Lovett v. Sanderson ( 1999 )

                          FOR THE FIFTH CIRCUIT
                                 No. 98-30290
    MILLIKEN & MICHAELS OF ARIZONA, INC., incorporated in Arizona,
    with its principal place of business in Tucson, Arizona; MILLIKEN
    & MICHAELS OF DELAWARE, INC., a Delaware corporation with its
    principal place of business in Dover, Delaware; MILLIKEN &
    MICHAELS OF NORTH CAROLINA, INC., a North Carolina corporation
    with its principal place of business in Boone, North Carolina;
    MILLIKEN & MICHAELS OF OREGON, INC., an Oregon corporation with
    its principal place of business in Beaverton, Oregon, a sales
    office only; MILLIKEN & MICHAELS OF COLORADO, INC., a Colorado
    corporation and a sales office only; MILLIKEN & MICHAELS OF
    TEXAS, INC., a Texas corporation,
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              Appeal from the United States District Court
                  for the Eastern District of Louisiana
                           - - - - - - - - - -
                                 June 18, 1999
    Before KING, Chief Judge, and REAVLEY and BENAVIDES, Circuit
    BENAVIDES, Circuit Judge:*
         Six Defendants appeal the district court’s decision to
    exercise personal jurisdiction over them. We REVERSE.
         *. Pursuant to 5TH CIR. R. 47.5, the court has determined
    that this opinion should not be published and is not precedent
    except under the limited circumstances set forth in 5TH CIR.
    R. 47.5.4.
         The named Plaintiffs brought suit in the United States
    District Court for the Eastern District of Louisiana against
    twelve Defendant entities, including the Appellants here,1
    alleging that the Defendants failed to pay them and similarly
    situated employees overtime wages as required by the Fair Labor
    Standards Act (“FLSA”), 29 U.S.C. §§ 201-219. The Appellants,
    three full-service corporations and three sales-office
    corporations,2 are each incorporated outside Louisiana. The
    Appellants moved to dismiss for failure of personal jurisdiction
    or, in the alternative, for transfer on the ground of forum non
    conveniens. The case was referred to a magistrate judge, who
    recommended that the district court grant the motion to dismiss for
    lack of personal jurisdiction.   The Plaintiffs filed objections to
    the recommendation, producing evidence regarding the control that
    Michael G. Sanderson, a Louisiana resident and the sole shareholder
    of each Defendant corporation, exercised over the Appellants’
         1. The remaining six Defendants do not challenge the
    district court’s exercise of jurisdiction over them. Those
    Defendants are all Louisiana residents or corporations: Michael G.
    Sanderson, a Louisiana resident and the sole shareholder of each
    Defendant corporation; Patricia Downing Sanderson, a Louisiana
    resident; Milliken & Michaels, Inc., a Louisiana corporation;
    Milliken & Michaels of Louisiana, Inc., a Louisiana corporation;
    Milliken & Michaels Receivables Management, Inc., a Louisiana
    corporation; and Milliken & Michaels Credit Services, Inc., a
    Louisiana corporation.
         2. Three Appellants maintain and service their own client
    bases. Those Appellants (the “full-service Appellants”) are
    Milliken & Michaels of Arizona, Inc.; Milliken & Michaels of
    Delaware, Inc.; and Milliken & Michaels of North Carolina, Inc.
    Three Appellants serve only as sales offices generating accounts
    to be collected by Milliken & Michaels Receivables Management,
    Inc. Those Appellants (the “sales-office Appellants”) are Milliken &
    Michaels of Oregon, Inc.; Milliken & Michaels of Colorado, Inc.;
    and Milliken & Michaels of Texas, Inc.
    policies with respect to employment and overtime pay. The district
    court found that the Plaintiffs established a prima facie case of
    sufficient contacts between the Appellants and Louisiana. The court
    therefore held that it could exercise personal jurisdiction over all
    the Defendants without offending due process.
         When a nonresident defendant presents a motion to dismiss
    for lack of personal jurisdiction, the plaintiff bears the burden
    of establishing that the court has jurisdiction. See Wilson v.
