Opinion
CIVIL NO. 06-1934 (JAG).
August 8, 2007
ATTORNEY FOR PLAINTIFF: José I. Ayala-Santana Ayala Cadiz Law Office, Ponce, PR.
ATTORNEY FOR DEFENDANT: Aurimir Arocho-Torres Manuel Porro Vizcarra Law Office, Guaynabo, PR, Manuel Porro-Vizcarra Manuel Porro Vizcarra Law Office, Guaynabo, PR.
OPINION AND ORDER
Pending before the Court is a Motion to Remand filed by plaintiff Luis Zamora Gonzalez ("plaintiff") on October 20th, 2006. (Docket No. 7). For the reasons discussed below, the Court GRANTS the Motion.
FACTUAL AND PROCEDURAL BACKGROUND
On August 4th, 2006, plaintiff filed a complaint for wrongful discharge against defendant Caribbean Sun Airlines ("CSA") in the Puerto Rico Court of First Instance, San Juan Part. The case was brought pursuant to the special summary proceedings of Puerto Rico Law No. 2 of October 17, 1961, 32 L.P.R.A. § 3114 et seq. (Docket No. 1-2), and relief was requested under Puerto Rico Law No. 80 of May 30, 1976, 29 L.P.R.A. § 185a et seq., and Law No. 115 of December 20, 1991, 29 L.P.R.A. § 194 et seq. CSA was served with summons and complaint on August 21st, 2006. Id.
On September 20th, 2006, CSA timely filed a Notice of Removal based on diversity of citizenship. (Docket No. 1). CSA alleges that it is a corporation organized under the laws of the State of Delaware, with its principal place of business in the State of Florida, whereas plaintiff is a resident of the Commonwealth of Puerto Rico. (Docket No. 1 at 3). CSA also submits that the claim exceeds the jurisdictional amount set in 28 U.S.C. § 1332(a).
On October 20th, 2006, plaintiff moved to remand the case back to state court, arguing that there is no diversity between the parties. (Docket No. 7). Relying on Diaz-Rodriguez v. Pep Boys Corp., 410 F.3d 56 (1st Cir. 2005), plaintiff contends that CSA is a corporation with physical operations and, thus, its principal place of business shall be determined using the "locus of operations" test, which decidedly points to Puerto Rico. Plaintiff proffers the following facts in support of his contention:
1. CSA is a Delaware Corporation on paper only. It has no corporate officers and/or physical operations in that state.
2. CSA only has some executives based in Miramar, Florida, who also provide services to CSA's sister companies and holding companies. CSA has no physical operations of their core business (providing commercial airline passenger service) in the state of Florida.
3. CSA has no physical operations of their core business in any of the 50 States of the Union.
4. The only physical operations that CSA maintains within the jurisdiction of the United States is in Puerto Rico, where it has a hub of operations and its largest and most important workforce.
5. CSA's planes are based in Carolina, Puerto Rico.
6. The majority of flight attendants who work for CSA are based in Carolina, Puerto Rico.
7. The majority of CSA's pilots are based in Carolina, Puerto Rico. Although some of them may fly in from the states, they nonetheless originate and finalize their duties with CSA in Puerto Rico.
8. The majority of CSA's mechanics are based in Carolina, Puerto Rico.
9. CSA originates and/or ends flights to 10 Caribbean destinations from its Puerto Rico hub.
10. CSA has a General Manager based in Puerto Rico that oversees the airlines day to day operations.
11. CSA maintains a Human Resources office in Puerto Rico, which at its peak employed 2 HR Representatives.
12. Puerto Rico is the place where CSA picks up all or the majority of the code share passengers it receives from its code share partners. (U.S. Airways).
13. CSA maintains a Group Sales office in Puerto Rico.
14. Caribbean Sun Airlines Holdings, Inc. is a for profit corporation duly registered in the Puerto Rico State Department's Registry of Corporations bearing corporate number 13524. CSA's physical address is registered as Luis Muñoz Marin International Airport, Terminal B Suite 226, Carolina, PR 00979.
15. CSA advertises in Puerto Rico's newspapers information regarding their constant expansion at the Carolina Airport. (Docket No. 7 at 2-3).
Caribbean Sun Airlines Holdings, Inc. is not a party in this litigation, and no claim of indispensable party has been raised.
On October 30th, 2006, CSA responded (without refuting the facts submitted by plaintiff) that the "locus of operations" test is inapplicable because CSA is a complex airline with operations spread throughout several jurisdictions. (Docket No. 10 at 4). As such, CSA contends that its principal place of business has to be determined under the rubric of the "nerve center" test, which looks to "the location from which the corporation's officers direct, control and coordinate all activities without regard to locale, in furtherance of the corporate objective." Lugo-Vina v. Pueblo International, Inc., 574 F.2d 41, 43 (1st Cir. 1978). Accordingly, CSA asserts that its principal place of business is Florida, inasmuch as its major corporate and financial decisions take place there. Id., at 7.
