Donald R. Wild and Diana H. Wild v. Subscription Plus, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
No. 01-3406
Donald R. Wild and Diana H. Wild,
Plaintiffs-Appellants,
v.
Subscription Plus, Inc., et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 00 C 67--Barbara B. Crabb, Chief Judge.
Argued April 18, 2002--Decided May 31, 2002
Before Flaum, Chief Judge, and Harlington
Wood, Jr., and Posner, Circuit Judges.
Posner, Circuit Judge. This is a
personal injury suit brought by the
parents of a young man killed in an
accident in Wisconsin. Federal
jurisdiction is based on diversity of
citizenship. The suit was filed
originally in a federal district court in
Louisiana, but the judge there
transferred the case to a federal
district court in Wisconsin, pursuant to
28 U.S.C. sec. 1406(a), because he
determined that Louisiana was not a
proper venue for suing all--or in fact
any--of the defendants. The district
judge in Wisconsin denied the plaintiffs’
motion to retransfer the case to
Louisiana and later granted motions to
dismiss or for summary judgment filed by
several of the defendants. The other
defendants having settled, the district
court entered a final judgment
terminating the litigation and sparking
this appeal. The principal though not
only issue is the lawfulness of the
transfer from Louisiana to Wisconsin; if
as the plaintiffs contend it was
unlawful, the motion to retransfer should
have been granted.
We note initially a serious deficiency
in the jurisdictional statement in the
plaintiffs’ brief that went unnoticed in
the four briefs filed by defendants. With

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regard to the insurance-company
defendants, the allegation of citizenship
takes the following form: "Progressive
Northern Insurance Company, a citizen of
the State of Wisconsin, with its
principal place of business in the State
of Ohio." (The allegations regarding the
other insurance companies are identical
except for name and states.) The
diversity statute states that a
corporation is a citizen of both the
state in which it is incorporated and the
state in which its principal place of
business is located. 28 U.S.C. sec.
1332(c)(1). If a firm is not a
corporation, its citizenship is
determined by the citizenship of its
proprietor, partners, members, or other
principals. Carden v. Arkoma Associates,
494 U.S. 185, 195 (1990); Cosgrove v.
Bartolotta, 150 F.3d 729, 731 (7th Cir.
1998); Indiana Gas Co. v. Home Ins. Co.,
141 F.3d 314, 316 (7th Cir. 1998);
Herrick Co. v. SCS Communications, Inc.,
251 F.3d 315, 322 (2d Cir. 2001);
Schiavone Construction Co. v. City of New
York, 99 F.3d 546, 548 (2d Cir. 1996).
The plaintiffs’ jurisdictional statement
does not allege that Progressive
Insurance Company or any of the other
insurance-company defendants is a
corporation--though inquiry of counsel
revealed that they are and that the
requirement of complete diversity of
citizenship is satisfied, with two
possible exceptions:
The corporate charter of one of the
defendants had been revoked before this
suit was brought; and though the charter
was later restored, jurisdiction is
normally determined as of the date of the
filing of the suit. The only case we can
find on the precise question, and it
happens to be a decision by this court,
allows retroactive reinstatement to
confer jurisdiction, Costain Coal
Holdings, Inc. v. Resource Investment
Corp., 15 F.3d 733, 734 and n. 3 (7th
Cir. 1994), contrary to (and without
discussing) the general principle (an
exception is discussed below) that
jurisdiction is determined as of the date
of the suit; and on that date, before
reinstatement, the corporation had no
corporate charter.
An approach consistent with the general
principle, but which leads to the same
result in this case as the approach in

