Opinion
CIVIL ACTION NO. 3:01-CV-1548-G
April 19, 2002
MEMORANDUM ORDER
Before the court are the motions of the defendants Michael D. Corradini ("Corradini") and Douglas C. Anderson ("Anderson") (collectively, "the defendants") to dismiss this action for lack of personal jurisdiction. For the reasons stated below, the motions are granted.
Aaron J. Jarson ("Jarson") was also named as a corporate officer defendant in the complaint. Although he has not filed a motion to dismiss for lack of personal jurisdiction, the court finds, for the reasons stated herein, that in personam jurisdiction over Jarson has not been demonstrated. Accordingly, the court sua sponte dismisses St. Claire's claims against Jarson.
I. BACKGROUND
Plaintiff, Frank A. St. Claire ("St. Claire"), a citizen of Texas, filed this suit against EnsureLink, a Nevada corporation and the individual defendants named above, asserting causes of action for breach of contract, declaratory judgment, indemnification, and attorneys' fees. Plaintiff's First Amended Original Complaint and Jury Demand ("Complaint") ¶¶ 23, 25, 28, 29; Defendant Michael D. Corradini's Motion to Dismiss for Lack of Personal Jurisdiction and Brief in Support ("Corradini's Motion") ¶¶ 1-2; Defendant Douglas C. Anderson's Motion to Dismiss for Lack of Personal Jurisdiction and Brief in Support ("Anderson's Motion") ¶¶ 1-2. EnsureLink is a start-up company formed in November 2000 with its primary place of business in California. Corradini's Motion ¶ 1; Anderson's Motion ¶ 1. Corradini is a member of the board of directors of EnsureLink and a shareholder in the corporation. Corradini's Motion ¶ 1. Anderson is president of EnsureLink and a shareholder in the corporation. Anderson's Motion ¶ 1.In early 2001, EnsureLink sought to hire a CEO to lead the company. Corradini's Motion ¶ 2; Anderson's Motion ¶ 2. After viewing St. Claire's resume on an Internet site, EnsureLink representatives invited St. Claire to an interview in California. Corradini's Motion ¶ 2; Anderson's Motion ¶ 2. St. Claire traveled to EnsureLink's California offices twice and met with the defendants on both occasions. Corradini's Motion ¶ 2; Anderson's Motion ¶ 2. On or about May 1, 2001, St. Claire was hired as CEO of EnsureLink, and he and EnsureLink executed an employment agreement. Complaint ¶ 12; Corradini's Motion ¶ 4; Anderson's Motion ¶ 4. Pursuant to the employment agreement, St. Claire performed his job duties as CEO in Dallas County, Texas. Complaint ¶ 13; Corradini's Motion ¶ 5; Anderson's Motion ¶ 5. According to the defendants, St. Claire demanded that EnsureLink permit him to work in Texas and that the employment agreement reflect this accommodation. Corradini's Motion ¶ 5; Anderson's Motion ¶ 5.
On August 8, 2001, EnsureLink's board of directors terminated St. Claire's employment. Complaint ¶ 14; Corradini's Motion ¶ 7; Anderson's Motion ¶ 7. In his complaint, St. Claire alleges that he was wrongfully terminated and that EnsureLink and the defendants refused to pay him the balance of his annual base salary as well as his deferred salary, stock options, medical and dental benefits, and severance pay. Complaint ¶¶ 12, 14, 15; Corradini's Motion ¶ 7; Anderson's Motion ¶ 7. The defendants then filed these motions to dismiss the claims against them for lack of personal jurisdiction. St. Claire has not responded to these motions to dismiss.
While this opinion was in draft, the court received St. Claire's response to Corradini's and Anderson's motions to dismiss. The response was filed thirty-two days after the due date; nevertheless, the court will, in the exercise of its discretion, consider it. After reviewing the arguments put forth in the response, the court's decision regarding the motions to dismiss remains unchanged. In his response, St. Claire argues that the defendants, in their individual capacities, tortiously avoided the employment agreement and committed the tort of negligent misrepresentation in Texas. Plaintiff's Response to Motions to Dismiss for Lack of Personal Jurisdiction by Douglas C. Anderson and Michael D. Corradini ("Response") ¶ 3. St. Claire contends that because the defendants have committed torts in whole or in part in Texas, this court may exercise jurisdiction over them. Id. Since St. Claire's allegations that the defendants committed torts in Texas were not raised in the complaint, St. Claire may not use his response to amend his complaint to include these new conclusory allegations. See Greggs v. Hillman Distributing Co., 719 F. Supp. 552, 555 (S.D. Tex. 1989) (holding that court had no obligation to accept as true bald, conclusory allegations where plaintiff raised a new argument in response to defendant's motion to dismiss without grounding it in a factual basis). Additionally, St. Claire asserts that the defendants engaged in continuous and systematic contacts with Texas but alleges no facts to support this assertion. Response ¶ 7. St. Claire also argues for the inapplicability of the fiduciary shield doctrine because he claims that the defendants used EnsureLink as their alter ego; here again, however, St. Claire fails to present facts that support this allegation. Id. ¶ 8.
