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ROMAN MOSAIC & TILE CO. v. THIOKOL CHEM. CORP.

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA


March 22, 1963

ROMAN MOSAIC & TILE CO., Inc.
v.
THIOKOL CHEMICAL CORPROATION

The opinion of the court was delivered by: DUSEN

The Complaint in this action alleges that plaintiff is a Pennsylvania corporation with its principal office in Pennsylvania and that defendant is a New Jersey corporation with its principal office in New Jersey. The jurisdiction of this court is claimed because of alleged diversity of citizenship. 28 U.S.C.A. § 1332(c) provides:

'(c) 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.'

 Defendant filed an Answer alleging it is a Delaware corporation with its principal place of business in Pennsylvania. It filed the Motion to Dismiss presently before the court on the ground that both parties are citizens of Pennsylvania within the meaning of 28 U.S.C.A. § 1332(c) and that, therefore, the requisite diversity jurisdiction is lacking. Plaintiff admits that defendant is a Delaware corporation *fn1" but contends that its principal place of business is not in Pennsylvania. The question now before the court is whether defendant has its principal place of business in Pennsylvania, for if it does, the Motion to Dismiss (Document 4) must be granted. The burden of proving that diversity jurisdiction exists rests on plaintiff, who asserted that such diversity is present. Thomson v. Gaskill, 315 U.S. 442, 446, 62 S. Ct. 673, 86 L. Ed. 951 (1942).

 The controlling case in this Circuit regarding determination of a corporation's principal place of business for diversity jurisdictional purposes is Kelly v. United States Steel Corporation, 284 F.2d 850 (3rd Cir. 1960). In that case, Judge Goodrich rejected the contention that the 'principal place of business' of a corporation is necessarily where final decisions on corporate policy are made through the Board of Directors and held that, for the purposes of 28 U.S.C.A. § 1332(c), the place where the business activities of the corporation are centered is the corporation's 'principal place of business.' In that case, the Board of Directors had delegated to an 'Operating Policy Committee' the business of conducting the business of the corporation regarding manufacturing, mining, transportation and general operation. It was held that this state (Pennsylvania) where this Committee operated, where a vast majority of the executive and administrative officers and their staffs were located, where the General Solicitor and his staff had their offices, and where there was situate the business headquarters of 34% Of the employees exempt under the applicable Fair Labor Standards Act because they were administrative, executive or professional employees (see 29 U.S.C.A. § 213(a)(1)), was the principal place of the corporation's business. In addition to the determination that the day-to-day corporate activities of the corporation and the management thereof took place in Pennsylvania, the court added the less significant facts that 32.13% Of the corporation's employees worked in Pennsylvania, *fn2" that one-third of the tangible property of the corporation was located there, and that 35% Of the total steel capacity of the corporation was in Pennsylvania, and found that Pennsylvania was the principal place of business under 28 U.S.C.A. § 1332(c).

 Defendant corporation, which has for its purpose the purchasing of licenses, patents, etc., and dealing in them by sale, manufacture, etc., *fn3" has three main divisions: its Rocket Division, conducting the major portion of the company's business, with headquarters in Utah; a Chemical Division with headquarters in New Jersey; *fn4" and a Specialties Division.

 The executive offices of the corporation are in Pennsylvania, *fn5" six of eight 'executive' officers and their staffs are located in that state, *fn6" the financial and accounting offices under the Treasurer are in Pennsylvania, the financial statements are sent from Pennsylvania, Federal Income Tax Returns are filed from Pennsylvania, the shareholders' meetings are held here, and major defense contracts are generally executed in Pennsylvania under direction of the officers.

 Although these factors might well be found sufficient under the 'nerve center' test, *fn7" under the test of the Kelly case, on the present record it cannot be held as a matter of law that Utah is not the principal place of business of the corporation. *fn8"

 Although the defendant alleges that only one executive officer is located in Utah, it states that the Divisions enter into contracts and that the executives in Pennsylvania are 'ultimately' responsible for sales, financing and executive decisions regarding the operation of the company (see Document 10). Since there are 2,412 employees in Utah who are exempt under the Fair Labor Standards Act (which represents over 50% Of the total number exempted) (see Document 12) and since the bulk of the business of the corporation is connected with the Rocket Division, it is difficult to hold that the only executive and administrative personnel are the eight listed by defendant. It is also noted, among other facts, that more of the corporation's employees are located in Utah than elsewhere (45.27%, as opposed to 16.38% In New Jersey and 5.74% In Pennsylvania); that the Utah payroll is by far the highest; that the value of goods shipped from Utah is far higher than the value shipped from any other state (Utah ships 61.80%, New Jersey 10.80%, and Pennsylvania 5.20%); and that more gross tangible assets are located in Utah (38.09% In Utah, 32.64% In New Jersey, and 9.70% In Pennsylvania).

 Although it would have been helpful to the court to have had more information concerning the managerial activities of the corporation, *fn9" the facts above, as well as others on the record, indicate that the defendant has not shown a complete absence of issues of fact concerning diversity of citizenship. *fn10" The Motion to Dismiss will, thereforE be denied, without prejudice to defendant's right to file another motion at a later time (including during the trial) if the record is later supplemented to show that Pennsylvania was the situs of daily corporate activities and management on the date this suit was instituted (April 27, 1962).


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