LEWIS et al v. LYCOMING et al

Filing 79

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE HARVEY BARTLE, III ON 6/27/12. 6/27/12 ENTERED AND COPIES E-MAILED.(kw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
PAMELA LEWIS, et al.
v.
LYCOMING, et al.

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CIVIL ACTION

NO. 11-6475

MEMORANDUM
Bartle, J.

June 27, 2012
Plaintiffs Pamela Lewis, individually and as personal

representative of the estate of Steven Edward Lewis, deceased,
and Keith Whitehead and John Wroblewski as co-personal
representatives of the estate of Philip Charles Gray, deceased,
bring this diversity action for wrongful death arising out of a
helicopter crash near Liverpool, England.

The eleven defendants

include "Lycoming,"1 Avco Corporation ("Avco"), Textron, Inc.
("Textron"), and Textron Systems Corporation ("TSC").2

Before

the court is the motion of plaintiffs to remand this case to the
Court of Common Pleas of Philadelphia County.
I.
Plaintiffs originally filed this action in the Court of
Common Pleas of Philadelphia County.

The defendants removed it

1. The plaintiffs sued "Lycoming" as a separate entity. The
record establishes that it is an unincorporated division of Avco
Corporation with the full name, "Lycoming Engines Division."
2. The remaining defendants are: Precision Airmotive LLC,
Precision Airmotive Corporation, Schweizer Aircraft Corporation,
Schweizer Holdings, Inc., Sikorsky Aircraft Corporation, United
Technologies Corporation, and Champion Aerospace LLC.

to this court pursuant to 28 U.S.C. § 1441(a) on the ground of
diversity of citizenship and an amount in controversy in excess
of $75,000, exclusive of interest and costs.
§ 1332(a)(2).

See 28 U.S.C.

The complaint alleges that the plaintiffs are and

the decedents whose estates plaintiffs represent were citizens of
the United Kingdom.

It is undisputed that none of the defendants

is a citizen of the United Kingdom or any other foreign state.
Plaintiffs have now moved to remand the action to the
Court of Common Pleas.

Under § 1332(c), a corporation is deemed

a citizen of its state of incorporation as well as the state
where it has its principal place of business.

While Avco's state

of incorporation is Delaware, plaintiffs maintain that its
principal place of business is in Pennsylvania under the "nerve
center" test enunciated by the Supreme Court in Hertz Corp. v.
Friend, 130 S. Ct. 1181 (2010).

Under 28 U.S.C. § 1441(b)(2),

removal from the state court of a diversity action is barred if
"any of the parties in interest properly joined and served as
defendants is a citizen of the State in which such action is
brought."3

This court allowed discovery limited to the issue of

Avco's principal place of business.4

3. Title 28 U.S.C. § 1441 has been amended, effective January 6,
2012, for actions commenced after that date. This specific
language has not changed.
4. While briefing on the propriety of removal was pending, the
plaintiffs filed a motion to collaterally estop Avco from
relitigating a determination as to its principal place of
business because a similar issue had recently been decided by
another judge in this court. We denied that motion. See Lewis
(continued...)
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The corporate tree of which Avco is a part is somewhat
complex.

Avco is a corporation whose sole shareholder is

Textron.

Textron has various subsidiaries and affiliates,

including Avco.

Avco is a holding company primarily in the

business of manufacturing products for the United States
Government and commercial customers, including military vehicles,
weapons, electronic surveillance, and aircraft engines.
various subsidiaries, including TSC.

It has

Avco also has seven

Operating Units, including Lycoming Engines Division, which
plaintiffs call Lycoming.5

The manufacturing facility of

Lycoming Engines Division ("Lycoming") is located in
Williamsport, Pennsylvania.
Avco has three members of its Board of Directors, W.
Robert Kemp ("Kemp"), Frederick M. Strader ("Strader"), and
Robert J. Sullivan ("Sullivan").
Wilmington, Massachusetts.

All three are located in

Avco's financial books and records

are housed in a building at 201 Lowell Street in Wilmington,
Massachusetts, which is owned by TSC.
the building say "Textron Systems."

