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Wild v. Subscription Plus

May 31, 2002


Appeal from the United States District Court for the Western District of Wisconsin. No. 00 C 67--Barbara B. Crabb, Chief Judge.

Before Flaum, Chief Judge, and Harlington Wood, Jr., and Posner, Circuit Judges.

The opinion of the court was delivered by: Posner, Circuit Judge

Argued April 18, 2002

This is a personal injury suit brought by the parents of a young man killed in an accident in Wisconsin. Federal jurisdiction is based on diversity of citizenship. The suit was filed originally in a federal district court in Louisiana, but the judge there transferred the case to a federal district court in Wisconsin, pursuant to 28 U.S.C. sec. 1406(a), because he determined that Louisiana was not a proper venue for suing all--or in fact any--of the defendants. The district judge in Wisconsin denied the plaintiffs' motion to retransfer the case to Louisiana and later granted motions to dismiss or for summary judgment filed by several of the defendants. The other defendants having settled, the district court entered a final judgment terminating the litigation and sparking this appeal. The principal though not only issue is the lawfulness of the transfer from Louisiana to Wisconsin; if as the plaintiffs contend it was unlawful, the motion to retransfer should have been granted.

We note initially a serious deficiency in the jurisdictional statement in the plaintiffs' brief that went unnoticed in the four briefs filed by defendants. With regard to the insurance-company defendants, the allegation of citizenship takes the following form: "Progressive Northern Insurance Company, a citizen of the State of Wisconsin, with its principal place of business in the State of Ohio." (The allegations regarding the other insurance companies are identical except for name and states.) The diversity statute states that a corporation is a citizen of both the state in which it is incorporated and the state in which its principal place of business is located. 28 U.S.C. sec. 1332(c)(1). If a firm is not a corporation, its citizenship is determined by the citizenship of its proprietor, partners, members, or other principals. Carden v. Arkoma Associates, 494 U.S. 185, 195 (1990); Cosgrove v. Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998); Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314, 316 (7th Cir. 1998); Herrick Co. v. SCS Communications, Inc., 251 F.3d 315, 322 (2d Cir. 2001); Schiavone Construction Co. v. City of New York, 99 F.3d 546, 548 (2d Cir. 1996). The plaintiffs' jurisdictional statement does not allege that Progressive Insurance Company or any of the other insurance-company defendants is a corporation--though inquiry of counsel revealed that they are and that the requirement of complete diversity of citizenship is satisfied, with two possible exceptions:

The corporate charter of one of the defendants had been revoked before this suit was brought; and though the charter was later restored, jurisdiction is normally determined as of the date of the filing of the suit. The only case we can find on the precise question, and it happens to be a decision by this court, allows retroactive reinstatement to confer jurisdiction, Costain Coal Holdings, Inc. v. Resource Investment Corp., 15 F.3d 733, 734 and n. 3 (7th Cir. 1994), contrary to (and without discussing) the general principle (an exception is discussed below) that jurisdiction is determined as of the date of the suit; and on that date, before reinstatement, the corporation had no corporate charter.

An approach consistent with the general principle, but which leads to the same result in this case as the approach in Costain would, makes the question of what state a corporation is a citizen of if its corporate charter has been revoked depend on the status of such an entity under the law of the state that granted (and later revoked) the charter. Most states sensibly permit a corporation whose charter has been revoked to continue nevertheless to operate as acorporation, specifically for purposes of suing and being sued, until it is actually dissolved. See, e.g., Paper Systems Inc. v. Mitsubishi Corp., 193 F.R.D. 601, 607-08 (E.D. Wis. 2000); Clipper Air Cargo, Inc. v. Aviation Products Int'l, Inc., 981 F. Supp. 956, 958-59 and n. 3 (D.S.C. 1997); Illinois Central Gulf R.R. v. Arbox Three Corp., 700 F. Supp. 389, 390-91 (N.D. Ill. 1988). Oklahoma, the state of incorporation of the defendant in question (Subscription Plus), is one of those states. 18 Okla. Stat. sec. 1099; Polk v. Unknown Trustees, Successors & Assigns of Three-In-One Oil & Gas Co., 298 P.2d 432, 435-36 (Okla. 1956) (per curiam). And, for icing on the cake, Oklahoma also has a statute making reinstatement of a corporation's charter retroactive. 18 Okla. Stat. sec. 1120(E). We conclude that the revocation of Subscription Plus's corporate charter did not affect its status for diversity purposes.

