Praetorian Insurance Company v. First Class Group, Inc. et al
MEMORANDUM OPINION AND ORDER Signed by the Honorable Robert M. Dow, Jr. on 5/18/2017. Mailed notice(cdh, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
FIRST CLASS GROUP, INC. and,
Case No. 16-cv-9565
Judge Robert M. Dow, Jr.
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiff Praetorian Insurance Company’s motion to remand  this
case to the Circuit Court of Cook County, Illinois pursuant to 28 U.S.C. § 1447(c) for lack of
federal diversity jurisdiction. For the reasons stated below, Plaintiffs’ motion to remand is
On or around March 1, 2001, Plaintiff and Defendant First Class Group, Inc. (“First
Class”) entered into a Program Administrator Agreement (“PAA”) by which First Class was to
solicit, underwrite, and bind Plaintiff’s commercial business insurance policies and to collect and
remit net premiums to Plaintiff. On October 7, 2015, Plaintiff filed a complaint against First
Class and Aileen Chan, the president and owner of First Class, in the Circuit Court of Cook
County for breach of the PAA, breach of fiduciary duty, conversion, fraud, an accounting of First
Class’s deposits into and disbursements from its premium and other accounts, and other state and
common law causes of action.
On November 16, 2015, Chan removed the lawsuit to this Court. See [2-2] (Notice of
Removal in Praetorian Ins. Co. v. First Class Group, Inc., No. 15-cv-10357 (N.D. Ill.)).
Plaintiff moved to remand, and Judge Shah granted the motion, finding that Defendants’ filings
did not establish a reasonable probability of diversity of citizenship and that Defendants, through
statements that discovery on citizenship may be required, had conceded that they did not have an
adequate basis for removal at that time. See [2-3] at 3-4. After conducting discovery in state
court, Defendants filed a second notice of removal to this Court on the basis of diversity
jurisdiction pursuant to 28 U.S.C. § 1332 and 1446(a) on October 6, 2016. See .
Plaintiff again has moved to remand the case. Plaintiff does not challenge the timeliness
of the notice of removal1 or that the amount in controversy exceeds $75,000. In addition, the
parties do not dispute that Plaintiff’s state of incorporation is Pennsylvania or that Defendants are
both citizens of New York. Plaintiff seeks remand on the basis that it has its principal place of
business in New York, thereby defeating any claim of complete diversity between the parties. In
response, Defendants argue that jurisdiction-related discovery supports the conclusion that
Plaintiff’s principal place of business is located in Wisconsin.
“The federal removal statute permits a defendant to remove a civil action from state court
when a district court has original jurisdiction over the action.” Micrometl Corp. v. Tranzact
Techs., Inc., 656 F.3d 467, 470 (7th Cir. 2011) (citing 28 U.S.C. § 1441(a)). In this case,
Defendants assert that the Court has jurisdiction based on diversity of citizenship. See 28 U.S.C.
§ 1332(a). In order for jurisdiction to be founded on diversity of citizenship, there must be
complete diversity of citizenship—i.e., no plaintiff can be a citizen of the same state as any
defendant. See LM Ins. Corp. v. Spaulding Enters. Inc., 533 F.3d 542, 546 n.1 (7th Cir. 2008)
(citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806)). For cases that reach the federal
28 U.S.C. § 1446(c)(1) states that a case may not be removed on the basis of jurisdiction conferred by
section 1332 more than one year after the commencement of the action, with the exception of a specific
situation not applicable here.
court by removal, diversity must exist both at the time of the original filing in state court and at
the time of removal. Altom Transp., Inc. v. Westchester Fire Ins. Co., 823 F.3d 416, 420 (7th
Cir. 2016). The Court considers the entire record in evaluating the existence of diversity
jurisdiction. See Harmon v. OKI Sys., 115 F.3d 477, 479-80 (7th Cir. 1997).
For the purpose of determining citizenship, a corporation is a citizen of “any State by
which it has been incorporated and of the State where it has its principal place of business.” 28
U.S.C. § 1332(c). The Supreme Court has interpreted the phrase “principal place of business” to
mean the place where a corporation’s officers direct, control, and coordinate the corporation’s
activities. Hertz Corp. v. Friend, 559 U.S. 77, 93 (2010). In practice, this “should normally be
the place where the corporation maintains its headquarters—provided that the headquarters is the
actual center of direction, control, and coordination, i.e., the ‘nerve center.’” Id.; see also Wis.
