1998 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

6-26-1998

Mennen Company v. Atl Mutl Ins Co

Precedential or Non-Precedential:

Docket 97-5266

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1998

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 1998 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"Mennen Company v. Atl Mutl Ins Co" (1998). 1998 Decisions. Paper 146.

http://digitalcommons.law.villanova.edu/thirdcircuit_1998/146
Filed June 26, 1998 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

NO. 97-5266 

THE MENNEN COMPANY 

Appellant, 

v. 

ATLANTIC MUTUAL INSURANCE COMPANY 

CENTENNIAL INSURANCE COMPANY 

AETNA CASUALTY & SURETY COMPANY 

FEDERAL INSURANCE COMPANY 

APPEAL FROM THE 

UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF NEW JERSEY 

D.C. CIVIL NO. 93-5273 

ARGUED November 20, 1997 

BEFORE: SCIRICA AND LEWIS,* Circuit Judges, 

and POLLAK,** District Judge. 

(Filed June 26, 1998) 

_________________________________________________________________ 

* Judge Lewis heard argument in this matter but was not available to 

clear the opinion. 

** Honorable Louis H. Pollak, United States District Judge for the 

Eastern District of Pennsylvania, sitting by designation. 
 Gita F. Rothschild (Argued) 

 McCarter & English 

 100 Mulberry Street 

 Four Gateway Center 

 Newark, New Jersey 07101 

 Attorney for Appellant 

 Kevin E. Wolff 

 McElroy, Deutsch & Mulvaney 

 1300 Mount Kemble Avenue 

 P.O. Box 2075 

 Morristown, New Jersey 07962 

 Attorney for Appellees, 

 Atlantic Mutual Insurance 

 Company 

 Centennial Insurance Company 

 Peter E. Mueller 

 Harwood Lloyd 

 130 Main Street 

 Hackensack, New Jersey 07601 

 Attorney for Aetna Casualty 

 and Surety Company 

 John J. Gibbons (Argued) 

 Crummy, Del Deo, Dolan, Griffinger 

 & Vecchione 

 One Riverfront Plaza 

 Newark, New Jersey 07102 

 David L. Menzell 

 Cuyler, Burk & Matthews 

 Four Century Drive 

 Parsippany, New Jersey 07054 

 Attorneys for Federal 

 Insurance Company 

 2 
OPINION OF THE COURT 

POLLAK, District Judge. 

Mennen, Inc. appeals the district court's dismissal, for 

lack of subject matter jurisdiction, of its complaint against 

Federal Insurance Company. For the reasons set forth 

below, we affirm. 

I. 

This litigation commenced in 1993 when Mennen, a New 

Jersey corporation, brought suit in the District Court for 

the District of New Jersey against several of its insurers-- 

all of them incorporated and having their principal places of 

business outside of New Jersey--seeking indemnity under 

state law for environmental clean-up liabilities. Mennen's 

complaint based federal jurisdiction on the diversity 

statute. 28 U.S.C. S 1332. Mennen did not initially name 

appellee Federal Insurance Co. ("Federal") as a defendant 

because Mennen believed that Federal--a company 

incorporated in Indiana--had its principal place of business 

in New Jersey, thus precluding diversity jurisdiction. 

Moreover, when Mennen filed suit, New Jersey insurance 

law was governed by a joint and several liability regime--a 

regime which appeared to permit Mennen to seek full

recovery from its other insurers without suing Federal. 

While the suit was pending, however, the New Jersey

Supreme Court decided Owens-Illinois v. United Insurance 

Co., 138 N.J. 437 (1994), which eliminated joint and several 

liability in cases involving several insurers and substituted 

a pro rata contribution scheme. The practical effect of the 

Owens-Illinois decision with respect to this litigation was 

that, if Mennen was to have the complete recovery it 

sought, it would be necessary for Mennen to secure the 

joinder of Federal as a party defendant. 

Mennen's first step was to move to compel the defendants 

to implead Federal. But this stratagem proved 

unsuccessful; the motion was denied. Then Mennen 

discovered pleadings that Federal had filed in other actions 

 3 
--pleadings in which Federal stated that its principal place 

of business was in Indiana, its state of incorporation. 

Armed with this new understanding of Federal's business 

operations, Mennen filed an amended complaint joining 

Federal as a defendant. Federal responded by moving that 

it be dismissed as a defendant for lack of subject matter 

jurisdiction. Federal contended that its principal place of 

business was in New Jersey, and hence that, for the

purposes of diversity jurisdiction, it was a citizen of New 

Jersey as well as of Indiana; this meant, so Federal argued, 

that there was a New Jersey plaintiff (Mennen) and a New 

Jersey defendant (Federal), a configuration fatal to diversity 

jurisdiction. Mennen opposed the motion to dismiss,

arguing that Federal was a citizen of Indiana only. 1 The 

district court, concluding that Federal's principal place of 

business was indeed New Jersey, granted Federal's motion. 

