MEMORANDUM AND ORDER
I. Background
Plаintiff is a California Partnership which owns and operates China Basin Landing, a San Francisco commercial real estate development. Defendаnt One Pass is a video recording and post-production business incorporated in Delaware. One Pass is a wholly owned subsidiary of Defendant Banta, a Wiscоnsin corporation with its principal place of business in Wisconsin.
Prior to July, 1991, One Pass conducted its business from certain premises at China Basin Landing which it leasеd from Plaintiff. On July 12, 1991, said premises were substantially destroyed by fire. Immediately after the fire, One Pass moved its business to another San Francisco location and informеd Plaintiff of its intent to terminate the lease. By September, One Pass had decided to wind down business operations. By mid-November, One Pass had sold all of the video equipment that survived the fire and had terminated all but two of its employees.
Alleging diversity jurisdiction, Plaintiff brought this action for alleged breach of lease contrаct against One Pass and Banta on November 21, 1991. Defendants move to dismiss pursuant ' to Fed.R.Civ.P. 12(b)(1). Defendants contend that the Court lacks jurisdiction because there is no diversity of citizenship between Plaintiff and Defendants.
II.Discussion
A. Diversity Jurisdiction
For the exercise of subject matter jurisdiction to be proper in a diversity case, no plaintiff can be a citizen of the same state as any defendant. 28 U.S.C. § 1332;
Owen Equipment & Erection Co. v. Kroger,
For diversity purposes, the citizenship of Plaintiff, a partnеrship, is determined by the citizenship of the individual partners.
See City of Clinton, Illinois v. Moffitt,
B. Citizenship of Inactive Corporations
The dispute in this case focuses on the citizenship of One Pass. Plaintiff argues that because One Pass was an inactive corporation on the date the complaint was filed, it had no principal place of business and was a citizen only of Delaware, its place of incorporation.
See also Gavin v. Read Corp.,
Defendants assert, however, that when a corpоration is winding down or has ceased its business activity, it is a citizen both of its state of incorporation and of its last principal place of business.
See also Comtec, Inc. v. National Technical Schools,
While the Ninth Circuit has never ruled on which view of the citizenship of a defunct corporation is proper, Defendants’ reading comports more closely with the plain meaning of 28 U.S.C. § 1332(c), its legislative history and congressional intent. See China Basin Properties, Ltd. v. Allendale Mutual Insurance Co., 1992 U.S.Dist.Lexis 13489 (N.D.Cal. Aug. 17, 1992) (concluding that defunct corporation is citizen of state of incorporation and principal place of business).
Section 1332(c) expressly states that corporate citizenship for diversity purposes is determined both by the corporation’s place of incorporatiоn and its principal place of business. The use of the conjunction “and" implies that Congress intended all elements to be met before diversity jurisdiction will attach. See 104 Cong.Rec. at 12684 (statement of Rep. Cellar) (statute requires that both standards be satisfied).
Moreover, the legislative history of the 1958 amendment to 28 U.S.C. § 1332 makes clear that Congress added the “principal place of business” requirement to prevent corporations from invoking diversity jurisdiction in localities in which they have established local ties. 1 Under the rule Plaintiff proposes, a defunct corporation, no matter how local in character, could remоve a case to federal court based on its state of incorporation. Such a rule would be contrary to Congress’ clearly expressed intеntion.
Moreover, diversity jurisdiction was created to allow litigants to avoid local prejudice in state courts by providing a “neutral” federal forum for сitizens of foreign states or countries.
Guaranty Trust Co. v. York,
Plaintiff contends that even if the Court looks beyond the place of incorporation to the principal place of business to determine the citizenship of One Pаss, One Pass’ last principal place of business was Wisconsin. Plaintiff argues that during the winding down process, Banta exercised “extraordinary dominion and control” over One Pass such that Banta was directing One Pass’ business from Banta’s Wisconsin office. Plaintiff, thus, argues that Banta’s principal place of business should be imputed to One Pass.
Plaintiff has failed, however, to adduce any compelling evidence to support this contention. To the contrary, the record reflеcts that One Pass employees sold the equipment that was salvaged from the fire, paid its bills from a local account, and oversaw its corporаte wind down. While Banta was involved in collecting the fire insurance proceeds, this fact, in itself, does not constitute the exercise of extraordinary dominion and control.
In the alternative, Plaintiff argues that Banta was the alter ego of One Pass. Plaintiff asks the court to “pierce the corporatе veil” and to recognize that, at the time the complaint was filed, One Pass had no identity separate from that of Ban-ta.
For diversity purposes, a parent and its subsidiary are treated as separate entities with separate principal places of business.
Lurie v. Loew’s San Francisco Hotel Corp.,
Thus, One Pass is a citizen of both California and Delaware for diversity purposes. Because Plaintiff is also a citizen of California, the parties lack complete diversity and the Court is without jurisdiction to hear Plaintiff’s claims against One Pass.
Accordingly,
IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss for Lack of Subject Matter Jurisdiction is GRANTED.
Notes
. The Senate Report accompanying the amendment noted:
The fiction of stamping a corporation a сitizen of the State of its incorporation has given rise to an evil whereby a local institution, engaged in a local business and in many cases locally owned, is enabled to bring its litigation into the Federal courts simply because it has obtained a corporate charter from another state.... It appears neither fair nor proper for such a corporation to avoid trial in the State where it has its principal place of business by resorting to a legal device not available to the individual citizen.
S.Rep. No. 1830, 85th Cong., 2d Sess., reprinted in 1958 U.S.Code Cong, and Admin.News 3099, 3101-02.