DESTECH PUBLICATIONS, INC. v. PORT CITY PRESS, INC.
MEMORANDUM AND/OR OPINIONSIGNED BY HONORABLE LAWRENCE F. STENGEL ON 12/1/11. 12/2/11 ENTERED AND COPIES EMAILED.(rf, ) (Main Document 8 replaced on 12/2/2011) (rf, ).
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
DESTECH PUBLICATIONS, INC.,
PORT CITY PRESS, INC.
December 1, 2011
The plaintiff, Destech Publications, Inc. (“Destech”), filed a Motion to Remand
this case, pursuant to 28 U.S.C. §1447, back to the Court of Common Pleas, Lancaster
County, Pennsylvania, from which it was removed by the defendant, Port City Press, Inc.
(“Port City”). I will deny plaintiff’s motion.
Destech filed its Complaint against Port City in the Court of Common Pleas,
Lancaster County, Pennsylvania, alleging breach of contract, negligence, and negligent
and fraudulent misrepresentation. The Complaint alleges that Destech and Port City
entered into a contract whereby Port City would print and deliver books to a technical
program in Naples, Italy for a very large workshop known as the Fifth European
Structural Health Monitoring Workshop 2010. Compl. ¶¶ 10-11.
The books were to be delivered no later than June 25, 2010 to ensure their
distribution for the workshop from June 28 – July 1, 2010. Compl. ¶ 11. However, the
books were not delivered until July 2, 2010, after the workshop had ended and the
attendants had all gone home. Compl. ¶ 12. Destech contends that the late delivery
occurred because Port City chose an unreliable shipping contractor, Cargo Logistics, and
that despite its knowledge that the materials would be late, Port City continually assured
Destech everything would be on time. Compl. ¶¶ 20-21. Because of the alleged breach,
Destech argues it suffered monetary and reputational damages.
On August 30, 2011, Port City removed this action based on diversity of
citizenship, 28 U.S.C. §1332. It is uncontested that Destech is a Pennsylvania
corporation with its principal place of business in Lancaster, PA. Compl. ¶ 1. Port City,
a subsidiary of CADMUS Investments, LLC (“Cadmus”), argues that it is a Maryland
corporation with its principal place of business in Maryland. (Doc. #7 at 2). Destech filed
a Motion to Remand arguing that Port City has its principal place of business in
Pennsylvania and, therefore, does not satisfy the requirements for 28 U.S.C. §1332.
Standard of Review
A. Standard for Remand
Federal courts possess limited jurisdiction and thus “only state-court actions that
originally could have been filed in federal court may be removed to federal court by the
defendant.” Caterpillar Inc. et al. v. Williams et al., 482 U.S. 386, 392 (1987). Federal
district courts have original subject matter jurisdiction over all civil actions between
citizens of different states when the amount in controversy exceeds $75,000.00. See 28
U.S.C. § 1332(a). Complete diversity between all plaintiffs and defendants is required to
remove a case on the basis of diversity jurisdiction.1 See Caterpillar Inc., 519 U.S. 61, 68
Section 1332(c)(1) provides that for the purposes of diversity jurisdiction and removal: “a corporation shall be
deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place
(1996); Strawbridge v. Curtiss, 7 U.S. 267, 267-68 (1806). The defendant bears the
burden of establishing removal jurisdiction. Boyer v. Snap-On Tools Corp., 913 F.2d
108, 111 (3d Cir. 1991).
“Removal statutes ‘are to be strictly construed against removal and all doubts
resolved in favor of remand.’” Id. at 456 (quoting Boyer v. Snap-on Tools Corp., 913
F.2d 108, 111 (3d Cir. 1990) (quoting Steel Valley Auth. V. Union Switch & Signal Div.,
809 F.2d 1006, 1010 (3d Cir. 1989))). 28 U.S.C. §1447 provides “if at any time before
final judgment it appears that the district court lacks subject matter jurisdiction, the case
shall be remanded.” However, there are limited grounds for remand. Aside from the
specific exceptions of lack of subject matter jurisdiction or failure to follow proper
removal procedures, “cases that are properly within the federal court’s jurisdiction after
removal may not be remanded for discretionary reasons not authorized by the controlling
statute.” Thermtron Prods., Inc. V. Hermansdorfer, 423 U.S. 336, 345 n.9 (1976).
B. Standard for Determining Citizenship
For diversity jurisdiction purposes, “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.” 28 U.S.C. § 1332(c)(1). Additionally, “a subsidiary corporation which is
incorporated as a separate entity from its parent corporation is considered to have its own
principal place of business” when determining diversity jurisdiction. Quaker State
Dyeing & Finishing Co. v. ITT Terryphone Corp., 461 F.2d 1140, 1142 (3d Cir. 1972).
Until recently, the Third Circuit applied a “center of corporate activities” test to
determine a corporations “principal place of business,” which looked to the corporation’s
day-to-day activities. Kelly v. United States Steel Corp., 284 F.2d 850, 854 (3d Cir.
1960). However, the Supreme Court recently resolved the Circuit split, overruling the
Third Circuit’s “center of corporate activities” test, and holding that the “nerve center”
test governs. Hertz Corp. v. Friend, 130 S.Ct. 118 (2010). The “nerve center” test directs
courts to look to “the place where the corporation’s high level officers direct, control, and
coordinate the corporation’s activities.” Id. at 1192. The Supreme Court stated that a
corporation’s nerve center will generally 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,’ and not simply an office where the corporation
holds its board meetings...” Id.
Both parties agree that this case involves issues of state law only. Therefore, the
appropriate basis for federal subject matter jurisdiction is diversity of citizenship and the
Court must examine defendant’s principal place of business to ascertain if the citizenship
of the parties is diverse. Destech argues that Port City has substantial business operations
in Pennsylvania because Port City is a division of Cadmus, which has considerable
operations in Pennsylvania, including two locations in Lancaster County. (Doc. #4-1 at
4). Destech cites Cadmus’ businesses in Easton, Ephrata, and Lancaster, PA., and
concludes that these substantial business operations defeat diversity. (Doc. #4-1 at 5).
Port City contends that it maintains only one place of business in Maryland and is
a separate and distinct entity from Cadmus. (Doc. #7 at 4). The Maryland facility is
where all of Port City’s employees are located, where the corporation performs all of its
functions, where the General Manager makes all decisions about corporate activities, and
where Port City manages payroll and reports all financial information. Id. Port City
argues that Destech’s attempt to attribute Cadmus’ Pennsylvania connections is improper
and irrelevant to the nerve center analysis. (Doc. #7 at 5).
I agree with the defendant. By merely alleging that Port City’s parent company
has substantial business operations, Destech provides no factual allegations that support a
finding for remand under the nerve center test. Measuring the total amount of business
activities that the corporation conducts in one particular state and determining whether
they are “significantly larger” than in another State is an incorrect approach to
determining a corporation’s principal place of business under the nerve center test.
Hertz, 130 S. Ct. at 1193. Port City has only one office in Maryland, which it refers to as
its “headquarters.” (Doc. #7 at 2). That office is the place where its high-level officers
direct, control and coordinate the corporation’s activities. Based on these facts, I am
persuaded that Port City has carried its burden to establish that Pennsylvania is not its
principal place of business, and I conclude that, under the nerve center test, defendant’s
principal place of business is Maryland.
For the foregoing reasons, I find that defendant’s principal place of business is
Maryland and diversity of citizenship exists among the parties.
An appropriate Order follows.
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