United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 03-2246
___________
Capitol Indemnity Corporation, *
*
Plaintiff - Appellant, *
* Appeal from the United States
v. * District Court for the Eastern
* District of Arkansas.
Russellville Steel Company, Inc., *
Freeman Industries, Inc., H. William *
Mitchener, Janet L. Mitchener, Boyd *
G. Freeman, Wanda Freeman, *
*
Defendants - Appellees. *
___________
Submitted: November 21, 2003
Filed: April 21, 2004
___________
Before MELLOY, RICHARD S. ARNOLD, and COLLOTON, Circuit Judges.
___________
MELLOY, Circuit Judge.
Plaintiff-Appellant Capitol Indemnity Corp (“Capitol”) appeals the district
court’s dismissal of this contract action for Capitol’s failure to demonstrate diversity
of citizenship. We reverse.
I.
Capitol sued Defendants-Appellees Russellville Steel Company, et al.
(collectively “Russellville”), to collect over $75,000 pursuant to a general indemnity
agreement. Defendants were citizens of Arkansas. In the complaint, Capitol alleged
that it was a Wisconsin corporation, but did not allege that it maintained its primary
place of business somewhere outside of Arkansas. Russellville moved to dismiss
under F.R.C.P. 12(b)(1) for lack of subject matter jurisdiction, claiming that Capitol
failed to plead diversity jurisdiction. Capitol responded to the motions and moved
for leave to amend its complaint to specifically allege that “[Capitol] is an insurance
corporation organized pursuant to the laws of the State of Wisconsin, with its
principal place of business in Madison, Wisconsin . . . .”
The district court granted Capitol leave to amend. In addition, the district court
set forth a procedure to address the outstanding Rule 12(b)(1) motions. The district
court instructed Capitol to provide proof of Wisconsin citizenship with the amended
complaint. The district court further stated that Russellville would have ten days after
the filing of the amended complaint to submit evidence to the contrary and that, “at
that time the Court will resolve the diversity issue and, if necessary, the other issues
raised in [the defendants’] motions to dismiss.”
With its amended complaint, Capitol submitted a certified copy of its
Wisconsin articles of incorporation as well as the affidavit of Andy L. Anderson,
Senior Claims Examiner for Capitol. Mr. Anderson averred as fact that Capitol was
incorporated in Wisconsin, maintained its principal place of business in Madison,
Wisconsin, did not maintain a place of business in Arkansas, and conducted its
business of writing insurance policies and surety bonds in Arkansas exclusively
through the use of independent agents who were not employees of Capitol.
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Within ten days of Capitol’s filing of the amended complaint, Russellville
submitted affidavits. These affidavits averred that Russellville had conducted
business with Capitol for over twenty years exclusively through one particular
attorney-in-fact for Capitol, Charles Allen, who maintained an office in Arkansas.
Capitol did not request an evidentiary hearing nor object to the procedure set
out by the district court in the order granting leave to amend. Three weeks after
Russellville submitted its affidavits, the district court ruled that Capitol failed to
prove that it maintained its principal place of business in Wisconsin. The district
court held that, because Capitol failed to prove that its principal place of business was
somewhere other than Arkansas, Arkansas had to be considered the principal place
of business. Accordingly, the district court found diversity of citizenship lacking and
granted the defendants’ Rule 12(b)(1) motions. The district court stated:
The only assertion in Anderson’s affidavit that somewhere other than
Arkansas is Capitol’s principal place of business is the bald assertion
that Wisconsin is. In fact, Capitol has not submitted any proof that it
writes insurance policies and surety bonds in any state other than
Arkansas.
It is not enough that Capitol might be able to easily prove that
Wisconsin is its principal place of business; it has not done so. Neither
is it enough that the Court could discover the information on its own
through Capitol’s website or by other means; the Court, limited to
reviewing the evidence submitted by the parties, may not do so. In
short, Capitol has failed to prove by a preponderance of the evidence
that its principal place of business is in Wisconsin. Although diversity
jurisdiction is often easily proven and frequently is a “bump in the road”
on the way to more substantive and, some may believe, more interesting
issues, this Court refuses to shirk its duty of protecting the jurisdiction
of the federal courts.
