United States District Court, Northern District of Illinois, E.D
August 26, 1960
LEO JACK GILARDI, PLAINTIFF,
ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, A CORPORATION, DEFENDANT.
The opinion of the court was delivered by: Igoe, District Judge.
This personal-injury action, based on common law negligence,
was commenced in the Town Court of Cicero. It was removed to
this court on defendant's petition alleging diversity of
citizenship between itself and plaintiff. The case is presently
before this court on plaintiff's motion to remand the action to
the Town Court on the grounds that: First, the removal was not
filed within twenty days after the service of summons and is,
therefore, untimely; second, that there is no diversity
jurisdiction within the meaning of 28 U.S.C. § 1441, inasmuch
as plaintiff, a citizen of Illinois, contends that defendant
Santa Fe's principal place of business is Chicago, Illinois.
Briefly stated, the facts are: Plaintiff filed his complaint
in the Town Court of Cicero on February 5, 1960. Neither the
complaint nor the summons served on defendant on February 15
indicated plaintiff's citizenship or residence. On March 15,
defendant served notice to take the plaintiff's discovery
deposition. On March 23, plaintiff's discovery deposition was
taken and for the first time, defendant ascertained that
plaintiff was a citizen of Illinois. The deposition was not
filed in the Town Court.*fn1 On April 11, nineteen days after
first ascertaining the citizenship of plaintiff, defendant
filed its removal papers stating that it was a citizen of the
State of Kansas, where it is incorporated and where it has its
principal place of business, and that plaintiff was a citizen
of Illinois. Plaintiff subsequently filed his motion to remand.
We turn first to the question of whether defendant's removal
was timely under 28 U.S.C. § 1446(b). Plaintiff, in his motion
to remand, initially ignored the second paragraph of this
section and contended that the petition for removal was filed
too late since it was filed more than twenty days after the
service of summons. Plaintiff has now abandoned this position
and presently contends that defendant's removal is premature.
28 U.S.C. § 1446(b) provides in the second paragraph:
"If the case stated by the initial pleading is
not removable, a petition for removal may be filed
within twenty days after receipt by the defendant,
through service or otherwise, of a copy of an
amended pleading, motion, order or other paper from
which it may first be ascertained that the case is
one which is or has become removable." (Emphasis
Defendant's removal was timely under § 1446(b) inasmuch as it
was effected within twenty days after defendant first
ascertained that the case was removable. Since the initial
pleading failed to state facts indicating whether the case was
removable, defendant was entitled to remove twenty days after
receipt by it of some pleading or other paper from which it was
first ascertained that the case was removable. The right to
remove dates from the receipt of the amended pleading, motion
or other paper from which it may first be ascertained that the
case is removable. Remington v. Central Pacific R. Co., 1905,
198 U.S. 95, 98, 25 S.Ct. 577, 49 L.Ed. 959; Powers v.
Chesapeake & Ohio R. Co., 1898, 169 U.S. 92, 101, 18 S.Ct. 264,
42 L.Ed. 673; Stack v. Strang, 2 Cir., 1951, 191 F.2d 106, 107;
Higgins v. Yellow Cab Co., D.C.Ill. 1946, 68 F. Supp. 453;
Morschauser v. American News Co., D.C.N.Y. 1958, 158 F. Supp. 517,
519; Cobleigh v. Epping Brick Co., D.C.N.H. 1949,
85 F. Supp. 862, 863; Hamilton v. Hayes Freight Lines, D.C. Ky.
1952, 102 F. Supp. 594, 596.
Plaintiff's discovery deposition taken pursuant to Illinois
Supreme Court Rule 19, even though not required to be filed,
was a sufficient "other paper" within the meaning of Section
1446(b) from which defendant first ascertained that the cause
was removable and defendant had twenty days after so learning
to remove the case. Stack v. Strang, 2 Cir., 1951,
191 F.2d 106, 107; Morschauser v. American News Co., D.C.N.Y. 1958,
158 F. Supp. 517, 519; Cobleigh v. Epping Brick Co., D.C.N.H. 1949,
85 F. Supp. 862, 863; Hamilton v. Hayes Freight Lines, D.C.Ky.
1952, 102 F. Supp. 594, 596.
Plaintiff mistakenly contends that the case may be
ascertained to be removable only as a result of some voluntary
act on his part. He apparently has confused the situation
— where the case stated initially is not removable but later
becomes removable because of some voluntary act on the part of
the plaintiff — with cases like the one at bar where the case
stated always was removable but is not
ascertained to be removable until a later time. Cases cited on
this point have been misinterpreted by plaintiff, are not in
point, and need not be discussed here.
Nor does the Court agree with plaintiff's contention that the
case may be ascertained to be removable only from some paper
filed of record in the State Court. Plaintiff's discovery
deposition was part of the judicial discovery process of the
State Court. "Other paper" refers to such court processes even
though not required to be filed, so long as these papers are
part and parcel of the State Court proceedings having their
origin and existence by virtue of the State Court processes.
