Lauing et al v. Rapid City, Pierre and Eastern Railroad, Inc.

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
CENTRAL DIVISION
JOHN DUSTIN LAUING, BERNARD
LAUING,EUGENIE LAUING,
3:19-CV-03006-RAL
Plaintiffs,
vs.
ORDER DIRECTING DEFENDANT TO
WITHDRAW JURISDICTIONAL DEFENSE
OR FILE MOTION TO DISMISS
RAPID CITY, PIERRE AND EASTERN
RAILROAD, INC., A SUBSIDIARY OF
GENESEE & WYOMING, DIG., A
CONNECTICUT CORPORATION;
Defendant.
Federal courts are courts of limited jurisdiction and have the obligation sua sponte to
evaluate whether federal jurisdiction exists. Thomas v. Basham, 931 F.2d 521, 522-23 (8th Cir.
1991). During its work on the pending motions, this Court has encountered a question of whether
there is complete diversity of citizenship here.
The Plaintiffs, who are South Dakota Residents, brought this case against Rapid City,
Pierre & Eastern Railroad, Inc. (RCPE) based on diversity jurisdiction. RCPE admitted in its
answer that it is headquartered in Rapid City, South Dakota, and that it is a Delaware corporation.
Doc.4 at 14. RCPE's corporate disclosure statement says that it is a wholly owned subsidiary of
Genesee & Wyoming, Inc. Doc. 6. As one of its affirmative defenses, RCPE alleged that this
Court lacks subject matter jurisdiction because the parties are not completely diverse. Doc.4 at 2.
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RCPE did not argue that this Court lacks jurisdiction in any of its other filings and has not moved
to dismiss.
Federal diversity jurisdiction requires complete diversity of citizenship among the parties.
OnePoint Solutions. LLC v. Borehert. 486 F.3d 342, 346 (8th Cir. 2007). "Complete diversity of
citizenship exists where no defendant holds citizenship in the same state where any plaintiff holds
citizenship." Id Under the diversity statute, "a corporation shall be deemed to be a citizen of
every State and foreign state by which it has been incorporated and of the State or foreign state
where it has its principal place of business." 28 U.S.C. § 1332(c)(1). The Supreme Court
interpreted the phrase "principal place ofbusiness" as "referring to the place where a corporation's
officers direct, control, and coordinate the corporation's activities," that is, the corporation's
'"nerve center.'" Hertz Corp. v. Friend, 559 U.S. 77,92-93 (2010). A corporation's nerve center
"should normally be the place where the corporation maintains its headquarters—^provided that the
headquarters is the actual center of direction, control, and coordination." Id. at 93.
The record shows that RCPE is headquartered in Rapid City, but there is nothing about
whether Rapid City is the "nerve center" of RCPE. Based on the Foreign Business Corporation
filing that RCPE made with the Secretary ofState for South Dakota,it appears that RCPE's officers
are not located in South Dakota.
RCPE's status as a wholly owned subsidiary of Genesee & Wyoming, Inc. adds another
wrinkle to this case. In cases like this one, where the subsidiary is separately incorporated, the
"general rule applied by the federal courts ... is that a subsidiary corporation has its own principal
place of business for purposes of diversity of citizenship jurisdiction, unless it is merely an 'alter
ego' or agent of the parent corporation." 13F Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 3625 (April 2022 update)(footnote omitted). There is, of course, no
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information in the record concerning how much control Genesee & Wyoming exercises over
RCPE.
Because there exists uncertainty in the record on whether there is complete diversity of
citizenship here, it is
ORDERED that Defendant has 21 days from the date of this order to file either a motion
to dismiss for lack of complete diversity of citizenship or a statement withdrawing its affirmative
defense oflack ofsubject matterjurisdiction together with a statement that RCPE's"nerve center"
is not within South Dakota. It is further
ORDERED that if Defendant moves to dismiss. Plaintiffs have 21 days to respond and
Defendant then has 14 days to reply.
DATED this 21st day of April, 2022.
BY THE COURT:
ROBERTO A. LANGE
CHIEF JUDGE
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