USCA1 Opinion

March 3, 1993
United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit
____________________
No. 92-1921
TABER PARTNERS, I, A NEW YORK GENERAL PARTNERSHIP,
Plaintiff, Appellant,
v.
MERIT BUILDERS, INC., A PUERTO RICO CORP., ET AL.,
Defendants, Appellees.
_____________________
No. 92-1922
TABER PARTNERS, I, A NEW YORK GENERAL PARTNERSHIP,
Plaintiff, Appellee,
v.
MERIT BUILDERS, INC., A PUERTO RICO CORP.,
Defendant, Appellant.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Jaime Pieras, Jr., U.S. District Judge]
___________________
____________________
Before
Selya, Circuit Judge,
_____________
Coffin, Senior Circuit Judge, and
____________________
Stahl, Circuit Judge.
_____________

____________________

Harvey B. Nachman with whom Joan Schlump Peters was on brief

_________________
____________________
Merit Builders, Inc. and Arch Stokes with whom John R. Hunt, Sto
___________
_____________ ___
and Murphy, Ruben T. Nigaglioni and Ledsma, Palou & Miranda were
__________
___________________
_______________________
brief for Taber Partners I.
Jay A. Garcia-Gregory with whom Rafael R. Vizcarrondo, Humbe
______________________
_____________________
_____
Guzman-Rodriguez and Fiddler, Gonzalez & Rodriguez were on brief
________________
______________________________
appellees.
____________________
March 3, 1993
____________________

STAHL, Circuit Judge.

______________
decide whether,
partnership's

for

purposes of

business activities

determining the principal

corporate partners.
that

activities

their

requires us to

diversity jurisdiction,
should

be considered

in

of each of

its

place of business

We hold that, in the absence of evidence

the partnership

maintain

This appeal

and its

separate

ordinarily

corporate partners

identities,

should

not

the

failed to

partnership's

be considered

for

this

purpose.
I.
I.
__
PROCEDURAL POSTURE
PROCEDURAL POSTURE
__________________
Plaintiff Taber
general

Partners I

partnership whose

corporations, Lerfer
Corp.

("Calumet"),

Hotel

&

Casino

Defendants

owns and

operates the

("Hotel")

two New

in

San

Inc.,

York

and Calumet

Ambassador Plaza

Juan,

and Merit

York

Puerto

Rico.

Builders, S.E.

referred to collectively as "Merit") are Puerto

Rico-based construction
Taber and

partners are

San Juan Corp. ("Lerfer"),

Merit Builders,

(hereinafter

sole

("Taber"), a New

Merit

companies.

entered into

Beginning in March 1988,

series of

consulting

and

construction contracts involving the renovation and expansion

of

the Hotel.

project, and

Disputes arose
in February

during

the course

1991, Taber commenced

action against Merit in the United States District

the District of

of

the

a diversity
Court for

Puerto Rico asserting, inter alia, breach of

_____ ____

-22

contract,

fraud,

and

several counterclaims
complaints

against

("VTA"),

the

negligence.
against

Metropolitanos,

Inc.

subcontractors.

Taber and

appellees

inspecting

Merit

Victor

filed

Torres

architect,

("Desarrollos"),

Like

Merit, both

responded

third-party
&

and
one

VTA and

with

Associates
Desarrollos

of

the project

Desarrollos are

citizens of Puerto Rico.

On the eve of trial,
dismiss, asserting that -of Puerto Rico -the

VTA and Desarrollos moved

because Taber was also a

to

citizen

diversity of citizenship was lacking.

As

citizenship of Taber depends upon the citizenship of its

partners, Lerfer and Calumet, the district court first had to

determine Lerfer's and Calumet's
Arkoma Assocs., 494 U.S.
______________
"oft-repeated rule

citizenship.

See Carden v.
___ ______

185, 195-96 (1990) (reaffirming the

that diversity jurisdiction in

a suit by

or against [a partnership] depends on the citizenship of `all

the

[partners]' . . .") (quoting Chapman v. Barney, 129 U.S.

_______
______

677,

682

(1889)).

As

Lerfer

incorporated in New York, the sole

court

was

corporations.
of

the

principal

See 28 U.S.C.
___

place

Calumet

are

both

issue before the district

of

business

of

both

1332(c)(1) ("For the purposes

[diversity,] . . . a corporation

citizen

and

shall be deemed to be a

of any [s]tate by which it has been incorporated and

___

of the [s]tate where it has its principal place of business")

(emphasis supplied).

