C. G. Bishop, Administrator of the Estate of Arthur Leebaker, Jr., Deceased, Appellant, v. S. Hendricks, Jr., Appellee, 495 F.2d 289 (4th Cir. 1974)

This is an action to recover under the wrongful death statute of South Carolina.¹  It arose out of a motor collision occurring in Newberry County, South Carolina. The deceased was a life-long citizen of South Carolina. The statutory beneficiaries of the action are likewise life-long citizens of South Carolina. The beneficiaries retained counsel to prosecute the wrongful death action on their behalf. After consulting with their counsel, they applied to the local probate court for the appointment of the plaintiff-appellant, a citizen of Georgia and a relative by marriage of the beneficiaries, as administrator in whose name the action might be prosecuted. This action was thereupon commenced as a diversity action in the District Court against the lessee-operator of the other vehicle involved in the accident.²  The lessee of the other vehicle, who is the appellee on this appeal, was a citizen of South Carolina. He moved to dismiss the action for lack of diversity claiming in support of his motion that when a deceased leaves, as the deceased did in this case, no estate to be administered and the sole reason for the appointment of an administrator is to provide a nominal party plaintiff to institute the action, the benefits of which, if successful, pass directly to the statutory beneficiaries without any general administration, the citizenship of the administrator should be disregarded and the citizenship of the beneficiaries of the action should control in ascertaining federal diversity jurisdiction. The appellant-administrator countered with the contention that such a rule was applicable only when it could be found that the sole motive for the appointment of an out-of-state fiduciary was to create federal jurisdiction. The District Court, however, concluded, as did the Court in Nickell v. Westervelt (D.C.Va.1973) 354 F. Supp. 111, 112, and Johnson v. Worley (D.C.Va.1972) 353 F. Supp. 1381, 1382, that Miller v. Perry (4th Cir. 1972) 456 F.2d 63, 'held that diversity of citizenship' in such a case as that here 'is determined by the citizenship of the beneficiaries rather than by the citizenship of the administrator', and it reached that conclusion despite its remark that in its opinion the 'motive' for the appointment of the out-of-state administrator in this case was not the creation of federal jurisdiction. It accordingly dismissed the action for want of jurisdiction. The administrator appeals. We affirm.

The appellant would confine the scope of Miller to the peculiar facts of that case; and since the facts in this case are different, he argues Miller is without application. Miller, however, was not phrased in the narrow terms of its own facts. The language of Miller was manifestly intended as a declaration of what one commentator has correctly denominated as 'a substantial change in diversity jurisdiction'.³  The Court in that case was focusing generally on the broad, fundamental problem of determining the real party in interest, not in a procedural but in a jurisdictional sense,⁴  and in making clear what, in the light of the decision in Kramer v. Caribbean Mills (1969) 394 U.S. 823, 89 S. Ct. 1487, 23 L. Ed. 2d 9, was an 'improper' or 'collusive' joinder under Section 1359, 28 U.S.C. The emphasis 'was on a fresh appraisal of an old problem.'⁵  By its decision, the Court was making a choice between the old, purely mechanical or 'ritualistic' rule that an administrator, validly appointed, is always the real party in interest whose citizenship fixes diversity jurisdiction and what, on the other hand, has been aptly described as the more recent 'substantive real party in interest test' as determined by the facts of the particular case.⁶  The Court recognized that 'there was nothing sacred in the customary rule that an administrator's citizenship governs, a principle which serves policies of judicial economy rather than federal-state comity' and concluded as a matter of principle that substance should prevail over mere procedure, that federal courts on jurisdictional issues should 'assess the substantive relations between the parties to the controversy'⁷  and that they should make 'a realistic determination with respect to the presence of diversity.'⁸  It found authority for such an approach in Kramer, which directed, as construed in Miller, 'that the duties and responsibilities of administrators should be taken into account in federal determinations of the relevancy of the citizenship of such a personal representative to the presence of diversity jurisdiction.'⁹  It held specifically that when the responsibilities of the administrator are solely to institute the wrongful death action-- when he is what one Court has described as 'an administrator ad litem' and no more¹⁰  -- the Court would 'hinge the diversity determination to the citizenship of the wrongful death action beneficiaries, rather than to that of their representative.'¹¹ 

The result reached in Miller had long found advocates among legal scholars.¹²  It has received wide approval from the legal commentators.¹³  It is in conformity with the rule as stated by Professor Moore in his authoritative text:

'Where a party sues (or is sued) as a receiver, representative of a class, assignee, subrogee, executor or administrator it is normally his citizenship that is material when jurisdiction is dependent upon the character of the parties. This is true also of the general guardian of an infant, or the curator or committee of a lunatic, when under the law of the state where such fiduciary is appointed he has the status of a real fiduciary. But if the law of the state gives the administrator, guardian, or other representative the status of only a nominal fiduciary then the beneficiary or the ward, not the administrator or guarddian, is the real party in interest, and it is the citizenship of the beneficiary or ward, as the case may be, that is determinative.' 3A, Moore's Federal Practice, pp. 112-4.

