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P r e c e de n t i al or N on-P r e c e de n t i al :

D ock e t 97-5266

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. e du/thir dc ir c uit_1998/146Filed 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 Distric t Judge for the Eastern District of Pennsylvania, sitting by design ation.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

2OPINION OF THE COURT

POLLAK, District Judge.

Mennen, Inc. appeals the district court's dismissal , for lack of subject matter jurisdiction, of its complai nt against Federal Insurance Company. For the reasons set fort h below, we affirm.

I.

This litigation commenced in 1993 when Mennen, a Ne w Jersey corporation, brought suit in the District Co urt for the District of New Jersey against several of its i nsurers-- all of them incorporated and having their principal places of business outside of New Jersey--seeking indemnity u nder state law for environmental clean-up liabilities. M ennen's complaint based federal jurisdiction on the diversi ty statute. 28 U.S.C. S 1332. Mennen did not initially name appellee Federal Insurance Co. ("Federal") as a def endant because Mennen believed that Federal--a company incorporated in Indiana--had its principal place of business in New Jersey, thus precluding diversity jurisdicti on. Moreover, when Mennen filed suit, New Jersey insura nce law was governed by a joint and several liability r egime--a regime which appeared to permit Mennen to seek full recovery from its other insurers without suing Fede ral. While the suit was pending, however, the New Jersey Supreme Court decided Owens-Illinois v. United Insu rance Co., 138 N.J. 437 (1994), which eliminated joint an d several liability in cases involving several insurers and s ubstituted a pro rata contribution scheme. The practical effec t of the Owens-Illinois decision with respect to this litiga tion was that, if Mennen was to have the complete recovery i t 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 defen dants to implead Federal. But this stratagem proved unsuccessful; the motion was denied. Then Mennen discovered pleadings that Federal had filed in othe r actions

3--pleadings in which Federal stated that its princi pal place

of business was in Indiana, its state of incorporat ion. Armed with this new understanding of Federal's busi ness operations, Mennen filed an amended complaint joini ng 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 citize n of New Jersey as well as of Indiana; this meant, so Federa l argued, that there was a New Jersey plaintiff (Mennen) and a New Jersey defendant (Federal), a configuration fatal t o 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 m otion. This appeal followed.

II.

The facts bearing on jurisdiction are undisputed. F ederal is a corporation wholly owned by the Chubb Corporat ion. For the first approximately ninety years of its exi stence, 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 require ment of
Indiana law.

Federal is in the business of providing property an d 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 th e United States.2 Rather, Federal's business in the United S tates is conducted by employees of Chubb & Son, another whol lyowned subsidiary of the Chubb Corporation, under a management services contract. Pursuant to similar

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1. Mennen also filed a motion for sanctions against Federal on the basis of these inconsistent pleadings, a motion the distr ict court denied. Mennen has not appealed this ruling.

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

4arrangements, many of these employees also handle t he

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 dis trict court found and the record reflects, the Warren off ice also (1) houses Federal's accounting, treasury, marketin g, 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 rep orts.

In Indiana, forty-five Chubb & Son employees carry out Federal's business. As Indiana law requires of comp anies incorporated in the state, Federal's primary books and
records are maintained at the Indiana office. Howev er, the Indiana office functions largely as a local claims and underwriting office, similar to other such local of fices throughout the country; no national corporate-wide authority over such functions is exercised in India na.

Mennen does not undertake to challenge the district court's factual findings. Rather, Mennen argues tha t--given that Federal has no employees in New Jersey--Federa l is only a citizen of Indiana, its state of incorporati on, and that the district court therefore erred in concluding th at subject matter jurisdiction is absent. We exercise plenary review over this issue. Mellon Bank v. Farino, 960 F.2d 12 17, 1220 (3d Cir. 1992).

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3. While the record is not entirely clear as to whi ch 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 appoi nted officers-- assistant vice presidents, assistant secretaries, a nd assistant treasurers --a plurality are located in New Jersey. Only one a ppointed officer is located in Indiana. The remainder are assigned to o ther cities in the
United States or to Federal's "Asia Pacific Zonal O ffice." None of the officers within the United States is an employee of Federal.