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Costain would, makes the question of what
state a corporation is a citizen of if
its corporate charter has been revoked
depend on the status of such an entity
under the law of the state that granted
(and later revoked) the charter. Most
states sensibly permit a corporation
whose charter has been revoked to
continue nevertheless to operate as
acorporation, specifically for purposes
of suing and being sued, until it is
actually dissolved. See, e.g., Paper
Systems Inc. v. Mitsubishi Corp., 193
F.R.D. 601, 607-08 (E.D. Wis. 2000);
Clipper Air Cargo, Inc. v. Aviation
Products Int’l, Inc., 981 F. Supp. 956,
958-59 and n. 3 (D.S.C. 1997); Illinois
Central Gulf R.R. v. Arbox Three Corp.,
700 F. Supp. 389, 390-91 (N.D. Ill.
1988). Oklahoma, the state of
incorporation of the defendant in
question (Subscription Plus), is one of
those states. 18 Okla. Stat. sec. 1099;
Polk v. Unknown Trustees, Successors &
Assigns of Three-In-One Oil & Gas Co.,
298 P.2d 432, 435-36 (Okla. 1956) (per
curiam). And, for icing on the cake,
Oklahoma also has a statute making
reinstatement of a corporation’s charter
retroactive. 18 Okla. Stat. sec. 1120(E).
We conclude that the revocation of
Subscription Plus’s corporate charter did
not affect its status for diversity
purposes.
The complaint describes another
defendant, Mutual Fire and Automobile
Insurance Company, as a "foreign insurer
authorized to conduct business in
Louisiana"--which says nothing about
where its principal place of business is
(or its state of incorporation, but we
have learned that it is Ohio, an answer
that does not destroy complete
diversity). In the plaintiffs’ brief on
appeal, Mutual is described as "a citizen
of a state other than Louisiana, with its
principal place [of business?] in a State
other than Louisiana." But how can the
plaintiffs know that the company’s
principal place of business is not in
Louisiana if they don’t know where its
principal place of business is? We doubt
that the plaintiffs conducted a census of
all businesses whose principal place of
business is in Louisiana and discovered
that Mutual Fire and Automobile Insurance
Company is not one of them. No matter.
The company was later dropped as a party,
and under Newman-Green, Inc. v. Alfonzo-

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Larrain, 490 U.S. 826, 837 (1989), a want
of complete diversity can be cured by
dropping the party that made diversity
incomplete.
With subject-matter jurisdiction secure,
we turn to the transfer issue and the
merits, first sketching in the factual
background.
Subscription Plus, owned and operated by
a woman named Karleen Hillery, is engaged
in the business of processing magazine
subscriptions. It contracted with
Y.E.S.!, a sales agency, to secure
magazine subscriptions for Subscription
Plus. The Wilds’ son Joseph was a
salesman employed by Y.E.S.! The Wilds
live in Louisiana, and Joseph Wild was
hired there.
The salesmen would travel in groups in
vans to various states to sell
subscriptions. Y.E.S.!’s owner, Lane,
bought a green van and employed a man
named Holmes to drive it. (The color
turns out to be relevant, as we’ll see
later but can ignore for now.) While
driving the sales crew in Wisconsin after
a day of door-to-door subscription
selling, Holmes, noticing that he was
being pursued by a police car and not
having a valid driver’s license, tried to
switch seats with one of the passengers,
lost control, and crashed the van. Seven
members of the sales crew, including
young Wild, were killed and the others
injured. Suits were brought on behalf of
all the victims except Wild in a
Wisconsin state court, where the suits
were consolidated and are pending.
Besides suing Hillery, Lane, Holmes,
Subscription Plus, Y.E.S.! and the
dealership that sold the van, the Wilds
sued the liability insurers of these
defendants; it could do this because
Louisiana, like Wisconsin, is a direct-
action state, meaning that a tort
plaintiff can sue his injurer’s liability
insurer as well as the injurer.
Section 1406(a) of the Judicial Code
provides that if a suit is brought in a
district that is not a proper venue under
28 U.S.C. sec. 1391, the judge can
transfer it to any district "in which it
could have been brought." The district
judge in Louisiana found that venue in
this diversity suit was not properly laid
in Louisiana because none of the