This appeal followed. 

II. 

The facts bearing on jurisdiction are undisputed. Federal 

is a corporation wholly owned by the Chubb Corporation. 

For the first approximately ninety years of its existence, 

Federal was incorporated in New Jersey. Since 1990,

however, Federal has been incorporated in Indiana. The 

corporation has an office in Indiana designated as its 

"Statutory Home Office" in fulfillment of a requirement of 

Indiana law. 

Federal is in the business of providing property and 

casualty insurance in the United States and abroad.

Although a great deal of the company's activity is carried on 

domestically, Federal itself has no employees in the United 

States.2 Rather, Federal's business in the United States is 

conducted by employees of Chubb & Son, another whollyowned subsidiary of the Chubb Corporation, under a 

management services contract. Pursuant to similar 

_________________________________________________________________ 

1. Mennen also filed a motion for sanctions against Federal on the basis 

of these inconsistent pleadings, a motion the district court denied. 

Mennen has not appealed this ruling. 

2. Federal does have some employees, but it appears that all of them 

work in Asia. 

 4 
arrangements, many of these employees also handle the 

business of other Chubb Corporation affiliates. 

In New Jersey, some two thousand Chubb & Son 

employees conduct Federal's business. Specifically,

Federal's national underwriting and claims-handling

functions are administered by Chubb & Son personnel at 

an office complex in Warren, New Jersey. As the district 

court found and the record reflects, the Warren office also 

(1) houses Federal's accounting, treasury, marketing, 

investment, human resources, and loss-control 

departments; (2) is the location of the majority of Federal's 

"senior executives;"3 and (3) is the situs for the filing of 

Federal's tax returns, policy forms, and annual reports. 

In Indiana, forty-five Chubb & Son employees carry out 

Federal's business. As Indiana law requires of companies 

incorporated in the state, Federal's primary books and 

records are maintained at the Indiana office. However, the 

Indiana office functions largely as a local claims and 

underwriting office, similar to other such local offices 

throughout the country; no national corporate-wide 

authority over such functions is exercised in Indiana. 

Mennen does not undertake to challenge the district

court's factual findings. Rather, Mennen argues that--given 

that Federal has no employees in New Jersey--Federal is 

only a citizen of Indiana, its state of incorporation, and that 

the district court therefore erred in concluding that subject 

matter jurisdiction is absent. We exercise plenary review 

over this issue. Mellon Bank v. Farino, 960 F.2d 1217, 1220 

(3d Cir. 1992). 

_________________________________________________________________ 

3. While the record is not entirely clear as to which officers the term 

"senior executives" encompasses, it appears likely that the term refers to 

Federal's elected officers--the president and board chair, senior vice 

presidents, and vice presidents. Of Federal's appointed officers-- 

assistant vice presidents, assistant secretaries, and assistant treasurers 

--a plurality are located in New Jersey. Only one appointed officer is 

located in Indiana. The remainder are assigned to other cities in the 

United States or to Federal's "Asia Pacific Zonal Office." None of the 

officers within the United States is an employee of Federal. 

 5 
III. 

A. 

Section 1332(a)(1) of the diversity statute requires 

complete diversity between the parties--that is, jurisdiction 

is lacking if any plaintiff and any defendant are citizens of 

the same state. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 

267 (1806). The determination of a corporation's citizenship 

was a matter of some doubt until Congress in 1958 

amended 28 U.S.C. S 1332 by adding a sub-section (c)(1), 

which provided, in relevant part, that "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."4 Act of July 25, 1958, Pub. L. No. 85- 

554, 72 Stat. 415 (codified at 28 U.S.C. S 1332(c)(1)). 

_________________________________________________________________ 

4. Diversity jurisdiction was statutorily authorized by Section 11 of the 

Judiciary Act of 1789, 1 Stat. 79, but the statute was silent on the 

subject of corporations. Initially, the Supreme Court, reasoning that a 

corporation could not itself be a citizen, held that whether a corporation 

could sue in diversity depended on the citizenship"of the individuals 

who compose the corporation." Bank of United States v. Deveaux, 9 U.S. 

(5 Cranch) 61, 92 (1809). Deveaux had the effect of markedly restraining 

the use of diversity jurisdiction in litigation involving corporations. 