5III.

A.

Section 1332(a)(1) of the diversity statute require s complete diversity between the parties--that is, ju risdiction is lacking if any plaintiff and any defendant are c itizens of the same state. Strawbridge v. Curtiss, 7 U.S. (3 C ranch) 267 (1806). The determination of a corporation's ci tizenship 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 corporati on shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its prin cipal 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)).

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4. Diversity jurisdiction was statutorily authorize d 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 Cou rt, reasoning that a corporation could not itself be a citizen, held tha t 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 inv olving 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 Richa rd 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, Cin cinnati & Charlestown R.R. Co. v. Letson, 43 U.S. (2 How.) 49 7, 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 Ma rshall 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 a n apparent effort to reconcile Deveaux and Letson, the Marshall Court he ld that although a corporation cannot be a citizen, the persons who ma ke up the corporation "may be justly presumed to be resident in the State which is the necessary habitat of the corporation, and wh ere alone they can be made subject to suit; and should be estopped in equ ity from averring a different domicil." 57 U.S. (16 How.) at 328; see a lso Ohio & Mississippi

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

was to curtail the availability of diversity jurisd iction. See S. Rep. No. 1830, 85th Cong., 2d Sess. (1958), reprint ed in 1958 U.S.C.C.A.N. 3099, 3101 ("In adopting this leg islation,
the committee feels . . . that it will ease the wor kload of our Federal courts by reducing the number of cases invo lving corporations which come into Federal district court s on the fictional premise that a diversity of citizenship e xists.").

Mennen is a citizen of New Jersey. Federal, incorpo rated in Indiana, was determined by the district court to have its principal place of business in New Jersey, making F ederal a citizen of New Jersey as well. The district court thus found complete diversity lacking and dismissed the complaint with respect to Federal. Consequently, th is 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 13 32(c)(1) is Kelly v. United States Steel Corp., 284 F.2d 850 (3d Cir. 1960). The Kelly articulation of standards for dete rmining a company's principal place of business has come to b e known as the "center of corporate activities" test for corporate citizenship. See generally 13B Charles Al an

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R. R. v. Wheeler, 66 (1 Black) U.S. 286, 296 (1862) (explicating
Marshall). Whether the Letson view or that expressed in Marsha ll doctrinally carried the day until the amendment of the diversity statut e in 1958 remains a matter of historical debate. Compare Navarro Sav. A ss'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 Carde n 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 citize nship.")(citing Great Southern Fire Proof Hotel Co. v. Jones, 177 U.S. 44 9, 456 (1900), and Chapman v. Barney, 129 U.S. 677, 682 (1889)). See a lso National Mutual Ins. Co. v. Tidewater Transfer Co., 337 U.S. 582, 6 18 n.12 (1949)(Rutledge, J. concurring in the judgment).

7Wright, Arthur R. Miller & Edward H. Cooper, Federa l

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 d ay-to-day corporate activity and management." 284 F.2d at 854 ; see also Midlantic Nat. Bank v. Hansen, 48 F.3d 693, 69 6 (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.2 d at 854) United States Steel Corporation, which approximatel y forty years ago had fourteen divisions and eleven subsidi aries 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--se eking to overturn dismissals for lack of diversity jurisdict ion--had urged a " `nerve center' " approach, according to w hich the
locus of the board of directors' final decision-mak ing 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 Stee l Corporation's life." Id. Applying that pragmatic ap proach, the court noted that final authority over "corporat e policy, including its financing," rested with the board in New York, but that the board had delegated "the duty of condu cting the business of the corporation relating to manufac turing, mining, transportation and general operation" to an "Operation Policy Committee," consisting of the boa rd chairman, the president, the seven executive vice presidents and certain other principal officers,"wh ich sits and conducts its affairs" in Pennsylvania. Id. at 8 54. Further, the court pointed out that the seven execu tive vice presidents, sixteen of the seventeen administrative vice presidents, and twenty-two of the twenty-five vice presidents had their offices and staffs in Pennsylv ania. Consequently, the court identified Pennsylvania as the state in which the corporation's "business by way of acti vities is

centered." Id.

