Bobby HARRIS, et al., Plaintiffs-Appellants, v. BLACK CLAWSON COMPANY, et al., Defendants, Intervenors-Defendants-Appellees, Riverwood International Corp., formerly known as Manville Forest Products Corp., Defendant, Intervenor-Plaintiff-Appellant.
No. 91-4804
United States Court of Appeals, Fifth Circuit
May 29, 1992
961 F.2d 547
Before SMITH and EMILIO M. GARZA, Circuit Judges, and KENT, District Judge.
We REVERSE and REMAND this case to the district court for further proceedings consistent with this opinion.
William S. Watkins, St. Martin, Lirette & Shea, Houma, La., Friedman, McKernan, & Gold, Houston, Tex., for Ruthie A. Roy Ellard, et al.
C.A. Martin, III, Shotwell, Brown & Sperry, Monroe, La., for Riverwood (f/k/a Manville).
Richard C. Raymond, Braunschweig, Rachlis, Fishman & Raymond, New York City, Mike C. Sanders, Thomas Davenport, Jr., Davenport, Files & Kelly, Monroe, La., for Black Clawson.
Kimberly O. Golden, L. Michael Ashbrook, Shafto & Ashbrook, Monroe, La., for Ford, Bacon and Davis.
SAMUEL B. KENT, District Judge.
I.
This case arises out of an industrial accident that occurred on October 20, 1987, at the West Monroe, Louisiana plant of the Manville Forest Products Corporation (MFPC). The accident occurred when steam was injected into a concrete hydrapulper.1 At that time, Bobby Harris, Tra
Plaintiffs below filed suit against several defendants in Louisiana state court on September 23, 1988. Defendants removed to federal court on October 31, 1988. Of those defendants originally sued, only Black Clawson Company remains; the rest were dismissed by the district court on its own motion.2
Subsequently, Plaintiffs were given leave to add Ford, Bacon & Davis (FB & D) and Ford, Bacon & Davis Construction Company (FB & DCC) as defendants. Thereafter, Plaintiffs filed two Motions to Remand, both based on the ground that FB & D or FB & DCC or both were citizens of Louisiana and that, therefore, complete diversity was lacking. These motions were denied. Additionally, Plaintiffs filed Motions for Reconsideration, Second Motions for Reconsideration, and Motions for Leave to Appeal, all of which were denied. Finally, Plaintiffs twice petitioned this court for a writ of mandamus; both petitions were denied.
All of the Defendants moved for summary judgment. These motions were granted on the ground that all of Plaintiffs’ claims are barred by the Louisiana statute of repose. This appeal followed.
II.
It is undisputed that all of the Plaintiffs below are citizens of Louisiana. Appellants argue that FB & DCC is also a citizen of Louisiana, and that, therefore, complete diversity does not exist between the parties.3
A corporation is a citizen of both its state of incorporation and the state in which it has its principal place of business.
Whether diversity jurisdiction exists is determined by examining the citizenship of the parties at the time suit was filed. Smith v. Sperling, 354 U.S. 91, 93 n. 1, 77 S.Ct. 1112, 1113 n. 1, 1 L.Ed.2d 1205 (1957). In the instant case, FB & DCC was inactive at the time suit was filed and had been so for over five years. Thus, at that time, FB
The issue of the location of an inactive corporation‘s principal place of business is one of first impression in this circuit. Appellants argue that despite FB & DCC‘s inactive status, its representations in annual reports and other documents filed with the Louisiana Secretary of State that its principal place of business was in Louisiana establish that Louisiana is FB & DCC‘s principal place of business. Appellants, however, cite no authority to support this proposition. Indeed, at least a few district courts have held that statements made to the secretary of state of a particular state are not binding for purposes of determining subject matter jurisdiction. Gautreau v. Central Gulf S.S., 255 F.Supp. 615 (E.D.La. 1966); Overton v. Rainbo Baking Co., 239 F.Supp. 800, 801 (E.D.Tenn. 1965). Also, it has been held that statements made to the Securities and Exchange Commission are likewise not binding. Uniroyal, Inc. v. Heller, 65 F.R.D. 83 (D.C.N.Y. 1974). Similarly, even though the Internal Revenue Service requires that a corporate return be filed where the corporation has its principal place of business, the fact that a return was filed in a particular state in compliance with this requirement is not determinative for subject matter jurisdiction purposes. C. Wright, A. Miller & E. Cooper, supra, § 3625, at 639.
By contrast, Appellees argue that because FB & DCC is an inactive corporation,6 it has no principal place of business and is a citizen only of its state of incorporation, New York. Thus, it is diverse from each of the Plaintiffs, all of whom are citizens of Louisiana.