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In a motion to reconsider filed under Rule 59(e), Capitol challenged the district
court’s findings and, for the first time, challenged the district court’s procedure for
submitting evidence on the diversity issue. Because Capitol had not previously
challenged the procedure, and because Capitol and the defendants all complied with
the procedure without objection, the district court rejected this challenge as an
impermissible attempt to raise new issues after judgment and denied Capitol’s
motion.
On appeal, Capitol raises two issues. First, Capitol argues that the procedure
used by the district court was not a “rational mode of inquiry” and therefore failed to
afford Capitol adequate due process protection. See Osborn v. United States, 918
F.2d 724, 730 (8th Cir. 1990) (“As no statute or rule prescribes a format for
evidentiary hearings on jurisdiction, ‘any rational mode of inquiry will do.’”) (quoting
Crawford v. United States, 796 F.2d 924, 929 (7th Cir. 1986)). Second, Capitol
argues that the district court clearly erred when it determined that Capitol’s principal
place of business was in Arkansas.
As to the first issue, Russellville argues that the district court did not abuse its
discretion when it denied Capitol’s Rule 59(e) motion to reconsider. Further,
Russellville argues that Capitol is entirely foreclosed from presenting its procedural
challenge argument to the appellate court due the fact that Capitol did not raise this
issue until the motion for reconsideration. As to the second issue, Russellville argues
that Capitol’s failure to provide evidence of business activities outside Arkansas
mandates a finding that Arkansas is the principal place of business.
II.
The district court did not abuse its broad discretion when it denied Capitol’s
Rule 59(e) Motion to Reconsider. District courts enjoy broad discretion in ruling on
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such motions. See Concordia College Corp. v. W.R. Grace & Co., 999 F.2d 326, 330
(8th Cir. 1993) (“The District Court did not abuse its broad discretion in concluding
that Concordia was improperly attempting to raise, via a motion to alter or amend,
arguments that it could have raised in response to W.R. Grace’s motion for summary
judgment.”). We have repeatedly held that Rule 59(e) motions are not proper
vehicles for raising new arguments. See id. (“. . . nor should a motion for
reconsideration serve as the occasion to tender new legal theories for the first time.”)
(quoting Hagerman v. Yukon Energy Corp., 839 F.2d 407, 414 (8th Cir. 1988));
Innovative Home Health Care, Inc. v. P.T.-O.T. Assocs. of the Black Hills, 141 F.3d
1284, 1286 (8th Cir. 1998) (“Rule 59(e) motions serve a limited function of
correcting “‘manifest errors of law or fact or to present newly discovered evidence.’”)
(citations omitted). Capitol impermissibly attempted to raise its procedural challenge
for the first time in its Rule 59 motion. We therefore affirm the district court’s
judgment regarding dismissal of the Rule 59(e) motion.
We find, however, that the underlying decision regarding diversity of
citizenship was clear error. See Blakemore v. Missouri Pac. R.R. Co., 789 F.2d 616,
618 (8th Cir. 1986) (applying clear error standard to a diversity of citizenship
determination and stating “[a] determination of citizenship for the purpose of
diversity is a mixed question of law and fact, but mainly fact.”). Capitol was not
required to prove specifically that its principal place of business was in Wisconsin.
Rather, to establish complete diversity of citizenship with the defendants, all that
Capitol was required to prove was that it was not a citizen of Arkansas. Because the
evidence before the district court, and all the reasonable inferences that could be
drawn from that evidence, precluded a finding that Capitol was a citizen of Arkansas,
Capitol met its burden.
Diversity jurisdiction exists where the amount in controversy is greater than
$75,000 and where there is complete diversity of citizenship. 28 U.S.C. § 1332(a).
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Complete diversity of citizenship exists where no defendants hold citizenship in a
state where any plaintiff holds citizenship. Owen Equipment & Erection v. Kroger,
437 U.S. 365, 373 (1978). For diversity purposes, a corporation may be the citizen
of two states. First, a corporation is a citizen of the state in which it is incorporated.
