Central West Virginia Energy Co. v. Mountain State Carbon, LLC
2011 U.S. App. LEXIS 7557
| 4th Cir. | 2011Background
- Central Energy and Massey Coal sued Mountain State Carbon and Severstal Wheeling et al. in federal court asserting diversity jurisdiction and a contract-based dispute over coal deliveries.
- Mountain State and Severstal Wheeling moved to dismiss for lack of complete diversity due to Severstal Wheeling’s West Virginia citizenship.
- District court dismissed after Hertz held nerve center is the principal place of business where high-level officers direct, control, and coordinate the company.
- Severstal Wheeling’s officers directing policy from Dearborn, Michigan, while day-to-day operations occur in Wheeling, West Virginia, was the factual core.
- Fourth Circuit granted review to determine whether Severstal Wheeling’s nerve center was in Dearborn, Michigan, under Hertz.
- Court reversed, holding Severstal Wheeling’s nerve center is Dearborn, Michigan, and that diversity jurisdiction exists in favor of plaintiffs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Principal place of business under Hertz? | Nerve center located in Dearborn; officers direct from Michigan. | Operations in West Virginia; nerve center elsewhere. | Nerve center is in Dearborn; Michigan is Severstal Wheeling’s principal place of business. |
| Application of Hertz to this case? | Hertz controls; nerve center test applies. | Plaintiffs’ emphasis on operations would misapply Hertz. | Hertz applies; nerve center governs jurisdiction. |
| Effect of corporate structure and parent company? | Parent influence not dispositive; Severstal Wheeling is separate. | Parent influence may be relevant to control. | Parent relationships do not override nerve center; Severstal Wheeling’s nerve center remains Dearborn. |
Key Cases Cited
- Hertz Corp. v. Friend, 130 S. Ct. 1181 (2010) (nerve center test for principal place of business)
- Athena Auto., Inc. v. DiGregorio, 166 F.3d 288 (4th Cir.1999) (nerve center vs place of operations framework)
- Caterpillar, Inc. v. Lewis, 519 U.S. 61 (1996) (complete diversity requires citizenship of every plaintiff and defendant)
- Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114 (4th Cir.2004) (citizenship of an LLC is the citizenship of its members)
- Peterson v. Cooley, 142 F.3d 181 (4th Cir.1998) (prior tests considered by the Fourth Circuit before Hertz)