"As a 

result of the decision, the reports of the Supreme Court and the Circuit 

Courts during the forty years thereafter reveal an almost complete 

absence of cases in which corporations (other than banking and 

insurance) were litigants . . . ." 1 Charles Warren, The Supreme Court in 

United States History 390-91 (1926); see also Richard H. Fallon, Daniel 

J. Meltzer, & Richard L. Shapiro, Hart and Wechsler's The Federal Courts 

and the Federal System 1535 (4th ed. 1996). Thirty-five years after 

Deveaux the Court changed course in Louisville, Cincinnati & 

Charlestown R.R. Co. v. Letson, 43 U.S. (2 How.) 497, 558 (1844), in 

which it held that a corporation "is entitled . . . to be deemed" a 

citizen 

of the state that created it. A decade later, in Marshall v. Baltimore & 

Ohio R. Co., 57 U.S. (16 How.) 314, 328 (1854), the Court arrived at the 

Letson result but through different reasoning. In an apparent effort to 

reconcile Deveaux and Letson, the Marshall Court held that although a 

corporation cannot be a citizen, the persons who make up the 

corporation "may be justly presumed to be resident in the State which 

is the necessary habitat of the corporation, and where alone they can be 

made subject to suit; and should be estopped in equity from averring a 

different domicil." 57 U.S. (16 How.) at 328; see also Ohio & Mississippi 

 6 
One of Congress's main purposes in enacting S 1332(c)(1) 

was to curtail the availability of diversity jurisdiction. See S. 

Rep. No. 1830, 85th Cong., 2d Sess. (1958), reprinted in 

1958 U.S.C.C.A.N. 3099, 3101 ("In adopting this legislation, 

the committee feels . . . that it will ease the workload of our 

Federal courts by reducing the number of cases involving 

corporations which come into Federal district courts on the 

fictional premise that a diversity of citizenship exists."). 

Mennen is a citizen of New Jersey. Federal, incorporated 

in Indiana, was determined by the district court to have its 

principal place of business in New Jersey, making Federal 

a citizen of New Jersey as well. The district court thus 

found complete diversity lacking and dismissed the 

complaint with respect to Federal. Consequently, this 

appeal turns on whether the district court erred as a matter 

of law in concluding that Federal's principal place of 

business is in New Jersey. 

B. 

In this circuit, the key authority interpretingS 1332(c)(1) 

is Kelly v. United States Steel Corp., 284 F.2d 850 (3d Cir. 

1960). The Kelly articulation of standards for determining a 

company's principal place of business has come to be 

known as the "center of corporate activities" test for 

corporate citizenship. See generally 13B Charles Alan 

_________________________________________________________________ 

R. R. v. Wheeler, 66 (1 Black) U.S. 286, 296 (1862) (explicating 

Marshall). 

Whether the Letson view or that expressed in Marshall doctrinally carried 

the day until the amendment of the diversity statute in 1958 remains a 

matter of historical debate. Compare Navarro Sav. Ass'n v. Lee, 446 U.S. 

458, 461 n.7 (1980)("[Marshall] view endured until 1958"), and United 

Steelworkers of America, AFL-CIO v. R. H. Bouligny, Inc., 382 U.S. 145, 

148 (1965) (characterizing the Marshall formulation as a "compromise 

destined to endure for over a century"), with Carden v. Arkoma 

Associates, 494 U.S. 185, 194 n.3 (1990)(" Marshall's fictional approach 

appears to have been abandoned. Later cases revert to the formulation 

of [Letson] that the corporation has its own citizenship.")(citing Great 

Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 449, 456 (1900), and 

Chapman v. Barney, 129 U.S. 677, 682 (1889)). See also National Mutual 

Ins. Co. v. Tidewater Transfer Co., 337 U.S. 582, 618 n.12 

(1949)(Rutledge, J. concurring in the judgment). 

 7 
Wright, Arthur R. Miller & Edward H. Cooper, Federal 

Practice and Procedure S 3625 (2d. ed. 1984 & Supp.

1998)(hereinafter "Federal Practice and Procedure"). The 

Kelly inquiry, reaffirmed and refined in subsequent cases, 

requires courts to ascertain "the headquarters of day-to-day 

corporate activity and management." 284 F.2d at 854; see 

also Midlantic Nat. Bank v. Hansen, 48 F.3d 693, 696 (3d 

Cir. 1995); Quaker State Dyeing and Finishing Corp. v. ITT, 

461 F.2d 1140, 1143 (3d Cir. 1972). 

In Kelly, this court was called on to determine the

principal place of business of the "giant" (284 F.2d at 854) 