This conclusion is consistent with the decisions of several district courts. For example, in Gavin v. Read Corp., 356 F.Supp. 483, 486-87 (E.D.Pa. 1973), the district court held that where, as of the date suit was filed, the defendant corporation had no office, did not pay rent on any office, and had no employees, office equipment, or furniture, it was a citizen only of its state of incorporation, Delaware, notwithstanding that it maintained an agent for service of process in another state.
Similarly, in Kreger v. Ryan Bros., Inc., 308 F.Supp. 727 (W.D.Pa. 1970), suit was filed in Pennsylvania in 1966. The defendant had been engaged in business in Pennsylvania until 1963. Subsequently, however, it had conducted only insubstantial activities in the state and had become almost entirely inactive. The court held that while Pennsylvania might well have been its principal place of business prior to 1963, [f]ollowing the general inactivity of the defendant in 1963, defendant‘s incorporation in Wisconsin and other indicia of its life there acquired new prominence as factors determining its principal place of business. 308 F.Supp. at 728. Thus, the court concluded, the defendant‘s principal place of business was in its state of incorporation.
There also exists, however, a small line of cases holding that the principal place of business of an inactive corporation is the place of its last business activity. This rule is apparently derived from the bankruptcy rule that venue for bankruptcy proceedings is properly laid in the jurisdiction in which a corporation conducted its last business activity.
Both the state of incorporation and the principal place of business should be considered in deciding whether diversity jurisdiction is present. To allow inactive corporations to avoid inquiry into where they were last active would give them a benefit Congress never planned for them, since under such a rule a defunct
In both WM. Passalacqua and Comtec, however, there was substantial evidence that the corporation‘s last business activity took place in the state that was its last principal place of business. WM. Passalacqua, 933 F.2d at 141; Comtec, 711 F.Supp. at 525. Thus, although the WM. Passalacqua and Comtec courts did not purport to apply the total activity test, we believe that, based on the particular facts of each case, the same result would have been reached in each case had the total activity test been applied.
To adopt a rule that the place of an inactive corporation‘s last business activity is relevant to determining its citizenship for subject matter jurisdiction purposes, especially where that activity took place in its last principal place of business is perfectly consistent with the total activity test. A rule that the place of an inactive corporation‘s last activity is always determinative of its citizenship for diversity purposes, however, has the potential to produce the odd result that an inactive corporation may be held to have its principal place of business in a jurisdiction in which it would never have been held to have its principal place of business while it was active. Surely Congress cannot have intended to produce this result either. Thus, a wholesale adoption of the last activity test would appear to be at odds with the total activity test. Therefore, we hold that, while the place of an inactive corporation‘s last business activity is relevant to determine its principal place of business, it is not dispositive.
In the instant case, however, we do not reach the question of the weight to be given to the place of FB & DCC‘s last business activity. Instead, we hold that, as a matter of law, where a corporation has been inactive in a state for a substantial period of time,10 in this case five years, that state is not the corporation‘s principal place of business, irrespective of any representations the corporation may have made to state officials.11 Because FB & DCC was inactive in Louisiana for a substantial period of time prior to the filing of this suit, its principal place of business at the time suit was filed was not in Louisiana.12 Therefore, complete diversity exists between the parties, and the district court properly exercised subject matter jurisdiction.
III.
The Louisiana Statute of Repose,
A.
In the instant case, the record indicates that Black Clawson designed the hydrapulper, and that FB & DCC participated in the construction at least to the extent of making it “site specific.” Appellants, however, argue that the statute does not apply because the hydrapulper tub is not an immovable. Appellants point out that in several documents, including numerous appraisals and mortgages, MFPC has characterized the hydrapulper tub as a movable. In particular, Appellants rely on the Cancellation of Declaration of Immobilization of Machinery and Appliances by Manville Forest Products Corporation, which is dated October 13, 1987. This document declares that all of MFPC‘s machinery, appliances, devices, fixtures, and the like are movables as of August 1, 1929.
Under Louisiana law, however, the peremption period cannot be “renounced, interrupted, or suspended,”14 and the running of the peremption period destroys a cause of action, and it cannot be revived by subsequent acts. Thus, Defendants argue that, assuming that the hydrapulper was an immovable when it was designed, the peremption period began to run in 1975 at the latest, and that no subsequent statements to the contrary can be held to have tolled the statute. Similarly, once the statute had run (by 1985), Plaintiffs’ causes of action were destroyed,15 and no statements by MFPC, such as the 1987 Declaration, could revive those causes of action.
Appellants cite no authority for the proposition that MFPC‘s statements are determinative as to whether the hydrapulper is an immovable, and indeed, it would be odd to conclude that, if the hydrapulper is an immovable under Louisiana law, MFPC‘s statements could convert it into a movable.16 See KSLA-TV, Inc. v. Radio Corp. of Am., 501 F.Supp. 891, 895 (W.D.La. 1980) (the fact that the parties in this cases treated [the object allegedly subject to the statute of repose] as a movable for [purposes of a chattel mortgage] is not controlling), aff‘d, 693 F.2d 544 (5th Cir. 1982).