28 U.S.C. § 1332(c)(1). Second a corporation is a citizen of the state in which it
maintains its principal place of business. Id. A corporation can have only one
principal place of business for the purposes of diversity citizenship. See 28 U.S.C.
§ 1332(c)(1) (“a corporation shall be deemed a citizen of the State where it has its
principal place of business”) (emphasis added); Gafford v. Gen. Elec. Co., 997 F.2d
150, 161 (6th Cir. 1993) (“By common sense and by law, a corporation can have only
one principal place of business for purposes of establishing its state of citizenship.”).
Congress made this clear in 1958 when it expanded the definition of corporate
citizenship for diversity purposes to include not only the state of incorporation, but
also the state of a corporation’s principal place of business:
The Judicial Conference of the United States has recommended that the
law be amended so that a corporation shall be regarded not only as a
citizen of the state of its incorporation, but also as a citizen of the state
in which it maintains its principal place of business. This will eliminate
those corporations doing a local business with a foreign charter but will
not eliminate those corporations which do business over a large number
of states, such as the railroads, insurance companies, and other
corporations whose businesses are not localized in one particular state.
Even such a corporation, however, would be regarded as a citizen of that
one of the states in which was located its principal place of business.
S. Rep. 85-1830, at 3102 (1958).
Here the undisputed evidence showed that Capitol was incorporated in
Wisconsin and that all defendants were citizens of Arkansas. Accordingly, the only
issue before the district court was whether Capitol maintained its principal place of
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business in Arkansas. Because a corporation can have only one principal place of
business, and because Capitol believed its principal place of business to be in
Wisconsin, submission of a simple description of Capitol’s activities in Wisconsin
would have been the most straightforward and preferred method of responding to
Russellville’s jurisdictional attack. We conclude, however, that in this case, a
showing that Arkansas is not Capitol’s principal place of business is sufficient to
establish diversity of citizenship.
The Eighth Circuit has not adopted a test for determining a corporation’s
“principal place of business.” However, other circuits have applied three different
tests. The first test, the “nerve center” or “locus of operations” test, considers the
principal place of business to be the location of corporate decision-makers and the
location of overall control. See Buethe v. Britt Airlines, Inc., 787 F.2d 1194, 1196
(7th Cir. 1986); Lugo-Vina v. Pueblo Intern., Inc., 574 F.2d 41, 43 (1st Cir. 1978).
The second test, the “corporate activities” test, considers the principal place of
business to be the location of the corporation’s production and service activities.
Kelly v. United States Steel Corp., 284 F.2d 850, 854 (3d Cir. 1960). The final test,
the “total activity” test, is actually a hybrid of the other two. The total activity test
recognizes that the nature of a corporation’s activities will impact the relative
importance of production activities, service activities, and corporate decision making.
Accordingly , the total activity test looks at all corporate activities. See, J.A. Olson
Co. v. City of Winona, Miss., 818 F.2d 401, 411 (5th Cir. 1987); Vareka Invs., N.V.
v. American Inv. Props., Inc., 724 F.2d 907, 910 (11th Cir. 1984).
District courts within the Eighth Circuit have applied the most open-ended of
these tests–the “total activity” test. White v. Halstead Indus., Inc., 750 F. Supp. 395,
398 (E.D. Ark. 1990); North Star Hotels Corp. v. Mid-City Hotel Assocs., 696 F.
Supp. 1265, 1270 (D. Minn. 1988); Associated Petro. Producers, Inc. v. Treco 3
Rivers Energy Corp., 692 F. Supp. 1070, 1074 (E.D. Mo. 1988). The district court
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in the present case purported to apply the “total activity” test. Neither party disputes
the use of this test, and we find this test to be the most appropriate and least limiting
of the tests other circuits have applied.