Signs in front of and on
Within this building is an

8'x8' office which is claimed to be Avco's headquarters.

There

4.(...continued)
v. Lycoming, No. 11-6475, 2012 U.S. Dist. LEXIS 64986 (E.D. Pa.
May 9, 2012).
5. The other Operating Units are AAI Logistics & Technical
Services Division, AAI Test and Training Division, AAI Unmanned
Aircraft Systems Division, Textron Defense Systems, Textron
Marine & Land Systems Division, and Textron Systems Advanced
Systems Division.
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are labels next to the door of this office which indicate that
Avco is located there.

Avco has no dedicated phone line or web

site.
Eighteen officers were elected at the most recent
meeting of Avco's Board of Directors, which lasted five minutes
and was held in Strader's office in Wilmington, Massachusetts on
May 10, 2011.

This meeting was the only in-person Board of

Directors meeting of Avco.
this meeting.

Kemp, Strader, and Sullivan attended

One of the officers elected at this meeting has

since resigned, leaving seventeen Avco officers.

Eight of these

officers are located in Wilmington, Massachusetts including:

the

President and Chief Executive Officer; the Executive Vice
President and Chief Strategy Officer; the Senior Vice President,
Treasurer, and Chief Financial Officer; and the Vice President
and Secretary.

In addition, three officers are located in Rhode

Island, two in Maryland, one in Texas, and one in the District of
Columbia.

The final two officers, Michael Kraft and David Dawes,

are located in Williamsport, Pennsylvania.

All of the officers

of Avco also hold positions at other affiliated companies,
including at TSC and Textron and within the Lycoming division.
Lycoming has eight sales managers.

Four are in Williamsport,

Pennsylvania, while two are in Texas, one in Spain, and one in
New Zealand.

None is in Massachusetts.

In addition to electing officers at the May 10, 2011
meeting of the Avco Board of Directors, the Board passed a
resolution regarding the "Designation of Authorized Signatories
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for Lycoming Engines."

It authorized the President or any Vice

President of Avco together with the Secretary or any Assistant
Secretary of Avco to designate certain employees of Lycoming as:
named "officers" or authorized signatories of the
Lycoming Engines Division and who shall be
authorized and empowered, severally or jointly
depending upon the terms of the designation, and
subject to all conditions thereby imposed and
applicable Corporation policies and procedures,
including, but not limited to, obtaining all
necessary approvals and appropriate legal review,
to sign, seal with the corporate seal, and execute
and deliver in the name and on behalf of the
Corporation with respect to the Lycoming Engines
Division, contracts, agreements, purchase orders,
bids, bonds, applications, reports, certificates,
affidavits or other documents or instruments
relative to or in connection with any work,
property, purchase, contract, service or
production of any kind which may be directly or
indirectly carried on or performed by the Lycoming
Engines Division of the Corporation....6
(emphasis added.)
Strader is the President and Chief Executive Officer of
Avco.

He maintains an office at 201 Lowell Street, Wilmington,

Massachusetts.

Strader meets weekly, in person or by telephone,

with the senior leadership from each of Avco's businesses,
including Lycoming.

He also reviews and approves monthly

financial reports and strategic plans for each of Avco's
businesses, including Lycoming, which are denominated President's
Business Reviews ("PBR").
The general manager of each of Avco's operating units,
including the general manager of Lycoming, submits a Strategic

6. This resolution is part of the minutes of the Annual Meeting
of the Board of Directors of Avco Corporation.
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Business Review ("SBR") to Strader each year.

The SBRs include

an assessment of the relevant industry, competitors, and
strategic objectives of each operating unit, including Lycoming,
over a five-year horizon.

Strader reviews and approves these

SBRs as well as Management Asset Plans ("MAP") for each of the
operating units, including Lycoming, which cover personnel
development succession planning, and executive compensation.

He

prepares performance evaluations for some employees and makes
recommendations with regard to advancement, salary, and bonus for
these employees.

