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POWERS v. FOX TV STATIONS

November 22, 1995

STEVE POWERS, Plaintiff, against FOX TELEVISION STATIONS, INC., Defendant.


The opinion of the court was delivered by: SCHEINDLIN

 SHIRA A. SCHEINDLIN, U.S.D.J.:

 Plaintiff filed the instant action in New York state court on August 15, 1994, alleging that Defendant terminated his employment in violation of the New York State Human Rights Law and New York City Administrative Code. See N.Y. Executive Law § 296(1)(a); N.Y.C. Admin. Code § 8-502(c). On August 30, 1994, Defendant removed the case to this Court based on its diversity jurisdiction. Plaintiff now moves to remand to state court, maintaining that diversity is lacking. For the reasons set forth below, Plaintiff's motion is denied.

 Plaintiff Steve Powers is a resident of Putnam Valley, New York. Defendant Fox Television is a corporation organized under the laws of Delaware, with its corporate offices located in California. Despite the fact that Fox Television's corporate offices are in California, Plaintiff maintains that it is actually a New York citizen. Essentially, Plaintiff contends that because Fox Television is a subsidiary of, and controlled by, New York parent companies, New York should be its imputed location for jurisdictional purposes.

 
A. Burden of Proof

 For the purpose of establishing diversity jurisdiction, a corporation is deemed to be a citizen of the state in which it is incorporated and in which it has its principal place of business. See 28 U.S.C. § 1332(c)(1). Typically, the party seeking to invoke federal diversity jurisdiction bears the burden of showing that jurisdiction is proper, even on a motion to remand. See R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 655 (2d Cir. 1979).

 However, the case at hand presents an unusual situation. Plaintiff, borrowing a concept most often used in cases where a party seeks to "pierce the corporate veil," argues that Defendant is merely the "alter ego" of its parent corporations. As such, Plaintiff argues that New York, where the parents are located, is Defendant's actual principal place of business. *fn1"

  Plaintiff correctly notes that courts have applied the "alter ego" analysis to determine the citizenship of related companies for diversity purposes. See, e.g., United States v. Jon-T Chemicals, Inc., 768 F.2d 686 (5th Cir. 1985), cert. denied, 475 U.S. 1014, 89 L. Ed. 2d 309, 106 S. Ct. 1194 (1986); In re Air Disaster Near Cove Neck, N.Y., 774 F. Supp. 718 (E.D.N.Y. 1991). Nonetheless, by arguing that Defendant is merely the alter ego of its parents, Plaintiff is asking the Court to depart from the general rule "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.'" Topp v. Compair, Inc., 814 F.2d 830 (1st Cir. 1987) (quoting 1 Moore's Federal Practice P 0.77[1.-2], at 717.10 (2d ed. 1986)).

 Because Plaintiff asks the Court to depart from this general rule, it seems reasonable to require Plaintiff to demonstrate that a departure is warranted. It would be fundamentally unfair to require Defendant to affirmatively demonstrate that it is more than a mere pawn of its parent corporations. Requiring Defendant to do this would deny it the benefit of the presumption articulated in Topp.

 Accordingly, although the ultimate burden of establishing the Court's jurisdiction remains with Defendant, Plaintiff must sustain the burden of proving that Defendant is a mere "alter ego" of its parents. Hence, Defendant will have the initial burden of making a prima facie showing that its principal place of business is California. If Defendant demonstrates this, Plaintiff will bear the burden of producing facts sufficient to support its assertion that Defendant is merely an "alter ego" of its New York parents. *fn2" Only if Plaintiff meets this burden of production will the ultimate burden of persuasion return to Defendant.

 
B. The Nerve Center Test

 The appropriate test for determining the principal place of business of a corporation with operations spread over numerous states is the "nerve center test." See R.G. Barry Corp., 612 F.2d at 655; Kubin v. Miller, 801 F. Supp. 1101, 1112 (S.D.N.Y. 1992); Petroleum & Energy Intelligence Weekly, Inc. v. Liscom, 762 F. Supp. 530, 534-35 (S.D.N.Y. 1989). This test seeks to locate "the nerve center from which [the corporation] radiates out to its constituent parts and from which [the corporation's] officers direct, control and coordinate all activities." Kubin, 801 F. Supp. at 1112 (quoting Scot Typewriter Co. v. Underwood Corp., 170 F. Supp. 862, 865 (S.D.N.Y. 1959)).

 Defendant has sufficiently demonstrated that its "nerve center" is California, where its corporate offices are located. The overwhelming majority of Defendant's officers and directors are in California, including its chairman, president, chief operating officer, secretary, treasurer and all of its executive vice presidents. See Affidavit of Attorney Donald L. Sapir, dated November 1, 1994 ("Sapir Aff."), Ex. 10, Interrogatory No. 6. This is an important consideration in determining a corporation's "nerve center." See, e.g., Kubin, 801 F. Supp. at 1112 (finding "nerve center" where executive officers worked full time).

 More importantly, all of Defendant's major operational decisions are made in California. From its corporate headquarters, Defendant formulates policies and provides direction for all of its television stations. See Affidavit of Corporate Secretary Jay Itzkowitz, dated November 18, 1994 ("Itzkowitz Aff."), at P 9. These are additional factors supporting a finding that California is truly Defendant's "nerve center." See Egan v. American Airlines, Inc., 211 F. Supp. 292, 295 (S.D.N.Y. 1962), aff'd, 324 F.2d 565 (2d Cir. 1963) (principal place of business is where company's "general overall management and business policy is prescribed"); ...


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