Knife Works v. Nat’l Metal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986). A corporation’s nerve
center is where its “brain” is—that is, the principal place of corporate management. Wis. Knife
Works, 781 F.2d. at 1282; see Chamberlain Mfg. Corp. v. Maremont Corp., 828 F. Supp. 589,
592 (N.D. Ill. 1993) (factors which deal with the brains of the organization should be considered
for the “nerve center” test and factors dealing with “day-to-day operating responsibilities” should
be disregarded). The burden of persuasion for establishing diversity jurisdiction is on the party
who asserts jurisdiction, and that party must support its jurisdictional allegations with
“competent proof.” Hertz Corp., 559 U.S. at 96-97; see Schimmer v. Jaguar Cars, Inc., 384 F.3d
402, 404 (7th Cir. 2004) (a removing defendant must demonstrate “reasonable probability that
subject-matter jurisdiction exists”). Thus, the removing Defendants bear the burden in this case.
In deciding whether to remand a case, the Court assumes the truth of the factual
allegations of the complaint. Sheridan v. Flynn, 2003 WL 22282378, at *3 (N.D. Ill. Sept. 30,
2003). Further, a plaintiff’s choice of forum is presumed valid, and the Court must resolve any
doubts about jurisdiction in favor of remand. See, e.g., Schur v. L.A. Weight Loss Centers, Inc.,
577 F.3d 752, 758 (7th Cir. 2009); Doe v. Allied-Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993)
(“Courts should interpret the removal statute narrowly and presume that the plaintiff may choose
his or her forum”); Schmude v. Sheahan, 198 F. Supp. 2d 964, 966 (N.D. Ill. 2002) (“Generally,
the removal statute is strictly construed, with an eye towards limiting federal jurisdiction”).
Praetorian’s Principal Place of Business
In this case, Plaintiff’s state court complaint alleges that its principal place of business is
at 88 Pine Street, New York, New York. See [2-1] at ¶ 1. Defendants have also submitted the
transcript and exhibits from the October 2016 deposition of Plaintiff’s corporate representative,
who was designated to have knowledge about its principal place of business. See [2-4]. The
following facts are taken from the deposition.
Plaintiff is an insurance company owned by QBE North America (“QBE”), and Plaintiff
maintains an office in New York at the Pine Street address. Id. at 2-3.2 Although Plaintiff does
not have any employees, it has officers and directors, who typically also serve as officers and
directors of QBE. Id. at 2, 4-6. Plaintiff’s President, Chief Executive Officer, Chief Actuary,
Chief Human Resources Officer, Chief Operating Officer, Chief Accounting Officer, Treasurer,
Executive Vice Presidents and others all had their offices in New York at the Pine Street address
in 2015 and they continued to do so as of the date of the deposition. Id. at 4-6. Non-independent
directors and trustees also had offices there. Id. at 6.
The deposition transcript and exhibits were submitted together as one exhibit [2-4]. Accordingly, the
citations herein are to the full pages of the exhibit as filed, not to the particular pages of the condensed
A 2013 annual statement designated the Pine Street location as Plaintiff’s “administrative
office”; annual statements from 2014 and 2015 instead list an address in Sun Prairie, Wisconsin
as Plaintiff’s “main administrative office,” “mail address,” and the “primary location of books
and records.” Id. at 3-4, 39-41. This change in designation occurred because Plaintiff’s “back
office” functions were moved to Wisconsin in 2014. Id. at 3. Specifically, QBE’s, Plaintiff’s,
and other QBE-owned companies’ books and records (including financial records) were
transferred from New York to Wisconsin at this time, as well as an “overwhelming majority of
the finance and accounting,” mail, and information security and technology functions. Id. at 810. All “executive decisionmaking,” however, was and is performed in New York at the Pine
Street office, such as all decisions with legal implications, decisions to open and write coverage
in new markets, and decisions to sell a company, for example. Id. at 4, 10. Only two Senior
Vice Presidents are located in Wisconsin. Id. at 10.
In light of this testimony, Defendants argue that Plaintiff’s principal place of business is
in Wisconsin for the following reasons. First, the annual statements and other documents they
have located (including an A.M. Best Rating Services website printout, Internet webpages, and
information pulled from the department of insurance websites of “several states”) indicate that
Plaintiff’s main administrative office is in Wisconsin. See id. at 35-37, 39-45. Second, because
Plaintiff does not have any employees to speak of, its nerve center must be where its records are
kept and where a significant amount of its operations take place—in Wisconsin.