His duties include interviews of candidates for

senior management positions with Avco's businesses and
performance of marketing and sales activities on behalf of Avco.
He further approves certain contracts and performs other
activities relating to the normal operation and management of
Avco's businesses.
Further, under the "Textron Systems Operational
Delegation of Authority Matrix" for Lycoming, Strader's approval
is expressly required for all cooperative business arrangements,
all capital expenditures, any business operations restructuring,
any acquisition or divestiture of business, all engagements of
consultants to do business with the United States government, all
appointments of sales agents and representatives, all press
releases and communications, all collective bargaining
agreements, and all reductions in force.

All of these activities

conducted by Strader occur in Massachusetts.

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Sullivan is the Senior Vice President, Treasurer, and
Chief Financial Officer of Avco.

Like Strader, Sullivan is also

located in Wilmington, Massachusetts.

Strader and Sullivan

together review and approve an Annual Operating Plan for each of
the Avco operating units, including Lycoming.

Strader and

Sullivan annually review and approve a Long Range Plan ("LRP")
submitted by the financial controller of each operating unit,
including Lycoming.
SBRs.

The LRPs are the financial components of the

David Dawes, Lycoming's Director of Finance in

Williamsport, submits the Lycoming LRP to Strader and Sullivan.
Dawes is also an Assistant Secretary of Avco.

He reports

directly to Sullivan.
Michael J. Kraft ("Kraft") is designated the Senior
Vice President and General Manager of Lycoming.

While he is also

an Assistant Secretary of Avco, he is located in Lycoming's
offices in Williamsport, Pennsylvania.
Strader.

Kraft reports directly to

Kraft also meets weekly with Strader, either in person

in Wilmington, Massachusetts or by video conference or
teleconference.

Kraft prepares the monthly PBRs and the annual

SBRs for Strader's review and approval.

He executes transactions

and business activities that have already been authorized by
Strader.

He does not have authority to expend funds which

Strader has not previously approved.
Strader and Sullivan are officers and directors of TSC
in addition to being officers and directors of Avco.

Strader is

the President, Chief Executive Officer, and a director of TSC,
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and Sullivan is the Treasurer and a director of TSC.

When

Strader and Sullivan approve Lycoming's activities, they
sometimes do so in their capacity as TSC officers and directors,
rather than in their capacity as Avco officers and directors.
For example, when they approved an allocation of funds from a
grant from the Commonwealth of Pennsylvania, they did so in their
capacity as "Sr. VP & CFO, TSC" and "President & CEO, TSC."
Similarly, when Lycoming submits to Strader its monthly business
presentation, called the President's Business Review, it is on
either a "Textron Systems" or a "Textron Systems Corporation"
template.
In 2009, "Lycoming Engines, a division of Avco
Corporation, a wholly-owned subsidiary of Textron, Inc." applied
for funding for capital projects from the Commonwealth of
Pennsylvania.

The application was submitted by the Lycoming

County Industrial Development Authority, with "Lycoming Engines,
a division of Avco Corporation, a wholly owned subsidiary of
Textron, Inc." as the sub-applicant.

In the application for the

funding, the sub-applicant identified the directors of Avco, all
with addresses at 201 Lowell Street, Wilmington, Massachusetts.
It also identified the officers of Avco, with their addresses.
Five of the officers were listed with addresses in Rhode Island,
four with addresses in Massachusetts, two with addresses in
Pennsylvania, and one with an address in Texas.

The application

also provided "a listing of the Lycoming Engines Leadership Team,
responsible for the operations and administration of the Lycoming
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Engines facility in Williamsport, Pa."

This listing included

fifteen members of the leadership team.

The address of only one

is identified and that is Williamsport.
The plaintiffs produced to the court various agreements
between "Lycoming Engines Division of Avco Corporation," the
Lycoming County Industrial Authority, and Lycoming County, where
Williamsport is located and where Lycoming has its manufacturing
facility.

These agreements provided for cooperation between

"Lycoming Engines Division of Avco Corporation," Lycoming County,
and the Lycoming County Industrial Authority on the application
to the Commonwealth of Pennsylvania for funding through the
Redevelopment Assistance Capital Program.