Applying the total activity test to the present case, we look first at the claims
made in Capitol’s affidavits. We give no weight to the direct claim that Capitol
maintained its principal place of business in Wisconsin. The ultimate determination
of where a corporation maintains its principal place of business is a mixed question
of law and fact and not appropriate subject matter for an affidavit. We give great
weight, however, to Capitol’s undisputed allegations of fact where the balance of the
evidence offers no grounds for rejection. In this regard, we find that Capitol, an
insurance company that writes indemnity policies and surety bonds, maintained no
offices in Arkansas. Further, Capitol conducted business in Arkansas only through
independent sales agents. Finally, because the affiant, Senior Claims Examiner Andy
L. Anderson, presumably was an employee and not an independent agent, it is clear
that Capitol maintained employees and offices outside of Arkansas. Russellville
disputed none of these facts, and the evidence before the district court provided no
basis for rejection of these assertions. In fact, Russellville’s own affidavits supported
Capitol’s claim that it conducted business in Arkansas solely through sales agents.
We also look to the reasonable inferences that necessarily flow from the
undisputed facts. In making these inferences, we may look beyond the evidence and
draw on our general knowledge of commonly known information even without a
request that we take judicial notice of particular facts. See, e.g.,United States v.
Fousek, 912 F.2d 979, 981 (8th Cir. 1990) (“We conclude that no such evidence was
necessary, for when a person in a position of public trust . . . embezzles money from
those he is bound to aid, it stands to reason that there will be some resulting loss of
public confidence in that institution.”); United States v. Slone, 405 F.2d 1033, 1036
(8th Cir. 1969) (“It is common knowledge that the movements of a child hardly 11
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months old are unpredictable.”); St. Paul Hotel Co. v. Lohm, 196 F.2d 233, 235 (8th
Cir. 1952) (“But it is equally common knowledge that such seats hinged on the brittle
porcelain parts are not meant to resist the pressure of weights thrust against them
from the side as plaintiff admits he did in this instance.”); Waldheim Realty & Inv.
Co. v. Comm’r of Internal Rev., 245 F.2d 823, 825 (8th Cir. 1957) (“It is common
knowledge that the surrender value of a policy cancelled by the insured is upon a
short term rate basis, and considerably less than the prorata return of the premium for
the unexpired term.”); Noland v. Pastor, 191 F.2d 1009, 1013 (8th Cir. 1951) (“That
a driver going thirty miles an hour can make a swerve of more than ten inches and can
sound a horn, or even apply brakes and stop within a much shorter distance than 100
feet, is a matter of such common knowledge as to be obvious. The court must take
judicial notice of it.”); Gardner v. Mid-Continent Grain Co., 168 F.2d 819, 821 (8th
Cir.1948) (“It is a matter of common knowledge, of course, of which we may take
judicial notice, that ordinary soybeans are not perishable goods and that they will not
rot and spoil from being in a grain car for such a period as was here consumed in their
transportation from Decatur to Kansas City.”).
Even without an offer of proof, then, we may take notice of the fact that
insurance companies cannot exist through sales agents alone. Insurance companies
are regulated entities that require a home office to produce the policies that agents (or
employees) sell and manage the assets that stand behind the policies. Insurance
companies require accountants, actuaries, claim examiners (like the affiant, Senior
Claims Examiner Andy L. Anderson), and other support personnel as well as
managers and directors. It cannot reasonably be disputed that such employees exist,
and it follows from the claims in Mr. Anderson’s affidavits that the offices and
activities of such employees, managers, and directors were located outside of
Arkansas.
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With no office in Arkansas, no employees in Arkansas, and only sales agents
in Arkansas, the evidence does not support an inference that Capitol’s principal place
of business was in Arkansas. Rather, it supports the inference that all underwriting,
claims examination, asset management, and corporate governance occurred
elsewhere. Although Capitol failed to demonstrate that it sold policies anywhere but
Arkansas, we do not find that policy sales alone are sufficient to satisfy the total
activity test and define an insurance company’s principal place of business. Capitol
sufficiently, albeit inefficiently, demonstrated that it was not a citizen of Arkansas.
The judgment of the district court is reversed.
COLLOTON, Circuit Judge, dissenting.
I conclude that the district court did not commit clear error in dismissing the
complaint, and I respectfully dissent.
