Opinion ID: 771612
Heading Depth: 3
Heading Rank: 1

Heading: The Substantial Predominance of Plaintiff's Business Activity is in California.

Text: 20 Plaintiff's main contention is that neither California, nor any other state, contains the substantial predominance of its business activity, and, therefore, the nerve center test is the appropriate test to determine its principal place of business. Plaintiff further asserts that, under the nerve center test, Plaintiff's principal place of business is Stamford, Connecticut. 21 Plaintiff's argument, however, incorrectly applies the Ninth Circuit's approach in determining a corporation's principal place of business. Specifically, Plaintiff misconstrues what constitutes a substantial predominance of business activity within a given state. Plaintiff supports its argument that California does not contain a substantial predominance of its business activities by comparing the percentage of its business activity in California to the combined percentage of its business activity in the rest of the United States. See Plaintiff's Opposition to Defendant's Motion to Dismiss, pp. 3-7. Plaintiff offers no evidence of its business activity in any specific state that can reasonably compare to the amount of its operations in California. 22 Contrary to Plaintiff's view, determining whether a corporation's business activity substantially predominates in a given state plainly requires a comparison of that corporation's business activity in the state at issue to its business activity in other individual states. See, e.g., Montrose Chemical Corp. v. American Motorists Ins. Co., 117 F.3d 1128, 1134-36 (9th Cir. 1997) (comparing a corporation's business activity between Nevada and Connecticut); Industrial Tectonics, 912 F.2d at 1094 (comparing a corporation's business activity between California and Michigan). Thus, substantial pre-dominance does not require the majority of a corporation's total business activity to be located in one state, but instead, requires only that the amount of corporation's business activity in one state be significantly larger than any other state in which the corporation conducts business. 23 The Ninth Circuit employs a number of factors to determine if a given state contains a substantial predominance of corporate activity, including the location of employees, tangible property, production activities, sources of income, and where sales take place. See Industrial Tectonics , 912 F.2d at 1094. Informed by these factors and the parties' pleadings, this Court finds that Plaintiff has failed to show that no state contains a substantial predominance of its business activities. Rather, the evidence shows that the substantial predominance of Plaintiff's business activity is in California. 24
25 Plaintiff asserts that [o]nly 21 percent of Tosco's employees are located in California and that the remainder of its employees are in states other than California.  Opposition to Defendant's Motion to Dismiss, p. 3. Plaintiff, however, fails to identify any other state containing a comparable number of its employees. 2 26
27 Plaintiff combines the refining capacity of three of its refineries located in three separate states to argue that over 50 percent of refining capacity is located outside of California, but, again, Plaintiff offers no comparison to its refining assets in other individual states. However, Defendant does provide such a comparison, using Plaintiff's own 1997 Annual Report and Form 10-K. See Defendant's Motion to Dismiss, p. 8; Declaration of R. Drury, Exhibits O and P. Five of Plaintiff's eight refineries are located in California; the remaining three are located in separate states. See id. at Exhibit P (pp. 31012). Plaintiff's California refineries have a refining capacity of 420,000 barrels per day, which is over 40 percent of Plaintiff's total refining capacity. See id. The state with the next highest refining capacity is New Jersey, where Plaintiff's refinery has a capacity of only 275,000 barrels per day, which is approximately 28 percent of Plaintiff's total capacity. See id. 28
29 Plaintiff's 76 Lubricant Company is based in Costa Mesa, California. See id. at Exhibit P (p. 314). Two of Plaintiff's four lubricant blending and packaging facilities are located in California. See id. The other two locations are in separate states. See id. 30
31 Plaintiff contends that only 35 percent of Tosco's total retail marketing locations are located in California  and the remainder are located across 33 other states. 3 Opposition, p. 4. Again, Plaintiff failed to show any state-to-state comparison. However, Defendant contends that Plaintiff's 1997 Annual Report clearly shows that the other 33 states each have far fewer retail locations than California. For instance, Plaintiff has 1,872 (37 percent) of its retail locations in California. See id. at Exhibit O (p. 260). The state with the next highest number of retail locations is Arizona, with 689 retail locations (14 percent). See id. 32
33 Plaintiff asserts that Tosco only operates 15 percent of its Circle K convenience stores in California. Opposition, p. 4. Once again, Plaintiff fails to identify another state with a percentage of its convenience stores that can reasonably compare to California. 34
35 Plaintiff states that less than one-third of its sales are generated from its California operations but fails to show another state with comparable sales. See id. at p. 5. Also, Plaintiff contends that only 35 percent of its inventories relate to its operations in California but fails to show another state with comparable inventories. See id. 36
37 Plaintiff contends that its executive and administrative functions are plainly located outside of California. Id. at p. 6. Plaintiff's principal corporate headquarters is located in Stamford, Connecticut. See id. Plaintiff's refining company headquarters is located in Linden, New Jersey, and its marketing headquarters is located in Phoenix, Arizona. See id. However, not all of Plaintiff's executive and administrative offices are located outside of California. Plaintiff's lubricant company headquarters is located in Costa Mesa, California. See Declaration of R. Drury, Exhibit P (p. 314). 38 This Court finds that Plaintiff has failed to show that no state contains a substantial predominance of its corporate operations. In fact, Plaintiff conducts a substantial predominance of its business activity in California. Despite having operations and executive offices in other parts of the United States, Plaintiff's presence in California significantly outweighs its presence in any other state. Therefore, the place of operations test, not the nerve center test, applies to determine Plaintiff's principal place of business, which is California. Accordingly, Plaintiff and Defendant are not diverse parties and cannot, therefore, invoke the subject matter jurisdiction of this Court. The purpose of diversity jurisdiction is to provide a federal forum for out-of-state litigants where they are free from prejudice in favor of a local litigant. J.A. Olson Co. v. City of Winona, 818 F.2d 401, 404 (5th Cir.1987). Plaintiff, as a major employer and business operator in California, is not the type of litigant that diversity jurisdiction was designed to protect. 39