United States Steel Corporation, which approximately forty 

years ago had fourteen divisions and eleven subsidiaries 

and whose "various manufacturing activities spread over 

practically all the United States and extend[ed] to foreign 

countries." Id. at 853. The plaintiffs in Kelly--seeking to 

overturn dismissals for lack of diversity jurisdiction--had 

urged a " `nerve center' " approach, according to which the 

locus of the board of directors' final decision-making 

authority would be determinative of the defendant 

corporation's principal place of business. Speaking through 

Judge Goodrich, the court characterized plaintiffs' proposed 

test as "a pleasant and alluring figure of speech," but then 

turned "to a consideration of the facts of the Steel 

Corporation's life." Id. Applying that pragmatic approach, 

the court noted that final authority over "corporate policy, 

including its financing," rested with the board in New York, 

but that the board had delegated "the duty of conducting 

the business of the corporation relating to manufacturing, 

mining, transportation and general operation" to an

"Operation Policy Committee," consisting of the board 

chairman, the president, the seven executive vice 

presidents and certain other principal officers,"which sits 

and conducts its affairs" in Pennsylvania. Id. at 854. 

Further, the court pointed out that the seven executive vice 

presidents, sixteen of the seventeen administrative vice 

presidents, and twenty-two of the twenty-five vice 

presidents had their offices and staffs in Pennsylvania. 

Consequently, the court identified Pennsylvania as the state 

in which the corporation's "business by way of activities is 

centered." Id. 

 8 
The Kelly court also looked to factors such as "physical 

location of employer's plants and the like"--factors which, 

while of "lesser importance," were of "some significance" 

when "added to the items already enumerated pointing to 

the center of corporate activity." Id. Specifically, the court 

noted that Pennsylvania had approximately a third of the 

company's personnel, tangible property, and productive 

capacity--far more than New York and, apparently, more 

than any other state. Id. 

In the present case, all of the Kelly factors--both the 

primary considerations and what in Quaker State Dyeing 

and Finishing Corp. v. ITT, 461 F.2d 1140, 1143 (3d Cir. 

1972), we referred to as the "secondary considerations"-- 

point to New Jersey. As between New Jersey and Indiana 

the choice is clear: the critical mass of corporate functions 

is located in the Warren offices. Warren is not only the 

center of Federal's national underwriting operations but 

also the location of its accounting, legal, human resource, 

and loss-control activities. There are more than two 

thousand Chubb & Son employees carrying out Federal's 

business--underwriting and providing insurance--in the 

Warren complex, where most of the company's officers are 

located. By contrast, forty-five Chubb & Son employees 

conduct Federal's business in the Indiana office, an office 

that has no corporation-wide authority. 

Hence a straightforward application of Kelly's principles 

leads to the conclusion that Federal's principal place of 

business is in New Jersey. Mennen, however, argues that 

this court's recent decision in Midlantic Nat. Bank v. 

Hansen, 48 F.3d 693 (3d Cir. 1995), has effected a seachange in the principal-place-of-business inquiry in this 

circuit. Hansen dealt with the problem presented when a 

court is called upon to decide, for diversity purposes, the 

citizenship of a corporation which has become entirely 

inactive. In Hansen, the corporation in question--Midlantic 

National Bank--was a failed savings and loan. The 

Resolution Trust Corporation had seized Midlantic and 

prohibited it from conducting any further business. We 

concluded that in a situation of this sort it was not 

necessary to "strain to locate a principal place of business 

when no such place in reality exists." Id. at 696. Given that 

 9 
the Kelly inquiry looks to actual business activities, we held 

in Hansen that a corporation not engaged in business 

activities can only be considered a citizen of its state of 

incorporation. Id. Hence our approach in Hansen does not 

represent a departure from this court's Kelly analysis, as 

Mennen's argument suggests, but a consistent application 

of Kelly's underlying premises.5 

Mennen acknowledges that Federal is not an inactive

corporation but urges that we extend the logic of Hansen to 

this case. Stressing our statement that courts should not 

"strain to locate a principal place of business," Mennen 

argues that Hansen should apply here because of the

unusual relationship between Mennen and Chubb & Son. 

Since Federal itself has no employees in the United States, 

but rather contracts out all of its underwriting and claimshandling functions to an affiliate, Mennen urges that 

Federal be treated as the functional equivalent of an 

inactive corporation for jurisdictional purposes. 

We decline Mennen's invitation to broaden the reach of 

our holding in Hansen. In adopting the "center of corporate 

activities" test in Kelly, this court opted for a functional 

approach to the principal place of business inquiry.6 Rather 

_________________________________________________________________ 

5. As we noted in Hansen, other circuits have taken different views in 

determining the citizenship of inactive corporations. Compare Wm. 

Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 

131, 141 (2d Cir. 1991)(last principal place of business dispositive), 

with 

Harris v. Black Clawson Co., 961 F.2d 547, 551 (5th Cir. 1992)(last 

principal place of business is relevant but not controlling). On the 

subject generally, see Timothy J. Yuncker, Inactive Corporations and 

Diversity Jurisdiction Under 28 U.S.C. S 1332(c): The Search for a 

Principal Place of Business, 28 U. Toledo L. Rev. 815 (1997); Dawn Levy, 

Note, Where Do Dead Corporations Live?: Determining the Citizenship of 

Inactive Corporations for Diversity Jurisdiction Purposes, 62 Brooklyn L. 

Rev. 663 (1996). 

6. As previously noted, this court in Kelly considered the "center of 

corporate activities" test a sounder guide than the "nerve center" test 

contended for by the Kelly plaintiffs-appellants. The "nerve center" test 

derives from the decision in Scot Typewriter Co. v. Underwood Corp., 170 

F.Supp. 862 (S.D.N.Y. 1959). The Scot Typewriter formulation placed 

emphasis on the highest levels of corporate decision making, looking to 

"the place where all of its business was under the supreme direction and 

 10 
than looking to the location of the highest level of policymaking as dispositive, we looked to the location of

production and "the headquarters of day-to-day corporate 

activity and management." 284 F.2d 854. In light of our 

stress on the pragmatic facts of corporate life as opposed to 

more formal lines of inquiry, we find it appropriate to 

consider the substantial quantity of Federal's activity 

carried out in New Jersey, notwithstanding that those who 

carry out Federal's business are not formally Federal 

employees. It is fully in line with this court's consistently 

functional approach to consider the actual day-to-day 

activities of Federal, irrespective of what corporation's name 

appears on the paychecks of the employees who carry out 

those activities.7 Accordingly, we reject Mennen's contention 

_________________________________________________________________ 

control of its officers." Id. at 865 (footnote and internal quotation 

marks 

omitted). Courts and commentators have since noted that the two 

approaches are not necessarily antagonistic. See, e.g., Merino de Walker 

v. Pueblo Intern., Inc., 569 F.2d 1169, 1171 (1st Cir. 1978); Egan v. 

American Airlines, Inc., 324 F.2d 565, 566 (2d Cir. 1963); 13B Federal 

Practice and Procedure S 3625 (2d ed. 1984 & Supp. 1998). Several 

courts have more recently embraced a "total activities" test, which 

synthesizes the two approaches. See, e.g., Gafford v. General Elec. Co., 

997 F.2d 150 (6th Cir. 1993); J.A. Olson Co. v. City of Winona, 818 F.2d 

401, 406 (5th Cir. 1987); Vareka Invs., N.V. v. American Inv. Properties, 

Inc., 724 F.2d 907, 910 (11th Cir.), cert. denied, 469 U.S. 826 (1984). 

Whether and to what extent the "nerve center" test as it would be 

applied today differs in a meaningful way from the Kelly test is not a 

question that needs to be resolved in the case at bar. To the extent that 

the tests appear to differ, at least as a matter of emphasis, the outcome 

of this appeal would be the same under either approach. 

7. Mennen also urges that the district court's conclusion impermissibly 

disregards the separate corporate identities of Federal and Chubb & Son. 

In aid of this argument, Mennen points to a plethora of cases holding 

that parents and subsidiaries each have their own principal places of 

business. This argument need not detain us long. The cases cited by 

Mennen are typified by Quaker State Dyeing and Finishing Corp. v. ITT, 

461 F.2d 1140, 1143 (3d Cir. 1972), which held that"a subsidiary 

corporation which is incorporated as a separate entity from its parent 

corporation is considered to have its own principal place of business." 

(quoting 1 Moore's Federal Practice 717.10, S 0.77). As Federal points 

out, 

this is indeed an "unremarkable proposition" and one that has no 

relevance in this case. Quaker State Dyeing simply instructs that a 

 11 
that the district court erred in taking into account the 

activities of Chubb & Son employees, who, pursuant to a 

management services contract, carry out the practical work 

of Federal. 

Mennen also urges that we give weight to Federal's 

assertions, in unrelated litigation, that its principal place of 

business is in Indiana. Collecting an array of pleadings filed 

by Federal in other proceedings in which Federal was a 

party defendant, Mennen contends that these 

representations provide valuable evidence indicating where 

Federal's corporate representatives believe the corporation's 

principal place of business to be.8 

_________________________________________________________________ 

subsidiary has its own principal place of business unless there is some 

abuse of corporate form that would allow the court to look through the 

juridical separation between the corporations and therefore regard the 

parent's principal place of business as that of the subsidiary. The 

district 

court in this case did not attribute Chubb & Son's principal place of 

business to Federal; rather, it examined those activities of Federal 

(albeit 

carried out by employees of the affiliated corporation), and determined 

that Federal had its own principal place of business in New Jersey. Thus 

the district court was not imputing one affiliate's principal place of 

business to another. Rather, the district court attributed to Federal the 

services that Chubb & Son operatives perform on behalf of Federal, 

which, as we here hold, is proper in this instance.