To my mind, this is a straightforward case. When plaintiff Capitol Indemnity
Corporation failed even to allege a basis for federal jurisdiction in its first complaint,
the district court allowed Capitol to amend its complaint, but directed it to submit
sufficient evidence to demonstrate diversity of citizenship within ten days, at which
point the court would resolve the matter. This is a perfectly "rational mode of
inquiry" in accord with our precedents, see Osborn v. United States, 918 F.2d 724,
730 (8th Cir. 1990), and the court does not contend otherwise.
In response to the district court's directive, Capitol submitted a two-page
affidavit, which contained only a conclusory allegation concerning Capitol's principal
place of business (on which the court properly declines to rely, ante at 7-8), and three
relevant statements of fact: (1) "Capitol is incorporated in the State of Wisconsin,"
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(2) "Capitol does not maintain a place of business in Arkansas," and (3) "Capitol's
business of writing insurance policies and surety bonds in the State of Arkansas is
conducted entirely through the use of independent agents who are not employees of
Capitol." The district court concluded that the evidence presented by Capitol was
insufficient to establish diversity of citizenship. I agree with that conclusion, and the
court does not contend otherwise. That should end the analysis.
The court, however, proceeds to find that the district court committed clear
error because it failed to "look beyond the evidence" and draw on its "general
knowledge of commonly known information," ante at 8, even though Capitol never
cited or argued any such "commonly known information" to the district court or to
this court. The court concludes that this general knowledge is sufficient, under the
newly adopted "total activities" test for determining a principal place of business, to
prove that Capitol's principal place of business cannot be in Arkansas. I disagree
with this analysis.
I accept, of course, the general proposition that a court may take judicial notice
of certain adjudicative facts, including those "generally known within the territorial
jurisdiction of the trial court." Fed.R.Evid. 201(b). But a district court is required to
take judicial notice of an adjudicative fact only when "requested by a party and
supplied with the necessary information." Fed.R.Evid. 201(d). Given that Capitol
never asked the district court to consider "general knowledge of commonly known
information," and never supplied any necessary information in that regard, it was
within the district court's discretion whether to consider such information on its own
initiative, and it was not required to do so. Fed.R.Evid. 201(c); FDIC v. Houde, 90
F.3d 600, 607-08 (1st Cir. 1996). The court should not reach out for facts necessary
to establish diversity jurisdiction, because "[j]udicial notice is an inappropriate device
for remedying a failure of proof." Glover v. Cole, 762 F.2d 1197, 1200 n.6 (4th Cir.
1985); see also United States v. Hawkins, 76 F.3d 545, 551 (4th Cir. 1996).
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Assuming for the sake of argument that the district court was required sua
sponte to consider "general knowledge" about insurance companies, the scope of
what may be judicially noticed about an insurance company is limited. The court is
forced by the paltry record to "presum[e]" that Capitol's senior claims examiner (who
served as an affiant in the district court) is an employee and not an independent agent,
ante at 8, but it is entirely possible that an insurance company would use independent
contractors as claims examiners. I daresay it is "commonly known" that the insurance
industry in the 21st century increasingly is outsourcing such functions as claims
processing and administration, underwriting, accounting, and information technology
services. See, e.g., Doug McPhie, Thumbs up on Outsourcing, CROSS CURRENTS,
Summer 2002, at 12-14, 21 (recognizing growing trend in life insurance industry
toward outsourcing of information technology and business processes, and citing
examples of outsourced policy administration functions, such as underwriting and
claims adjudication), http://www.ey.com/global/download.nsf/Belgium_E/Cross
Currents_Summer_2002/$file/CrossCurrents_Summer_2002.pdf.1 These industry
1
See also, e.g., Chris Pryer, Outsourcing to Play Larger Role Among Insurance
Companies, OUTSOURCING JOURNAL, January 2003 (describing outsourcing of
insurance processes, including field-based services such as auditing; policy
administration and billing; financial recoveries, which comprises subrogation and
premium collection; and data management and regulatory reporting), at http://www.