The district court ultimately

-33

agreed

with

principal
Puerto

VTA's

and

Desarrollos'

place of business

Rico.

Thus, on

granted

their

subject

matter

of both Lerfer

July, 8,

motion and

argument

jurisdiction.

See
___

the

and Calumet was

1992, the

dismissed

that

district court

the case

for

lack of

Taber Partners I
__________________

Insurance Co. of North America, Inc., 798 F. Supp.

_____________________________________

v.

904, 912

(D.P.R. 1992).
In this appeal, Taber and Merit, adversaries below,
mount a

joint challenge to the district court's dismissal of

their case.

In so doing,

undisputed evidence
activities

that

occurred almost

district court's

they argue that, in

Lerfer's and
exclusively

selection of

place of business of

light of the

Calumet's
in

Puerto Rico as

New

corporate
York,

the

the principal

both corporations is clearly erroneous.

Before

addressing

appellants'

argument,

we

sketch

the

Romano and

Ms.

relevant facts.
II.
II.
___
FACTUAL BACKGROUND
FACTUAL BACKGROUND
__________________
In
Linda E.
and

December 1986,

Romano, citizens

Calumet in

New York.

Mr.

F. Eugene

of New York,
At

incorporated Lerfer

all relevant

times,1 Eugene

____________________
1. For purposes of diversity jurisdiction, citizenship is
determined as of the date of the initiation of the lawsuit.
See, e.g., Freeport-McMoRan, Inc. v. K N Energy, Inc., 111 S.
___ ____ ______________________
________________
Ct. 858, 859 (1991); Media Duplication Servs., Ltd. v. HDG
_______________________________
___
Software, Inc., 928 F.2d 1228, 1236 (1st Cir. 1991).
Thus,
______________
we recite relevant facts as they existed on February 15,
1991, the date Taber filed its complaint.
-44

Romano owned all the outstanding shares

Romano

owned all the

Romano

and Mrs.

of Lerfer, and Linda

outstanding shares of

Jeanne

Romano served

as

Calumet.

Linda

the officers

of

Lerfer, while

Eugene Romano and Jeanne Romano

officers of Calumet.

The

served as the

same three individuals also served

as the directors of both corporations.

Lerfer and Calumet are "Subchapter S" corporations,
a status entitling them to favorable tax treatment under both
federal

law, see
___

state law.
1987).

generally 26
_________

1361 et
__

See generally New York Tax Law

___ _________

See also Taber Partners I,

___ ____ _________________

(explaining the

legal and

Corporation").

The

companies contain
"to

U.S.C.

engage

in

any

lawful

660(a) (McKinney

798 F. Supp.

at 907-09

practical underpinnings of

Certificates of

a broad

seq., and
____

Incorporation of

declaration of
acts

an "S

or

corporate purpose

activities for

corporations may be organized under the

both

which

Business Corporation

Law of the State of New York . . . ."

The

headquarters

(and

sole

office)

of

both

corporations is located at 501 Main

Street, Utica, New York.

All

are

corporate

books

and

records

maintained

at

the

headquarters, and all accounting, auditing, and legal work is

handled for both corporations in the state of New York by New
York
their

accountants and attorneys.

Both corporations maintain

bank accounts in New York, and Lerfer also maintains a

working capital account

with an investment firm in New York.

-55

Each files federal income tax returns from New York and state
income tax returns

in New

York.

Neither

files income

tax

returns in Puerto Rico.

On

December

incorporation, Lerfer

29,

1986,

shortly

after

and Calumet entered into a partnership

agreement ("the Agreement") that formed Taber.

lists

New

York,

or "such

[p]artners may determine[,]"

business.2

Under

the

ownership

interest

ownership

interest.

their

in

other

place

as Taber's

or

Lerfer

places as

the

principal place

Agreement, Lerfer
Taber,

The Agreement

obtained

and Calumet

obtained

and Calumet agreed

of
99%

1%

to share in

Taber's net profits and losses under a formula which mirrored

their respective ownership interests.
Article IV

of the Agreement states:

and

specific purpose of [Taber] is

and

manage [the Hotel in Puerto Rico]."

to acquire, own, operate

Pursuant to section

7.01 of the Agreement, Lerfer and Calumet

to-day

management of

director,

and

Linda Romano,

responsibilities
delegated

to

Taber to

the

not

delegated the day-

Eugene Romano,
as

assistant

enumerated

partnership

"The primary

in

as executive

director.

section

generally.

