CostCommand, LLC v. WH Administrators, Inc.
2016 U.S. App. LEXIS 7010
| D.C. Cir. | 2016Background
- CostCommand (an LLC owned by Vance, a Maryland citizen) sued Turner, WH Administrators, Inc. (WHA), and two California companies, alleging wrongdoing that destroyed CostCommand’s business.
- WHA was incorporated in Texas; parties disputed WHA’s principal place of business (Texas v. Maryland), which determines corporate citizenship for diversity jurisdiction.
- WHA’s and Turner’s initial answers admitted WHA’s principal place of business was Houston, Texas; later they corrected those answers, saying the principal place of business was Bethesda, Maryland, and submitted affidavits (Turner and Bob Ring).
- The district court ordered supplemental filings, found on the record that Turner (in Maryland) exercised near-total control of WHA (the “nerve center”), and dismissed the case for lack of diversity jurisdiction.
- CostCommand sought reconsideration and jurisdictional discovery; after limited discovery (Turner deposition and documents) the district court again held WHA’s nerve center was in Maryland and denied reconsideration. CostCommand appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Location of WHA’s principal place of business | WHA’s admitted pleadings and numerous objective indicia (Houston address on filings, bank, taxes, records, meetings) show Texas HQ | Turner actually exercised direction, control, and coordination from Bethesda — WHA’s nerve center is Maryland | Court held WHA’s nerve center was Maryland; diversity lacking, dismissal affirmed |
| Effect of admissions in answers | CostCommand relied on WHA/Turner’s admissions that WHA’s principal place was Texas | Admissions were corrected; California defendants never consented to Texas and contested jurisdiction | Admissions did not bind the court where other parties disputed and defendants amended with affidavits; admissions insufficient to create jurisdiction |
| Relevance of pre-Hertz objective factors (bank, tax, records) | Those objective factors point to Texas and should determine principal place | Hertz’s nerve-center test controls; such factors matter only insofar as they show where high-level officers direct/control the company | Court applied Hertz: objective factors relevant only if they indicate where high-level officers direct/control; here they did not outweigh evidence of Maryland control |
| Adequacy of district-court procedure (reconsideration/discovery) | District court should have given more opportunity/jurisdictional discovery before dismissal | District court permitted limited discovery and considered filings; record supports holding | Court assumed de novo review but affirmed on the merits: limited discovery adequate because record clearly showed Maryland nerve center |
Key Cases Cited
- Hertz Corp. v. Friend, 559 U.S. 77 (establishing the “nerve center” test for a corporation’s principal place of business)
- Caterpillar Inc. v. Lewis, 519 U.S. 61 (no diversity if any plaintiff shares citizenship with any defendant)
- Grupo Dataflux v. Atlas Global Group, L.P., 541 U.S. 567 (citizenship measured at time complaint filed)
- Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826 (individual citizenship determined by domicile)
- Americold Realty Trust v. Conagra Foods, Inc., 136 S. Ct. 1012 (unincorporated associations take citizenship of their members)
- Hoschar v. Appalachian Power Co., 739 F.3d 163 (4th Cir. — consideration of objective factors post-Hertz to locate nerve center)
- Central W. Va. Energy Co. v. Mountain State Carbon, LLC, 636 F.3d 101 (4th Cir. — reaffirming nerve-center touchstone and limited role of pre-Hertz factors)