Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-16-2006

McCann v. George W Newman
Precedential or Non-Precedential: Precedential

Docket No. 05-2312




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                                      PRECEDENTIAL

     UNITED STATES COURT OF APPEALS
          FOR THE THIRD CIRCUIT


                    No. 05-2312


       VIRGINIA McCANN, on behalf of the
          Estate of William E. McCann,
                                  Appellant
                        v.

THE GEORGE W. NEWMAN IRREVOCABLE TRUST;
    THE BANK OF NEW YORK, as Trustee of the
      Irrevocable Trust of George W. Newman;
          MARC JOSEPH, as Trustee of the
      Irrevocable Trust of George W. Newman;
    PATRICIA J. THERYOUNG, as Trustee of the
      Irrevocable Trust of George W. Newman


   On Appeal from the United States District Court
           for the District of New Jersey
         D.C. Civil Action No. 03-cv-6077
        (Honorable Dennis M. Cavanaugh)


   Submitted Pursuant to Third Circuit LAR 34.1(a)
                    April 27, 2006
            Before: SCIRICA, Chief Judge,
        NYGAARD and ALARCÓN*, Circuit Judges

                 (Filed: August 16, 2006)

GEORGE H. PARSELLS, ESQUIRE
JOHN P. LEONARD, ESQUIRE
McElroy, Deutsch, Mulvaney & Carpenter, LLP
1300 Mount Kemble Avenue
P.O. Box 2075
Morristown, NJ 07962
      Attorneys for Appellant

GARY K. WOLINETZ, ESQUIRE
JEMI M. GOULIAN, ESQUIRE
Greenbaum, Rowe, Smith & Davis LLP
Metro Corporate Campus One
P.O. Box 5600
Woodbridge, NJ 07095
      Attorneys for Appellees,
      The George W. Newman Irrevocable Trust and
      Marc Joseph, as Trustee of the
      Irrevocable Trust of George W. Newman



    *
    The Honorable Arthur L. Alarcón, United States Circuit
Judge for the Ninth Judicial Circuit, sitting by designation.

                             2
CHRISTOPHER J. STRACCO, ESQUIRE
Pitney Hardin LLP
P.O. Box 1945
Morristown, NJ 07962
       Attorney for Appellee,
       The Bank of New York, as Trustee of the
       Irrevocable Trust of George W. Newman

LORI E. GRIFA, ESQUIRE
JOSEPH TRIPODI, ESQUIRE
Wolff & Samson PC
The Offices at Crystal Lake, One Boland Drive
West Orange, NJ 07052
      Attorneys for Appellee,
      Patricia J. Theryoung, as Trustee of the
      Irrevocable Trust of George W. Newman


                 OPINION OF THE COURT


SCIRICA, Chief Judge.
        In this appeal from the District Court’s final order
granting defendants’ motion to dismiss for lack of subject matter
jurisdiction, the issue is whether plaintiff established diversity
of citizenship based on a change of domicile. We will vacate
and remand.


                                3
                                 I.
                                 A.
        On July 6, 1990, George W. Newman established and
funded the George W. Newman Irrevocable Trust to acquire and
hold property in Secaucus, New Jersey. Newman named as
trustees Patricia Theryoung, Marc Joseph, and the National
Community Bank, which was later acquired by the Bank of New
York. Newman’s development company, Allied Junction
Corporation, was to develop the property acquired by the trust
into a commercial and transportation center. Newman hired
William E. McCann as President, Chief Executive Officer, and
Director of Operations of Allied Junction Corporation, which
later became Secaucus Connection, L.L.C.
        A dispute arose between McCann and the Newman Trust
over McCann’s compensation. Theryoung and the Bank of New
York, as trustees, agreed to settle the dispute by granting
McCann an equity interest in the development project. Joseph,
the third trustee, filed an action in state court to enjoin the other
two trustees from entering the proposed agreement with
McCann and from granting McCann any interest in trust
property.
        McCann died in February 2002 while this and related
state court actions were pending. McCann’s widow, Virginia,
filed an action to intervene on behalf of McCann’s estate, which
the court denied. The court also dismissed all pending actions
because Theryoung and the Bank of New York—the trustees


