Lovett v. Sanderson ( 1999 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 98-30290
SANDRA LOVETT, TERRY HAWK, RICHARD A. THRAILKILL,
Plaintiffs/Appellees,
versus
MICHAEL G. SANDERSON, ET AL.,
Defendants,
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,
Defendants/Appellants.
- - - - - - - - - -
Appeal from the United States District Court
for the Eastern District of Louisiana
(94-CV-3380)
- - - - - - - - - -
June 18, 1999
Before KING, Chief Judge, and REAVLEY and BENAVIDES, Circuit
Judges.
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that this opinion should not be published and is not precedent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.
-2-
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.
Belin, 20 F.3d 644, 648 (5th Cir. 1994) (citing Stuart v.
Spademan, 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.
Gillespie, 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
-3-
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 (1987).
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
-4-
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.
-5-
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
-6-
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
Corp., 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
-7-
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.
-8-