DANJAQ, S.A. v. PATHE COMMUNICATIONS CORP. No. 91-55878.
979 F.2d 772 (1992)
DANJAQ, S.A., Plaintiff-Appellant, v. PATHE COMMUNICATIONS CORPORATION; MGM-Pathe Communications Co.; Tracinda Corporation; Kirk Kerkorian; MGM/UA Communications Co., Defendants-Appellees.
United States Court of Appeals, Ninth Circuit.
Decided November 12, 1992.
Howard King, Gang, Tyre, Ramer & Brown, Los Angeles, Cal., for plaintiff-appellant.
Eric N. Landau, Christensen, White, Miller, Fink & Jacobs; and Howard Weitzman, Karen Randall, Mark A. Wooster and Lura L. Burton, Katten Muchin Zavis & Weitzman, Los Angeles, Cal., for defendants-appellees.
Before: FEINBERG, GOODWIN and SCHROEDER, Circuit Judges.
SCHROEDER, Circuit Judge:
This appeal involves two arcane issues of subject matter jurisdiction that are of first impression in this Circuit. Both issues relate to the determination of a corporation's principal place of business for purposes of diversity jurisdiction. The first is whether alien corporations are subject to 28 U.S.C. § 1332(c), which states that a corporation is a citizen both of its place of incorporation and the location of its principal place of business. We agree with the district court that an alien corporation, like a domestic corporation, is a citizen of both.
The second issue is whether the activities of a subsidiary corporation — not a party to the litigation — should be considered to determine the principal place of business of
The final issue is to determine the principal place of business of Plaintiff-Appellant Danjaq, S.A., a Swiss corporation. We conclude the district court correctly determined that place to be California, where appellant's business activities are conducted. Switzerland, where the corporate offices are located, serves merely as Appellant's administrative headquarters. We affirm.
Danjaq is engaged in the development and production of motion pictures involving James Bond. In 1962, Danjaq and United Artists ("UA"), later succeeded by MGM/UA ("MGM"), entered into a Distribution Agreement whereby the latter was granted the exclusive commercial rights to the Bond movies.
Danjaq is incorporated in Switzerland, where its sole director, Gerald Schlaeppi, resides. Schlaeppi admittedly knows little about the film business and serves as a director of some fifteen other corporations. Laussane is the site of all Danjaq board of director and stockholder meetings, and is the location of all administrative records. All of Danjaq's financial transactions take place in Switzerland, including the payment of Swiss taxes.
Since 1986, Danjaq's sole shareholders have been Albert and Dana Broccoli. The Broccolis have resided in Los Angeles, California for over twenty years. Albert Broccoli co-founded Danjaq and is the principal decisionmaker for the development of the Bond films. Broccoli maintains an office in the MGM building in Culver City, California.
Much of the actual production of the Bond films is carried on by Eon Productions, Ltd. ("Eon"), which is based in London, England. Eon oversees the filming of the motion pictures, a duty that often takes it to various parts of the world depending upon the script. Generally, the final editing is completed by Eon in London.
In 1990, MGM was acquired by Pathe Communications, resulting in the formation of MGM-Pathe Communications ("MGM-Pathe"). Danjaq brought this action alleging breach of contract, breach of fiduciary duty, conspiracy to do the same, and copyright infringement. Specifically, Danjaq charged that the defendants were licensing the Bond movies in a manner contrary to the terms of the Distribution Agreement so as to help finance Pathe's acquisition of MGM.
The district court ruled that it had no jurisdiction to hear the first three claims because of a lack of diversity between the parties. The district court also held that the copyright claim against Pathe was meritless. Danjaq, S.A. v. MGM/UA Communications Co.,
DOES 28 U.S.C. § 1332(c) APPLY TO ALIEN CORPORATIONS?
The first question we must consider is whether an alien corporation has dual citizenship for purposes of diversity jurisdiction. Danjaq contends that the diversity statute, in so far as it defines a corporation's citizenship as the place of incorporation and the location of its principal place of business, does not apply to alien corporations. The district court rejected this argument and we agree.