Plaintiff replied that "CSA's only claim to being a complex corporation with far flung and varied activities is that it is an airline," but that it otherwise fails to "explain in any detail and/or in the context of their particular airline, why they are far flung and complex." (Docket No. 12 at 2-3). Plaintiff also pointed out that CSA had failed to rebut any of the facts proffered to show that the bulk of its physical operations are conducted in Puerto Rico.
CSA countered that its operations are far-flung because it flies to various jurisdictions all over the Caribbean. (Docket No. 14 at 3). Specifically, CSA contrasted its situation with that of Pep Boys PR, see Pep Boys, 410 F.3d at 62, whose operations are located exclusively in Puerto Rico. CSA also stated that courts have consistently applied the "nerve center" test in determining the principal place of business of airlines. CSA thus concluded, citing Sanchez v. UHS Puerto Rico, 223 F.Supp.2d 371 (D.P.R. 2002), that the "nerve center" test is applicable when "corporate operations are spread out over many different jurisdictions, thereby making the analysis of the location of the corporation's physical operations unhelpful." (Docket No. 14 at 4 ¶ 9).
The issue before the Court is to determine the proper test for establishing CSA's principal place of business. As the arguments advanced by the parties illustrate, the question is dispositive in determining whether removal was proper.
STANDARD OF REVIEW
1. Removal/Remand Standard
Pursuant to 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." City of Chicago v. International Coll. of Surgeons, 522 U.S. 156, 163-64 (1997).
When a party questions the propriety of a removal petition, the removing party bears the burden of showing that removal is proper. See, e.g., Danca v. Private Health Care Systems, 185 F.3d 1, 4 (1st Cir. 1999) (citing BIW Deceived v. Local S6, Industrial Union of Marine and Shipbuilding Workers of America, IAMAW District Lodge 4, 132 F.3d 824, 831 (1st Cir. 1997)). Removal statutes are strictly construed against removal. See,Rosselló-Gonzalez v. Calderón-Serra, 393 F.3d 16, 27 (1st Cir. 2004) (citing Shamrock Oil Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941)). When plaintiff and defendant clash about jurisdiction, uncertainties are construed in favor of remand.Burns v. Windsor Ins. Co., 31 F.3d 1092, 1097 (11th Cir. 1994);Asociacion de Detallistas de Gasolina v. Shell, 380 F.Supp.2d 40 (D.P.R. 2005).
DISCUSSION
CSA contends that it is a complex airline with operations dispersed throughout several jurisdictions and, hence, its principal place of business must be determined pursuant to a "nerve center" analysis. Since its "nerve center" is in Florida, CSA asserts that there is complete diversity between the parties and thus removal was proper. The Court disagrees.
"Diversity of Jurisdiction exists only when there is complete diversity, that is, when no plaintiff is a citizen of the same state as any defendant." Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806); Gabriel v. Preble, 396 F.3d 10, 13 (1st Cir. 2005). For diversity purposes, a corporation is a citizen of both the state where it is incorporated and "the State where it has its principal place of business." 28 U.S.C. § 1332(c)(1). Nonetheless, a corporation can have only one principal place of business for purposes of establishing its state of citizenship.See Capitol Indem. Corp. v. Russellville Steel Co., 367 F.3d 831, 835 (8th Cir. 2004).
As used in the diversity statute, the term "state" includes Puerto Rico. 28 U.S.C. § 1332(e).
In Pep Boys Corp., 410 F.3d at 59, the Court of Appeals for the First Circuit ("First Circuit") identified three relevant tests for determining a corporation's principal place of business: the "nerve center" test, which focuses on the place from which the corporation's activities are controlled; the "center of corporate activity" test, which focuses on the location of the corporation's day-to-day management; and the "locus of operations" test, which searches for the location of the actual physical operations of the corporation. Id., at 59.
In discussing each test, the First Circuit held that the "nerve center" test shall apply "only to farflung corporations or corporations without physical operations." Id., at 61. Conversely, if a corporation "has the bulk of its physical operations in one state," the "locus of operations" test controls "even if the corporation's executive offices are in another state." Id. The First Circuit found the "center of corporate activity" test "largely redundant," and held that district courts shall henceforth use "either the nerve center test or the locus of operations test, depending on the characteristics of the corporation." Id. The Court further noted that such a holding was consistent with the policies underlying 28 U.S.C. § 1332, namely, to shield foreign parties from the prejudice they might face as outsiders in state court. Specifically, the First Circuit concluded that the "principal place of business should be the place where the corporation conducts the most activity that is visible and impacts the public, so that it is least likely to suffer from prejudice." Id., at 61 (citing Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1094 (9th Cir. 1990).