The

7.01

All
were

Agreement

____________________
2. While the Agreement was negotiated, drafted, and recorded
in New York, it was "protocolized" in Puerto Rico for the
purpose of recording the deed to the Hotel at the Registry of
Property in San Juan. The protocol procedure was necessary
to establish Taber's authority to own property under Puerto
Rico law. See P.R. Laws Ann. tit. 31,
4313 (1991).
___
-66

specifically

granted

Taber the

authority,

inter
_____

borrow money,

enter into

contracts, bring and

actions,

"[d]o

any

and

proper

in

and

necessary or

all

other

defend legal

acts

furtherance

of

the

incorporation

in

1986,

alia, to
____

and

things

[p]artnership

business."
Since
Calumet have

their

both described themselves on

Lerfer

and

their federal and

state tax returns as "holding compan[ies]."

Eugene and Linda

Romano testified in their depositions that each corporation's

sole

function

is

interest in Taber.
"control-group"

of

to

hold

To this
twelve

or

administer

its

respective

end, Lerfer and Calumet employ a

individuals

to

maintain

their

corporate

records

maintenance occurs
the type
Calumet

and

financial

exclusively in New

of New York-centered
engage

accounts.

is

their

such

An

example of

activity in which

Lerfer and

management

designed to secure their ownership

York.

All

of loan

transactions

interests in Taber.

For

instance, Eugene Romano has made substantial loans (totalling

approximately $8,000,000) to Lerfer, which, in turn, reloaned
these funds to Taber.

Each of these loans consisted of funds

that originated in New York

and were evidenced by promissory

notes prepared, executed, and delivered in New York.

The
Lerfer and
decision

record reveals that

Calumet are made in

to invest

in

all policy

New York.

Taber was

made in

decisions for

For example, the

New

York.

The

-77

election

of

corporate

accountants occur
held

in New

evidence of

York.

officers

and

at the annual Board

Indeed, the

the

appointment

of

of Directors meetings

record contains

corporate activity on the part

almost no

of either Lerfer

or Calumet taking place outside of New York.3

Despite

these

court concluded that

Lerfer

uncontroverted facts,

the principal place of business of both

and Calumet was Puerto Rico.

rejected appellants'
as "passive"

the district

In so doing, the court

characterization of Lerfer

holding companies

and found that

and Calumet
their raison
______

d'etre included the operation of the Hotel:

______
Only a[n] unrealistically narrow view of
the orientation of the corporations and
their partnership could yield such a
conclusion. The corporations were formed
to act as owners of the [Hotel].
They
devote almost all of their corporate
activity to administer their assets in
the
partnership.
They
actively
authorized the formation of Taber and the
obtaining of a bond to assist in the
financing of the projects.
They have
loaned substantial amounts of money to
Taber.
And
the directors
of the
partnership, Mr. and Ms. Romano, are the
directors of the corporations.
Under
these circumstances, the Court cannot
accept
the
characterization of
the
corporations'
interests in
Taber as
passive. The Court therefore considers
of greater significance the location of
the corporations' primary activity. This
activity is the renovation and operation
____________________
3. The record reveals that Lerfer's and Calumet's Boards of
Directors held two "special meetings" in San Juan, Puerto
Rico, in connection with the initial purchase and subsequent
refinancing of the Hotel.
-88

of the [Hotel],
Puerto Rico.

which

is

Taber Partners I, 798 F. Supp. at 912.

_________________

located

in

We do not concur in

the district court's analysis.

III.
III.
____
DISCUSSION
DISCUSSION
__________
A district court's determination of citizenship for
purposes of diversity jurisdiction is a mixed question of law
and

fact.

As such,

we

will not

set

aside the

court's decision unless it is "clearly erroneous."

v.

district
Lundquist
_________

Precision Valley Aviation, Inc., 946 F.2d 8, 11 (1st Cir.

_______________________________

1991);

Media Duplication, 928 F.2d at 1237.

_________________

In addition, we

review the facts of this case mindful that the party invoking
the jurisdiction

of a

proving its existence.

