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ALPHA PORTLAND CEMENT CO. v. MACDONALD ENGG. CO.

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA


November 7, 1963

ALPHA PORTLAND CEMENT COMPANY
v.
MacDONALD ENGINEERING COMPANY and Lastik Products Company, Inc.

The opinion of the court was delivered by: DUSEN

The plaintiff in this action alleges that it is a New Jersey corporation and that its principal place of business is in New York. Defendant Lastik Products Company, Inc. (Lastik), a Pennsylvania corporation, has filed a Motion to Dismiss, claiming that plaintiff's principal place of business is in Pennsylvania and, therefore, the requisite diversity required by 28 U.S.C.A. ยง 1332(c) is lacking. *fn1" The question now before the court is whether plaintiff's principal place of business is in Pennsylvania, for if it is, then the Motion to Dismiss (Document 11) must be granted. The burden of proving that diversity jurisdiction exists is on the plaintiff, who asserts that diversity is present. Thomson v. Gaskill, 315 U.S. 442, 446, 62 S. Ct. 673, 86 L. Ed. 951 (1942).

Kelly v. United States Steel Corp., 284 F.2d 850 (3rd Cir. 1960), is the controlling case in this Circuit for the determination of a corporation's principal place of business. In the Kelly case, the contention that the 'principal place of business' of a corporation was that place where final decisions of the Board of Directors were made was rejected. It was held that the headquarters of the corporation's day-to-day activities and management determined the corporation's principal place of business. '* * * It is the activities rather than the occasional meeting of policy-making Directors which indicate the principal place of business.' Kelly v. United States Steel Corp., supra, 284 F.2d at p. 854. *fn2"

 An examination of the affidavit of Robert E. Hartman (Document 13), plaintiff's Secretary-Treasurer, and the deposition of Harold E. Stepanek (Document 14), plaintiff's Vice President of Finance and Administration, reveals the following: plaintiff corporation has eight executive officers, six of whom have their offices, staffs and residences in Easton, Pa. *fn3" The Easton officers are responsible for the corporation's operations, research, quality control, new development, marketing, manufacturing, technological development, sales, distribution, advertising, financial accounting, credits and collections, acquisitions, attending directors', shareholders', and executive committee meetings, and maintaining liaison with the plaintiff's general counsel. The other two Vice Presidents, one in Alabama and one in New York, are each responsible for the Birmingham and Eastern sales districts.

 The staffs of the officers in Pennsylvania include the Director of Quality Control, Director of Research, Director of Advertising, and the Credit Managers, all of whom are also located in Pennsylvania. These officers meet with their staffs and with each other in Easton to discuss common problems, pass on information, and go over matters prior to their submission to the Board. The Vice Presidents in New York and Alabama have no staffs.

 In his deposition (Document 14), Harold F. Stepanek, the plaintiff's Vice President, stated at page 22:

 'It (the Easton office) is the center of our sales organization, our managing offices, quality control, adververtising -- * * * planning, purchasing department.'

 Major contracts are negotiated and approved in Easton, Pennsylvania. From Easton, instructions, price determinations, budget requests, engineering work, personnel policies, purchases, purchasing procedures, requests for reports, payments for purchases, salary checks, and dividend checks emanate.

 Reports are sent to Easton and most employees are interviewed there. All of the plaintiff's records, accounting records, administrative records, and personnel records, are maintained in Easton.

 The corporate activities performed outside of Pennsylvania are primarily board meetings, solicitation of business, and the production of cement. The Board of Directors, the ultimate authority within the corporation, *fn4" meets regularly throughout the year, usually in New York but with at least one meeting a year in Easton, Pa. The Board considers the plaintiff's financial reports, results of operations prior to the meeting, problem areas, requests for capital, dividends, etc. Other activities, not discussed above, may be compared in the following table: New York Pennsylvania % of total production, 1961 18.6 14.4 % of total production, 1962 21.7 14.5 % of total assets, 1961 24.60 11.25 % of total shipments, 1961 19.0 13.0 % of total shipments, 1962 19.0 15.0 % of hourly employees 16.0 15.07 Number of production plants 2 1 Number of distribution terminals 1 0 Number of offices 2 1 Location of office of general counsel x - Location of office of auditors x - Location of transfer agent and stock registrar x - Location of place where federal income tax return filed - x New York City Easton Office Office No. of Executive-Administrative personnel 3 75 No. of clerical personnel 5 75 No. of sales representatives 2 Unspecified

19631107

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