Ballard et al v. Union Carbide Company et al

Filing 35

MEMORANDUM OPINION AND ORDER granting defendants' 24 MOTION for Leave to File a Surreply in Opposition to Plaintiffs' Reply to Defendants' Opposition to Motion for Remand; directing the Clerk to terminate the parties' 30 JOINT MOTION to extend plaintiffs' time to respond to defendants' motion to dismiss; denying plaintiffs' 10 MOTION to Remand Case to Circuit Court of Kanawha County. Signed by Judge John T. Copenhaver, Jr. on 10/3/2011. (cc: attys; any unrepresented parties) (mkw)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
GREGORY and PATTY BALLARD,
husband and wife, residents of the
State of West Virginia;
INDIVIDUALS AND RESIDENTS OF
WEST VIRGINIA, et al.,
Plaintiffs,
v.

Civil Action No. 2:11-0366

UNION CARBIDE COMPANY, a Delaware
corporation, having its principal place
of business in the State of West Virginia;
DOW CHEMICAL CORPORATION, a Delaware
corporation, with its principal place of
business in Michigan; ELKEM METALS CORPORATION,
a Norwegian corporation, having its principal
offices in the State of Pennsylvania;
GLOBE SPECIALTY METALS, INC., a Delaware
corporation, having its principal place
of business in the State of New York;
GLOBE METALLURGICAL, INC., a Delaware corporation,
having its principal place of business in
the State of Ohio; WEST VIRGINIA ALLOYS, INC.,
a Delaware corporation, having its principal
place of business in the State of West Virginia,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending are plaintiffs’ motion to remand filed June 20,
2011, defendants’ motion for leave to file a surreply, filed
August 2, 2011, and the parties’ joint motion to extend
plaintiffs’ time to respond to defendants’ motion to dismiss
(“joint request for an extension”), filed August 24, 2011.

Both plaintiffs and defendants requested, and were
granted, briefing extensions respecting the motion to remand.
The final brief on the matter, defendants’ proposed surreply, was
received August 2, 2001.

Having considered the parties’

positions concerning the necessity of a surreply, the court
ORDERS that the motion for leave to file that document be, and it
hereby is, granted.

Further, inasmuch as the court has, by entry

of an agreed order on September 9, 2011, adjudicated the joint
request for an extension, the Clerk is directed to terminate that
request.

I.

The representative plaintiffs, and the putative class
on whose behalf they appear, are or were previously residents,
property owners, workers, or students in an area within five
miles of a metals plant located near Alloy, West Virginia (“Alloy
Plant”).

From 1934 to present, the Alloy Plant released

substantial quantities of antimony, arsenic, chromium, iron,
lead, manganese, vanadium, polycyclic aromatic hydrocarbons
(PAHs), silica, and volatile and semi-volatile organic compounds
(“hazardous substances”) into the surrounding community.

Recent

tests indicate that residential areas within the five-mile radius
are contaminated with levels of the hazardous substances.
2

There are a number of defendants.

Union Carbide

Company (“Union Carbide”) owned and operated the Alloy Plant from
approximately 1934 to 1981.
Union Carbide in 2001.

Dow Chemical Corporation purchased

Elkem Metals Corporation next owned the

Alloy Plant from approximately 1981 to December 15, 2005.
According to plaintiffs, Globe Specialty Metals, Inc. (“Globe
Specialty”), Globe Metallurgical, Inc. (“Globe Metallurgical”),
West Virginia Alloys, Inc. (“WV Alloys”), or a combination of one
or more of them, took over the Alloy Plant at that time and
continue to own it.
On March 31, 2011, plaintiffs instituted this class
action in the Circuit Court of Kanawha County.

The class

representatives assert claims for (1) private nuisance,
(2) trespass, (3) medical monitoring, and (4) unjust enrichment.
On May 20, 2011, defendants removed.

Defendants allege two bases

for subject matter jurisdiction under 28 U.S.C. § 1332.

The

first basis is complete diversity of citizenship, and
satisfaction of the jurisdictional minimum, pursuant to section
1332(a)(1).

Defendants allege that they are corporate citizens

of states other than West Virginia and that plaintiffs are West
Virginia residents.

3

The second basis for diversity jurisdiction is the
Class Action Fairness Act of 2005 (“CAFA”), 28 U.S.C. §§ 1332(d),
1453, 1711-1715.