In this

federal court carries

the burden

of

See, e.g., Lundquist, 946 F.2d at 10.

___ ____ _________

circuit, we

utilize "three

distinct, but

not

necessarily

inconsistent

corporation's principal
center" test, which

tests"

place of

for

determining

business:

(1)

the "nerve

searches for the location from which the

corporation's activities are controlled and directed; (2) the

"center of

corporate activity" test, which

location of the corporation's

the

searches for the

day-to-day management; and (3)

"locus of the operations of the corporation" test, which

searches

for

the

location

of

the

corporation's

actual

-99

physical operations.

Topp v. CompAir Inc., 814 F.2d 830, 834

____
____________

(1st Cir. 1987).

While we have not had occasion to apply these tests
to a general partnership
frequently

have

applied

parent-subsidiary
Properties Corp. v.
________________
(1st

Cir.

1988),

whose partners are corporations, we

them to

corporations

relationships.

See,
___

involved in

e.g.,
____

M.D. Constr. Co., Inc., 860

_______________________
cert.
_____

denied,
______

490

U.S.

U.S.I.
______

F.2d 1,

1065

(1989);

Rodriguez v. SK & F Co., 833 F.2d 8, 9 (1st Cir. 1987); Topp,

_________
__________
____
814 F.2d at 833-39; Lugo-Vina v. Pueblo Int'l, Inc., 574 F.2d
_________
__________________
41, 43-44 (1st Cir.

1978); de Walker v. Pueblo Int'l, Inc.,

_________
___________________

569 F.2d 1169, 1170-73 (1st Cir. 1978).

In

have repeatedly held

is no evidence

the integrity

that, where there

of the corporate

form has been

separate

corporate

identities of

should be

honored

when determining

place

of business.

(recognizing
despite

See
___

separate

evidence

"grandparent"

parent

corporation,

was
all

principal

860 F.2d

identity

shared

violated, the

either one's

subsidiary

that

and subsidiary

U.S.I. Properties,
_________________

corporate

that

this context, we

of

at 7

subsidiary

wholly-owned
its

officers

by
and

directors with grandparent, was grossly undercapitalized, and

did not prepare its own budget, construction requirements, or
policies

and

procedures);

Rodriguez,
_________

(recognizing separate corporate

evidence showed

that

it

F.2d

at

identity of subsidiary where

operated

-1010

833

independently

from

its

parent);

Topp,
____

corporate

814

F.2d

identity

of

at

833

subsidiary

(recognizing
holding

separate

company despite

evidence that it could not act without the express permission

of its parent,
financial

conduit for

(recognizing
evidence

separate

showed

subsidiary);
separate

and that its

sole function was

parent);

Lugo-Vina, 574
_________

corporate

identity of

it operated

de Walker,
__________

independently

569

F.2d

corporate identity of

reports

subsidiary

in

to shareholders,

"division" of
of parent's

774-75
identity

of

43

(recognizing

and losses with that

parent's

that subsidiary

was

1992)

considered a

accounted for 60%

combined operations).

parent

(recognizing

despite

of its

financial

Pathe Communications Corp., 979

___________________________

Cir.

where

of wholly-owned

presenting

and subsidiary's

(9th

F.2d at
parent

1173

parent, and that subsidiary

Danjaq, S.A. v.
_____________

as

parent despite evidence that

parent consolidated its profits

wholly-owned

at

to serve

Accord
______
F.2d 772,

separate

corporate

that

subsidiary

evidence

"perform[ed] the lion's share" of the film production for the

parent)

(citing

Lugo-Vina,
_________

Securities Ltd. v.
_______________
(D.C.

Cir.)

parent despite

574

F.2d

at

43-44);

IB Resolution, Inc., 924 F.2d

___________________

(recognizing

separate

evidence that

corporate

Pyramid
_______

1114, 1120
identity

parent was "alter-ego"

of

of its

subsidiary and
(citing

was being

sued for

U.S.I. Properties Corp.,

_________________________

denied, 112
______

S. Ct.

85 (1991);

acts of

its subsidiary)

860 F.2d

at

7),

cert.
_____

Schwartz v. Electronic Data

________
________________

-1111

Sys., Inc., 913

__________
separate

F.2d 279, 283

corporate

showed "formal

identity

of

(recognizing

subsidiary

where evidence

separation [was] maintained")

(citing U.S.I.
______

Properties Corp., 860

_________________
Contra Freeman
______ _______

(6th Cir. 1990)

F.2d at

7; Topp,
____

814 F.2d

at 835).

v. Northwest Acceptance Corp.,

__________________________

754 F.2d 553,

557 (5th Cir. 1985) (imputing citizenship of a

subsidiary to

its parent

and alleged "alter-ego") (citing

Quality Meats, Inc., 610 F.2d

___________________

Toms v. Country
____
_______

313, 315-16 (5th Cir.