'Such a determination', also, has the virtue that it 'insures that federal jurisdiction will be invoked only when necessary to protect the party whose personal interest in the suit might be prejudiced by the presence of local bias', which 'has been the historical view for why diversity jurisdiction originated'. Note, Federal Jurisdiction-- Citizenship of the Beneficiary Controls in Wrongful Death Actions Requiring a Resident Administrator, 51 N.C.L.Rev. 639, 646, and n. 44 (1973).¹⁴  To permit the appointment of a nominal non-resident fiduciary to create federal diversity jurisdiction would clearly 'run counter to the general policy of viewing the federal courts as tribunals of limited jurisdiction whose subject matter jurisdiction principles should be applied with restraint,'¹⁵  and, through its artificial creation of diversity, would represent an 'improper manufacture of jurisdiction'¹⁶  in obvious violation of the purposes of Section 1359.

Even if it be conceded that the rule in Miller is normally of general application, the appellant, however, would restrict it to situations where the reason or 'motive' assigned for the appointment of the administrator was to create diversity jurisdiction. It may be assumed that if there is a valid reason for the appointment of an out-of-state administrator that gives to his representation greater substantiality than a mere administrator ad litem, the citizenship of the administrator may be determinative of diversity. This exception was implicit in Miller, which drew a clear distinction between the situation where the administrator was merely an agent to sue 'without stake' in the litigation as it were and where he had some substantial interest or stake in the proceedings. It was, also, recognized by implication in Lester v. McFaddon. But it must be remembered that, in a situation where an out-of-state administrator files a wrongful death action on behalf of resident beneficiaries, involving the death of a resident decedent in an accident occurring within the state, want of diversity will be presumed unless the record provides sufficient support for the conclusion that the representation of the administrator is not nominal but was based on a valid and substantial reason.¹⁷  But for the reason or motive for the appointment to give the necessary substantiality to his representation that his citizenship will be regarded for diversity it must be more than an expression of sentiment or personal preference /18/ or mere kinship with either the beneficiaries or the decedent.¹⁹  Nor can it be established by some self-serving profession of good faith in the appointment. The reason or motive that will render the out-of-state administrator's citizenship important for diversity purposes must be one that harmonizes with the thrust and purposes of Section 1359 itself.²⁰  The history of Section 1359 makes clear its purpose. It was enacted as Section 5 of the Act of March 3, 1875, 18 Stat. 470, for the purpose of denying the use of federal courts in suits which did not 'really and substantially involve a dispute or controversy properly within the jurisdiction' of the federal courts. This the statute stated in express terms. When this section and the assignee provision of the original Judiciary Act of 1789 were combined in the revision of 1948, this statement of express purpose was omitted but not because it was the intention of the revisers to alter in any way the purpose of the statute;²¹  the purpose of the revision and of the omission was to simplify the two provisions in order to eliminate 'some of the abstruse distinctions that had grown up * * *'. O'Brien v. Avco Corporation, supra (425 F.2d at p. 1033). That the purpose of the statute remained the same was emphasized by the Circuit Court opinion in Kramer, where 'improper or collusive' joinder for jurisdiction was declared to result when it rested on 'colorable assignment or other device without substance.'²²  And this was the construction adopted and applied in Miller. Accordingly, any appointment of an out-of-state administrator, which is nominal and 'without substance' and which, if given effect for jurisdictional purposes, has the effect of giving diversity to an action which does not 'really and substantially involve a dispute or controversy' between citizens of different states, is violative of the purposes of, and falls under the interdict of, Section 1359.²³  The courts should accordingly evaluate the reasons for the appointment and determine whether the reasons given logically or realistically establish that, as a result, the fiduciary sustains more than a nominal relationship to the litigation.²⁴  The Courts have often done just that and, on the basis of their evaluation, have determined whether the citizenship ofthe administrator is to be given effect. As we have said, the fact that the beneficiaries are prostrated by grief, or are related to the out-of-state administrator, or are relying on the administrator for advice or that the out-of-state administrator is 'a competent business man', will not justify diversity based on the administrator's citizenship.²⁵  Confidence in the superior business judgment and ties of friendship, even intimate ones, are equally unavailing.²⁶  On the other hand, O'Brien v. Stover (8th Cir. 1971) 443 F.2d 1013, 1015-1016, instances circumstances in which the appointment will control diversity. In that case, the out-of-state administratrix was the daughter of the deceased and 'her sole heir'. Under these circumstances, the Court said, 'The diversity here is bona fide and plaintiff's appointment as administrator was natural and logical under the circumstances. She was the real party in interest. These facts are sufficient to establish diversity jurisdiction.'²⁷  Again, when a general administrator, having assets other than the wrongful death suit to administer and who, incidental to his duties as general administrator, files a wrongful death suit, it has been held, though not uniformly, that his citizenship may be considered for diversity.²⁸  In summary, only if the Court can conclude that the out-of-state administrator has something more than a nominal relationship to the litigation will the citizenship of an out-of-state administrator sustain diversity, and any reason or motive for the appointment which does not elevate his relationship to the litigation above the level of a nominal party is irrelevant to the issues of diversity.²⁹ 

