The opinion of the court was delivered by: SAUNDRA BROWN ARMSTRONG
On August 12, 1991, plaintiff China Basin Properties, Inc., ("China Basin") filed the instant complaint in the Superior Court for the State of California, in and for the City and County of San Francisco, against defendant Allendale Mutual Insurance Company ("Allendale"). On August 27, 1991, Allendale removed the action to this Court on the basis of diversity jurisdiction, pursuant to 28 U.S.C. § 1441(b). On January 16, 1992, plaintiff amended its complaint to add Banta Corporation ("Banta") and One Pass, Inc. ("One Pass"), as defendants to this action. Thereafter, China Basin voluntarily dismissed Allendale from this action.
The parties are now before the Court on defendant One Pass' motion to dismiss the complaint on the ground that there is no diversity of citizenship between the parties. After having considered the papers submitted and the arguments of the parties, for the reasons set forth below, the Court grants One Pass' motion to dismiss.
One Pass, a Delaware corporation, operated a video recording and post-production studio in San Francisco, California. One Pass was a wholly-owned subsidiary of Banta, a Wisconsin corporation. On or about July 23, 1987, China Basin and One Pass entered into a lease agreement for premises located in the China Basin Building located in San Francisco. On June 12, 1991, the leased premises were substantially destroyed by fire. The fire also destroyed much of the equipment and other property owned by One Pass.
After the fire, One Pass moved its business to another location in San Francisco. Cecchetti Depo. at 27:24-28:8, Zimmerman Decl., Ex. C. By September 13, 1991, however, One Pass had decided to cease its business operations. Id. at 26:19-22. Thus, by mid-November 1991, all of the video equipment salvaged from the fire had been sold, id. at 40:13-24, Antonio Decl., Ex. A, and with the exception of Roy Cecchetti and one other employee, all remaining personnel had been terminated by One Pass, id. at 33:6-8. Subsequently, an account manager with "Scanline" took over responsibility for the details of the winding down, such as tying up loose ends and paying final bills. Id. at 67:12-68:9.
At the time of the fire, the premises leased by One Pass were insured under a policy issued by Allendale and obtained by Banta. In mid-November 1991, Banta, on behalf of One Pass, negotiated with Allendale and settled One Pass' property loss damage claim for $ 6.5 million. Bardack Decl. Ex. A1. PP 3-5. Allendale subsequently paid $ 6.5 million in insurance proceeds to Banta, which Banta then credited to One Pass. Cecchetti Depo. at 47:13-15, Antonio Decl., Ex. A.
On January 16, 1992, China Basin filed its first amended complaint in this action which advances claims against Allendale, One Pass and Banta. Plaintiff brings this action to recover the insurance loss proceeds paid to Banta. The crux of plaintiff's complaint is that One Pass breached its lease obligations by failing to name China Basin as an additional insured under the Allendale policy, and that both Banta and One Pass have improperly refused to pay certain insurance proceeds as required by the lease.
In response, China Basin offers three arguments as to why One Pass should not be considered a resident of California. First, as a defunct corporation, One Pass' citizenship for diversity purposes is determined exclusively by its state of incorporation, Delaware. Second, at the time the amended complaint was filed, the bulk of One Pass' business was being directed by Banta in Wisconsin. Because Banta exercised extraordinary dominion and control over One Pass' affairs, Wisconsin, Banta's principal place of business, is imputed to One Pass. And finally, because One Pass is really the alter ego of Banta, One Pass' citizenship is the same as Banta's.
A.Complete Diversity Between the Parties Is Required For ...