1332 to include a corporation's principal place of business as its state of incorporation through the use of the conjunctive "and," Congress could not have meant that a corporation's citizenship would be its principal place of business or its state of incorporation. If Congress intended such a result, it clearly could have expressly stated as such. Since there is nothing in section 1332 to suggest that a corporation's principal place of business should be ignored once that corporation becomes inactive, a strict reading of the statute requires this Court to utilize One Pass' last principal place of business in determining its citizenship.
C. Banta's Activities in Winding-Down One Pass' Business Do Not Alter One Pass' Principal Place of Business
China Basin contends that even if the Court declines to look solely to One Pass' place of incorporation to determine its citizenship, One Pass' principal place of business nonetheless should be considered to be the state of Wisconsin. Specifically, China Basin points to the fact that at the time of the filing of the amended complaint, One Pass was not engaged in revenue-generating activities. In addition, Banta acted on One Pass' behalf by settling the insurance claim and performing other winding-down activities. Thus, by undertaking these tasks on behalf of One Pass, Banta allegedly exercised extraordinary dominion and control over One Pass' corporate activities. China Basin insists that this control transferred One Pass' principal place of business to Wisconsin. Pl.'s Mem. at 6.
As authority for its argument, plaintiff relies on the "principal place of business" test utilized in Industrial Tectonics Inc. v. Aero Alloy,7 912 F.2d 1090 (9th Cir. 1990). In Industrial Tectonics, the court held that where a majority of a corporation's business activity takes place in one state, that state is the corporation's principal place of business regardless of the location of the company's headquarters. Id. at 1094. Because One Pass' California business was destroyed in the fire, plaintiff argues that, as of the time of the amended complaint, all of One Pass' business activity was directed from Wisconsin.
Industrial Tectonics, however, is distinguishable from the instant case.
In Industrial Tectonics, the defendant was operating its core business at the time the complaint was filed. Id. In contrast, at the time China Basin filed its amended complaint, One Pass had ceased doing business; One Pass had no employees or tangible property, was not earning any income, and did not make any purchases or sales. Moreover, nowhere in its opposition papers does plaintiff allege that Banta was conducting One Pass' video business. The only activities undertaken by Banta on behalf of One Pass were in the nature of negotiating the insurance settlement. See Pl.'s Opp'n at 12. Thus, the Court concludes that Banta's principle place of business should not be attributed to One Pass.
D. One Pass is Not the Alter Ego of Banta
Finally, plaintiff argues that One Pass is the "alter ego" of Banta, and therefore, One Pass' principal place of business is the same as Banta's. Pl.'s Mem. at 12-13. China Basin acknowledges that normally, a parent and its subsidiary corporations are seen as separate entities with separate principal places of business for the purpose of determining the existence of diversity jurisdiction. See Lurie v. Loew's San Francisco Hotel Corp., 315 F. Supp. 405, 410 (N.D. Cal. 1970). However, relying on Adams v. Republic Steel Corp., 621 F. Supp. 370, 374 (D.C. Tenn. 1985), China Basin claims this action involves two entities which have not maintained their separation, thus rendering the existence of the subsidiary "a mere fiction."
Nevertheless, the Adams court cautioned that "creation of diversity jurisdiction is one of the least compelling reasons for disregarding" the separate corporate existence of a subsidiary. Id. at 374 (citation omitted). Plaintiff acknowledges that the Fifth Circuit has taken this position, however, it claims that the Ninth Circuit has not adopted this interpretation. Pl.'s Mem. at 13 n.2. Unfortunately, plaintiff fails to offer any Ninth Circuit authority to support its position. In addition, the cases which plaintiff does cite caution that the court should pierce the corporate veil only if the corporation does not observe the formalities of corporate separation. See Cannon Mfg. Co. v. Cudahy Co., 267 U.S. 333, 69 L. Ed. 634, 45 S. Ct. 250 (1925); Leach Co. v. General Sani-Can Manuf. Corp., 393 F.2d 183, 186 (7th Cir. 1968).
Here, China Basin has failed to adduce any compelling evidence to demonstrate that Banta exercised sufficient dominion over One Pass to render the separation between the two entities a mere fiction. Plaintiff points to the fact that One Pass' leased premises were insured under a policy obtained by Banta (to cover a number of business locations leased by its subsidiaries) and that Banta negotiated the insurance claim settlement with its insurer after the fire establishes a lack of corporate separation. Pl.'s Mem. at 14. China Basin, however, fails to provide any authority to support the notion that the mere fact that a parent corporation handles certain insurance matters on behalf of its subsidiary necessarily infringes on the formalities of corporate separation. Thus, the facts presented by China Basin are insufficient to pierce the corporate veil.
Lurie Co., 315 F. Supp. at 410 (citing Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 69 L. Ed. 634, 45 S. Ct. 250 (1925) ("where the corporate separation between a parent and subsidiary though perhaps merely formal, is real and carefully maintained, the separate place of business of the subsidiary is recognized in determining jurisdiction, even though the parent corporation exerts a high degree of control through corporate ownership or otherwise.").
The Court finds that One Pass' citizenship for diversity purposes is both Delaware and California. Because China Basin is a California resident, there is no diversity of citizenship between the parties. Therefore, this Court is without jurisdiction to hear plaintiff's claims against One Pass. Accordingly,
IT IS HEREBY ORDERED THAT:
(1) Defendant One Pass's motion to dismiss be GRANTED.
(2) The above-captioned matter be REMANDED to the Superior Court for the State of California, in and for the City and County of San Francisco. The Clerk of this Court shall mail a certified copy of this order to the clerk of the state court from which this case was removed.
(3) Plaintiff's request to amend its complaint to allege the citizenship of its partners, and the state of One Pass' principal place of business is DENIED.
IT IS SO ORDERED.
DATED: August 14, 1992
SAUNDRA BROWN ARMSTRONG
United States District Judge