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Danjaq, S.A. v. PaCommunications Corp.

filed: November 12, 1992.

DANJAQ, S.A., PLAINTIFF-APPELLANT,
v.
PATHE COMMUNICATIONS CORPORATION; MGM-PATHE COMMUNICATIONS CO.; TRACINDA CORPORATION; KIRK KERKORIAN; MGM/UA COMMUNICATIONS CO., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Central District of California. D.C. No. CV-90-5498-SVW. Stephen V. Wilson, District Judge, Presiding.

Before: Wilfred Feinberg,*fn* Alfred T. Goodwin and Mary M. Schroeder, Circuit Judges. Opinion by Judge Schroeder.

Author: Schroeder

SCHROEDER, Circuit Judge:

This appeal involves two arcane issues of subject matter jurisdiction that are of first impression in this Circuit. Both issues relate to the determination of a corporation's principal place of business for purposes of diversity jurisdiction. The first is whether alien corporations are subject to 28 U.S.C. § 1332(c), which states that a corporation is a citizen both of its place of incorporation and the location of its principal place of business. We agree with the district court that an alien corporation, like a domestic corporation, is a citizen of both.

The second issue is whether the activities of a subsidiary corporation - not a party to the litigation - should be considered to determine the principal place of business of the parent. We hold that a subsidiary's activities should not be considered for this purpose, at least absent a showing that the subsidiary is merely an alter ego of its parent.

The final issue is to determine the principal place of business of Plaintiff-Appellant Danjaq, S.A., a Swiss corporation. We conclude the district court correctly determined that place to be California, where appellant's business activities are conducted. Switzerland, where the corporate offices are located, serves merely as Appellant's administrative headquarters. We affirm.

FACTUAL BACKGROUND

Danjaq is engaged in the development and production of motion pictures involving James Bond. In 1962, Danjaq and United Artists ("UA"), later succeeded by MGM/UA ("MGM"), entered into a Distribution Agreement whereby the latter was granted the exclusive commercial rights to the Bond movies.

Danjaq is incorporated in Switzerland, where its sole director, Gerald Schlaeppi, resides. Schlaeppi admittedly knows little about the film business and serves as a director of some fifteen other corporations. Laussane is the site of all Danjaq board of director and stockholder meetings, and is the location of all administrative records. All of Danjaq's financial transactions take place in Switzerland, including the payment of Swiss taxes.

Since 1986, Danjaq's sole shareholders have been Albert and Dana Broccoli. The Broccolis have resided in Los Angeles, California for over twenty years. Albert Broccoli co-founded Danjaq and is the principal decisionmaker for the development of the Bond films. Broccoli maintains an office in the MGM building in Culver City, California.

Much of the actual production of the Bond films is carried on by Eon Productions, Ltd. ("Eon"), which is based in London, England. Eon oversees the filming of the motion pictures, a duty that often takes it to various parts of the world depending upon the script. Generally, the final editing is completed by Eon in London.

In 1990, MGM was acquired by Pathe Communications, resulting in the formation of MGM-Pathe Communications ("MGM-Pathe"). Danjaq brought this action alleging breach of contract, breach of fiduciary duty, conspiracy to do the same, and copyright infringement. Specifically, Danjaq charged that the defendants were licensing the Bond movies in a manner contrary to the terms of the Distribution Agreement so as to help finance Pathe's acquisition of MGM.

The district court ruled that it had no jurisdiction to hear the first three claims because of a lack of diversity between the parties. The district court also held that the copyright claim against Pathe was meritless. Danjaq, S.A. v. MGM/UA Communications Co., 773 F. Supp. 194 (1991). Danjaq having abandoned the copyright claim, the only issue on appeal is whether the district court properly concluded jurisdiction was absent. There is no dispute that defendants' citizenship for diversity purposes is ...


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