8. Specifically, Mennen points to the following: (1) Campbell v. New 

Jersey Mfrs. Ins. Co., No. L-233693, an insurance coverage action filed 

in the New Jersey Superior Court in 1996. The plaintiff in Campbell, 

responding to Federal's argument that the action was barred by the 

entire controversy doctrine, urged that it was not possible to join 

Federal 

in the earlier federal court proceeding because Federal's New Jersey 

citizenship would have destroyed diversity. Federal's reply brief 

maintained that the corporation's principal place of business was in 

Indiana. Federal later submitted a correction (after the underlying 

controversy had settled), indicating that this representation was in error 

and that the company's principal place of business was in New Jersey. 

(2) In Gencorp v. Adriatic Ins. Co., No. 95-2464, a 1995 case in the 

Northern District of Ohio, Federal stated in its original answer that its 

principal place of business was in Indiana. Federal subsequently moved 

for leave to amend the answer, stating that the original answer 

misidentified the company's principal place of business as being in 

Indiana when it was in fact in New Jersey. (3) In Mercury Fin. Co. v. 

 12 
We do not find that these prior Federal pleadings have 

evidentiary value for the purpose of assessing where 

Federal's principal place of business is located. The 

representations made in these pleadings run contrary to 

the empirical facts with which the jurisdictional inquiry is 

concerned. While pleadings that contain unwarranted

assertions as to matters bearing on jurisdiction reflect no 

great credit on the attorneys who apparently drafted and 

filed them without sufficient inquiry, the pleadings 

themselves have no intrinsic capacity either to establish or 

disestablish jurisdiction; it is axiomatic that a party may 

not confer or defeat jurisdiction by mere pleading. See 

Insurance Corp. of Ireland v. Compagnie des Bauxites de 

Guinee, 456 U.S. 694, 702(1982); Owen Equipment & 

Erection Co. v. Kroger, 437 U.S. 365, 377 n.21 (1978). 

Rather, subject matter jurisdiction depends upon facts of 

record, and when any question arises as to the existence of 

jurisdiction a federal court is obligated to make an 

independent determination of those facts. See Fed. R. Civ. 

P. 12(h)(3) ("Whenever it appears by suggestion of the 

parties or otherwise that the court lacks jurisdiction of the 

subject matter, the court shall dismiss the action."); 

Mitchell v. Maurer, 293 U.S. 237, 244 (1939).9 

_________________________________________________________________ 

Aetna Cas. Co., 900 F. Supp. 390, 391 (M.D. Ala. 1995), the court 

(presumably on the representation of Federal's counsel) identified 

Indiana as the location of Federal's principal place of business. In both 

Gencorp and Mercury, whether Federal was a citizen of New Jersey as 

well as Indiana appears to have been immaterial; diversity would not 

have been defeated in either case if New Jersey had been considered 

Federal's principal place of business. Mennen also cites a number of 

other pleadings, which, although not free of ambiguity, present no stark 

inconsistency with Federal's argument in this action that its principal 

place of business is in New Jersey. 

9. In its reply brief, Mennen makes an oblique suggestion that Federal 

may be held to its prior representations. Although Mennen avoids overt 

invocation of "estoppel"--the term of art that seems most aptly to 

describe its argument--Mennen appears in effect to be urging that 

Federal be bound to those jurisdictional contentions. 

In support of this argument, Mennen relies upon DiFrischia v. New 

York Central Railroad, 279 F.2d 141 (3d Cir. 1960), in which this court, 

while acknowledging the general precept that jurisdiction may not be 

 13 
 

(Text continued on page 16) 

_________________________________________________________________ 

bestowed or waived by action of parties, held that the defendant was 

bound to its representation as to federal jurisdiction, despite a factual 

lack of diversity. In DiFrischia, the defendant had stipulated to 

jurisdiction early in the litigation, but then moved to dismiss after the 

expiration of the relevant limitations period. On these extreme facts, 

this 

court determined that the district court had abused its discretion in 

dismissing the action, stating that "a defendant may not play fast and 

loose with the judicial machinery and deceive the courts." 279 F.2d at 

144. 

In the two decades that followed, the holding in DiFrischia failed to 

draw broad support. With one exception, every circuit court called upon 

to apply DiFrischia either distinguished or voiced disapproval of the 

decision. See, e.g., Sadat v. Mertes, 615 F.2d 1176, 1188 (7th Cir. 1980) 

(DiFrischia, is applicable, if at all, only on its "unusual facts"); 

Eisler v. 