8The Kelly court also looked to factors such as "phy sical

location of employer's plants and the like"--factor s which, while of "lesser importance," were of "some signifi cance" when "added to the items already enumerated pointin g to the center of corporate activity." Id. Specifically , the court noted that Pennsylvania had approximately a third o f the company's personnel, tangible property, and product ive capacity--far more than New York and, apparently, m ore than any other state. Id.

In the present case, all of the Kelly factors--both the primary considerations and what in Quaker State Dye ing and Finishing Corp. v. ITT, 461 F.2d 1140, 1143 (3d Cir. 1972), we referred to as the "secondary considerati ons"-- point to New Jersey. As between New Jersey and Indi ana the choice is clear: the critical mass of corporate functions
is located in the Warren offices. Warren is not onl y the center of Federal's national underwriting operation s but also the location of its accounting, legal, human r esource, and loss-control activities. There are more than tw o thousand Chubb & Son employees carrying out Federal 's business--underwriting and providing insurance--in the Warren complex, where most of the company's officer s are located. By contrast, forty-five Chubb & Son employ ees conduct Federal's business in the Indiana office, a n office that has no corporation-wide authority.

Hence a straightforward application of Kelly's prin ciples leads to the conclusion that Federal's principal pl ace 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 i n this circuit. Hansen dealt with the problem presented wh en a court is called upon to decide, for diversity purpo ses, the citizenship of a corporation which has become entir ely inactive. In Hansen, the corporation in question--M idlantic National Bank--was a failed savings and loan. The Resolution Trust Corporation had seized Midlantic a nd prohibited it from conducting any further business. We
concluded that in a situation of this sort it was n ot necessary to "strain to locate a principal place of business when no such place in reality exists." Id. at 696. Given that

9the Kelly inquiry looks to actual business activiti es, we held

in Hansen that a corporation not engaged in busines s activities can only be considered a citizen of its state of incorporation. Id. Hence our approach in Hansen doe s not represent a departure from this court's Kelly analy sis, as Mennen's argument suggests, but a consistent applic ation of Kelly's underlying premises.5

Mennen acknowledges that Federal is not an inactive corporation but urges that we extend the logic of H ansen to this case. Stressing our statement that courts shou ld not "strain to locate a principal place of business," M ennen 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 an d claimshandling functions to an affiliate, Mennen urges th at 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 c orporate activities" test in Kelly, this court opted for a f unctional approach to the principal place of business inquiry .6 Rather

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5. As we noted in Hansen, other circuits have taken different views in determining the citizenship of inactive corporation s. Compare Wm. Passalacqua Builders, Inc. v. Resnick Developers So uth, Inc., 933 F.2d 131, 141 (2d Cir. 1991)(last principal place of bus iness dispositive),
with Harris v. Black Clawson Co., 961 F.2d 547, 551 (5th Cir. 1992)(last principal place of business is relevant but not con trolling). On the subject generally, see Timothy J. Yuncker, Inactive Corporations and Diversity Jurisdiction Under 28 U.S.C. S 1332(c): T he Search for a Principal Place of Business, 28 U. Toledo L. Rev. 8 15 (1997); Dawn Levy, Note, Where Do Dead Corporations Live?: Determining the Citizenship of Inactive Corporations for Diversity Jurisdiction Pu rposes, 62 Brooklyn L. Rev. 663 (1996).

