Summary
finding that the center of decision-making authority is defendant insurance company's principal place of business
Summary of this case from Allstate Ins. Co. v. FieldsOpinion
No. 3:01-CV-1342-M.
January 11, 2002.
MEMORANDUM ORDER
Before the Court is Plaintiffs' Motion to Remand, filed on August 13, 2001. On October 23, 2001, the Court, in its Memorandum Order and Opinion, found the amount in controversy requirement for diversity jurisdiction had been met by Defendant Southern Farm Bureau Casualty Insurance Company ("Southern"), but that more information was necessary for a determination of Southern's citizenship under 28 U.S.C. § 1332. It ordered the parties to conduct further discovery on the limited issue of Southern's principal place of business and to file supplemental briefing regarding the same. Specifically, the Court ordered the parties to provide the Court with information on the company's organization and the nucleus of its decision-making activity to allow the Court to ascertain, pursuant to the Fifth Circuit's "total activity" test, whether Southern's principal place of business was in Texas or Mississippi.
Pursuant to 28 U.S.C. § 1332(c)(1), "a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business."
Although the supplemental briefing was to be limited to these issues, Plaintiffs, for the first time in their supplement, raised the argument that the "direct action" proviso in 28 U.S.C. § 1332(c)(1) "may" apply to this case, thus deeming the insurer a citizen of the Texas. The claim was not timely made, but even if it were, it is not persuasive. Congress added the proviso in 1964 to prevent plaintiffs from bringing an action directly against an alleged tortfeasor's foreign insurance carrier without joining the alleged wrongdoer as a defendant. See Northbrook Nat'l Ins. Co. v. Brewer, 493 U.S. 6, 9 (1989). The proviso does not affect suits brought by an insured against her own insurer based on its independent wrongs or actions. Blankenship v. Sentry Ins. Co., No. 95-936, 1995 WL 861099, *1 (S.D. Tex. June 1, 1995); Barton v. Allstate Ins. Co., 729 F. Supp. 56, 57 (W.D. Tex. 1990). This suit does not constitute a "direct action."
As set out fully in the Court's October 23, 2001, Memorandum Order and Opinion, the "total activity" test is comprised of the "nerve center" and the "place of activity" tests. Mississippi is Southern's place of incorporation and place of charter. Further, its home office, main administrative office, and mailing address, are all in Mississippi, which is also the primary location of its books, records, and corporate documents. While, on the surface, Mississippi appeared to be the "nerve center" of the company, the Court requested evidence substantiating that the activities outside the state of Mississippi did not establish otherwise.
Nauru Phosphate Royalties v. Drago Daic Interests, 138 F.3d 160, 164 (5th Cir. 1998), cert. denied, 525 U.S. 876 (1999).
As stated in J.A. Olson Co. v. City of Winona, the Fifth Circuit "consider[s] substance over form in determining the nerve center." For instance, in Tubbs v. Southwestern Bell Tele. Co., on the surface, Missouri appeared to be the "nerve center" of the corporation. Yet, in Tubbs, because ten of the corporation's top executives and directors were in Texas, the "nerve center" inference was outweighed. Important to the Court's decision that Texas was the principal place of business was the autonomy of Texas's operations, and the fact that approximately 56 percent of the defendant's total operating revenue was generated in Texas. The "place of activity" test was thus dispositive in favor of Texas, even though the corporation's operations were "far flung," having several satellite offices in different states.
818 F.2d 401, 404 (5th Cir. 1987), cert. denied, 516 U.S. 865 (1995).
846 F. Supp. 551, 552 (S.D. Tex. 1994).
Here, because among the six states in which it sells insurance, Southern accounted for the largest percentage of company sales from its activities in Texas (50.80%), and Mississippi accounted for the lowest percentage of company sales (.24%), the Court paused to assess the company's management and decision-making structure. The evidence demonstrates that the large majority (nineteen out of twenty-seven) of Southern's executive officers and directors are located in and conduct business from Southern's home office in Ridgeland, Mississippi. Of the remaining eight, only one is located in Texas. With few exceptions, Southern's shareholder meetings, Executive Committee meetings, and Board of Directors' Meetings have all been held at Southern's home office in Mississippi. All investment decisions involving Southern's assets, and the company's 401(k) plan, pension plan, group life plan, and long-term disability plan are all administered from its home office in Mississippi. Southern's home office actuarial department, in Ridgeland, Mississippi, recently researched, negotiated, and purchased networked claims-handling software to assist Southern's claims personnel in each of the several states where Southern does business. Further, the state satellite offices do not possess their own mainframe computers; instead, all data entered from the various branches is networked to the mainframe located and maintained at the home office in Mississippi.
It is true that since substantially more insurance business of Southern is done in Texas than Mississippi, Southern has more employees in Texas. However, the supplemental evidence distinguishes this situation from that found in Tubbs. Texas is not the nucleus of Southern's decision-making activity, nor is it the place from which Southern's corporate officers, directors, and executives conduct the company's business. The Court finds that Mississippi is Southern's principal place of business and thus DENIES Plaintiffs' Motion to Remand, which is based on the contention that Southern's principal place of business is in Texas.
SO ORDERED.