1980));

Bonar, Inc. v. Schottland, 631 F. Supp. 990, 997-98 (E.D. Pa.

___________
__________
1986)

(imputing citizenship

of

parent to

subsidiary where

evidence showed that the business of both was "identical" and

court determined

that their formal separation

was "merely a

corporate fiction").
For instance,
court erred in applying
which

"ignore[d]

the

in Topp,
____

we held that

the district

the "nerve center" test in

separate

corporate

identity of

corporation whose citizenship [was] being sought."

F.2d at 835.

In

that case, the

that the principal

England, the

location

subsidiary

in

Topp
____

of the
was

manufacturing, purchasing,
n.3.
conduit

Its

principal
for

district court

place of business

its

financial services to

holding

determined

at 832.

company

or sales facilities.

function was
parent,

Id.
___

to

providing

act as

-1212

with

was
The
no

Id. at 834
___
a

financial

administrative

various other subsidiaries

the

Topp, 814
____

of the subsidiary

parent.
a

a manner

and

across the

United

States.

although

Id. at 834.
___

The district court found that,

the subsidiary maintained

its business

activities in New Hampshire,

by the parent
including

who made

the hiring

subsidiary.

an office

all of the
and

it was controlled

major policy

firing of

As a result,

the

the district court

reversed the

erroneously merged
parent in
at 834.

We

Id. at 832.
___
and held

whose citizenship is
Moreover,

we

held

that

formalities are preserved by

center."

as

the company

those that are

long

as

Id.
___

a corporation's

the activities of

at issue are

that it

subsidiary and the

made clear that, in determining

of business,

the

reasoned that

determining the subsidiary's "nerve

principal place

Id.
___

district court

the activities of the

decisions,

employees of

England was the subsidiary's "nerve center."

We

and conducted

relevant.

the

corporate

the parent and subsidiary, they

are entitled to recognition:

[D]efendants
presented
uncontradicted
evidence
that
[the
subsidiary]
maintained, in New Hampshire, its own
general ledger, corporate minutes book
and register of unissued stock, its own
bank accounts, and its own executive
offices. [The subsidiary] filed its own
federal and state income and unemployment
taxes, social security contributions and
excise taxes.
This evidence indicates
that the separate corporate identity of
[the subsidiary] is
entitled to
be
recognized.
Id. at 837.
___

We therefore concluded that, while

"the shots"

may

have been called by the parent in England, the principal

-1313

place of business
"operational

of the subsidiary

was New Hampshire,

center of the corporation in question."

the

Id. at
___

835 n.4.
Likewise,

in de Walker, we
__________

held that

a parent's

principal place of business was Puerto Rico, the situs of its

___
"day-to-day management and operations," rather than New York,
the

place

business.
evidence

where

its

de Walker,
_________
that the

wholly-owned

569 F.2d at 1172.

parent and

closely intertwined, see id.

___ ___
to

subsidiary

Despite compelling

subsidiary in de Walker were

__________
at 1171, we were

ignore their separate corporate identities.

The critical

conducted

not persuaded
Id. at 1172.
___

factual question in de Walker, as in

__________

Topp, was not the degree of control the parent exercised over
____
the

subsidiary,

but whether

the

their separate corporate identities.

two

businesses preserved

We reasoned that:

While the documents . . . indicate that

[the parent] was ultimately the sole
beneficiary
and
director
of
[the
subsidiary's] corporate activities, there
is nothing in the record to undermine
[the
parent's]
claim that
the two
corporations
were
separately
incorporated, had
separate boards of
directors, kept separate accounting and
tax records, and had separate facilities
and operational personnel.
And, leaving
aside the activities of [the subsidiary
in New York], there is next to nothing in
the
record
to establish
that [the
parent],
in its
corporate capacity,
__ ___
_________ ________
conducted any business outside Puerto
Rico.

