P (citizen of TX) filed a personal injury claim against D in state court.
D had the suit removed to federal court.
P raised a motion to remand the action to state court for lack of subject matter jurisdiction due to a lack of diversity.
Procedural History:
District Court granted motion to remand to state court, D was TX corporation, lack of diversity, no subject matter jurisdiction.
Issues:
How can a court determine the state of citizenship for a business or corporation?
Holding/Rule:
The primary test a court should use to determine the state of citizenship for a business or corporation is the "total activity" test, an amalgam of the…
The "nerve center" test - the state in which the corporation has its nerve center or "brain," is its principal place of business.
Applied when the corporation is engaged in far-flung and varied activities which are carried on in different states.
The "place of activity" test - the state in which the corporation carries out its operations is its principal place of business.
Applied when the corporation has a collection of "nerve cells serving the common function of making the corporate enterprise go."
Reasoning:
Since D is attempting to invoke the court's jurisdiction by having removed the suit from a TX state court to the TX federal court, it has the burden to show that TX is not its principal place of business.
D is telecom public utility incorporated in MO, operates in multiple states.
56% of total operating revenue generated in TX. (17% MO)
57% of customer bills were bills of TX residents. (17% MO)
50% of total wages paid were paid to TX employees. (27% MO)
59% of equipment and cable in TX. (15% MO)
57% of total assets in TX. (17% MO)
10 of 31 officers and directors in TX. (18 of 31 in MO)
D's business is more analogous to corporations analyzed under the "place of activity" test.
TX accounted for over 55% of all D's activities (20% MO)
TX and MO both contained "nerve cells"
More people in TX were susceptible to the type of injury sustained by the P than the combined number of people in the other four states D services.
D is a public utility and provides telecom services to virtually every citizen of TX. Visibility is an important factor in favor of TX.
It is anomalous to think that D would not be treated fairly in a TX state court, considering its virtual universal visibility.
Federal diversity jurisdiction was intended to ensure fairness, so it is not needed in this case. Also, section 1332(c) was designed to reduce the number of cases coming to federal courts on the ground of diversity.