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defendants resided there or could be
served there (or elsewhere under
Louisiana’s long-arm statute) and "a
substantial part of the events or
omissions giving rise to the claim" had
not taken place there either. 28 U.S.C.
sec. 1391(a)(2). There is no serious
contention that the judge erred in this
ruling or that the Western District of
Wisconsin is not a district in which
venue can be laid, at least with regard
to most of the defendants (and possibly
all, as we’re about to see). The accident
occurred there, and it is clearly the
most convenient site for the litigation.
All the other suits growing out of the
accident have been consolidated there,
and while there is no procedure for
consolidating those suits with the Wilds’
suit because those suits are in state
court and the Wilds’ suit is in federal
court, at least the defendants--who are
the same in all the suits, including the
Wilds’ suit--can localize their defense
efforts to one state, minimizing travel
time for their lawyers.
The only basis for the motion to
retransfer the case was that the district
judge had ruled that Hillery could not be
served under Wisconsin’s long-arm
statute, thus forcing the Wilds, unless
the case was retransferred, to split
their suit between Wisconsin (all the
defendants except Hillery) and Louisiana
(Hillery). After the judge ruled, the
Wilds did bring a suit against Hillery in
Louisiana, but it was promptly
transferred to Wisconsin (and is pending
before the same district judge), because
in the interim a Wisconsin state court
ruling in one of the cases arising from
the accident interpreted Wisconsin’s
long-arm statute in a way that makes
clear that Hillery is within the
statute’s reach after all. Forgues v.
Heart of Texas Dodge, Inc., No. 99CV0952,
slip op. at 2 (Wis. Cir. Ct. Nov. 5,
2001). Although an unpublished opinion of
a trial court, and so hardly an
authoritative guide to the law of
Wisconsin, the parties do not question
its soundness.
It is very difficult in these unusual
circumstances to get excited about the
prospect of bouncing this three-year-old
case back to Louisiana, but cf. Shutte v.
Armco Steel Corp., 431 F.2d 22, 24 (3d
Cir. 1970), even apart from the fact

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that, since venue cannot be laid in
Louisiana, the case would have to be
dismissed or transferred elsewhere.
Supposing the district judge had gotten
Wisconsin law right when she ruled on
Hillery’s motion to dismiss for want of
personal jurisdiction (that is, supposing
she had anticipated the decision in
Forgues), Hillery would be a party to the
present case and the claim against her,
which is indistinguishable from that
against her company, Subscription Plus,
would have gone down the drain with that
claim. As it is, the claim against her
remains alive in the district court--if
barely, since the defendants have moved
to dismiss it as barred by res judicata.
Still, the plaintiffs are no worse off,
or, in any practical sense, differently
situated, than if the district judge had
not mistakenly dismissed Hillery, thus
raising the retransfer issue.
But in any event we do not agree with
the plaintiffs that a transfer under
section 1406(a) (or the closely parallel
section 1404(a), which, under the same
conditions as section 1406(a), see Van
Dusen v. Barrack, 376 U.S. 612, 622 and
n. 13 (1964); Ellis v. Great Southwestern
Corp., 646 F.2d 1099, 1104 n. 5 (5th Cir.
1981), permits transfers for the
convenience of the parties even if venue
is proper in the district in which the
suit was originally filed) is invalid
just because one defendant in a
multidefendant case (there were 13
defendants before Hillery was dismissed)
cannot be served either directly or under
a long-arm statute in the transferee
district. Were there only one defendant
and he or she could not be served there,
it would be plain that the suit "could
not be brought" there and so transfer
would be improper. Van Dusen v. Barrack,
supra, 376 U.S. at 621; Ellis v. Great
Southwestern Corp., supra, 646 F.2d at
1107; 15 Charles Alan Wright, Arthur R.
Miller & Edward H. Cooper, Federal
Practice & Procedure sec. 3827, pp. 274-
75 and n. 30 (2d ed. 1986). For consider
the implications: A sues B in a district
in which venue is improper, meaning
(among other things) that B does not
reside and cannot be served there, and
the court transfers the case to another
district in which B does not reside (in
which event B could be served) and cannot
otherwise be served; it would be absurd
to permit such a transfer. The suit

