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WEBSTER v. WILKE

August 25, 1960

LESTER WEBSTER ET AL., PLAINTIFFS,
v.
FRED S. WILKE ET AL., DEFENDANTS.



The opinion of the court was delivered by: Mercer, Chief Judge.

This cause, commenced by plaintiffs' complaint against the Midland Electric Coal Corporation for damages for breach of contract and against United Mine Workers of America for damages for interference with Midland's performance of the same contract, is now before the court upon the defendants' several motions to quash return of service of summons or to dismiss the cause for want of jurisdiction. Jurisdiction is predicated upon allegations of diversity of citizenship. Each defendant appears specially for the purpose of presenting his respective motion.

Plaintiffs concede that the attempted service of summons in Washington, D.C., upon the defendants, Thomas Kennedy and John Owen, as officers of United Mine Workers is a nullity. Fed.R. Civ.Procedure 4(f), 28 U.S.C.A. The return of service on such defendants will therefore be quashed.

All of the plaintiffs are citizens of the State of Illinois. Plaintiffs concede that Ralph Hays, Fred S. Wilke and Hugh White, individually, cannot remain as defendants in the cause without destroying the diversity of citizenship requisite to the court's jurisdiction of the cause, and now request that the cause be dismissed as to those defendants. The same will be dismissed accordingly.

With all of the individual defendants thus removed from the cause, there remains only the questions whether or not the court has jurisdiction of the cause against Midland Electric Coal Corporation and United Mine Workers.

Midland, an Indiana corporation, has moved to dismiss the cause upon the ground that diversity of citizenship between Midland and plaintiffs does not exist. In support of its motion, that corporation presents the affidavit of T.C. Mullins, Jr., who states as follows: that Midland is engaged in the mining and production of bituminous coal; that all of its mining operations are carried on within the State of Illinois, where it produced approximately 2,400,000 tons of coal in 1959; that the executive office of the president of the corporation is located in the City of Chicago, Illinois; and that the corporation's mine offices are located in Atkinson, Farmington and Victoria, all in the State of Illinois. Upon those facts, Midland contends that its principal place of business is in the State of Illinois, and, therefore, that it must be deemed a citizen of Illinois for the purpose of the determination whether diversity of citizenship exists within the meaning of Section 1332(c) of the Judicial Code, 28 U.S.C.A. § 1332(c).

Subsection (c), added to Section 1332 by amendment in 1958, provides, in pertinent part, that "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." Congress did not define the phrase "principal place of business", but did suggest that the courts, in construing that phrase in Section 1332(c), were to be guided by decisional law construing the identical phrase in other federal statutes. Specific reference was made to Section 11 of the Bankruptcy Act, 11 U.S.C.A. § 11. U.S.Code Cong. & Adm.News 1958, p. 3102, quoted in Scot Typewriter Co. v. Underwood Corp., D.C.S.D.N.Y., 170 F. Supp. 862, 863, note 1.

The Section 11 analogy was applied in Moesser v. Crucible Steel Co., D.C.W.D. Pa., 173 F. Supp. 953, one of the few reported cases construing Section 1332(c). The court said that the question of where a corporation maintains its principal place of business is always a question of fact which depends for its solution upon all of the circumstances of the particular case. Decision of that question requires a general survey of the corporation's activities and a comparison of the character, importance and scope of the activities conducted in each state where the corporation operates.

The Moesser case was a personal injury suit prosecuted in the United States District Court for the Western District of Pennsylvania by a Pennsylvania citizen. The defendant, Crucible, was a New Jersey corporation. Upon its findings that most of Crucible's manufacturing activities were carried on in Pennsylvania, that a majority of its employees were there employed and that its production supervisory offices were there located, the court held that the principal place of business of the corporation was in Pennsylvania and that diversity of citizenship of the parties did not exist.

Upon the issue of the location of the principal place of business of a corporation for the purpose of determining whether diversity of citizenship was shown, the court said, in Scot Typewriter Co. v. Underwood Corp., D.C.S.D.N.Y., 170 F. Supp. 862, 865, that that issue is governed "by the totality of corporate activity at a given place, which, * * *, may be said to represent the `center of gravity' of corporate function."

In Colorado Interstate Gas Co. v. F.P.C., 10 Cir., 142 F.2d 943, 950-951, the court, construing the phrase "principal place of business" in Section 19(b) of the Natural Gas Act, 15 U.S.C.A. § 717r (b), said that the principal place of business of a corporation "is where the actual business of the corporation is conducted or transacted. It is a question of fact to be determined in each particular case by taking into consideration such factors as the character of the corporation, its purposes, the kind of business in which it is engaged, and the situs of its operations."

As applied to the mining industry, the phrase "principal place of business" was construed in Continental Coal Corp. v. Roszelle Bros., 6 Cir., 242 F. 243, 244, involving an involuntary petition under Section 11 of the Bankruptcy Act. Continental, the alleged bankrupt, was a Wyoming corporation. It maintained its principal executive offices in Chattanooga, Tenn., and all of its sales were there consummated. All of its mining operations, shipping and other production activities were done in the Eastern District of Kentucky. The offices of its production superintendants and mine managers were located in Kentucky. Under those circumstances, the court held that Continental's principal place of business was in Kentucky, not Tennessee, and that the proceeding had been properly filed in the District Court for the Eastern District of Kentucky.

In the case at bar, Midland's business is the mining, processing and sale of coal. The activities which exemplify that corporation's reason for being are all conducted in the State of Illinois. All of its mines are there located, all processing and shipping is there done, its production employees are there employed, its executive offices are there located and its production-supervisory offices are there situated. By reason of those facts, the conclusion is inescapable that the principal place of business of the corporation, within the meaning of Section 1332(c), is in Illinois. Diversity of citizenship between Midland and plaintiffs, therefore, does not exist.

By contrast, all bread and butter activities of Midland are localized in Illinois, while only general administrative and accounting activities are carried on in Indiana. The distinction drawn is suggested by the Continental opinion. There the court, by dictum, suggested that a mining company which conducted mining operations in several different states would have as its principal place of business the nerve center from which the ...


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