The signatures of the

individuals signing the agreements for "Lycoming Engines Division
of Avco Corporation" are illegible.

The agreements state that

the entity has "a principal place of business in Williamsport,
Pennsylvania."

These agreements are dated April 28, 2009 and

August 20, 2009 respectively, and an "Amendment to Agreement"
containing the same language regarding a principal place of
business of the entity is dated December 22, 2011.
II.
Defendants, which have removed this action from the
state court, are the parties that bear the burden of establishing
that they have complied with all substantive and procedural
removal requirements.

Steel Valley Auth. v. Union Switch &

Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987).

The federal

statutes regarding removal are construed strictly in favor of
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remand.

Id.

The district court must remand if there is either a

lack of subject matter jurisdiction or a defect in the removal
process.
1993).

PAS v. Travelers Ins. Co., 7 F.3d 349, 352 (3d Cir.
Here, subject matter jurisdiction is not contested, as

the plaintiffs are citizens of a foreign state and the defendants
are all citizens of the United States.

However, as noted above,

the plaintiffs argue that there is a statutory bar to removal
under 28 U.S.C. § 1441(b)(2) because one of the defendants, Avco,
is a citizen of the state where the action was brought, that is,
because its principal place of business is in Pennsylvania.
"[A] corporation's unincorporated division is not an
independent entity for diversity purposes."

Bruesewitz v. Wyeth

Corp., No. 05-5994, 2006 U.S. Dist. LEXIS 13206, at *9 (E.D. Pa.
Mar. 27, 2006).

A subsidiary corporation, if incorporated as a

separate entity, has its own principal place of business.

Id.

(citing Quaker State Dyeing & Finishing Co., Inc., v. ITT
Terryphone Corp., 461 F.2d 1140 (3d Cir. 1972)).

However, an

unincorporated division is different from a subsidiary
corporation and "has the same citizenship of the corporation of
which it is a part."

Id. (citations omitted).

Accordingly,

Lycoming's citizenship is the citizenship of Avco.
The critical issue before us is whether Avco has met
its burden of proof to establish that its principal place of
business is in a state other than Pennsylvania.

To answer this

question, we must decide whether Avco has shown that its "nerve
center," as defined by the Supreme Court in Hertz Corp. v.
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Friend, 130 S. Ct. 1181 (2010), is in Wilmington, Massachusetts,
rather than in Williamsport, Pennsylvania.
In Hertz v. Friend, the Supreme Court decided on the
meaning of a corporation's "principal place of business" for
purposes of diversity jurisdiction under 28 U.S.C. § 1332(c).

Up

to that point in time the various circuits had provided different
answers and methods for making that determination.
The Supreme Court held:
"principal place of business" is best read as
referring to the place where a corporation's
officers direct, control and coordinate the
corporation's activities. It is the place that
Courts of Appeals have called the corporation's
"nerve center."
130 S. Ct. at 1192.

The Court explained that a corporation's

principal place of business is "the actual center of direction,
control, and coordination, i.e., the 'nerve center' and not
simply an office where it holds its board meetings (for example,
attended by directors and officers who have traveled there for
the occasion)."

Id.

The Court recognized that anomalies might arise under
the nerve center test.

For example, if the bulk of a company's

activities which are visible to the public take place in New
Jersey but the top officers run the business from New York, the
company's principal place of business, for diversity purposes, is
in New York.

Nonetheless, the Court reasoned that the nerve

center test had the advantage of being a clear rule, designed to

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avoid "overly complex jurisdictional administration."

Id. at

1194.
It is evident at the outset that the public persona of
Avco, to the extent it exists, is in Williamsport, Pennsylvania
where Lycoming is located.

It is there that it manufactures

airplane engines and nowhere else.

Two Avco officers are on the

scene who oversee the operations at the site.

In contrast,

Avco's visibility to the public in Massachusetts is virtually
non-existent.
Although Avco's public face is in Pennsylvania, the
record reflects that the top officers of Avco are situated in
Wilmington, Massachusetts.

All major decisions involving the

business are made or approved there.