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should instead be dismissed and A forced
to sue B somewhere B can be served.
A multidefendant case, this
multidefendant case in any case, is
different. The 13 defendants are
scattered all over the United States.
There is (or so the district judge
believed when she denied the retransfer
back to Louisiana) no federal district in
which all could be served. If the case
could not have been transferred from
Louisiana to Wisconsin, it could not have
been transferred anywhere, which means it
would have had to be dismissed in its
entirety because Louisiana was not a
proper venue for any of the defendants,
and the Wilds forced to sue maybe in 13
different districts or states. This
result would be contrary to the purpose
of section 1406(a), which introduced
transfer as an alternative to dismissal.
As the Supreme Court explained in
Goldlawr, Inc. v. Heiman, 369 U.S. 463,
466 (1962), "the problem which gave rise
to the enactment of the section was that
of avoiding the injustice which had often
resulted to plaintiffs from dismissal of
their actions merely because they had
made an erroneous guess with regard to
the existence of some elusive fact of the
kind upon which venue provisions often
turn. Indeed, this case is itself a
typical example of the problem sought to
be avoided, for dismissal here would have
resulted in plaintiff’s losing a
substantial part of its cause of action
under the statute of limitations . . . .
The language and history of sec. 1406(a)
. . . show a congressional purpose to
provide as effective a remedy as possible
to avoid precisely this sort of
injustice." That is the result for which
the Wilds (paradoxically and
opportunistically, since they are the
plaintiffs) contend.
It is a bad result, not contemplated by
Congress; and we conclude that there is
no absolute bar to the transfer of a
multidefendant suit to a district in
which one of the defendants cannot be
served. But that leaves the question
whether a defendant in a multidefendant
suit who cannot be served can be forced
to defend in the transferee district or,
as most cases hold, must be severed from
the rest of the suit and the suit against
him either dismissed or (better, to avoid
the running of the statute of

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limitations) transferred back to the
district in which the suit was first
filed or to a district in which service
upon him is possible. Liaw Su Teng v.
Skaarup Shipping Corp., 743 F.2d 1140,
1148 (5th Cir. 1984); Sharp Electronics
Corp. v. Hayman Cash Register Co., 655
F.2d 1228, 1230 (D.C. Cir. 1981) (per
curiam); Relf v. Gasch, 511 F.2d 804,
807-08 and n. 13 (D.C. Cir. 1975); Shutte
v. Armco Steel Corp., supra, 431 F.2d at
24; 15 Wright, Miller & Cooper, supra,
sec. 3845, pp. 351-53 (2d ed. 1986 & 2002
Supp.). The argument for the latter
course, nowhere made in the notably
sparse discussions in the cases, is that
the transfer statutes do not purport to
alter the rules governing personal
jurisdiction; and of course the outer
bounds of those rules are set by the
Constitution. At all events, by
dismissing Hillery from the suit, the
district judge did what the case law
permits.
We move on to the merits, where we can
be brief. The nonsettling defendants are
Subscription Plus, the dealership that
sold the van to Lane, and several of the
insurance companies. Since Y.E.S.! was an
independent contractor of Subscription
Plus, the Wilds could not impute the neg
ligence (or worse) of Holmes, Y.E.S.!’s
employee, to Subscription Plus. Wagner v.
Continental Casualty Co., 421 N.W.2d 835,
844 (Wis. 1988); Snider v. Northern
States Power Co., 260 N.W.2d 260, 261
(Wis. 1977); Giffin v. Poetzl, 634 N.W.2d
901, 905 (Wis. App. 2001); Sullivan v.
Freeman, 944 F.2d 334, 336 (7th Cir.
1991). There are a number of exceptions
to the rule that a principal is not
liable for the torts of his independent
contractors, but, as explained at length
by the district judge, none of them is
applicable to this case. And anyway if
Holmes had been an employee of
Subscription Plus, he would be subject to
Wisconsin’s workers’ compensation law,
which preempts tort claims by employees
against their employers.
The claim against the dealership is
completely frivolous. Lane when he bought
the van showed the dealer a valid
driver’s license and proof of insurance.
The dealer had no reason to think Lane
would entrust the van to a person who did
not have a valid driver’s license and was
reckless; and so no negligence can be