Defendants also argue that Plaintiff has not set forth sufficient evidence to demonstrate that its
corporate decisionmaking occurs in New York.
Under the facts presented, the Court finds that Defendants have failed to carry their
burden of proving federal jurisdiction for several reasons. As an initial matter, the Court
assumes, as it must at this stage, that the factual allegations in Plaintiff’s original complaint are
true, and Plaintiff’s state court complaint specifically alleges that its principal place of business
is in New York. Sheridan, 2003 WL 22282378, at *3. Even if the Court were to disregard this
allegation, it is not persuaded by Defendants’ arguments in favor of finding that Wisconsin is
Plaintiff’s principal place of business.
Hertz directs that a corporation’s principal place of business is where its officers direct,
control, and coordinate its activities. Hertz Corp., 559 U.S. at 93. Here, Plaintiff has offered
uncontroverted deposition testimony that most, if not all, of its officers and directors work out of
its New York office and that all of the decisionmaking that directs Plaintiff’s insurance activities
takes place there. Put differently, New York is where Plaintiff’s “brain” is located. The fact that
Plaintiff’s annual statements and certain other Internet documents list Plaintiff’s “main
administrative office” in Wisconsin cannot overcome that testimony, not only because all doubts
must be resolved in favor of remand (Schur, 577 F.3d at 758), but also because Hertz rejected an
even more compelling version of that logic. There, the Supreme Court stated that merely filing a
government form listing a corporation’s “principal executive office” would not be sufficient
proof, without more, to establish a corporation’s “nerve center.” See Hertz Corp., 559 U.S. at
97. Forms and other Internet documents thus are not determinative of where Plaintiff’s nerve
center is located, and moreover a reference to an “administrative office” does not, in and of
itself, indicate that executive decisionmaking occurs there.
Further, the fact that Plaintiff’s records are kept in Wisconsin and that certain
administrative functions—significant or not—are performed there similarly is not conclusive on
this issue, where the test looks to where a corporation’s top officers direct its activities, not
necessarily where the bulk of a corporation’s publicly visible activities take place. Id. at 96.
Defendants argue that the records and activities in Wisconsin are determinative in this situation,
pointing to Plaintiff’s lack of employees. But this argument ignores the deposition testimony
that Plaintiff has officers and directors who make corporate decisions in New York. In similar
situations, courts have located the nerve center of a holding company by looking to the location
in which its officers or directors meet to make high-level management decisions—not simply
where corporate books are records are located. See, e.g., Johnson v. SmithKline Beecham Corp.,
724 F.3d 337, 356 (3d Cir. 2013) (holding company’s nerve center is where board of directors
meet to make ownership decisions); Cent. W. Va. Energy Co., Inc. v. Mountain State Carbon,
LLC, 636 F.3d 101, 105-07 (4th Cir. 2011) (nerve center of holding company is where high-level
officers work, make decisions, and set policy, regardless of the fact that they do so from the
building of the corporate parent or that they are also engaged in affiliated companies’ business);
Lewis v. Lycoming, 2012 WL 2422451, at *5 (E.D. Pa. June 27, 2012) (holding company’s nerve
center is the place where its officers make major business decisions, not the location of its
“public persona”). More appropriately, the “back-office” functions that take place in Wisconsin
are part of Plaintiff’s day-to-day operations, or its metaphorical “body,” and thus are not
pertinent to the nerve-center test. See Chamberlain Mfg. Corp., 828 F. Supp. at 592.
Plaintiff cites CPS Timberlands, LLC v. Chesapeake La., LP, 2016 WL 4004867 (W.D.
La. May 10, 2016), report and recommendation adopted by 2016 WL 4004867 (W.D. La. July
25, 2016). There, the court held that a removing defendant had proved that its own principal
place of business was in Arizona where it submitted a sworn statement that its corporate office
and headquarters was in Arizona, its very few corporate activities were carried out by officers
and employees in Arizona, and its corporate records were stored there as well. Id. at *4. The
court further concluded that evidence that the removing defendant had a significant number of
officers in Texas and other connections to that state (including having principal business offices
there, as designated on administrative filings) was insufficient to sustain remand. Notably, there
was no evidence in that case that the officers located in Texas did anything to direct corporate
activities. Id. at *3. It appears that the evidence in favor of diversity produced by the removing
defendant in CPS Timberlands—who was in the posture of proving its own nerve center, not
disproving the nerve center of its opponent—was much more competent and certain than the
record shows here. Based on what is before this Court, it reaches a different conclusion.