From his office in

Massachusetts Strader reviews and approves Lycoming's monthly
financial reports and strategic plans, reviews and approves
Lycoming's annual strategic assessments and objectives, and
reviews and approves Lycoming's annual personnel plans.

Strader

prepares performance evaluations for high level employees of
Lycoming, and interviews candidates for senior management
positions at Lycoming.

His approval is expressly required for

all cooperative business arrangements, all capital expenditures,
any business operations restructuring, any acquisition or
divestiture of business, all engagements of consultants to do
business with the United States government, all appointments of
sales agents and representatives, all press releases and

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communications, all collective bargaining agreements, and all
reductions in force.
Under the facts presented, the nerve center of Avco and
thus Lycoming is in Massachusetts.

See Central West Virginia

Energy Co., Inc. v. Mountain State Carbon LLC, 636 F.3d 101 (4th
Cir. 2011).

As the Supreme Court cautioned in Hertz v. Friend,

simply because it may appear to the public that the business of
Avco or Lycoming is centered in Pennsylvania is not controlling.
The nerve center test, the Court acknowledged, sometimes produces
a counterintuitive result.

130 S. Ct. at 1194.

Plaintiffs argue that removal is improper because
Avco's top officers, who are also officers of affiliated
companies such as Textron, often made decisions for Avco or
Lycoming using titles or stationery of companies other than Avco.
Indeed, Strader and Sullivan take on multiple roles within the
affiliated companies that include Textron, Inc., TSC, Avco, and
Lycoming.

However, the plaintiffs do not dispute that Strader

and Sullivan control and direct the activities of Avco.
Accordingly, their location is the location of the "nerve
center."

Even assuming Strader and Sullivan sometimes

disregarded corporate formalities and were acting or appeared to
be acting as officers of Textron or TSC when they made the
various decisions impacting Avco, it is of no moment here, since
the decisions were all made in Massachusetts and not in
Pennsylvania.

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In support of its motion to remand, plaintiffs also
rely on the language in the agreements between "Lycoming Engines
Division of Avco Corporation," Lycoming County, and the Lycoming
County Industrial Development Authority that "Lycoming Engines
Division of Avco Corporation" had "a principal place of business
in Williamsport, Pennsylvania."

(emphasis added).

Significantly, the word formulation found in 28 U.S.C. § 1332(c),
"its principal place of business," is not used.
added).

(emphasis

Under § 1332(c), for purposes of diversity jurisdiction,

a corporation has only one principal place of business.
Friend, 130 S. Ct. at 1185-86.

Hertz v.

The agreements on which

plaintiffs rely imply more than one.

In addition, two of the

three agreements were signed before the Supreme Court handed down
Hertz v. Friend, which decided on the proper interpretation of
the phrase "its principal place of business."

At least with

respect to them, we cannot attribute to Avco a definition the
Supreme Court had not yet articulated.

Furthermore, the Supreme

Court in Hertz v. Friend rejected the argument that the mere
filing of a document, for example, a filing with the SEC stating
the location of a company's principal officers, is sufficient
without more to establish a corporation's principal place of
business.

Accordingly, the wording of Avco's agreements with the

Lycoming Industrial Development Corporation is not helpful to the
plaintiffs.
Plaintiff cites Agostini v. Piper Aircraft Corp., No.
11-7172, 2012 WL 646025 (E.D. Pa. Feb. 29, 2012).
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There, another

judge of this court held that Avco had not proven that its
principal place of business was not in Pennsylvania and ordered
the case remanded to the state court.

It appears that the

evidence produced by Avco in that case was much more limited than
what the record shows here.

Based on what is before us, we reach

a different conclusion.
In summary, Avco has proven that its nerve center, and
thus its principal place of business, is in Wilmington,
Massachusetts.

Complete diversity of citizenship exists and no

defendant is a citizen of the Commonwealth of Pennsylvania.
required amount in controversy has been satisfied.

The

Removal of

the action to this court was proper under 28 U.S.C. § 1441(a) and
is not barred under 28 U.S.C. § 1441(b)(2).
The motion of plaintiffs to remand this action to the
Court of Common Pleas of Philadelphia County will be denied.

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