in the Federal
courts. Unfortunately, completely accurate figures on
just how much effect this action would have are not
available. The reasons [sic] for this is that the
Federal rules do not require that information as to
the principal place of business of the corporation
appear in its pleadings. Therefore, the last
information, is not usually available." (Emphasis
Obviously Representative Keating was discussing the degree of
Federal court congestion which would be relieved by the amendment
in question and his statement that Federal rules make no
requirement that information as to "principal place of business"
be given in the pleadings must be viewed in light of the fact
that a corporation prior to the amendment was regarded only as a
citizen of the State where it was incorporated. Therefore, the
principal place of business of a corporation was irrelevant in
the petition for removal and in the pleadings. Today, under
amended Sec. 1332(c) a corporation is a citizen of the State
where it is incorporated and also of the State where it has its
principal place of business. Therefore, if the provisions of
28 U.S.C. § 1446 requiring a "verified petition containing a
short and plain statement of the facts which entitle him or them
to removal", as well as the provisions of Sec. 1332 and Sec. 1441
are to be met, it is clear that the principal place of business
of a corporation must be set out in the petition to properly
establish diversity of citizenship.
In keeping with the policy of Federal courts to strictly
construe removal statutes and to resolve all doubts against
removal, the Federal courts have always been very particular in
requiring a distinct statement of the citizenship of the parties
in order to sustain the jurisdiction of those courts. Cameron v.
Hodges, 127 U.S. 322, 8 S.Ct. 1154, 32 L.Ed. 132; Phoenix Ins.
Co. v. Pechner, 95 U.S. 183, 24 L.Ed 427; Southern Pac. Co. v.
Haight, 9 Cir., 126 F.2d 900; Marshall v. Navco, Inc., D.C.,
152 F. Supp. 50; Gratz v. Murchison, D.C., 130 F. Supp. 709; Kovell v.
Pennsylvania Railroad Co., D.C., 129 F. Supp. 906.
Here, since the principal place of business of the defendant
corporations is not set out in the petition or the pleadings,
there is no allegation of diversity of citizenship as required by
Sec. 1332. Therefore, there is a fatal defect in the petition and
therefore there are no grounds for removal since this court has
no basis upon which to assume jurisdiction.
On October 20, 1958, defendants filed an amendment to their
petition for removal setting out the principal places of business
of each maintaining that this was no more than a technical defect
which can be cured by amendment. I cannot agree. This is an
attempted amendment to a petition for removal and not an
amendment to a complaint. Since the petition for removal was in
reality not a petition for removal because of its failure to
allege a necessary jurisdictional fact, the amendment would have
had to have been filed within the statutory
time. Sec. 1446(b) provides for a twenty day period "after the
receipt by the defendant, through service or otherwise, of a copy
of the initial pleading * * * or within twenty days after the
service of summons upon the defendant * * *." Here summons was
served on defendants on August 22, 1958, and their amendment was
filed on October 20, 1958 some two months later and thus after
the twenty day statutory time set out in Sec. 1446.
Therefore, the amendment cannot be allowed. Gratz v. Murchison,
D.C., 130 F. Supp. 709; White v. Sullivan, D.C., 107 F. Supp. 959;
Cline v. Belt, D.C., 43 F. Supp. 538.
Title 28 U.S.C. § 1653 provides that "defective allegations of
jurisdiction may be amended, upon terms, in the trial or
appellate courts." This is not the instant case. There is no
pleading of the required facts at all. This is not an attempt to
cure a defect but to make an entirely new allegation. Amendments
to petitions for removal after the statutory time has passed may
be permitted only where the amendment is one to cure technical
defects or to amplify the allegations of the petition. Thus, the
amendment must do no more than set forth in proper form what has
been previously imperfectly stated in the petition for removal.
Kinney v. Columbia Savings and Loan Ass'n, 191 U.S. 78, 24 S.Ct.
30, 48 L.Ed. 103; Powers v. Chesapeake & O.R. Co., 169 U.S. 92,
18 S.Ct. 264, 42 L.Ed. 673; Frazier v. Hines, 4 Cir., 260 F. 874;
Cline v. Belt, D.C., 43 F. Supp. 538.
Defendants cite a number of cases in opposition to the motion
to remand (including the Kinney and Powers cases above, which
clearly support the motion to remand) which, in my opinion have
either been misinterpreted by defendants or are not in point.
Accordingly they will not be discussed here.
The motion to remand is granted, and the cause is hereby
remanded to the Circuit Court of Lake County, Illinois.
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