6. As previously noted, this court in Kelly conside red the "center of corporate activities" test a sounder guide than the "nerve center" test contended for by the Kelly plaintiffs-appellants. T he "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 fo rmulation placed emphasis on the highest levels of corporate decisio n making, looking to "the place where all of its business was under the supreme direction and

10than looking to the location of the highest level o f policymaking as dispositive, we looked to the location of production and "the headquarters of day-to-day corp orate 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 appropriat e to consider the substantial quantity of Federal's acti vity carried out in New Jersey, notwithstanding that tho se who carry out Federal's business are not formally Feder al employees. It is fully in line with this court's co nsistently functional approach to consider the actual day-to-d ay activities of Federal, irrespective of what corpora tion's name appears on the paychecks of the employees who carry out those activities.7 Accordingly, we reject Mennen's contention

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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 C ir. 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 activit ies" 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. Cit y of Winona, 818 F.2d 401, 406 (5th Cir. 1987); Vareka Invs., N.V. v. Ame rican 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 b ar. 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 appro ach.

7. Mennen also urges that the district court's conc lusion impermissibly disregards the separate corporate identities of Fed eral and Chubb & Son. In aid of this argument, Mennen points to a plethor a of cases holding that parents and subsidiaries each have their own p rincipal places of business. This argument need not detain us long. Th e cases cited by Mennen are typified by Quaker State Dyeing and Fini shing Corp. v. ITT, 461 F.2d 1140, 1143 (3d Cir. 1972), which held that "a subsidiary corporation which is incorporated as a separate ent ity 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 on e that has no relevance in this case. Quaker State Dyeing simply instructs that a

11that the district court erred in taking into accoun t the

activities of Chubb & Son employees, who, pursuant to a management services contract, carry out the practic al work

of Federal.

Mennen also urges that we give weight to Federal's assertions, in unrelated litigation, that its princ ipal place of business is in Indiana. Collecting an array of plea dings filed by Federal in other proceedings in which Federal wa s a party defendant, Mennen contends that these representations provide valuable evidence indicatin g where Federal's corporate representatives believe the cor poration's principal place of business to be.8

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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 t herefore 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 acti vities of Federal (albeit carried out by employees of the affiliated corporat ion), and determined that Federal had its own principal place of busines s in New Jersey. Thus the district court was not imputing one affiliate's principal place of business to another. Rather, the district court att ributed to Federal the services that Chubb & Son operatives perform on beh alf 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 c overage action filed in the New Jersey Superior Court in 1996. The plain tiff in Campbell, responding to Federal's argument that the action wa s barred by the entire controversy doctrine, urged that it was not possible to join

Federal in the earlier federal court proceeding because Fed eral's New Jersey citizenship would have destroyed diversity. Federal 's reply brief maintained that the corporation's principal place o f business was in Indiana. Federal later submitted a correction (afte r the underlying controversy had settled), indicating that this repr esentation 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 or iginal answer that its principal place of business was in Indiana. Federal subsequently moved for leave to amend the answer, stating that the ori ginal answer misidentified the company's principal place of busi ness as being in Indiana when it was in fact in New Jersey. (3) In M ercury Fin. Co. v.

12We do not find that these prior Federal pleadings h ave

evidentiary value for the purpose of assessing wher e Federal's principal place of business is located. T he representations made in these pleadings run contrar y to the empirical facts with which the jurisdictional i nquiry is concerned. While pleadings that contain unwarranted assertions as to matters bearing on jurisdiction re flect no great credit on the attorneys who apparently drafte d and filed them without sufficient inquiry, the pleading s themselves have no intrinsic capacity either to est ablish or disestablish jurisdiction; it is axiomatic that a p arty may not confer or defeat jurisdiction by mere pleading. See Insurance Corp. of Ireland v. Compagnie des Bauxite s de Guinee, 456 U.S. 694, 702(1982); Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 377 n.21 (197 8). Rather, subject matter jurisdiction depends upon fa cts of record, and when any question arises as to the exis tence of jurisdiction a federal court is obligated to make a n 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 jurisdict ion of the subject matter, the court shall dismiss the action. "); Mitchell v. Maurer, 293 U.S. 237, 244 (1939).9

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Aetna Cas. Co., 900 F. Supp. 390, 391 (M.D. Ala. 19 95), the court (presumably on the representation of Federal's coun sel) identified Indiana as the location of Federal's principal plac e of business. In both Gencorp and Mercury, whether Federal was a citizen of New Jersey as well as Indiana appears to have been immaterial; di versity 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 ambigu ity, present no stark inconsistency with Federal's argument in this actio n that its principal place of business is in New Jersey.