Defendants assert that minimal diversity of

citizenship exists1, the class consists of more than 100
individuals, and the amount in controversy exceeds $5,000,000,
exclusive of interest and costs.
Defendants have also submitted the declaration of
Malcolm Appelbaum, the Vice-President, Treasurer, and a Director,
of WV Alloys.

He attests to the following facts:

WV Alloys primary operations from 2005 until November
2009 were conducted in West Virginia, during which
period it owned the Alloy Plant.
On November 5, 2009, it sold the Alloy Plant.2
All of the officers and directors of WV Alloys are
residents of either Pennsylvania or New York.
WV Alloys did not, at the time this action was
instituted or thereafter, conduct any business in West
Virginia, own the Alloy Plant, or have any employees in
West Virginia.

Minimal diversity of citizenship refers to the CAFA
provision found in section 1332(d)(2)(A) providing that diverse
citizenship occurs if there is “any member of a class of
plaintiffs [that] is a citizen of a State different from any
defendant . . . .” 28 U.S.C. § 1332(d)(2)(A).
1

Plaintiffs assert that WV Alloys has not disclosed the
documents supporting this sale. The parties appear to be
embroiled in an ongoing dispute respecting the voluntary
disclosure of the sale information. Plaintiffs have not sought
leave to conduct jurisdictional discovery on the point.
2

4

Since November 2009, WV Alloys’ activities have been
directed, controlled and coordinated by its officers in
New York, with support from others located in Ohio.
Corporate policy for WV Alloys is set by the officers
in New York.
WV Alloys’ corporate books and records are maintained
in New York.
WV Alloys has maintained no physical headquarters or
offices since November 2009. While there remains a
post office box in the entity’s name in Alloy, West
Virginia, that was never closed, it has not been used
since November 2009.
Since the November 2009 sale of the Alloy Plant, WV
Alloys has “continued to make its normal state
filings[3] . . . but has done so without undertaking a
full review and adjustment of statements in light of
the sale of the Alloy Plant.” (Appelbaum Aff. at 4).
The June 22, 2011, annual report filed with the
Secretary of State by WV Alloys was “pro forma” and
“incorrectly continued to list its principal office as
Alloy, WV, as it had during its ownership between 2005
and 2009.” Id.
On June 20, 2011, plaintiffs moved to remand.

They

challenged, however, only the first ground for removal, asserting
as follows:
[WV Alloys] . . . denies it is a corporate citizen of
West Virginia in the Notice of Removal. However, WV
Alloys has acted at least twice before the state
government and state courts of West Virginia to assert
it is a citizen of West Virginia by representing itself
as a corporation having its principal place of business
and principal office address and mailing address at
Route 60 East, Alloy, Fayette County, West Virginia, as
more fully discussed below.
The states in which filings have been made are West
Virginia and Delaware.
3

5

(Mot. to Rem. at 4).

Plaintiffs assert that, in two cases filed

in 2008, Hall v. Sodder Trucking Company, Inc., Civil Action No.
08-C-186, a civil action pending in the Circuit Court of Fayette
County, and Rogers et al v. Armstrong Public Service District,
2:08-0034, an action instituted in this court, WV Alloys admitted
to having West Virginia corporate citizenship.
Additionally, in corporate filings with the West
Virginia Secretary of State on February 1, 2010, and June 22,
2011, WV Alloys stated that its principal office and mailing
addresses were in Alloy, West Virginia.

The current information

listed for WV Alloys on the Secretary of State’s website
continues to show an Alloy, West Virginia mailing and principal
office addresses, along with a Charleston notice of process
address.4

Filings of a similar nature were apparently made by WV

Alloys in Delaware.
Defendants assert that, under Hertz Corp. v. Friend,
130 S. Ct. 1181 (2010), and Mr. Appelbaum’s unchallenged
affidavit, WV Alloys’ principal place of business is New York.

For the first time in their reply, plaintiffs note that the
Globe Metallurgical, Inc., website reflects that WV Alloys “owns
and operates [its] West Virginia plant . . . .” (Pls.’ Reply at
5 n.2 (citation omitted)). WV Alloys is a wholly owned
subsidiary of Globe Metallurgical, Inc.
4

6

II.

A.

Governing Standard

Title 28 U.S.C. § 1441(a) governs federal removal
jurisdiction.

The statute provides pertinently as follows:

[A]ny civil action brought in a State court of which
the district courts of the United States have original
jurisdiction, may be removed by the . . . defendants .
. . to the district court of the United States for the
district and division embracing the place where such
action is pending. . . .
28 U.S.C. § 1441(a).
U.S.C. § 1332.