Defendants also argue that Plaintiff has not set forth enough evidence for the Court to
find that Plaintiff’s nerve center is in New York, but this argument misses the mark because it is
Defendants, not Plaintiff, who bear the burden of persuading the Court that diversity jurisdiction
exists. In any event, Defendants’ attempts to call into question the degree of decisionmaking that
takes place in New York again do nothing more than cast shades of suspicion that are easily
resolved in Plaintiff’s favor.3 Despite having conducted months of discovery on the issue of
jurisdiction, Defendants have failed to prove that diversity jurisdiction is reasonably probable in
this case. Schimmer, 384 F.3d at 404.
As a final point, the Court notes that Hertz warned courts to guard against jurisdictional
manipulation by ensuring that a corporation’s headquarters is actually its center of direction, “not
simply an office where the corporation holds its board meetings” (Hertz Corp., 559 U.S. at 93),
or “nothing more than a mail drop box, a bare office with a computer, or the location of an
Specifically, Defendants’ argument that “some” decisionmaking “must have taken place in Wisconsin”
because three corporate signatories on Plaintiff’s 2015 annual statement signed the document in
Wisconsin is unconvincing. See  at 4 (emphasis in original). Similarly, Defendants’ argument that
their research indicates that Plaintiff’s then-CEO resided in Exton, Pennsylvania in 2015 cannot overcome
Plaintiff’s allegations and evidence that its corporate decisions were made in New York. Id. Both
arguments ignore modern means of travel and imply that corporate decisionmaking must take place on
every day of the year and in only one location to satisfy the nerve center test. The Court does not agree
with Defendants’ premise, nor does it find that their arguments undermine Plaintiff’s evidence for
purposes of this analysis.
annual executive retreat” (id. at 97). Nothing in the record here suggests that Plaintiff’s New
York nerve center is a jurisdictional fabrication. To the contrary, the evidence in the record,
viewed with the understanding that the removal statute is interpreted narrowly and in favor of
remand, points to the conclusion that Plaintiff’s principal place of business is in New York. Id.
at 96 (the “nerve center” test “points courts in a single direction, towards the center of overall
direction, control, and coordination”). Therefore, complete diversity of citizenship does not
exist, and removal of the action to this Court was improper.
The next issue to consider is whether Defendants should be ordered to pay Plaintiff’s fees
in connection with their (second) wrongful removal. 28 U.S.C. § 1447(c) permits a district court
to require payment of costs as part of its remand order. See Martin v. Franklin Capital Corp.,
546 U.S. 132, 138 (2005). The Supreme Court has held that Section 1447(c) imposes neither a
bias in favor of remand fee awards nor a strong presumption against such awards: “The statutory
language and context strike us as more evenly balanced * * *; we see nothing to persuade us that
fees under § 1447(c) should either usually be granted or usually be denied.” Id. 138-39.
In general, “if, at the time the defendant filed his notice in federal court, clearly
established law demonstrated that he had no basis for removal, then a district court should award
a plaintiff his attorneys’ fees.” Lott v. Pfizer, Inc., 492 F.3d 789, 793 (7th Cir. 2007); see also
PNC Bank, N.A. v. Spencer, 763 F.3d 650, 654 (7th Cir. 2014) (per curiam) (affirming award of
fees and costs to plaintiff where there was no objectively reasonable basis for federal jurisdiction
or removal); Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 410 (7th Cir. 2000) (affirming
award of fees and costs where “[r]emoval was unjustified under settled law.”). The decision to
award costs and fees rests within the district court’s discretion. Martin, 546 U.S. at 137-39.
At this time, the Court declines to find that clearly established law demonstrated that
Defendants had no basis for removal, and accordingly, the Court declines to require Defendants
to pay Plaintiff’s costs and expenses. Even so, the Court notes that Defendants’ support for its
second notice of removal is rather thin, especially considering that Defendants bear the burden of
persuading the Court that it has jurisdiction over this matter. In making their arguments,
Defendants conclusorily discredit the deposition testimony and complaint allegations pointing to
New York as Plaintiff’s nerve center and instead rely on less persuasive evidence in order to
make their motion before the one-year cut-off. Defendants’ arguments based on that evidence
were rejected by Judge Shah and they are rejected here, as they are in conflict with the directives
For the foregoing reasons, Plaintiffs’ motion to remand  this case is granted, and the
Court remands this case to the Circuit Court of Cook County, Illinois for further proceedings
Dated: May 18, 2017
Robert M. Dow, Jr.
United States District Judge
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