Stritzler, 535 F.2d 148, 151 n.2 (1st Cir. 1976)(noting that DiFrischia is 

"plainly inconsistent with governing Supreme Court authorities"); Basso 

v. Utah Power & Light Co., 495 F.2d 906, 909 (10th Cir. 1974)(holding 

DiFrischia distinguishable even though defendant did not raise 

jurisdictional defect until adverse judgment was rendered); see also 13 

Federal Practice and Procedure S 3522 at 50 (1st ed. 1975)("the 

significance of the case as a general precedent is dubious."). Nor was 

this 

reluctance to find occasion for applying the DiFrischia rule confined to 

circuits other than our own. See, e.g., Joyce v. United States, 474 F.2d 

215, 218 n.1 (3d Cir. 1973); Stapleton v. $2,438,110, 454 F.2d 1210, 

1218 (3d Cir. 1972); Ramsey v. Mellon Nat. Bank & Trust Co., 350 F.2d 

874, 879 (3d Cir. 1965); see also Eisler, 535 F.2d at 152 ("We note that 

DiFrischia has not proved to be a particularly generative inroad on the 

traditional rule, even in the Third Circuit."). 

The lone exception to this disinclination on the part of other circuit 

courts to follow DiFrischia was the Eighth Circuit in Kroger v. Owen 

Equipment & Erection Co., 558 F.2d 417 (8th Cir. 1977). That case 

presented the Eighth Circuit with facts similar to those that moved this 

court in DiFrischia to find an exception to the general rule against 

creating jurisdiction by estoppel. The jurisdictional issue in Kroger 

turned on the citizenship of Owen Equipment & Erection Co. ("Owen"), 

which was brought into the action under Rule 14 by the original 

defendant. Plaintiff later amended her complaint to state claims directly 

against Owen, and by the time of trial Owen was the only party 

defendant in the case. The amended complaint alleged that Owen was a 

Nebraska corporation with its principal place of business in Nebraska, 

an allegation Owen never directly disputed; rather Owen issued a general 

denial qualified by an admission that it was "'a corporation organized 
 14 
and existing under the Laws of the State of Nebraska.' " 558 F.2d at 419. 

On the third day of trial, however, (well after the statute of limitations 

had run) Owen challenged jurisdiction, asserting that its principal place 

of business was in fact in Iowa, the state in which the plaintiff was 

domiciled. The district court rejected the challenge, and a divided panel 

of the Eighth Circuit affirmed, giving substantial weight to DiFrischia. 

558 F.2d at 425-26 & nn.33-34. 

DiFrischia's moment of recognition as a vital precedent was short-lived. 

The Supreme Court reversed the Eighth Circuit's Kroger decision in 

Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 (1978), holding 

that a district court, in a diversity case, may not exercise ancillary 

jurisdiction over a state-law controversy between citizens of the same 

state. In doing so, the Court noted that "the asserted inequity in the 

respondent's alleged concealment of its citizenship is irrelevant. Federal 

judicial power does not depend upon `prior action or consent of the 

parties.' " Id. at 377 n.21 (quoting American Fire & Casualty Co. v. Finn, 

341 U.S. 6, 17-18 (1951). 

After over two decades of carefully stepping around DiFrischia, this 

court was presented, in Rubin v. Buckman, 727 F.2d 71 (3d Cir. 1984), 

with an occasion to revisit DiFrischia in light of the Supreme Court's 

decision in Owen Equipment. Rubin involved the kind of fact pattern that 

moved this court to the result in DiFrischia and the Eighth Circuit to its 

conclusion in Kroger. Rubin, alleging that he was a Hong Kong citizen, 

filed a diversity action against Buckman. However, after the district 

court granted Buckman's motion for summary judgment on the merits, 

Rubin filed a motion for reconsideration on the ground that there was no 

diversity; in that motion Rubin revealed that he was not in fact a citizen 

of Hong Kong. The district court--holding that DiFrischia was 

distinguishable--granted the motion, vacated its judgment, and 

dismissed the lawsuit. On appeal, Buckman urged that Rubin should 

have been bound to his jurisdictional allegation. Rejecting this argument, 

this court explicitly repudiated DiFrischia. The Rubin opinion emphasized 

that two intervening Supreme Court decisions--Insurance Corp. of 

Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 n. 9 

(1982), and Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365 

(1978)--made it clear that "jurisdiction cannot be created by estoppel, 

even as a sanction for conduct such as that here or in DiFrischia." 727 

F.2d at 72. Because of this inconsistency with Supreme Court precedent, 

the panel held that DiFrischia "can no longer be regarded as the law of 

this circuit." 727 F.2d at 72. One post-Rubin opinion of this court 

parenthetically mentions the holding in DiFrischia in a footnote, but the 

DiFrischia holding was not characterized by the court as being germane 

 15 
Conclusion 

For the foregoing reasons, the judgment of the district 

court is affirmed. 