                                 4
who negotiated the agreement granting McCann an interest in
the development project—had since resigned.
        On December 23, 2004, McCann’s estate filed an action
in federal court in New Jersey against the Newman Trust and its
trustees, seeking to enforce the proposed agreement. The estate
asserted subject matter jurisdiction based on diversity,
contending McCann had changed his domicile from New Jersey
to New Hampshire prior to his death. Defendants filed a motion
to dismiss for lack of subject matter jurisdiction under Fed. R.
Civ. P. 12(b)(1), contending diversity of citizenship was lacking
because all parties were domiciled in New Jersey.1
                                B.
        The material facts regarding McCann’s domicile are
undisputed. In 1969, he and his wife, Virginia, purchased a
house in Short Hills, New Jersey, where they resided for over
thirty years. In 1990, they purchased a second house in North
Hampton, New Hampshire. In June 2000, they sold their New
Jersey house and moved their furniture and personal belongings

  1
    Defendants Theryoung and the Bank of New York also filed
motions to dismiss for failure to state a claim under Fed. R. Civ.
P. 12(b)(6). They contended they lacked the authority to grant
the relief the estate requested because they were no longer
trustees of the Newman Trust. Because the District Court
dismissed the complaint for lack of subject matter jurisdiction,
it did not consider their motions to dismiss for failure to state a
claim.

                                5
to New Hampshire. Virginia became a full-time resident of
New Hampshire, but McCann rented an apartment in
Springfield, New Jersey, and continued to live and work in New
Jersey during the week. He spent weekends in New Hampshire.
        McCann stopped commuting to New Jersey in November
2001, when he stopped receiving a salary from Secaucus
Connection, L.L.C. During the three months between
November 2001 and his death in February 2002, he traveled to
New Jersey four times to attend meetings regarding the
development project. He did not use his New Jersey apartment
after January, but he did not cancel or break the lease or sublet
the apartment.
       McCann had ties to both states. He registered to vote in
New Jersey in August 2001 and voted in the New Jersey general
election on November 6, 2001. He registered to vote in New
Hampshire at the end of November, but never actually voted
there prior to his death. On July 30, 1999, he obtained a New
Hampshire driver’s license, but he maintained a New Jersey
license, which he renewed after receiving the New Hampshire
license. When Virginia became a full-time New Hampshire
resident, the McCanns registered and insured all of their
personal vehicles in New Hampshire. McCann had use of a
company car in New Jersey.
       McCann transferred his personal bank accounts to New
Hampshire, but maintained a brokerage account in excess of
$2.6 million in New Jersey. His federal income tax returns filed
during his life represented he was a New Jersey resident. But

                               6
his 2001 federal income tax return, prepared by Virginia and
filed after his death, represented he was a New Hampshire
resident. Virginia’s application for continued health insurance
coverage after McCann’s death represented he was a New Jersey
resident. McCann’s funeral was held in New Jersey, but he was
buried in New Hampshire.
                               C.
        On August 8, 2005, the District Court heard oral
argument on defendants’ motion to dismiss. Neither party
requested—and the court did not hold—an evidentiary hearing
regarding McCann’s domicile. Following oral argument, the
District Court dismissed the estate’s complaint for lack of
subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1). In a
letter opinion dated the same date, the court explained, “the
burden here rests squarely on Plaintiff to demonstrate by clear
and convincing evidence that McCann 1) took up residence in
New Hampshire, and 2) intended to remain there.” (App. 8.)
The court concluded the estate had not met this burden and
accordingly, had not established McCann changed his domicile
to New Hampshire prior to his death.
       The estate contends on appeal that the District Court
erred in applying a clear and convincing evidence standard of
proof, in concluding McCann was not a domiciliary of New
Hampshire, and in failing to hold an evidentiary hearing prior to
dismissing the complaint.
                               II.


                               7
       We have jurisdiction to review the District Court’s final
order granting defendants’ motion to dismiss under 28 U.S.C. §
1291.
        A district court’s dismissal for lack of subject matter
jurisdiction is a question of law, over which we exercise plenary
review. See Golden ex rel. Golden v. Golden, 

, 354
(3d Cir. 2004); Grand Union Supermarkets of V.I., Inc. v. H.E.
Lockhart Mgmt., Inc. 