9. In its reply brief, Mennen makes an oblique sugg estion that Federal may be held to its prior representations. Although Mennen avoids overt invocation of "estoppel"--the term of art that seem s most aptly to describe its argument--Mennen appears in effect to be urging that Federal be bound to those jurisdictional contention s.

In support of this argument, Mennen relies upon DiF rischia v. New York Central Railroad, 279 F.2d 141 (3d Cir. 1960), in which this court, while acknowledging the general precept that jurisd iction may not be

13(Text continued on page 16)

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bestowed or waived by action of parties, held that the defendant was bound to its representation as to federal jurisdict ion, despite a factual lack of diversity. In DiFrischia, the defendant had stipulated to jurisdiction early in the litigation, but then move d to dismiss after the expiration of the relevant limitations period. On t hese extreme facts,
this
court determined that the district court had abused its discretion in dismissing the action, stating that "a defendant ma y not play fast and loose with the judicial machinery and deceive the c ourts." 279 F.2d at

144.

In the two decades that followed, the holding in Di Frischia failed to draw broad support. With one exception, every circu it 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)(no ting 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 di d not raise jurisdictional defect until adverse judgment was re ndered); 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 DiFris chia rule confined to circuits other than our own. See, e.g., Joyce v. Un ited States, 474 F.2d 215, 218 n.1 (3d Cir. 1973); Stapleton v. $2,438,11 0, 454 F.2d 1210, 1218 (3d Cir. 1972); Ramsey v. Mellon Nat. Bank & T rust 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 gene rative inroad on the traditional rule, even in the Third Circuit.").

The lone exception to this disinclination on the pa rt of other circuit courts to follow DiFrischia was the Eighth Circuit in Kroger v. Owen Equipment & Erection Co., 558 F.2d 417 (8th Cir. 19 77). That case presented the Eighth Circuit with facts similar to those that moved this court in DiFrischia to find an exception to the gen eral rule against creating jurisdiction by estoppel. The jurisdiction al issue in Kroger turned on the citizenship of Owen Equipment & Erect ion 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 allege d that Owen was a Nebraska corporation with its principal place of bu siness in Nebraska, an allegation Owen never directly disputed; rather Owen issued a general denial qualified by an admission that it was "'a co rporation organized14and existing under the Laws of the State of Nebrask a.' " 558 F.2d at 419.

On the third day of trial, however, (well after the statute of limitations had run) Owen challenged jurisdiction, asserting th at its principal place of business was in fact in Iowa, the state in which the plaintiff was domiciled. The district court rejected the challeng e, 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 prece dent was short-lived. The Supreme Court reversed the Eighth Circuit's Kro ger decision in Owen Equipment & Erection Co. v. Kroger, 437 U.S. 3 65 (1978), holding that a district court, in a diversity case, may not exercise ancillary jurisdiction over a state-law controversy between c itizens of the same state. In doing so, the Court noted that "the asser ted inequity in the respondent's alleged concealment of its citizenship is irrelevant. Federal judicial power does not depend upon `prior action o r 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 th e 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 gro und that there was no diversity; in that motion Rubin revealed that he wa s not in fact a citizen of Hong Kong. The district court--holding that DiFr ischia was distinguishable--granted the motion, vacated its ju dgment, and dismissed the lawsuit. On appeal, Buckman urged tha t Rubin should have been bound to his jurisdictional allegation. R ejecting this argument, this court explicitly repudiated DiFrischia. The Ru bin opinion emphasized that two intervening Supreme Court decisions--Insur ance 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 Supr eme Court precedent, the panel held that DiFrischia "can no longer be re garded as the law of this circuit." 727 F.2d at 72. One post-Rubin opini on of this court parenthetically mentions the holding in DiFrischia in a footnote, but the DiFrischia holding was not characterized by the cou rt as being germane

15Conclusion

For the foregoing reasons, the judgment of the dist rict
court is affirmed.