This holding is consistent with the policy and purpose of
Congress to effect removals as early as possible and avoid
unnecessary delay. The filing of such a deposition does not
make the fact of diversity of citizenship ascertainable, but
the revelation under oath and recording of such diversity does.
To hold that the time for removal does not commence to run
until such a paper as the deposition is filed in court would be
to require an unnecessary action.
The removal having been timely, we now consider whether
federal jurisdiction based on diversity of citizenship exists.
Since the Santa Fe is incorporated under the laws of Kansas,
whether diversity of citizenship exists depends upon whether it
has its principal place of business in that State or in
Illinois. 28 U.S.C. § 1332, augmenting § 1441, provides that
for the purposes of diversity jurisdiction, 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."
Plaintiff contends that the location of the Santa Fe's
executive offices at Chicago is determinative of the question,
and supports his position with a list of the railroad's
executive officers located in Chicago, as indicated in
defendant's Annual Report for 1959. Defendant contends that it
has its principal place of business in Topeka, Kansas, as
determined by an analysis of the totality of its corporate
activity. Defendant supported its position with a twenty-two
page affidavit of facts sworn to, among others, by its Auditor,
Assistant Secretary, General Manager and General Storekeeper,
all located at Topeka. It attached to this affidavit a map of
its railway system.
As is not uncommon in these cases, one side emphasizes while
the other obscures significant factors. Both cite decisions
wherein the courts appear to have emphasized factors which each
side contends should control the decision here.
In determining the place of a corporation's principal place
of business, the issue is a question of fact to be determined
in each particular case largely upon the character of the
corporation, its purposes, the kind of business it is engaged
in, and the situs of its operations. No single factor is
determinative of the question. In re Tygarts River Coal Co.,
D.C.W.Va. 1913, 203 F. 178, 180; In re Tennessee Construction
Co., D.C.N.Y. 1913, 207 F. 203, affirmed 2 Cir., 213 F. 33;
Scot Typewriter Co. v. Underwood Corp., D.C.N.Y. 1959,
170 F. Supp. 862, 864.
The legislative purpose of Sections 1332 and 1441 is
discussed in the Congressional Record of June 30, 1958, at
pages 11, 502-11, 509 and is set out in U.S. Congressional &
Administrative News, 1958, at pages 3099-3166. By amending
Sections 1332 and 1441, Congress was attempting to ease the
workload of the Federal Courts and prevent frauds on and abuses
of federal jurisdiction, but was not attempting to eliminate:
"* * * those corporations which do business over
a large number of States, such as the 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." Senate Report 1830,
U.S. Congressional & Administrative News, p. 3102.
Congress did not define the phrase "principal place of
business", but did suggest that the courts were to be guided by
decisional law construing the same language used in the
Bankruptcy Act, 11 U.S.C.A. § 11. Senate Report 1830, 1958 U.S.
Congressional & Administrative News, pp. 3099, 3102; Scot
Typewriter Co. v. Underwood Corp., D.C., 170 F. Supp. 862, 863.
Increased importance is placed on decisions construing the
Bankruptcy Act to determine the factors to be considered in
deciding a corporation's principal place of business. Most of
the cases construing this phrase, "principal place of business"
under the Bankruptcy Act and Sections 1332 and 1441 are in
accord that this finding always has been determined by an
analysis of the totality of corporate activity rather than the
mere determination of the location of executive offices. Dryden
v. Ranger Refining & Pipe Line Co., 5 Cir., 1922, 280 F. 257,
259-260; In re Tygarts River Coal Co., D.C.W.Va. 1913, 203 F.
178-180; In re Hudson River Nav. Corp., 2 Cir., 1932,
59 F.2d 971, 974; 8 C.J.S. Bankruptcy § 24 note 75, p. 434.
Some of the Federal Courts have found the principal place of
business to be the place where executive officers reside and
maintain an office. In re Hudson River Nav. Corp., 2 Cir.,
1932, 59 F.2d 971, 974; Scot Typewriter Co. v. Underwood Corp.,
D.C. 1959, 170 F. Supp. 862, 865; Burdick v. Dillon, 1 Cir.,
1906, 144 F. 737, 738. But this has never been the sole
criterion and other decisions greatly minimize the location of
executive offices. Continental Coal Corp. v. Roszelle Bros., 6
Cir., 1917, 242 F. 243, 247; Dryden v. Ranger Refining & Pipe
Line Co., 5 Cir., 1922, 280 F. 257-259.
Plaintiff's emphasis on one controlling factor, the situs of
the executive offices, is misplaced and unrealistic. As was
said in In re Tygarts River Coal Co., D.C.W.Va. 1913, 203 F.
"* * * its principal office there * * * does not
in such case constitute its `principal place of
"* * * but in my judgment the determination of
the question of where the principal place of
business is depends upon where the actual business
of the concern is transacted. It is a question of
fact to be determined in each particular case
largely on the character of the corporation, its
purposes, and the kind of business it is engaged
in * *. It is not sufficient for the officers of
such a corporation to gather together in a city
office and call it `the principal place of
business' of the concern because it better suits
their convenience to live and meet in such city."