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attributed to the dealer. Bankert by
Habush v. Threshermen’s Mutual Ins. Co.,
329 N.W.2d 150, 153 (Wis. 1983);
Halverson by Boles v. Halverson, 541
N.W.2d 150, 153 (Wis. App. 1995); Joyce
v. Joyce, 975 F.2d 379, 385 (7th Cir.
1992).
That leaves only the insurance
companies. Two of them, Acceptance and
Scottsdale, were the liability insurers
of Subscription Plus and of Hillery,
respectively. Wisconsin permits a direct
action regardless of whether the insured
is a party, but only if the insurance
policy was issued or delivered in
Wisconsin, Kenison v. Wellington Ins.
Co., 582 N.W.2d 69, 73 (Wis. App. 1998);
Lexington Ins. Co. v. Rugg & Knopp, Inc.,
165 F.3d 1087, 1092 (7th Cir. 1999)
(Wisconsin law), which neither of these
policies was. Otherwise the direct action
can be maintained only if and so long as
the insureds remain parties. See Wis.
Stat. sec.sec. 631.01(1), 632.24; Kenison
v. Wellington Ins. Co., supra, 582 N.W.2d
at 73. Both Subscription Plus and Hillery
were properly dismissed, and out with
them went their two insurers.
Progressive was Lane’s insurer; Lane,
remember, owned the van that crashed as
well as owning and controlling Y.E.S.!,
which operated the van. But here is where
color becomes significant. The van was
green; but the policy was written to
cover a white van that had been purchased
earlier but was out of service. The green
van was bought in January 1999; the
policy on the white van became effective
on March 5; and the accident occurred on
March 25. The policy provides coverage
for replacement vehicles but only "for a
period of not greater than 30 days
without notification to us." The purpose
is to enable the policy holder to obtain
coverage without having to buy a separate
policy while enabling the insurance
company to adjust the premium
retroactively to reflect any greater risk
created by the substitution. Lewis v.
Bradley, 97 N.W.2d 408, 411 (Wis. 1959);
Rabatie v. U.S. Security Ins. Co., 581
So. 2d 1327, 1329-30 (Fla. App. 1989) (en
banc) (per curiam). The plaintiffs argue
that the 30 days did not begin to run
until March 5, even though the
replacement vehicle had been in service
for more than a month before then. We
think that either the green van was never

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covered, either because it was acquired
before the policy took effect, see United
Farm Bureau Mutual Ins. Co. v. Elder, 427
N.E.2d 127, 129 (Ill. 1981); Patrick v.
Thines, 590 N.E.2d 850, 852 (Ohio App.
1990); cf. Offerdahl v. Glasser, 93
N.W.2d 362, 363 (Wis. 1959), or because
it was in service for more than 30 days
without notification to the company; or
that, at the very least, notification was
due at the time the policy took effect.
An insurance company does not want to
insure indefinitely a vehicle of which it
has no knowledge whatever.
The deficiency in the parties’
jurisdictional statements is inexcusable,
just as in Cincinnati Ins. Co. v. Eastern
Atlantic Ins. Co., 260 F.3d 742, 747-48
(7th Cir. 2001), where we reprimanded the
lawyers for both sides. As in that case,
so in this one, the lawyers disregarded
an utterly clear jurisdictional
provision, here regarding the citizenship
of corporations, and are hereby
reprimanded.
Affirmed.

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