Hoch v. Eli Lilly and Company

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
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SUSAN LEE HOCH, et al., )
Plaintiffs, )
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v. ) Civil Action No. 10-1191 (RCL)
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ELI LILLY AND COMPANY, et al., )
Defendants. )
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)
MEMORANDUM AND ORDER
Before the Court is Plaintiffs’ Motion [5] to Remand to D.C. Superior Court Due to Lack
of Diversity Jurisdiction. Upon consideration of the motion, defendant’s opposition thereto [22],
and defendant’s supplemental authority in opposition thereto [38, 41], the Court will deny the
motion for the reasons set forth beloW.
I. BACKGROUND
Plaintiffs, citizens of Pennsylvania, filed this action in the Superior Court of the District
of Columbia. On July l4, 2010, defendant Eli Lilly and Company ("Lilly") removed the case to
this Court, alleging diversity jurisdiction In its Notice of Removal, Lilly asserted that, to the
best of its knowledge, none of the remaining defendants are incorporated in, or have their
principal place of business in, the state of Pennsylvania. Notice of Removal at 5, ECF No. l.
On July 16, 2010, the plaintiffs moved to remand the case to the D.C. Superior Court on
the ground that defendant GlaxoSmithKline LLC ("GSK LLC") is a citizen of Pennsylvania, thus
defeating diversity jurisdiction and precluding removal under 28 U.S.C. § l44l. The plaintiffs
argue that GSK LLC is a citizen of Pennsylvania, because its principal place of business under
the "nerve center" test is in Pennsylvania. The plaintiffs further argue that Pennsylvania courts
retain jurisdiction over GSK LLC, formerly SmithKline Beecham Corporation ("SBK"), under
15 Pa. C.S. § 1979, which subjects corporations to suit in Pennsylvania for two years after
dissolution.
In its opposition to the motion to remand, GSK LLC argues that it is not a corporation to
which the "nerve center" test applies. GSK LLC asserts that it is a limited-liability company,
and thus that its citizenship is determined by that of its members. GSK LLC’s sole member is
GSK Holdings. The defendant contends that GSK Holdings is incorporated in Delaware and that
its principal place of business is in Delaware. The defendant further argues that Section l979 is
inapplicable, because SBK did not dissolve under Pennsylvania law. Rather, it converted into a
Delaware limited-liability company that can still be sued.
II. DISCUSSION
As the defendant asserts, a limited-liability company’s citizenship is determined by the
citizenship of its members. Breakman v. AOL LLC, 545 F. Supp. 2d 96, 102 (D.D.C. 2008).
GSK LLC’s only member is GSK Holdings, a Delaware corporation. As a corporation, GSK
Holdings’ citizenship is determined by its state of incorporation and its principal place of
business. There is no dispute that GSK Holdings is incorporated in Delaware. Thus, the only
question before the Court is the location of GSK Holdings’ principal place of business.
The Supreme Court has articulated the appropriate test for determining a corporation’s
principal place of business. Hertz Corp. v. Friena’, l30 S. Ct. 1181 (2010). In Hertz, the Court
adopted the "nerve center" test, under which a corporation’s principal place of business is the
place where its "high level officers direct, control, and coordinate the corporation’s activities."
Id. at ll86. The Court stated that the nerve center will "typically be found at a corporation’s
headquarters." Id. The nerve center should be more than "simply an office where the
corporation holds its board meetings (for example, attended by directors and officers who have
traveled there for the occasion)." Id.The plaintiffs mistakenly treat GSK LLC as a corporation, applying the nerve center test
to GSK LLC rather than to its sole member, GSK Holdings. The plaintiffs offer no evidence to
demonstrate that GSK Holdings does not have its principal place of business in Delaware.
ln support of its assertion that GSK Holdings’ principal place of business is in Delaware,
the defendant has submitted the declaration of Julian Heslop, Chief Financial Officer of
GlaxoSmithKline PLC and President and director of GSK Holdings. Mr. Heslop states that GSK
Holdings "holds financial assets and liabilities, largely in relation to the GlaxoSmithKline group
of companies," and performs a "narrow asset management function." Decl. of Julian Heslop at{l
15, attached as Ex. A to Defs.’ Opp’n. He avers that GSK Holdings is headquartered in
Delaware and uses a Delaware address for documents filed with the Delaware Secretary of State
and federal tax filings. Ia'. at 1]1] 13, l7, and l8. According to the declaration, many actions in
fi,irtherance of GSK Holdings’ business are conducted outside Delaware, particularly in London.
Id. at 11 l5. However, “formal control over and approval of all significant decisions regarding
these actions are made or ratified by its officers and directors in Delaware." Ia’. Further, GSK
Holdings’ quarterly meetings, during which its Board of Dircctors approves corporate accounts
and key business activities, take place in Delaware. Ia’. at 1[ 22.
Mr. Heslop’s declaration provides sufficient evidence that GSK Holdings’ nerve center is
in Delaware. lt is headquartered there, its officers and directors make and ratify significant
decisions there, and its board meetings take place there. The evidence indicates that Delaware is
the place where GSK Holdings’ "high level officers direct, control, and coordinate the
corporation’s activities." See Hertz, 13 S.Ct. at ll86. Under Hertz, therefore, GSK Holdings’
principal place of business is in Delaware. Because GSK Holdings is incorporated in and has its
principal place of business in Delaware, it is a citizen of Delaware. Accordingly, GSK LLC is a
citizen of Delaware.
The plaintiffs further argue that, notwithstanding GSK LLC’s citizenship, Pennsylvania
courts retain jurisdiction over GSK LLC for two years after its dissolution as a Pennsylvania
corporation This argument relies on l5 Pa. C.S. § 1979, under which a corporation’s dissolution
"shall not eliminate nor impair any remedy available to or against the corporation" for claims
existing or liabilities incurred prior to dissolution. Section 1979 provides a two-year survival
period during which plaintiffs can recover against a fully dissolved corporation.
Section 1979, however, is inapplicable here. When SBK filed Articles of Dissolution in
Pennsylvania, it did so pursuant to 15 Pa. C.S. § 1980. See Articles of Dissolution, attached as
Ex. C to Defs.’ Opp’n. Section 1980 provides for a corporation’s dissolution by domestication
under the laws of another jurisdiction. The official commentary to Section 1980 states that "[t]he
effect of filing under this section is not to dissolve the corporation in the ordinary sense but
simply to terminate its status as a domestic business corporation. The existence of the
corporation is not affected because the same entity continues to exist in the new jurisdiction of
incorporation." 15 Pa. C.S. § 1980 cmt. (West 2010). Because the corporation still exists under
the laws of another state, plaintiffs’ remedies against the corporation are preserved. Section
l979’s survival period is thus not necessary when a corporation dissolves under Section 1980.
As SBK’S Articles of Dissolution indicate, the defendant was "domesticated to Delaware
and subsequently converted to a Delaware Limited Liability Company under Delaware and
Pennsylvania law." Articles of Dissolution, attached as Ex. C to Defs.’ Opp’n. At no point
during this process did the defendant cease to exist as a corporate entity.' The defendant’s
corporate restructuring did not eliminate or impair any remedies available to the plaintiffs.
Therefore, the two-year survival period under Section 1979 is inapplicable. The Court thus
concludes that GSK LLC is a Delaware citizen and that 15 Pa. C.S. § 1979 does not apply.
III. CONCLUSION
Accordingly, for the reasons stated above, it is hereby ORDERED that plaintiffs’ motion
to remand is DENIED.
SO ORDERED this ``day of September 2010.
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