Under Louisiana law, only tracts of land and their component parts are immovables.
A piece of equipment is permanently attached if it cannot be removed without substantial damage to [itself] or to the immovables to which [it] is attached.
By contrast, in the instant case, the evidence indicates that the hydrapulper tub is a reinforced concrete tub with dimensions of approximately twelve by eighteen feet. Moreover, it is permanently embedded in the ground and cannot be removed without damaging either the tub or the building to which it is attached. Therefore, the tub is distinguishable from the generator in Rochon.
Additionally, in KSLA-TV v. Radio Corp. of Am., supra, the court held that a contract for the design and construction of a 1,709’ 7” antenna was a construction contract and not a sales contract. Therefore, the antenna was an immovable and the statute of repose applied. 501 F.Supp. at 895. In reaching this conclusion, the court noted that in determining whether a contract is a construction contract or a sales contract, Louisiana courts generally ... weigh[] the economics of the situation to determine whether the primary obligation is one to give [sales contract] or to do [construction contract]. Id. at 894 (quoting The Work of the Louisiana Appellate Courts for the 1977-1978 Term—Sales, 39 La.L.Rev. 705, 712 (1979)). The court distinguished the contract for the purchase and installation of the antenna from purchase and installation contracts concerning smaller, more standardized products which can be constructed elsewhere and installed later, such as air conditioners, glass windows and doors, awnings, and the like. In the latter contracts, the installation provisions are only an incidental part of the agreement. The value of the obligation to install the equipment is minimal compared to the value of the equipment itself. Id. at 894. By contrast, it could not be said that the provision providing for the installation of the antenna was incidental to the contract. Id. at 895.
In the instant case, it is difficult to characterize the contracts in the record as either construction contracts or installation contracts. However, it is certain that the tub was constructed on site, and it is simply not possible that such a large structure could be constructed elsewhere and shipped to the site for installation. Moreover, given the size of the tub and the fact that it is embedded in the building in which it is installed, it cannot be said that the installation provision of the contract for the design and installation of the tub was merely incidental to the tub‘s sale.
B.
Appellants also argue that Defendants failed to present any summary judgment evidence as to the date of the acceptance of the contract to design and install the hydrapulper. Therefore, a genuine issue of material fact exists as to whether the peremptive period has run. In particular, Appellants point to the Acceptance of Construction for Contract # MRC 172, which was submitted to the district court. Page 31 of this contract lists specified drawings to which this contract applies. These drawings are identified by drawing numbers. None of the drawings issued by Black Clawson for the hydrapulper contain any of these numbers. Therefore, Defendants have failed to establish the accept
All of this, however, is irrelevant. The contract registered in 1971 is indisputably the tiling contract for the tub. The peremptive period begins to run on the date of registry of acceptance by the owner in the mortgage record.
Moreover, acceptance is only one way to start the running of the peremptive period. It is undisputed that the tub was in use in 1975. Therefore, the owner necessarily took possession of the tub no later than that time. If the statute had not already started running, it began to run at that time.
C.
Plaintiffs also assert that the statute of repose does not apply to products liability actions. This is incorrect. It is true, however, that in Bunge Corp. v. GATX Corp., supra, the Louisiana Supreme Court created a limited exception, for certain failure to warn cases, to the general rule that the statute does apply to products liability cases.20 Bunge concerned a contractor who constructed a grain storage tank, and who subsequently learned that the tank was defective, but failed to inform the owner. Under these circumstances the court held that the contractor‘s failure to warn could fall within the fraud exception to the statute of repose. In the instant case, however, the record contains no evidence that Defendants ever knew that the tub was defectively designed. Therefore, Bunge is not applicable: there is no genuine issue of material fact as to whether their failure to warn should fall under the statute‘s fraud exception.21
D.
Finally, Appellants argue that the Louisiana statute of repose is unconstitutional under both the United States and the Louisiana Constitutions. In the majority of cases relied on by Appellants, however, a statute of repose was held unconstitutional because it could not be squared with a particular provision of a state constitution.22 In the instant case, however, the Louisiana Supreme Court has upheld the constitutionality of section 9:2772 under the Louisiana Constitution. Burmaster v. Gravity Drainage Dist. No. 2, 366 So.2d 1381, 1384-88 (La. 1978). Moreover, while some state courts have held that statutes of repose similar to the one at issue in this case violate the Equal Protection and Due Process clauses of both the federal and their respective state constitutions,23 we are not convinced that section 9:2772 is not rationally related to a legitimate state objective. See Burmaster, 366 So.2d at 1386-87.
Therefore, we conclude that the district court correctly held that all of Plaintiffs’ causes of action are preempted by the Louisiana statute of repose. It is thus unnecessary for us to consider whether a genuine issue of material fact exists regarding any of Plaintiffs’ substantive allegations.
AFFIRMED.