Specifically, the Court noted that "there does not appear to be any context in which the center of corporate activity test supplies an analysis different from that available under one of the other two tests." Id.
Employing the above-referenced analysis, the Pep Boys court held that the "nerve center" test was inapplicable because "Pep Boys PR has physical operations and is not a complex or far-flung corporation." Id., at 60. The Court thus applied the "locus of operations" test, and found that Puerto Rico is Pep Boys PR's principal place of business because that is where the company has all of its physical operations and assets. Id., at 62.
Therefore, it must be concluded from the foregoing that the "nerve center" test applies only where a corporation has no physical operations (e.g. a holding company, see Taber Partners, I v. Merit Builders, Inc., 987 F.2d 57 (1st Cir. 1993)), or where its operations and activities are so diffuse or pervasive that no particular place readily comes up as distinctively dominant. A review of the record shows that, contrary to CSA's assertions, neither is the case here.
See e.g. Lugo-Vina v. Pueblo International, Inc., 574 F.2d 41 (1st Cir. 1978) (stating that "[t]he `nerve center' test was developed for application in cases involving a `large corporate enterprise with complex and farflung activities' where only the `nerve center' can actually be termed the `principal place of business").
The facts in this case clearly indicate that the bulk of CSA's physical operations are located in Puerto Rico. Specifically, CSA does not dispute that all of its flights to ten destinations in the Caribbean originate and end in Puerto Rico. It is also uncontested that CSA's hub of operations, as well as its largest and most important workforce and equipment, are based in Puerto Rico. In fact, CSA does not deny that Puerto Rico is the only place within the United States where CSA has physical operations.
CSA does not claim to have its principal place of business in any other of its 10 destinations in the Caribbean, nor provides evidence that it has the majority of its physical operations in a place other than Puerto Rico.
Furthermore, the Court is not persuaded by CSA's argument — grounded on a handful of older cases — that the principal place of business of airlines shall invariably be determined pursuant to the "nerve center" test. A perusal of the cases cited by CSA reveals that the circumstances therein are clearly distinguishable from the one at bar. As effectively illustrated in plaintiff's well-reasoned briefs, the cases cited by CSA deal with airlines that — due to their size and complexity — have substantial operations in several jurisdictions and, therefore, none of the places in which they operate clearly stands out as the principal place of business. See e.g. Egan v. American Airlines, 324 F.2d 565 (2nd Cir. 1963), Briggs v. American Flyers Airline Corp., 262 F.Supp. 16 (D.C. Ok. 1966). Hence, the decision to apply the "nerve center" test in those cases responded to the particular circumstances of the corporations involved, and not to the fact that the companies were airlines. In other words, the fact that some airlines are complex and far-flung does not mean that all airlines necessarily are, as CSA suggests.
Some of the other cases cited by CSA appear to support plaintiff's position, see Lugo-Vina, 574 F.2d at 44 (1st Cir. 1978), de Walker v. Pueblo International, Inc., 569 F.2d 1169 (1st Cir. 1978), Sanchez v. UHS of Puerto Rico, 223 F.Supp.2d 371 (D.P.R. 2002), while others are simply unpersuasive or employ a rationale that runs counter to the latest and more definite guidelines established by the First Circuit in Pep Boys and, as such, are inapposite. See Ortiz-Mercado v. Puerto Rico Marine Management, 736 F.Supp. 1207 (D.P.R. 1990), Tolchester Lines, Inc. v. Dowd, 253 F.Supp. 643 (D.C.N.Y 1966), Textron Electronics, Inc. v. Unholtz-Dickie Corp., 193 F.Supp. 456 (D.C. Conn. 1961).
On this record, the Court must find that the "locus of operations" test is applicable. Under that standard, CSA's principal place of business is Puerto Rico, for that is where the majority of its physical operations are located. That is also the place where the corporation is more visible and where its activities impact the public the most, thus making it the place where it is least likely to suffer from prejudice. See Pep Boys, 410 F.3d at 61.
Since plaintiff is also a resident of Puerto Rico, diversity is lacking. There being no other basis for federal jurisdiction, the Court must remand the case to the state court from which it was improvidently removed.
CONCLUSION
For the reasons elucidated above, the Court finds that CSA fails to prove the existence of diversity jurisdiction and, therefore, the Motion to Remand is GRANTED. Judgment shall be entered accordingly.
IT IS SO ORDERED.