, 410 (3d Cir. 2003). A
district court’s determination regarding the relevant burden of
proof is also a question of law, over which we exercise plenary
review. See United States v. Rodriguez, 

, 298 (3d
Cir. 2003); Polselli v. Nationwide Mut. Fire Ins. Co., 

, 750 (3d Cir. 1994).
       A district court’s determination regarding domicile or
citizenship is a mixed question of fact and law, but primarily
one of fact, which we review for clear error. See Krasnov v.
Dinan, 

, 1299–1300 (3d Cir. 1972). Under this
standard of review, “our sole function is to review the record to
determine whether the findings of the District Court were clearly
erroneous, i.e., whether we are ‘left with a definite and firm
conviction that a mistake has been committed.’” 

(quoting Speyer, Inc. v. Humble Oil and Ref. Co., 

,
770 (3d Cir. 1968)).
                              III.
                               A.



                               8
        Federal district courts are vested with original jurisdiction
over civil actions where the matter in controversy exceeds the
sum or value of $75,000 and is between “citizens of different
States.” 28 U.S.C. § 1332(a)(1). If a party is deceased, “the
legal representative of the estate of a decedent shall be deemed
to be a citizen only of the same State as the decedent.” §
1332(c)(2).
       Several principles guide our analysis of a party’s
citizenship for purposes of subject matter jurisdiction. The party
asserting diversity jurisdiction bears the burden of proof.
McNutt v. Gen. Motors Acceptance Corp., 

, 189
(1936); Samuel-Bassett v. KIA Motors Am., Inc., 

,
396 (3d Cir. 2004). A party generally meets this burden by
proving diversity of citizenship by a preponderance of the
evidence. 

.
       Citizenship is synonymous with domicile, and “the
domicile of an individual is his true, fixed and permanent home
and place of habitation. It is the place to which, whenever he is
absent, he has the intention of returning.” Vlandis v. Kline, 

, 454 (1973). In determining an individual’s domicile,
a court considers several factors, including “declarations,
exercise of political rights, payment of personal taxes, house of
residence, and place of business.” 

(quotation omitted). Other factors to be considered may include
location of brokerage and bank accounts, location of spouse and
family, membership in unions and other organizations, and
driver’s license and vehicle registration. 13B Charles Alan


                                 9
Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice
and Procedure § 3612 (3d ed. 2005).
       An individual can change domicile instantly. To do so,
two things are required: “[h]e must take up residence at the new
domicile, and he must intend to remain there.” 

. But “[a] domicile once acquired is presumed to
continue until it is shown to have been changed.” Mitchell v.
United States, 

, 353 (1874); Korn v. Korn, 

, 691 n.4 (3d Cir. 1968) (quoting 

).
This principle gives rise to a presumption favoring an
established domicile over a new one. See, e.g., Acridge v.
Evangelical Lutheran Good Samaritan Soc., 

, 448
(5th Cir. 2003); Gutierrez v. Fox, 

, 427 (2d Cir.
1998); State Farm Mut. Auto. Ins. Co. v. Dyer, 

, 519
(10th Cir. 1994); Holmes v. Sopuch, 

, 434 (8th Cir.
1981); Hawes v. Club Ecuestre El Comandante, 

,
701 (1st Cir. 1979); Stine v. Moore, 

, 447 (5th Cir.
1954); see also 13B Wright et al., supra, § 3612.
       Here, the estate—the proponent of federal
jurisdiction—bore the burden of establishing diversity of
citizenship. The District Court required it to carry this burden
by proving a change in domicile by clear and convincing
evidence.2 The District Court noted the presumption in favor of


   2
    As defendants note, following oral argument, the District
Judge stated the estate had not established “by clear and
convincing evidence or even by a preponderance of the