One source of original jurisdiction is 28

The two subdivisions of that statute that are

relevant here provide as follows:
The district courts shall have original
jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75,000,
exclusive of interest and costs, and is between -- . .
. citizens of different States . . . .
. . . .
The district courts shall have original
jurisdiction of any civil action in which the matter in
controversy exceeds the sum or value of $5,000,000,
exclusive of interest and costs, and is a class action
in which -- . . . any member of a class of plaintiffs
is a citizen of a State different from any defendant .
. . .
28 U.S.C. § 1332(a)(1) and (d)(2).

7

Our court of appeals has observed time and again that
it is obliged to exercise caution in the removal setting:
We have noted our obligation “to construe removal
jurisdiction strictly because of the ‘significant
federalism concerns’ implicated” by it. Maryland
Stadium Auth. v. Ellerbe Becket Inc., 407 F.3d 255, 260
(4th Cir. 2005) (quoting Mulcahey, 29 F.3d at 151). . .
. Consistent with these principles, we have recognized
that state law complaints usually must stay in state
court when they assert what appear to be state law
claims. See, e.g., Harless v. CSX Hotels, Inc., 389
F.3d 444, 450 (4th Cir.2004); King, 337 F.3d at 424;
Darcangelo v. Verizon Communications, Inc., 292 F.3d
181, 186 (4th Cir. 2002); Cook v. Georgetown Steel
Corp., 770 F.2d 1272, 1274 (4th Cir. 1985).
Lontz v. Tharp, 413 F.3d 435, 440 (4th Cir. 2005).

B.

Governing Law

Title 28 U.S.C. § 1332 provides the general means for
assessing corporate citizenship: “[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 of business.”
28 U.S.C. § 1332(c)(1).

In Hertz, the Supreme Court resolved a

split of authority between the circuit courts of appeal
respecting the meaning of the phrase “principal place of
business.”

It stated as follows:

[W]e conclude that the phrase “principal place of
business” refers to the place where the corporation's
high level officers direct, control, and coordinate the
corporation's activities. Lower federal courts have
8

often metaphorically called that place the
corporation's “nerve center.” We believe that the
“nerve center” will typically be found at a
corporation's headquarters.
Hertz, 130 S. Ct. at 1186; Central West Virginia Energy Co., Inc.
v. Mountain State Carbon, LLC, 636 F.3d 101, 102 (4th Cir. 2011)
(noting that “the Supreme Court [in Hertz] clarified that the
phrase principal place of business refers to the place where the
corporation's high level officers direct, control, and coordinate
the corporation's activities.”) (internal quotation marks
omitted).
The decision in Hertz also discussed the proof
requirements governing the inquiry and who bears the burden:
The burden of persuasion for establishing diversity
jurisdiction, of course, remains on the party asserting
it. When challenged on allegations of jurisdictional
facts, the parties must support their allegations by
competent proof. And when faced with such a challenge,
we reject suggestions such as, for example, the one
made by petitioner that the mere filing of a form like
the Securities and Exchange Commission's Form 10–K
listing a corporation's “principal executive offices”
would, without more, be sufficient proof to establish a
corporation's “nerve center.” . . . [I]f the record
reveals attempts at manipulation -- for example, that
the alleged “nerve center” is nothing more than a mail
drop box, a bare office with a computer, or the
location of an annual executive retreat -- the courts
should instead take as the “nerve center” the place of
actual direction, control, and coordination, in the
absence of such manipulation.
Id. at 1194-95 (citations omitted); Central West Virginia, 636
F.3d at 105 (“It is true that, under Hertz, merely filing a
9

government form listing a principal place of business, without
more, would be insufficient to establish a corporation's “nerve
center.”).
Using the aforementioned standards, the Supreme Court,
noting Hertz’ “unchallenged declaration” on the point, suggested
that “Hertz's center of direction, control, and coordination, its
‘nerve center,’ and its corporate headquarters are one and the
same, and they are located in New Jersey, not in California.”
Hertz, 130 S. Ct. at 1195.