Before 1958, an alien corporation was considered a citizen solely of the foreign state in which it was incorporated for purposes of diversity jurisdiction. See, e.g., National S.S. v. Tugman,
28 U.S.C. § 1332(c). The question presented is whether § 1332(c) applies to alien corporations.
The first case to decide whether § 1332(c) applies to alien corporations was Eisenberg v. Commercial Union Assurance Co.,
The only two federal courts of appeals to entertain this issue have reached the opposite conclusion, holding instead that the statute does apply to alien corporations. See Cabalceta v. Standard Fruit Co.,
S.Rep. No. 1830, 85th Cong., 2d Sess. 4 (1958). Given Congress' reasons, logic dictates that there be no distinction drawn between those corporations incorporated in a state of the United States and those incorporated in a foreign country for purposes of § 1332(c).
MAY A SUBSIDIARY'S ACTIVITIES BE CONSIDERED TO DETERMINE ITS PARENT'S PRINCIPAL PLACE OF BUSINESS?
In order to determine where Danjaq's principal place of business is located, the following threshold question must be addressed: Should the activities of Danjaq's subsidiary Eon be considered to determine Danjaq's principal place of business? This issue is one that has been addressed by only a few courts.
Many courts have addressed the converse of the situation before us today: whether a parent's citizenship can be imputed to the subsidiary for purposes of determining the subsidiary's principal place of business. The general rule derived from these cases is that "in a suit involving a subsidiary corporation, the court looks to the state of incorporation and principal place of business of the subsidiary, and not its parent." 1 James W. Moore et al., Moore's Federal Practice ¶ 0.77[2.-5] (2d ed. 1992); see also Schwartz v. Electronic Data Sys., Inc.,
Appellant urges us to take a different approach on the facts before us. Admittedly, the situation in this case is different. Here we deal with whether a subsidiary's activities may be considered to determine the principal place of business of the parent. However, Appellant offers no reason why this inquiry should lead to a different result. We therefore hold that the citizenship of a parent is distinct from its subsidiary where, as here, there is no evidence of an alter ego relationship.
In the only recent case of which we are aware involving a parent's citizenship, the D.C. Circuit refused to consider a subsidiary's activities. Pyramid Securities Ltd. v. IB Resolution, Inc.,
Appellant's arguments to the contrary are unpersuasive. Appellant relies principally on the Third Circuit case of Kelly v. United States Steel Corp.,
DANJAQ'S PRINCIPAL PLACE OF BUSINESS
Having determined that the diversity statute applies to Danjaq and that the activities of Eon may not be considered, we turn now to Danjaq's principal place of business. The district court found that Danjaq's principal place of business is Los Angeles, California. We agree.
This Circuit recently outlined the tests available to a court to determine a corporation's principal place of business and under what circumstances each should be applied. Industrial Tectonics, Inc. v. Aero Alloy,
Id. at 1094.
To the extent that there is a general rule to be derived from the two approaches, it is "that the bulk of corporate activity, as evidenced by the location of daily operating and management activities, governs the choice of a principal place of business." Wright, Miller & Cooper, supra, § 3635, at 625; see also Industrial Tectonics, 912 F.2d at 1093 n. 3. Using this as a guidepost, it is obvious that Danjaq's principal place of business is California.
Danjaq engages in the development and production of the Bond films. There can be no dispute that Albert Broccoli is the central figure in the development of the Bond films. The district court made the following findings: Broccoli makes virtually every important decision for Danjaq; he and his wife are the sole shareholders and live in Los Angeles; Broccoli maintains an office in Culver City, California; and discussions and negotiations with MGM take place in Los Angeles several times each year.
Appellant offers both Switzerland and London as locations where Danjaq conducts more business than in California. Switzerland, however, is home only to Danjaq's administrative offices and ministerial duties. There are no decisions made in Switzerland that deal with the policy and direction of the corporation. Further, London cannot qualify as the principal place of business. Although most of the actual production of the Bond films occurs there, all activity is carried on by Danjaq's subsidiary Eon. For the reasons discussed above, Eon cannot be considered for purposes of determining Danjaq's principal place of business.
California is the principal place of business of Danjaq. Given the lack of diversity between the parties, the district court correctly dismissed the state law claims.
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