                              10
an original or former domicile, and explained, “[w]here the
proponent of federal jurisdiction is also the party contending that
there has been a change of domicile of one of the litigants, the
effect of this presumption is to raise the standard of proof which
that party must bear.” (App. 7–8.) The court cited Federal
Practice and Procedure, which states, “[t]he effect of this
presumption is to put a heavier burden on a party who is trying
to show a change of domicile than is placed on one who is trying
to show the retention of an existing or former one.”3 13B
Wright et al., supra, § 3612. The court noted, “[t]hough the
Third Circuit has not ruled on this issue, many district courts
within this Circuit, as well as courts within the Second Circuit,
have required proof of change in domicile by clear and
convincing evidence.” (App. 8 n.3.) The District Court



evidence, that [McCann] actually changed his domicile to New
Hampshire.” (App. 393.) But the District Court’s letter opinion
clearly states the court was applying a clear and convincing
evidence standard.
       3
        Federal Practice and Procedure does not state the
presumption imposes a higher standard of proof on a party
trying to establish a change of domicile. It states only that the
presumption places a “heavier burden” on the party. 13B
Wright et al., supra, § 3612. As discussed, we believe this
“heavier burden” entails shifting to that party the burden of
production regarding the change of domicile, not raising the
standard of proof.

                                11
concluded it would “follow their lead and apply a clear and
convincing standard.” (Id.)
        We are not convinced the proper standard is proof by
clear and convincing evidence. There are two distinct elements
of the burden of proof—the burden of production and the burden
of persuasion. See Lew v. Moss, 

, 751 (9th Cir.
1986) (“The ‘burden’ in a civil case involves not one but two
elements: the burden of going forward with proof (the burden of
‘production’) and the burden of persuading the trier of fact (the
burden of ‘proof’).”); see also 21B Wright et al., supra, § 5122.
       Under Fed. R. Evid. 301,4 a presumption in a civil case
imposes the burden of production on the party against whom it
is directed, but does not shift the burden of persuasion. See
Wards Cove Packing Co. v. Antonio, 

, 659–60
(1989); In re G-I Holdings, Inc., 

, 318 (3d Cir.
2004). We have interpreted Rule 301 to express the Thayer-
Wigmore “bursting bubble” theory of presumptions. See


   4
    Fed. R. Evid. 301 provides:
      In all civil actions and proceedings not otherwise
      provided for by Act of Congress or by these rules, a
      presumption imposes on the party against whom it is
      directed the burden of going forward with evidence to
      rebut or meet the presumption, but does not shift to such
      party the burden of proof in the sense of the risk of
      nonpersuasion, which remains throughout the trial upon
      the party on whom it was originally cast.

                               12
McKenna v. Pac. Rail Serv., 

, 829–30 (3d Cir.
1994); 

(Mansmann, J., dissenting). Under this theory,
“the introduction of evidence to rebut a presumption destroys
that presumption, leaving only that evidence and its inferences
to be judged against the competing evidence and its inferences
to determine the ultimate question at issue.” 

In other
words, the presumption shifts the burden of producing sufficient
evidence to rebut the presumed fact. Once that burden is met,
the presumption “disappears from the case.”5 J. Weinstein &
M.A. Berger, Weinstein’s Evidence § 301.02[2] (2d ed. 2004);
see also J. H. Wigmore, Wigmore on Evidence § 2491 (3d ed.
1940). This view of Rule 301 is widely accepted. See, e.g., In
re Yoder Co., 

, 1119 (6th Cir. 1985) (stating most
commentators conclude that under Rule 301, “a presumption
vanishes entirely once rebutted, and the question must be
decided as any ordinary question of fact”); see also Nunley v.
City of Los Angeles, 

, 796 (9th Cir. 1995); A.C.
Aukerman Co., v. R.L. Chaides Constr. Co., 

,
1037–1038 (Fed. Cir. 1992); Legille v. Dann, 

, 5–7


  5
    As we explained in Sheridan v. E.I. DuPont de Nemours and
Co., in saying the presumption drops from the case, we do not
imply the trier of fact can no longer consider the evidence that
initially gave rise to the presumption. 

, 1069 (3d
Cir. 1996). “[T]his evidence and inferences properly drawn
therefrom may be considered by the trier of fact.” 

Dept. of Cmty. Affairs v. Burdine, 

, 252 n.10
(1981)).