outsourcing-journal.com/issues/jan2003/insurance.html; William R. Pape, The Fewer
the Merrier, INC. MAGAZINE, Dec. 1998 (reporting that in 1998, outsourcing allowed
GeneraLife Insurance Company of America to employ a staff of only 13, some of
them college students, to manage more than 3,000 independent insurance agents),
http://www.inc.com/magazine/19981201/5420.html; Florida Dep't Ins., 2001 Property
and Casualty Target Market Conduct Examination of DeSoto Insurance Company,
at 4 (March 8, 2002) (insurance company relied on third-party managing general
agent to provide underwriting, production, marketing, policy issuance, premium
billing and collection, premium accounting, claims adjusting, auditing, payroll
issuance and various other services, while managing general agent subcontracts the
policy administration and claims administration functions to third-party servicing
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developments show that one cannot reliably make broad assumptions about the
number and function of employees at an insurance company. Moreover, the
presumed existence of certain core employees, managers, and directors does not tell
us anything about where they are located, including whether they are in a single state
or dispersed among different venues. While it may be possible to infer from the
barebones affidavit and common knowledge that Capitol has some sort of "home
office" outside Arkansas, much beyond that is left to speculation.
More problematic is the legal conclusion that "general knowledge" about
insurance companies necessarily demonstrates diversity of citizenship in this case.
The mere existence of a judicially noticed home office outside Arkansas, especially
when the nature of such an office is speculative, does not establish that Capitol's
principal place of business is outside Arkansas. The very cases cited by the court to
illustrate the "total activities" test, ante at 7, demonstrate the point.
As the court observes, Capitol failed to prove that it sold insurance policies
anywhere other than Arkansas. The court's authorities agree that "[w]hen virtually
all of the corporate business is conducted in one state, but the headquarters and
policy-making functions are conducted in another, the situs of the corporate business
assumes greater importance." Associated Petroleum Producers, Inc. v. Treco 3 Rivers
Energy Corp., 692 F. Supp. 1070, 1074 (E.D. Mo. 1988). If, for example, Capitol
were incorporated in Wisconsin for the purpose of selling insurance exclusively in
Arkansas (a scenario that the record and the court's judicially noticed facts do not
exclude), decisions applying the total activity test indicate that the company's
principal place of business would be Arkansas. See id. at 1075 (where sole officers
and employees, company headquarters, policy-making functions, and place of
incorporation were in Missouri, but 92% of sales were in Kentucky, principal place
providers), http://www.fldfs.com/companies/pc/Exams/Desoto_030802_Rpt. Pdf.
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of business was Kentucky); North Star Hotels Corp. v. Mid-City Hotel Assocs., 696
F. Supp. 1265, 1270 (D. Minn. 1988) (where Texas was plaintiff's state of
incorporation, residence of officers and directors, situs of bookkeeping and
accounting tasks, and location of corporate offices where policy decisions were made
and records were maintained, but sole source of income was hotel in Minnesota
managed and operated through management agreement, principal place of business
was Minnesota); White v. Halstead Indus., Inc., 750 F. Supp. 395, 399 (E.D. Ark.
1990) (where company's executive offices were in North Carolina, but majority of
goods, sales, and employees were associated with two plants in Arkansas, principal
place of business was Arkansas); Hanna Mining Co. v. Minnesota Power & Light,
573 F. Supp. 1395, 1400 (D. Minn. 1983) (where company was created to hold and
operate parent's interest in Minnesota mining project, principal place of business was
Minnesota rather than state where executive and administrative offices were located),
aff'd, 739 F.2d 1368 (8th Cir. 1984). Given the paucity of evidence in the record
about Capitol, even when it is augmented by the judicially noticed existence of a
home office outside Arkansas, I do not find clear error in the conclusion that Capitol
failed to prove diversity of citizenship.
As the district court observed, it may well be that Capitol could demonstrate
easily that its principal place of business is outside Arkansas. It should remain free
to do so in other litigation. But Capitol failed to make the requisite showing in this
case, and I see no good reason to strain both the doctrine of judicial notice and the
"total activities" test to create diversity jurisdiction over this lawsuit. I would affirm
the judgment of the district court, and I respectfully dissent.
______________________________
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