The complaint describes another defendant, Mutual Fire and Automobile Insurance Company, as a "foreign insurer authorized to conduct business in Louisiana"--which says nothing about where its principal place of business is (or its state of incorporation, but we have learned that it is Ohio, an answer that does not destroy complete diversity). In the plaintiffs' brief on appeal, Mutual is described as "a citizen of a state other than Louisiana, with its principal place [of business?] in a State other than Louisiana." But how can the plaintiffs know that the company's principal place of business is not in Louisiana if they don't know where its principal place of business is? We doubt that the plaintiffs conducted a census of all businesses whose principal place of business is in Louisiana and discovered that Mutual Fire and Automobile Insurance Company is not one of them. No matter. The company was later dropped as a party, and under Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 837 (1989), a want of complete diversity can be cured by dropping the party that made diversity incomplete.

With subject-matter jurisdiction secure, we turn to the transfer issue and the merits, first sketching in the factual background.

Subscription Plus, owned and operated by a woman named Karleen Hillery, is engaged in the business of processing magazine subscriptions. It contracted with Y.E.S.!, a sales agency, to secure magazine subscriptions for Subscription Plus. The Wilds' son Joseph was a salesman employed by Y.E.S.! The Wilds live in Louisiana, and Joseph Wild was hired there.

The salesmen would travel in groups in vans to various states to sell subscriptions. Y.E.S.!'s owner, Lane, bought a green van and employed a man named Holmes to drive it. (The color turns out to be relevant, as we'll see later but can ignore for now.) While driving the sales crew in Wisconsin after a day of door-to-door subscription selling, Holmes, noticing that he was being pursued by a police car and not having a valid driver's license, tried to switch seats with one of the passengers, lost control, and crashed the van. Seven members of the sales crew, including young Wild, were killed and the others injured. Suits were brought on behalf of all the victims except Wild in a Wisconsin state court, where the suits were consolidated and are pending. Besides suing Hillery, Lane, Holmes, Subscription Plus, Y.E.S.! and the dealership that sold the van, the Wilds sued the liability insurers of these defendants; it could do this because Louisiana, like Wisconsin, is a direct-action state, meaning that a tort plaintiff can sue his injurer's liability insurer as well as the injurer.

Section 1406(a) of the Judicial Code provides that if a suit is brought in a district that is not a proper venue under 28 U.S.C. sec. 1391, the judge can transfer it to any district "in which it could have been brought." The district judge in Louisiana found that venue in this diversity suit was not properly laid in Louisiana because none of the defendants resided there or could be served there (or elsewhere under Louisiana's long-arm statute) and "a substantial part of the events or omissions giving rise to the claim" had not taken place there either. 28 U.S.C. sec. 1391(a)(2). There is no serious contention that the judge erred in this ruling or that the Western District of Wisconsin is not a district in which venue can be laid, at least with regard to most of the defendants (and possibly all, as we're about to see). The accident occurred there, and it is clearly the most convenient site for the litigation. All the other suits growing out of the accident have been consolidated there, and while there is no procedure for consolidating those suits with the Wilds' suit because those suits are in state court and the Wilds' suit is in federal court, at least the defendants--who are the same in all the suits, including the Wilds' suit--can localize their defense efforts to one state, minimizing travel time for their lawyers.

The only basis for the motion to retransfer the case was that the district judge had ruled that Hillery could not be served under Wisconsin's long-arm statute, thus forcing the Wilds, unless the case was retransferred, to split their suit between Wisconsin (all the defendants except Hillery) and Louisiana (Hillery). After the judge ruled, the Wilds did bring a suit against Hillery in Louisiana, but it was promptly transferred to Wisconsin (and is pending before the same district judge), because in the interim a Wisconsin state court ruling in one of the cases arising from the accident interpreted Wisconsin's long-arm statute in a way that makes clear that Hillery is within the statute's reach after all. Forgues v. Heart of Texas Dodge, Inc., No. 99CV0952, slip op. at 2 (Wis. Cir. Ct. Nov. 5, 2001). Although an unpublished opinion of a trial court, and so hardly an authoritative guide to the law of Wisconsin, the parties do not question its soundness.

It is very difficult in these unusual circumstances to get excited about the prospect of bouncing this three-year-old case back to Louisiana, but cf. Shutte v. Armco Steel Corp., 431 F.2d 22, 24 (3d Cir. 1970), even apart from the fact that, since venue cannot be laid in Louisiana, the case would have to be dismissed or transferred elsewhere. Supposing the district judge had gotten Wisconsin law right when she ruled on Hillery's motion to dismiss for want of personal jurisdiction (that is, supposing she had anticipated the decision in Forgues), Hillery would be a party to the present case and the claim against her, which is indistinguishable from that against her company, Subscription Plus, would have gone down the drain with that claim. As it is, the claim against her remains alive in the district court--if barely, since the defendants have moved to dismiss ...

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