                               13
(D.C. Cir. 1976); Weinstein et al., supra, § 301.02[4]. But see
21B Wright et al., supra, § 5122.2 (disagreeing with this
interpretation of Rule 301).6
        Under Rule 301, the presumption favoring an established
domicile places the burden of production on the party alleging
a change in domicile, but does not affect the burden of
persuasion, which remains throughout with the proponent of
federal jurisdiction. Accordingly, the presumption’s only effect
is to require the party asserting a change in domicile to produce
enough evidence substantiating a change to withstand a motion
for summary judgment or judgment as a matter of law on the
issue.
       When the party claiming a new domicile is the opponent
of federal jurisdiction, the effect of the presumption in favor of
an established domicile is straightforward. The party claiming
a new domicile bears the initial burden of producing sufficient
evidence to rebut the presumption in favor of the established
domicile. If the party does so, the presumption disappears, the


    6
      For an explanation of how Rule 301’s legislative history
supports our interpretation, and a response to the leading
argument to the contrary, see 

(Alito,
J., dissenting). The majority in Sheridan similarly interpreted
Rule 301 to express the “bursting bubble” theory, differing with
the dissent only on the consequences in a Title VII
discrimination case after the presumption “dissipated or ‘burst.’”

                               14
case goes forward, and the party asserting jurisdiction bears the
burden of proving diversity of citizenship. See e.g. Bank One,
Tex. N.A. v. Montle, 

, 50 (1st Cir. 1992); 

–51.
       When the party claiming a new domicile is the proponent
of federal jurisdiction, the effect of the presumption is less
straightforward. One of the parties will bear both burdens—the
burden of production regarding domicile and the burden of
persuasion regarding federal jurisdiction. The District Court
followed other courts in concluding the effect of placing both
burdens on one party was to raise the relevant standard of proof.
(See App. 8 n.3 (citing Palazzo v. Corio, 

, 42 (2d
Cir. 2000); Avins v. Hannum, 

, 936 (E.D. Pa.
1980), Liakakos v. Cigna Corp., 

, 586 (E.D. Pa.
1988); Hakkila v. Consol. Edison Co. of N.Y., 

,
990 (S.D.N.Y. 1990)).) We are not so certain. We believe the
effect of placing both burdens on one party is to require the
party to initially carry the burden of production to rebut the
presumption in favor of an established domicile. If and when
the party does so, the presumption falls out of the case and the
party is required to carry the burden of persuasion by proving
that a change of domicile occurred, creating diversity of
citizenship. Whether the party asserting a change of domicile is
asserting or contesting federal subject matter jurisdiction, the
appropriate standard of proof is preponderance of the evidence.
       Several Supreme Court cases reiterate the basic tests for
establishing diversity jurisdiction, but do not state the requisite


                                15
burden of proof for establishing a change of domicile. See, e.g.,
Thomson v. Gaskill, 

, 446 (1942); KVOS, Inc., v.
Associated Press, 

, 277–78 (1936); 

; Gilbert v. David, 

, 566-67 (1915). We
believe our conclusion is consistent with the guidance we can
glean from these cases. In McNutt, in determining whether the
amount in controversy satisfied the diversity jurisdiction
requirement, the Court directly and specifically set forth
preponderance of the evidence as the appropriate standard of

(“And where they are not so challenged
the court may still insist that the jurisdictional facts be
established or the case be dismissed . . . the court may demand
that the party alleging jurisdiction justify his allegations by a
preponderance of evidence.”). We see no reason why the
Court’s directive should not apply to all facts supporting
diversity jurisdiction.
       Our conclusion is also consistent with the conclusion of
the Court of Appeals for the First Circuit, which explicitly
rejected the clear and convincing standard as the appropriate
standard for proving a change of domicile for purposes of
diversity jurisdiction, and adopted the preponderance of the
evidence standard. Perez v. Santaella, 

, 351 (1st
Cir. 2004). The court held “[t]o the extent that the court
evaluated the appellants’ evidence under a clear and convincing
standard, plain error occurred.” 

Without offering its
rationale, the court concluded once a party’s domicile is
challenged, the party invoking diversity jurisdiction must prove


                               16
domicile by a preponderance of the evidence, even if a party is
alleging a new domicile. 

        The only other court of appeals to have conclusively
addressed this issue—the Court of Appeals for the Second
Circuit—adopted the clear and convincing standard. See Katz
v. Goodyear Tire & Rubber Co., 

, 243 (2d Cir.
1984); see also 

. But we believe the
Second Circuit cases are of limited relevance to our
determination of the proper standard. Katz, the case that
originally adopted the standard, based its domicile determination
on New York law. See 

(“Under New
York law, the party asserting a change in domicile has the
burden of proving such a change by clear and convincing
evidence.”). Palazzo followed Katz in applying the clear and
convincing evidence standard. 

