United States District Court, N.D. Illinois, Eastern Division
June 25, 2004.
S.W.L., INC., an Illinois corporation, Plaintiff,
ENVIRONTECH, INC., a Delaware corporation, Defendant.
The opinion of the court was delivered by: WAYNE ANDERSEN, District Judge
MEMORANDUM, OPINION AND ORDER
This matter is before the Court on plaintiff SWL, Inc.'s motion
to remand the action to the Circuit Court of Grundy County,
Illinois pursuant to 28 U.S.C. § 1447(c) and Federal Rule of
Civil Procedure 12(b)(1) for lack of federal diversity
jurisdiction. For the reasons stated below, the motion to remand
On November 20, 2003, SWL, Inc. filed a complaint against
Environtech, Inc. in the Circuit Court of Grundy County seeking a
declaratory judgment and an accounting of Environtech's royalty
obligations to SWL. The underlying dispute concerns Environtech's
alleged obligation to account for and pay certain royalties to
SWL based on three contracts entered into between the parties. On
April 27, 2004, Environtech filed its notice of removal to this
Court on the basis of diversity jurisdiction pursuant to
28 U.S.C. § 1332. SWL does not challenge the timeliness of the removal or that
the amount in controversy exceeds $75,000. Instead, SWL seeks
remand solely on the basis that Environtech has its principal
place of business in Illinois, thereby defeating any claim for
complete diversity between the parties as SWL is an Illinois
corporation. Environtech does not dispute that its operating
headquarters are located in Illinois but argues that its
principal place of business is located in Arizona and that
jurisdiction is proper in this Court.
Federal Rule of Civil Procedure 12(b)(1) provides for dismissal
of any claim over which the federal court lacks subject matter
jurisdiction. In reviewing a 12(b)(1) motion, a court may look
beyond the complaint and view any extraneous evidence submitted
by the parties to determine whether federal jurisdiction exists.
United Transp. Union v. Gateway Western Ry. Co., 78 F.3d 1208,
1210 (7th Cir. 1996). Federal diversity jurisdiction requires
complete diversity among the parties, and Environtech, as the
party asserting federal jurisdiction in this case, bears the
burden of establishing that the prerequisites of federal
diversity jurisdiction have been satisfied. Minatuaur Promotions
Enters., Ltd. v. Drizin, 1994 WL 110472, *2(N.D.Ill. Mar. 30,
Under the general diversity statute, a corporation is deemed to
be a citizen of any state in which it has been incorporated and
of the state in which it has its principal place of business.
See 28 U.S.C. § 1332(c)(1). The Seventh Circuit has adopted the
"nerve center" test for determining the location of a
corporation's principal place of business. Wisconsin Knife Works
v. National Metal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986).
Generally, courts "look for the corporations's brain." Id. Courts have relied upon a variety of
operational and procedural factors to determine where a company's
nerve center and principal place of business are located
including, among others: (1) the location of business operations
and where the day-to-day operational decisions are made; (2) the
place where important corporate and management decisions are
made; (2) the location of the corporation's officers, directors,
shareholders and general counsel; (3) the location of the
majority of its operating staff; and (4) the location of
corporate records and bank accounts. See generally Targetcom,
Inc. v. Cirrus Systems, Inc., 1995 WL 1071103 (N.D. Ill. Mar. 6,
1995); Chamberlain Manufacturing Corp. v. Maremont Corp.,
828 F. Supp. 589 (N.D. Ill. 1993); Parkside Medical Services Corp. v.
Lincoln West Hospital, Inc., 1990 WL 71276 (N.D. Ill. Apr. 27,
In this case, Environtech admits that its sole business is the
ownership and operation of a landfill located in Grundy County,
Illinois. Environtech also admits that its operating headquarters
are located in Morris, Illinois and that the daily operations of
its business take place in Illinois. Environtech's daily
operations are controlled by three officers, its President,
Vice-President and assistant Secretary, and each of those
officers resides in Illinois. Nevertheless, Environtech asserts
that its nerve center, and hence its principal place of business,
is located in Arizona, not Illinois. Environtech asserts that
Arizona is its principal place of business because its parent
company is headquartered in Arizona and three of its directors
and seven of ten of the corporate officers are located in
Arizona. Environtech also states that while the officers located
in Illinois are chiefly tasked with the day-to-day operational
responsibilities of Environtech's landfill, the major policy and
management decisions of the company remain the responsibility of the officers and directors who are located in Arizona.
Environtech also explains that the corporate records and bank
account are maintained in Arizona.
Based on the record before this Court, Environtech has failed
to carry its burden of proving federal jurisdiction in this case.
Although Environtech asserts that its principal place of business
is located in Arizona, the fact that Environtech's operating
headquarters, business operations and those executives
responsible for the day-to-day operations are located in Illinois
defeats Environtech's claim. Environtech claims that a variety of
its corporate activities occur in Arizona, yet Environtech does
not describe a single specific corporate action or decision that
its purported "brain" or "nerve center" has taken outside of
Illinois whereas SWL has pointed to a variety of corporate
actions taken by Environtech in Illinois. SWL explains that all
negotiations between Environtech and SWL have occurred in
Illinois and that all correspondence from Environtech is on its
letterhead, which lists an Illinois address. Furthermore, SWL
represents that throughout the duration of the parties'
relationship, SWL has not had any meetings with Environtech
outside of Illinois and has never met with or had telephone
conversations with any representatives in Arizona.
We note that this case presents a substantial jurisdictional
question and that it is a close call. Indeed, some of the factors
considered by courts point to Arizona as a principal place of
business. However, the facts that Environtech's sole business is
the ownership and operation of a landfill located in Grundy
County, Illinois and that its sole base of operations is
conducted in Illinois tip the scales. We believe that the nerve
center for Environtech, and thus, its principal place of business
is located in Illinois. Moreover, an error by this Court in
assuming jurisdiction, if reversed on appeal, would result in a
substantial waste of time and energy by both the litigants and the Court without even resolving the dispute between the
parties. There is no question that the state court has
jurisdiction and that this dispute can be resolved with finality
in that court.
Finally, SWL also requests that this Court award costs and
attorneys' fees pursuant to 28 U.S.C. § 1447(c) for having to
file its motion to remand As the language of section 1447(c)
indicates, an award of costs, expenses and attorneys' fees is not
mandatory, and the decision whether to award any costs and
expenses rests with the broad discretion of this Court. Tenner
v. Zurick, 168 F.3d 328, 330 (7th Cir. 1999). Based on the
record before us, Environtech's removal of this matter to this
Court does not warrant the imposition of costs or expenses. The
issues presented in Environtech's removal petition raised a
substantial jurisdictional question for this Court's
consideration, and as noted above, resolution of this issue was a
close call. There is absolutely no indication that Environtech
acted in bad faith or otherwise proceeded without a reasonable
basis for claiming that federal jurisdiction exists in this
Court. Therefore, an award of costs and expenses in this case is
not warranted, and SWL's request is denied.
For all of the foregoing reasons, the motion to remand is
granted, and SWL's request for costs and expenses is denied.
It is so ordered.
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