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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 t he DiFrischia holding in Rubin had put the matter to rest, at lea st as a live legal
issue in this circuit. Mennen argues, however, that Rubin 's report of DiFrischia's demise was exaggerated. The Rubin pane l, so Mennen urges, was without power to overturn DiFrischia because Ru le 9.1 of this court's Internal Operating Procedures (IOP) provides that o nly 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 o pinion. However, this rule gives way when the prior panel's holding is in conflict with Supreme Court precedent. See Jaguar Cars, Inc. v. Royal Oak s Motor Car Co., 46 F.3d 258, 266 n.6 (3d Cir. 1995). Judge Garth, in h is Rubin concurrence, wrote separately for the very purpose of emphasizing this point. See Rubin, 727 F.2d at 74 (Garth, J., concur ring)("Because the rule in DiFrischia is obviously in conflict with Su preme Court precedent, I agree that it should be overruled, and that our a ction in rejecting DiFrischia may be accomplished without the necessit y 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 Suprem e Court cases preceding DiFrischia consistently held that federal jurisdiction could not be bestowed by consent or estoppel--and Owen Equipm ent is consistent with Supreme Court decisions predating DiFrischia-- our DiFrischia opinion must be regarded as governing circuit law u ntil the full court overturns it. Neither logic nor our case law suppor ts this position.

Supreme Court cases long predating DiFrischia cert ainly made its holding at least doubtful from the outset. See Amer ican Fire & Casualty Co. v. Finn, 341 U.S. 6, 17-18 (1951); Mansfield, C oldwater & Lake Michigan Ry. v. Swan, 111 U.S. 379 (1884). The Rubi n court acknowledged as much in its decision. 727 F.2d at 7 2 n.1. However, this acknowledgment made DiFrischia a stronger candidate for overturning

16A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

___________________________________________________ ______________

without the need for rehearing by the full court, n ot a weaker one. We reject the proposition that a panel opinion which l acks harmony not only with subsequent Supreme Court authority but also wi th antecedent Supreme Court authority has a greater claim to perm anence as circuit precedent than a panel decision undercut by subsequ ent Supreme Court authority but apparently not in tension with Suprem e Court authority

when announced.

It need hardly be added that our decisions interpre ting the relevant IOP rule neither state nor imply the limiting princ iple for which Mennen contends. The very case that Mennen cites as suppor tive of its rather implausible reading of the rule--Goodman v. Lukens Steel Co., 777 F.2d 113, 120 (3d Cir. 1985)--approvingly quotes Judge G arth's concurrence in Rubin, which itself noted the tension between th e DiFrischia holding and Supreme Court authority of both early and late vintage. See 727 F.2d at 74 (Garth, J., concurring). The fact that m ost cases in which we have applied the exception speak in terms of interv ening decisions merely shows (what should be unsurprising) that it is the rare circuit court decision that is inconsistent with the weight of an tecedent Supreme Court precedent.

With all charity, it should be observed that althou gh the principle that jurisdiction cannot be waived or established by con sent had been firmly established before DiFrischia was decided, the Supr eme Court had yet to render a decision in a case presenting the rather e xtreme circumstances
that this court confronted in DiFrischia. Hence rea sonable minds could have concluded (and did conclude) that a party who had willfully concealed the absence of jurisdiction early in liti gation would not be heard to assert the jurisdictional defect later in the proceedings. The advent of the Supreme Court's decision in Owen Equi pment--which reversed the only circuit court opinion that embrac ed and applied the DiFrischia rule--certainly removed any lingering do ubt on that score. Consequently, the Rubin panel's disavowal of DiFris chia can hardly be deemed to be outside of the panel's authority. Rath er, 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