Lovett v. Sanderson

• Court: Court of Appeals for the Fifth Circuit
• Decided: June 22, 1999
• Docket: 98-30290
• Status: Unpublished

Opinion

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 R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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.

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