-1414

de Walker, 569 F.2d at 1171 (emphasis supplied).

__________

We further

reasoned that the close interrelationship of the corporations

was

incidental to

subsidiary's

stock

the
and

parent's ownership
did

"not

justify

of

100% of

the

ignoring

the

otherwise separate character of

the two corporations."4

Id.
___

at 1173.
Thus, pertinent circuit authority, particularly our
opinions in Topp and
____
unremarkable

de Walker, stand for the

_________

propositions:

(1)

that

in

following two
determining

corporation's principal place of business, a district court's

inquiry must focus
corporation whose
and

solely on the business activities

______
principal place

of business is

of the

at issue;

(2) that an exception to this general rule applies where

there is evidence that the separate corporate identities of a

parent and subsidiary have
reason

why these

been ignored.

propositions should

We can

discern no

not apply

with equal

force where the entities at issue are corporate partners.5

____________________
4. An exception to this general rule exists in cases where
there is evidence that the parent and subsidiary have
violated the integrity of the corporate formalities which
they selected. E.g., de Walker, 569 F.2d at 1173.
____ _________
5. The appellees attempt to justify the district court's
treatment of Taber, Lerfer, and Calumet as one entity for
diversity purposes by relying almost exclusively upon New
York partnership law, which they contend regards the partners
and a partnership as a single entity.
Whether or not
appellees are correct in their characterization of New York
partnership law, a proposition on which we express no
opinion, such law is not controlling in light of federal law
_______
which distinguishes between a partnership and its partners
for purposes of diversity jurisdiction.
See, e.g., Carden,
___ ____ ______
-1515

Here, the uncontroverted facts reveal that the sole

corporate

"activities"

of

Lerfer

and

holding or administering their assets

Calumet consist

in Taber, and that all

such administering occurs exclusively in New York.

there

is no evidence that

operation

Lerfer and Calumet

and/or management

of

of

the Hotel.

Moreover,

engage in the
Indeed,

it is

uncontroverted that Taber was expressly created by Lerfer and

Calumet,

as

stated

in

the Agreement,

"to

operate and manage [the Hotel in Puerto Rico]."

F. Supp. at 905,

acquire,

own,

See also 798

___ ____

906 (characterizing as undisputed

the fact

that "Taber's business is the operation and management of the

[Hotel]").
Lerfer
Taber

is

also apparent

from

and Calumet

delegated the

day-to-day management

to

It

Taber's

officers,

Appellees have introduced no

Eugene

the Agreement

and

Linda

that
of

Romano.

evidence to suggest that either

Lerfer or Calumet ever usurped that role.6

____________________
494 U.S. at 195-96.
unpersuasive.

We

therefore find appellees'

argument

6. We are aware that the district court found that Lerfer's

and Calumet's "primary activity . . . is the renovation and
operation of the [Hotel], which is located in Puerto Rico."
See Taber Partners I, 798 F. Supp. at 912.
However, we have
___ ________________
not found any evidence to support such a finding. Indeed,
the district court itself found that "[Lerfer and Calumet]
devote almost all of their corporate activity to administer
their assets in the partnership," id., activity which occurs
___
almost exclusively in New York.
It further found that
"Taber's business is the operation and management of the
[Hotel]." Id. at 906. Given that the district court made no
___
attempt to reconcile these findings, we are not inclined to
accord them any deference.
-1616

In sum, the record

serve

as

reveals that Lerfer and Calumet

holding companies

which

manage

their assets

Taber, a separate, and legally distinct, partnership

and that

all their

exclusively in
either the
activity"
Lerfer

"activities" as holding

New York.

We

need go

"nerve center" test

test,7 the

principal

and Calumet is New York.8

no

entity,

companies occur
further.

or the "center
place of

in

Under

of corporate

business of

both

Cf. Vareka Invs., N.V. v.