    20 F.3d 644
    , 648 (5th Cir. 1994) (citing Stuart v.
    772 F.2d 1185
    , 1192 (5th Cir. 1985)). In the case at
    bar, the magistrate judge and the district court reviewed the
    plaintiffs’ and defendants’ submissions and heard oral arguments
    but did not conduct evidentiary hearings. When no evidentiary
    hearing is held, the plaintiff, in order to bear its burden, need
    only present a prima facie case that jurisdiction is proper. See
    id. (citing Thompson v. Chrysler Motors Corp., 
    755 F.2d 1162
    1165 (5th Cir. 1985)). In determining whether a prima facie case
    for personal jurisdiction exists, the court must resolve factual
    conflicts in the plaintiff’s favor. See id. (citing Bullion v.
    895 F.2d 213
    , 215 (5th Cir. 1990)). We review de novo
    the district court’s legal decision to exercise personal
    jurisdiction, see id. at 647-48 (citing Bullion, 895 F.2d at
    216), using the same standards employed by the district court.
         The path for a district court to follow in deciding whether
    to exercise personal jurisdiction over an out-of-state defendant
    in a federal-question case is well-trodden and clear. The court
    must look first to the service-of-process provisions of the
    federal statute from which the case arises. See Omni Capital
    International v. Rudolf Wolff & Co., 
    484 U.S. 97
    , 105-06, 108 S.
    Ct. 404, 410 (1987). When the statute is silent as to service of
    process, as the FLSA is, see 29 U.S.C. § 216; Aviles v. Kunkle,
    978 F.2d 201
    , 203-04 (5th Cir. 1992), the federal court may reach
    those entities that are subject to the jurisdiction of the state
    in which the district court sits. See Fed. R. Civ. P. 4(e); Point
    Landing, Inc. v. Omni Capital International, Ltd., 
    795 F.2d 415
    419 (5th Cir. 1986), aff’d sub nom. Omni Capital International,
    Ltd. v. Rudolf Wolff & Co., 
    484 U.S. 97
    108 S. Ct. 404
    Louisiana’s long-arm statute permits its state courts to exercise
    jurisdiction over nonresident aliens to the full limits allowed
    by constitutional due process. See La. Rev. Stat. Ann.
    § 13:3201(B) (West 1999); Dalton v. R&W Marine, Inc., 
    897 F.2d 1359
    , 1361 (5th Cir. 1990). Our analysis thus amounts to an
    inquiry into whether the district court’s exercise of
    jurisdiction comports with constitutional due process
    requirements. See id.
         Constitutional due process principles permit a court to
    exercise jurisdiction over a nonresident defendant when that
    defendant has established sufficient “minimum contacts” with the
    forum state and the exercise of jurisdiction does not offend
    “traditional notions of fair play and substantial justice.”
    Burger King Corp. v. Rudzewicz, 
    471 U.S. 462
    , 476, 
    105 S. Ct. 2174
    , 2184 (1985). A court considers five factors in assessing
    whether its exercise of jurisdiction meets the fairness prong of
    the due process inquiry: (1) the burden upon the nonresident
    defendant to litigate in that forum; (2) the forum state’s
    interests in the matter; (3) the plaintiff’s interest in securing
    relief; (4) the interstate judicial system’s interest in
    obtaining the most efficient resolution of controversies; and (5)
    the several states’ shared interest in furthering substantive
    social policies. See Asahi Metal Industry Co. v. Superior Court,
    480 U.S. 102
    , 113, 
    107 S. Ct. 1026
    , 1033 (1987).
         Minimum contacts may be established under a theory of
    specific jurisdiction or under a theory of general jurisdiction.
    See, e.g., Felch v. Transportes Lar-Mex Sa De Cv, 
    92 F.3d 320
    324 (5th Cir. 1996) (quoting Wilson, 20 F.3d at 746). Specific
    jurisdiction exists when a plaintiff’s claim arises out of a
    foreign defendant’s specific activity within the forum state.