In this case, the administrator has failed to establish any substantive facts or to assign any valid reasons for his appointment that would give 'substance' to his representation or fix his status in the suit as different from nominal. Without any 'real (or) substantial interest in the outcome of the litigation', he possesses 'no stake in the litigation'.³⁰  He has nothing to gain by the suit save a fee for the use of his name if successful, and, if the suit is lost, nothing to lose.³¹  In fact, it would seem that the beneficiaries of the action, if they chose to, could settle the action, with or without consulting him.³²  Nor is the prosecution of the action incidental to any general fiduciary duties of an administrator.³³  There are no assets in the estate other than this suit. The appellant has no knowledge of the accident out of which the litigation arose and can contribute nothing to its prosecution. He actually had no part in the selection or employment of counsel. The employment of counsel occurred before his appointment and under the circumstances, he, like the representative in Lester v. McFaddon, supra (415 F.2d at p. 1103) 'can hardly be expected to ride herd upon them (i.e., counsel) or exercise any effective supervision of their conduct of the litigation'. It is true, he is the nominal plaintiff but this is simply because the statute so commands.³⁴  As the Court emphasized in Bennett v. Ry., Gas & Electric Co. (1914) 97 S.C. 27, 30, 81 S.E. 189, "That the act requires the personal representative (administrator or executor) to sue need not trouble us; the Legislature could as well impose that duty on the sheriff or the coroner. The proceeds recovered are not for creditors, or the family generally, or for the legatees, but is (are) strictly confined to certain members of the family of the deceased." (Quoting from Reed v. Ry. Co.,37 S.C. 42, 53, 16 S.E. 289, 291).

The only reason assigned for his appointment and sought to justify diversity on the basis of his citizenship was that he was more experienced in business affairs than the father or mother of the deceased, the beneficiaries of the action. This reason is not persuasive. The beneficiaries, either of whom would have been the natural fiduciary, chose the attorney to prepare to suit and to try it. That was substantially the only function the administrator in a case such as this would perform. The suggestion that the father and mother were without business experience was unimportant since there could be no occasion to use business experience in the very limited, nominal role to be played by the administrator.

In summary, the appellant is, so far as this suit is concerned, a 'straw party', appointed just as a guardian ad litem solely for the purposes of providing a nominal plaintiff for the maintenance of this action. His appointment is manifestly an artificial creation of federal diversity and as such cannot support jurisdiction. It is, for all practical purposes, similar to the situation in First Nat. Bank of Amherst, Mass. v. Fulcher (D.C.Va.1954) 119 F. Supp. 759, p. 763,³⁵  where the Court, 'looking at reality' and determining diversity in the citizenship of the beneficiaries of the Virginia wrongful death statute rather than that of the administrator, said:

'* * * The personal representative is nominally the plaintiff solely because the statute says that he must be. Should there be a recovery, no creditor could touch it. No administration is necessary. Any recovery would go to the sons as the jury might direct.'

We have not overlooked that the District Court stated that, if the issue were properly before him he would find that the 'motive' in the appointment of the appellant as administrator was not improper. He gave no reason for such opinion. As we have indicated, however, the propriety of an administrator's appointment in a case such as this is determined under Section 1359 by whether the administrator has something more than a nominal interest at stake in the litigation.³⁶  The appellant-administrator manifestly did not have such an interest and the District Court properly dismissed the action on jurisdictional grounds.

Affirmed.