___ __________________

American Inv. Properties, Inc., 724 F.2d 907, 910 (11th Cir.)
______________________________

(holding that

Ecuador corporation which

investment vehicle"

for

Florida

real

served as
estate

principal place

of business

in Ecuador where

its

books

records,

corporate

and

decisions, held all corporate

made

venture

had

it maintained
all

corporate

meetings, hired its employees,

and obtained loans for the initial purchase of

cert.
_____

"passive

denied, 469 U.S. 826 (1984).9

______

the venture),

Both Lerfer and Calumet

____________________
7. Because Lerfer and Calumet have no physical operations
(i.e., factories, warehouses, sales offices, etc.) the "locus
____
of the operations of the corporation" test would not be
helpful. See Topp, 814 F.2d at 834 n.3 (rejecting utility of
___ ____
a "locus of physical operations of the corporation" test for
a holding company).
8. Because we find that New York is the principal place of
business of both Lerfer and Calumet under either the "nerve
center" or "center of corporate activity" test, we need not
determine which of the two tests is most appropriate under
these facts.
9. In so holding, we are not unaware of a line of cases in
which district courts, in determining the principal place of
business of a holding company, have looked to the business of
the entity whose assets are being held rather than to the
-1717

____________________
business of the holding company.

See Bonar, 631 F. Supp. at

___ _____
996 ("[the holding company] was created to hold and operate
[parent's] interest in [Pennsylvania company], and it has no
business other than this venture. Therefore, [the holding
company's]
principal
place
of
business
is
clearly
Pennsylvania, not the state in which its executive and
administrative offices may be located . . . ."); Hanna Mining
____________
Co. v. Minnesota Power & Light Co., 573 F. Supp. 1395, 1400
___
____________________________
(D. Minn. 1983) ("[The holding company] was created to hold
and operate [parent's] interest in [Minnesota venture], and
it has no business other than this venture. Therefore, [the
holding company's] principal place of business is clearly in
Minnesota, not in the state in which its executive and
administrative offices may be located . . . ."), aff'd, 739
_____
F.2d 1368 (8th Cir. 1984); Hereth v. Jones, 544 F. Supp. 111,
______
_____
112 (E.D. Va. 1982) ("[The holding company's] sole raison
______
d'etre is to be the corporate general partner in [a] Virginia
______
nursing home venture.
Thus[,] such activity as exists in
Virginia is greater than the non-activity in any other
[s]tate.").
While we were unable to discern from the facts of Hanna
_____
Mining exactly what level of activity took place in the state
______
where the holding company's offices were located, the facts
of both Bonar and Hereth reveal that the holding companies at
_____
______
issue in each case performed no corporate activity of any
__
kind in the states where their offices were located. Indeed,
in Bonar, the evidence revealed that the "office" was merely
_____
a mailing address, and that the company had no employees,
executives, officers, or directors in the state where the
"office" was located. Bonar, 631 F. Supp. at 994-95. As a
_____
result, the court was persuaded to look to Minnesota, where
the holding company's attorney resided and worked, where its
officers and directors resided, and where the negotiations
over the initial stock purchase occurred.
Id. at 995.
___

Likewise, in Hereth, the court found that the holding company

______
had "absolutely no function or activity" in the state of
incorporation, and had "no employees anywhere." Hereth, 544
______
F. Supp. at 112.
As a result, the court looked to the
activities of the business venture that was owned by the
partnership in which the holding company was a general
partner. Id.
___
The
instant case,
however, presents
an entirely
different fact pattern.
As detailed above, Lerfer and
Calumet operate out of New York.
They have an office,
_______
employees,
bank accounts,
a working
capital account,
corporate books and records, and Board of Directors meetings
in New York. The corporate officers and directors all reside
in New York, and almost all of the corporations' decisions
-1818

are

therefore

partnership is
partners

citizens
a

citizen

of

New
of

York.

those

And

states

because

in

which

a
its

are citizens, see supra p. 3, it follows that Taber

___ _____

is also a citizen of New York, and that the

district court's

contrary determination was clearly erroneous.

IV. CONCLUSION
IV. CONCLUSION
_______________
As

Taber is a citizen

controversy is ample, and

of New York,

the amount in

none of the entities on

the other

side

of

matter

the

lawsuit

jurisdiction is

remand the case for

shares

Taber's citizenship,

present.

We therefore

subject

reverse and

further proceedings consistent with this

opinion.
Reversed and remanded.
______________________

____________________
are made in New York.
As such, Lerfer and Calumet, unlike
the holding companies at issue in Bonar and Hereth, are
_____
______
holding companies with corporate operations distinct from
those of the company whose assets they hold. As a result, we
find the reasoning in the above line of cases inapposite.
-1919