Again, in Dryden v. Ranger Refining & Pipe Line Co., 5 Cir.,
1922, 280 F. 257, 259, the court held:
"The business of a corporation is its activities
in the acquisition of production of that which its
charter authorizes it to produce or acquire, and
its dealings with its customers, not its relations
with its own employees or officers in its internal
government, or in applying to them the checks it
may have devised in carrying on its business as
security against the improvidence or negligence of
In seeking to equate principal place of business to executive
offices, plaintiff relies on Scot Typewriter Co. v. Underwood
Corp., D.C.N.Y. 1959, 170 F. Supp. 862; In re Hudson River Nav.
Corp., 2 Cir., 1932, 59 F.2d 971
and Riley v. Gulf, M & O R.
Co., D.C.S.D.Ill. 1959, 173 F. Supp. 416. However, none of these
cases is authority for the proposition that executive offices
is the exclusive factor in determining principal place of
business. In Riley, the court merely concludes, upon the facts
before it, that the railroad company's principal
place of business was not Illinois, but Alabama, where its
principal place of business was located and where, in addition,
its executive offices were located. Unfortunately, the court
does not review the factors upon which it based its
determination of the principal place of business. In both Scot
Typewriter and Hudson River Nav. Corp., increased importance
was given to the location of executive offices, but this was
just one of the many controlling factors. In Hudson River Nav.
Corp., the court points out, 59 F.2d at page 974, that the
principal factors it relied on in making its determination were
that the greatest percentage of the navigable right of way was
located, the largest operating revenue was earned, and the
executive offices were located within the Southern District. In
the instant case, as will be seen from a resumé of the facts,
these first two factors favor Kansas. In Scot Typewriter, the
court also pointed out, 170 F. Supp. page 864, that it was
considering more than the location of the corporation's
executive offices. Its decision was also based upon the fact
that all phases of the business operation was conducted from
New York and that the corporation's last federal income tax
return was filed in New York, pointing out that corporate
returns are required to be filed in the district in which is
located the principal place of business. These factors, when
applied to the instant case, also favor Kansas.
The facts in this case disclose that Santa Fe is a Class I
railroad operating as a common carrier in the transportation of
freight, passengers, mail, and express through twelve states
over some 13,000 miles of line. Santa Fe was chartered by the
State of Kansas and has been closely associated to the
commercial fabric of that state for many years. Its principal
dealings with its customers and its principal activities are
generally carried on in the State of Kansas. In Kansas, the
Santa Fe has located its chief railroad facilities for the
transportation of mail, passengers and freight. Its general
office building at Topeka is occupied exclusively by Santa Fe
personnel and contains more than twice the space of the Chicago
office building. Its highest percentage of operating revenue,
both gross and net, comes from the State of Kansas and is many
times larger than that of Illinois. Its operating expenses in
Kansas were more than twice those in Illinois. The number of
employees in the State of Kansas is more than twice the number
employed in Illinois. Its pay roll in Kansas is twice that in
Illinois. It has ten times the amount of road in Kansas than it
has in Illinois. Its railroad facilities in Illinois for the
repair or construction of equipment cannot even begin to
compare with those in Kansas. The archives of the company are
kept and filed in its general office at Topeka, where the
Secretary is located. Almost all of its accounting transactions
are recorded at Topeka. Its federal income tax returns are
filed in the Kansas office of the Bureau of Internal Revenue.
The value of its rolling stock located in Kansas is
approximately three times that located in Illinois. The value
of its inventory stored at Topeka alone, is approximately
sixteen times larger than that of the entire State of Illinois.
The amount of taxes accrued for the State of Kansas is more
than three times larger than the taxes in Illinois. Its annual
stockholders' meetings are held in Topeka. Reports to the
Interstate Commerce Commission, including monthly, quarterly
and annual reports, emanate from its Topeka office. The actual
operation of its Eastern Lines, which includes the States of
Illinois and Kansas, is under the control of its General
Manager and his two assistants, all headquartered at Topeka.
These facts support only one conclusion: The Santa Fe has its
principal place of business in Topeka, Kansas. This conclusion
is based upon a thorough analysis of the facts, the legislative
history of Sections 1332 and 1441, the decisions construing the
Bankruptcy Act, 11 U.S.C.A. § 11, which Congress has directed
to be our guide, and the decisions
construing Sections 1332 and 1441 since the 1958 amendment.
The result reached in this case is consistent with the intent
of Congress. To equate principal place of business to executive
offices would not only do injustice to defendants, but would
run the risk of creating a substitute fiction for the fiction
of charter citizenship.
Inasmuch as the defendant Santa Fe has its principal place of
business in the State of Kansas, and plaintiff is a citizen of
the State of Illinois, this court has jurisdiction based upon
diversity of citizenship.
Plaintiff's motion to remand is denied.