. The
determination of whether a litigant is domiciled in a particular
state for purposes of diversity jurisdiction is properly based on
federal law. See 

; Rishell v. Jane
Phillips Episcopal Mem’l Med. Center, 

, 172 (10th
Cir. 1993); Stifel v. Hopkins, 

, 1120 (6th Cir.
1973); Ziady v. Curley, 

, 874 (4th Cir. 1968). The
Court of Appeals for Second Circuit provided no reasoning for
application of the clear and convincing standard based on
federal law.
        We conclude the appropriate standard is preponderance
of the evidence. Because of this conclusion, we will vacate the
District Court’s order applying the clear and convincing


                               17
evidence standard. We will remand for reconsideration under
the preponderance of the evidence standard.
                               B.
       Though it did not request an evidentiary hearing, the
estate now contends the District Court erred in dismissing its
complaint without a hearing. Because district courts “enjoy
substantial procedural flexibility in handling Rule 12(b)(1)
motions,” Berardi v. Swanson Mem’l Lodge No. 48, 

, 200 (3d Cir. 1990), and because of the circumstances of
this case, we conclude the District Court did not err in this
respect.
        In its letter opinion, the District Court recited the
established procedures for ensuring a ruling on a Rule 12(b)(1)
motion is based on an adequate factual record. (App. 6 (citing
Int’l Ass’n of Machinists & Aerospace Workers v. Nw. Airlines,
Inc., 

, 711–12 (3d Cir. 1982); Gould Elec. Inc. v.
United States, 

, 177 (3d Cir. 2000)).) If a
defendant does not challenge the facts alleged in the plaintiff’s
pleadings, a court may rule on the motion by accepting these
allegations as true. Gould 

. If a defendant
contests any of the jurisdictional allegations as pled by the
plaintiff, the court must permit the plaintiff to respond with
rebuttal evidence in support of jurisdiction, and the court then
decides the jurisdictional issue by weighing the evidence. 

is a dispute of a material fact, the court must conduct a
plenary hearing on the contested issues prior to determining
jurisdiction. 

District Court concluded none of the

                               18
material facts were in dispute. Accordingly, the court proceeded
to determine its jurisdiction by weighing the relevant evidence.
        The estate notes the District Court’s statement that
“Defendants have offered many facts which cast doubt upon the
inferences raised by Plaintiff regarding McCann’s intent,” (App.
8–9), and contends these “inferences” were disputed issues of
material fact that should not have been resolved without a
hearing. But elsewhere, the estate notes “Defendants-Appellees
simply do not counter these facts. Instead they introduce other
‘facts’ and argue that their facts outweigh those presented by the
Estate.” (Reply Br. 3.) As the District Court noted, the
accuracy of the facts submitted by the parties was not in dispute.
What was in dispute was the estate’s allegation that these facts
demonstrated a change of domicile. In a similar situation, the
Court of Appeals for the First Circuit concluded an evidentiary
hearing was not necessary. See Valentin v. Hospital Bella Vista,

, 364 (1st Cir. 2001).
       A court can evaluate its jurisdiction without an
evidentiary hearing “so long as the court has afforded [the
parties] notice and a fair opportunity to be heard.” Tanymore v.
Bethlehem Steel Corp., 

, 1323–1324 (3d Cir.
1972); see also Valentin, 254 at 364; Zappia Middle E. Constr.
Co. v. Emirate of Abu Dhabi, 

, 253 (2d Cir. 2000).
A key consideration in determining whether a hearing is
required is whether either party requested one. See 

–65; Aoude v. Mobil Oil Corp., 

,
1120 (1st Cir. 1989). Here, the parties had ample opportunity to


                               19
be heard through depositions, affidavits, and briefs. Neither
party requested an evidentiary hearing, and the estate did not
object to the absence of one until after their complaint was
dismissed. The District Court did not err in not holding a
hearing before dismissing the complaint.
                              IV.
       For the reasons set forth, we will vacate the judgment of
the District Court and remand for further proceedings consistent
with this opinion.




                              20