The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge
ORDER DECLINING TO REMAND CASE
On November 17, 2008, the Court ordered Defendants in this case to show cause why the case should not be remanded to California Superior Court. Specifically, the Court requested that Defendants file a statement setting forth their principal places of business as a basis for diversity jurisdiction.
On December 1, 2008, Defendants Federal Insurance Company ("Federal") and Pacific Indemnity Company ("Pacific") filed their response. The Court is satisfied that Defendants have demonstrated that their principal places of business are not located in California.
Federal courts generally use either the "place of operations" test or the "nerve center" test to determine a corporation's principal place of business. Tosco v. Communities for a Better Environment, 236 F.3d 495, 500 (9th Cir. 2001). Using the "place of operations" test, a corporation's principal place of business is located in the state where the substantial predominance of its business activity takes place. Id. Courts look to factors including the location of employees, tangible property, production activities, sources of income, and where sales take place to determine whether a corporation's substantial predominance of business activity is in any given state. Id. In the Ninth Circuit, courts only use the "nerve center" test when no state contains a substantial predominance of the corporation's business. Id. The "nerve center" test places a corporation's principal place of business where the majority of its executive and administrative functions are performed. Id.
Using the "place of operations test, the Court finds it unclear where the substantial predominance of Pacific's business activity is located. Since Pacific has no employees and no tangible property, the Court looks to the location of its sources of income, place of sales, and executive and administrative offices. New York accounts for the largest monetary amount of Pacific's direct written premiums, followed by Massachusetts. Pacific's greatest per capita revenue is located in Massachusetts, followed by New York. Pacific's executive and administrative functions are located in New Jersey. Thus, the Court finds that no state contains a substantial predominance of Pacific's business activity. The Court employs the "nerve center" test and holds that New Jersey, the location of its corporate headquarters, qualifies as Pacific's principal place of business.
Using either the "place of operations" test or the "nerve center" test, Defendants make clear that Federal's principal place of business is not California. The largest number of Federal employees are located in New York. Federal also draws the most direct written premiums and per capita revenue from New York. But, the majority of Federal's tangible property is in New Jersey, as are its executive and administrative functions. Thus, it is unclear whether the substantial predominance of Federal's business is located in New York or New Jersey. Using the "nerve center" test, Federal's principal place of business is in New Jersey. Regardless of the test used, Federal has adequately shown that California is not Federal's principal place of business.
For the reasons stated above, the Court is satisfied that Defendants Federal and Pacific have demonstrated diversity of citizenship. The Court therefore declines to remand this case to the Superior Court.
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