A similar conclusion was reached in

Central West Virginia, as summarized by Judge Wynn in the course
of authoring the panel opinion:
In this case, seven of Defendant Severstal Wheeling,
Inc.'s eight officers, including its chief executive
officer, chief operating officer, and chief financial
officer, set corporate policies and oversee significant
corporate decisions out of Dearborn, Michigan.
Accordingly, under Hertz, Dearborn, Michigan is
Severstal Wheeling's principal place of business. We
therefore conclude that the district court erred in
holding otherwise and reverse.
Central West Virginia, 636 F.3d at 102.

C.

Analysis

As noted, the Appelbaum affidavit reflects that (1) WV
Alloys sold the Alloy Plant in November 5, 2009, long before this
action was instituted, (2) the officers and directors of WV
10

Alloys reside outside West Virginia, (3) WV Alloys no longer
conducts business in West Virginia and has no employees here, and
(4) to the extent the entity engages in any corporate decision
making presently, it is directed, controlled, and coordinated
from New York and Ohio.
Notwithstanding argument and bare denials to the
contrary by plaintiffs, the existing evidentiary record
adequately demonstrates that New York, and perhaps to a lesser
extent Ohio, are the places where WV Alloys’ officers direct,
control, and coordinate the corporation's activities.

The court,

accordingly, concludes that WV Alloys’ principal place of
business is in a state other than West Virginia.
In light of the essentially uncontested Appelbaum
affidavit, the contrary “nerve center” indicators relied upon by
plaintiffs are practically weightless.

WV Alloys’ filings in the

Sodder and Hall case came in 2008, at a time when circumstances
were much different than now.

The record reflects that since the

time of those court filings WV Alloys has divested itself of the
Alloy Plant, corporate decision making now occurs in other
jurisdictions, and WV Alloys has no employees in the state.
Further, Appelbaum has attested to the fact that WV Alloys’ most
recent corporate governmental filings in West Virginia and
11

Delaware are erroneous and the product of oversight and neglect.
Were it otherwise, controlling precedent indicates that the
governmental filings would nevertheless constitute a very shaky
basis upon which to pin corporate citizenship.

See, e.g.,

Central West Virginia, 636 F.3d at 105 (“It is true that, under
Hertz, merely filing a government form listing a principal place
of business, without more, would be insufficient to establish a
corporation's “nerve center.”).
One other contention merits brief mention.

Plaintiffs

assert remand is warranted in view of the unpublished decision in
Mays v. Monsanto, 2010 U.S. Dist. LEXIS 106451 (S.D. W. Va. Sept.
29, 2010).

In Mays, plaintiff asserted that one of the named

defendants, Apogee Coal Company, LLC (“Apogee”), was a diversitydestroying West Virginia entity.

Apogee’s sole member was Magnum

Coal Company, whose principal place of business was in dispute.
But there was also in existence another Magnum entity known as
Magnum Coal Sales, LLC (“Magnum LLC”).
As in this action, certain filings with a governmental
agency suggested a West Virginia nerve center for Magnum Coal
Company, and hence Apogee, and Magnum LLC.

There were also some

unanswered questions respecting the interrelationship, if any,
between Magnum Coal Company and Magnum LLC.
12

The court in Mays

consequently concluded that plaintiff failed to prove that Apogee
was a West Virginia citizen:
The relationship between [the two different] Magnum
[entities] is unclear. The [governmental] filings
suggest that . . . [one entity] . . . , at least, is
subject to some control from Missouri. Nevertheless,
both [Magnum entities] listed the location of their
"Principal Office" as Charleston, West Virginia. The
term "Principal Office" suggests that Magnum is
directed, controlled, and coordinated from that
location. The forms allow companies to list a
"Principal Office," "Mailing Address," and, crucially,
a "Local Office," strongly suggesting that "Principal
Office" refers to the company's overall "nerve center,"
and not simply its principal in-state office.
Mays, 2010 U.S. Dist. LEXIS at 13-14.

As is apparent, the

circumstances in Mays made for a far murkier analysis.

The

undisputed Appelby affidavit provides much greater confidence
that WV Alloys is, in fact, not a West Virginia citizen.
The court, accordingly, concludes that defendants have
satisfactorily shown that it is appropriate to exercise diversity
jurisdiction pursuant to section 1332(a).

The court need not, at

this time, adjudicate the existence of CAFA subject matter
jurisdiction.

It is ORDERED that plaintiffs’ motion to remand

be, and it hereby is, denied.
The Clerk is directed to forward copies of this written
opinion and order to all counsel of record and any unrepresented
parties.
DATED: October 3, 2011

13

John T. Copenhaver, Jr.
United States District Judge