    Although the “specific activity” may be a single act, see, e.g.,
    Bullion, 895 F.2d at 216, the foreign defendant must have
    purposely undertaken the in-state activity; it may not be a
    consequence of the plaintiff’s unilateral action. See, e.g.,
    Bearry v. Beech Aircraft Corp., 
    818 F.2d 370
    , 374 (5th Cir.
    1988). General jurisdiction exists when a foreign defendant’s
    contacts with a state have been “continuous and systematic.” See,
    e.g., id. General jurisdiction may attach in the absence of
    specific jurisdiction, see id., and the forum state need not have
    a direct interest in the action in order to exercise general
    jurisdiction. See, e.g., Felch, 92 F.3d at 326.
         Applying these standards to the case at bar, the district
    court concluded that it could properly exercise personal
    jurisdiction over the Appellants.
         The court found that specific jurisdiction existed because
    Michael Sanderson, a Louisiana resident, recommended the overtime
    wage policy that the Appellants followed and, thus, the
    Plaintiffs’ “claims for unpaid overtime wages arise out of and
    are directly related to defendants’ contacts with Louisiana.” We
    find this determination legally incorrect. Even assuming that
    Sanderson insisted upon a specific overtime policy, a foreign
    corporation’s mere adherence to a policy set in a forum state is
    not the kind of activity encompassed by the doctrine of specific
    jurisdiction. The Burger King decision explains:
              Where a forum seeks to assert specific
         jurisdiction over an out-of-state defendant who has not
         consented to suit there, [the] “fair warning”
         requirement is satisfied if the defendant has
         “purposefully directed” his activities at residents of
         the forum . . . and the litigation results from alleged
         injuries that “arise out of or relate to” those
         activities . . . .
    Burger King, 471 U.S. at 472-73, 105 S. Ct. at 2182 (citations
    and footnotes omitted) (emphasis added). Here, the Appellants did
    not engage in any activity within Louisiana that affected that
    state’s residents. Specific jurisdiction did not exist.
         The district court also found that, as to the Appellant
    full-service corporations, general jurisdiction existed under a
    corporate “alter ego” theory. The district court is correct that,
    in considering personal jurisdiction, it may rely on the
    activities of a corporation’s “alter ego” to find that the
    corporation has sufficient minimum contacts with a forum state.
    See, e.g., Dalton, 897 F.2d at 1363; Hargrave v. Fibreboard
    710 F.2d 1154
    , 1159 (5th Cir. 1983). Total stock ownership
    and commonality of officers and directors, however, will not
    suffice to establish an alter ego for jurisdictional purposes.
    Instead, the two entities must in reality be one and the same
    corporation. See id. at 1159-60. To that end, the district court
    stated that, in this case, “the parent’s control is pervasive
    enough for the corporate entities of the non-Louisiana defendants
    to be disregarded for purposes of personal jurisdiction.” We
    disagree. The plaintiffs did not make any submissions on or
    present any evidence of the kind of pervasive “control by the
    parent over the internal business operations and affairs of the
    subsidiary,” Hargrave, 710 F.2d at 1160, that has been found
    sufficient in this Circuit to disregard separate corporate
    identities for jurisdictional purposes.
         As to the sales-office Appellants, we agree with the
    district court, and the Appellants have conceded, that sufficient
    minimum contacts exist between those offices and Louisiana to
    fulfill that prong of the due process analysis. We also agree
    with the magistrate judge, however, that “traditional notions of
    fair play and substantial justice” in this case counsel against
    the district court’s exercising jurisdiction. Louisiana’s
    interest in seeing resolution of this conflict is slight, as the
    offended parties are residents of Oregon, Colorado, and Texas,
    and are employed by sales offices operating in those states.
    Neither the Plaintiffs’ opportunity to secure relief nor the
    several states’ interest in FLSA policies will suffer if the
    Plaintiffs bring suits in their home states. Fairness dictates
    that courts in Oregon, Colorado, and Texas assume jurisdiction
    over the claims of in-state residents against corporations
    operating out of those states.
         Accordingly, the district court’s decision to exercise
    jurisdiction over the Appellants is REVERSED and the case is
    REMANDED to the district court to grant the Appellants’ motions
    to dismiss.