_________________________________________________________________ 

to any issue it was called upon to decide. Knop v. McMahan, 872 F.2d 

1132, 1139 n.16 (3d Cir. 1989). 

One might well think that our strong disavowal of the DiFrischia 

holding in Rubin had put the matter to rest, at least as a live legal 

issue 

in this circuit. Mennen argues, however, that Rubin's report of 

DiFrischia's demise was exaggerated. The Rubin panel, so Mennen urges, 

was without power to overturn DiFrischia because Rule 9.1 of this court's 

Internal Operating Procedures (IOP) provides that only an in banc 

decision can overturn a prior panel's opinion. 

To be sure, IOP 9.1 prohibits a panel of this court from overruling a 

holding of a prior panel expressed in a published opinion. However, this 

rule gives way when the prior panel's holding is in conflict with Supreme 

Court precedent. See Jaguar Cars, Inc. v. Royal Oaks Motor Car Co., 46 

F.3d 258, 266 n.6 (3d Cir. 1995). Judge Garth, in his Rubin 

concurrence, wrote separately for the very purpose of emphasizing this 

point. See Rubin, 727 F.2d at 74 (Garth, J., concurring)("Because the 

rule in DiFrischia is obviously in conflict with Supreme Court precedent, 

I agree that it should be overruled, and that our action in rejecting 

DiFrischia may be accomplished without the necessity of an in banc 

hearing."). 

Mennen, however, struggles to save its argument by asserting that the 

exception to this court's bar against intra-circuit conflicts applies only 

when an intervening Supreme Court opinion calls for rejection of a prior 

panel's holding. Mennen reasons that because Supreme Court cases 

preceding DiFrischia consistently held that federal jurisdiction could not 

be bestowed by consent or estoppel--and Owen Equipment is consistent 

with Supreme Court decisions predating DiFrischia--our DiFrischia 

opinion must be regarded as governing circuit law until the full court 

overturns it. Neither logic nor our case law supports this position. 

Supreme Court cases long predating DiFrischia certainly made its 

holding at least doubtful from the outset. See American Fire & Casualty 

Co. v. Finn, 341 U.S. 6, 17-18 (1951); Mansfield, Coldwater & Lake 

Michigan Ry. v. Swan, 111 U.S. 379 (1884). The Rubin court 

acknowledged as much in its decision. 727 F.2d at 72 n.1. However, this 

acknowledgment made DiFrischia a stronger candidate for overturning 

 16 
A True Copy: 

Teste: 

Clerk of the United States Court of Appeals 

for the Third Circuit 

_________________________________________________________________ 

without the need for rehearing by the full court, not a weaker one. We 

reject the proposition that a panel opinion which lacks harmony not only 

with subsequent Supreme Court authority but also with antecedent 

Supreme Court authority has a greater claim to permanence as circuit 

precedent than a panel decision undercut by subsequent Supreme Court 

authority but apparently not in tension with Supreme Court authority 

when announced. 

It need hardly be added that our decisions interpreting the relevant 

IOP rule neither state nor imply the limiting principle for which Mennen 

contends. The very case that Mennen cites as supportive of its rather 

implausible reading of the rule--Goodman v. Lukens Steel Co., 777 F.2d 

113, 120 (3d Cir. 1985)--approvingly quotes Judge Garth's concurrence 

in Rubin, which itself noted the tension between the DiFrischia holding 

and Supreme Court authority of both early and late vintage. See 727 

F.2d at 74 (Garth, J., concurring). The fact that most cases in which we 

have applied the exception speak in terms of intervening decisions merely 

shows (what should be unsurprising) that it is the rare circuit court 

decision that is inconsistent with the weight of antecedent Supreme 

Court precedent. 

With all charity, it should be observed that although the principle that 

jurisdiction cannot be waived or established by consent had been firmly 

established before DiFrischia was decided, the Supreme Court had yet to 

render a decision in a case presenting the rather extreme circumstances 

that this court confronted in DiFrischia. Hence reasonable minds could 

have concluded (and did conclude) that a party who had willfully 

concealed the absence of jurisdiction early in litigation would not be 

heard to assert the jurisdictional defect later in the proceedings. The 

advent of the Supreme Court's decision in Owen Equipment--which 

reversed the only circuit court opinion that embraced and applied the 

DiFrischia rule--certainly removed any lingering doubt on that score. 

Consequently, the Rubin panel's disavowal of DiFrischia can hardly be 

deemed to be outside of the panel's authority. Rather, the panel in Rubin 

did this court yeomanly service by laying to rest a rule that had already 

long been moribund. We will not undertake to revive it now. 

 17