Holston Investments Inc. B.V.I. v. LanLogistics, Corp.
766 F.Supp.2d 1327, 2011 WL 484306, 2011 U.S. Dist. LEXIS 26001 (2011)
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Rule of Law:
For purposes of diversity jurisdiction, a corporation that has been dissolved and has formally withdrawn from conducting business in a state is considered a citizen only of its state of incorporation.
Facts:
- LanLogistics, Corp. was a Delaware corporation with its corporate headquarters and Chief Executive Officer located in Miami, Florida.
- In May 2007, LanLogistics sold most, if not all, of its assets.
- LanLogistics formally dissolved as a corporation in Delaware on December 27, 2007.
- On January 8, 2008, LanLogistics filed an application with the State of Florida to voluntarily surrender its authority and cease transacting business in Florida.
- The State of Florida processed and filed the application on January 16, 2008, five months before a lawsuit was initiated.
- Alberto Hernandez, a citizen of Florida, and Holston Investments, a citizen of the British Virgin Islands, had a contract dispute with LanLogistics.
Procedural Posture:
- Plaintiffs Alberto Hernandez and Holston Investments filed a lawsuit against Defendant LanLogistics, Corp. in the U.S. District Court for the Southern District of Florida, a federal trial court, based on diversity jurisdiction.
- Following a bench trial, the court found LanLogistics liable for breach of contract.
- The court entered a final judgment in favor of the Plaintiffs for over $5 million on June 18, 2010.
- On July 2, 2010, after the judgment was entered, Defendant LanLogistics filed a Motion to Vacate the Judgment, arguing for the first time that the court lacked diversity jurisdiction.
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Issue:
For diversity jurisdiction purposes, is a dissolved corporation that has formally withdrawn from transacting business in a state a citizen only of its state of incorporation, or is it also a citizen of the state where it last conducted business?
Opinions:
Majority - Moreno, J.
Yes, for diversity jurisdiction purposes, a dissolved corporation that has formally withdrawn from business in a state is a citizen only of its state of incorporation. The court adopted the bright-line rule from the Third Circuit's decision in Midlantic Nat’l Bank v. Hansen, which holds that an inactive corporation is a citizen only of its state of incorporation. The court found this case factually similar to cases like Ripalda and Dunkle, where a corporation's formal withdrawal from business activities was a determinative factor. The court distinguished this case from others, like Passalacqua, where the dissolved corporation had not formally surrendered its authority to do business. Finally, the court reasoned that the Supreme Court’s 'nerve center' test from Hertz Corp. v. Friend does not apply to a dissolved, inactive corporation whose 'corporate brain' is no longer directing activities, but found that Hertz's preference for simple jurisdictional rules supported adopting the Midlantic bright-line test for administrative simplicity and predictability.
Analysis:
This decision contributes to an existing circuit split on how to determine the citizenship of a dissolved or inactive corporation for diversity jurisdiction purposes. By adopting the Third Circuit's bright-line rule, the court prioritizes administrative simplicity and the corporation's formal legal status (state of incorporation and official withdrawal) over a more complex, fact-intensive inquiry into its last business activities. This ruling provides a clear standard within the Southern District of Florida, but highlights the lack of a uniform national approach, which can lead to forum shopping and uncertainty for litigants. The court’s refusal to apply the Hertz 'nerve center' test to dissolved corporations carves out an important exception and clarifies the scope of that landmark decision.