II. ANALYSIS A. Factual Standard:_ Prima Facie _Case
When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing the district court's jurisdiction over the nonresident. Wilson v. Belin, 20 F.3d 644, 648 (5th Cir.), cert. denied, 513 U.S. 930 (1994); Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985). If the district court chooses to decide the matter without an evidentiary hearing, the plaintiff may meet his burden by presenting a prima facie case for personal jurisdiction. Wilson, 20 F.3d at 648; Thompson v. Chrysler Motors Corporation, 755 F.2d 1162, 1165 (5th Cir. 1985). The court will take the allegations of the complaint as true, except where they are controverted by opposing affidavits, and all conflicts in the facts are resolved in favor of the plaintiff. Wilson, 20 F.3d at 648. In making its determination, the court may consider affidavits, interrogatories, depositions, oral testimony, or any combination of recognized discovery methods. Thompson, 755 F.2d at 1165; Spademan, 772 F.2d at 1192.B. Legal Standard
A court determines the existence of personal jurisdiction over a nonresident defendant by examining the "(1) assertion of jurisdiction by the law of the forum;" and "(2) conformity of the law with the Constitution." Pedelahore v. Astropark, Inc., 745 F.2d 346, 347 (5th Cir. 1984). A defendant is amenable to the personal jurisdiction of a federal court sitting in diversity to the same extent that he would be amenable to the jurisdiction of a state court in the same forum. Id. Applying state law, this court must first determine whether Texas, the forum state, could assert long-arm jurisdiction. Id. Because the Texas long-arm statute confers jurisdiction to the limits of the federal constitution, Hall v. Helicopteros Nacionales de Colombia, S.A., 638 S.W.2d 870, 872 (Tex. 1982), rev'd on other grounds, 466 U.S. 408 (1984), the court need only concern itself with the federal due process inquiry. Bullion v. Gillespie, 895 F.2d 213, 215-16 (5th Cir. 1990).
C. Due Process Requirements
Due process requires the satisfaction of two elements to exercise personal jurisdiction over a nonresident: (1) the nonresident must have some minimum contact with the forum which results from an affirmative act on his part; and (2) it must be fair and reasonable to require the nonresident to defend the suit in the forum state. Spademan, 772 F.2d at 1189. The due process clause ensures that persons have "fair warning that a particular activity may subject [them] to the jurisdiction of a foreign sovereign." Burger King Corporation v. Rudzewicz, 471 U.S. 462, 472 (1985).
To establish minimum contacts, a nonresident defendant must do some act or acts by which he "purposefully avails [him]self of the privilege of conducting activities within the forum State, thus invoking the benefits and protection of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). In determining whether the exercise of jurisdiction is appropriate, the Supreme Court has focused less on presence in the forum state as a means to establish jurisdiction and looked increasingly to whether a defendant's contacts with the forum make it reasonable to require the defendant to defend the particular suit in that forum. Shaffer v. Heitner, 433 U.S. 186, 203 (1977).
Two types of in personam jurisdiction may be exercised over a nonresident defendant: specific and general. Specific jurisdiction exists if the cause of action is related to, or arises out of, the defendant's contacts with the forum, and those contacts meet the due process standard. Holt Oil Gas Corporation v. Harvey, 801 F.2d 773, 777 (5th Cir. 1986), cert. denied, 481 U.S. 1015 (1987); Wilson, 20 F.3d at 647; Spademan, 772 F.2d at 1190. General jurisdiction, on the other hand, may be found when a claim is unrelated to the nonresident's contacts with the forum but where those contacts are "continuous and systematic." Helicopteros, 466 U.S. at 415; Wilson, 20 F.3d at 647.
1. Minimum Contacts (a) Specific Jurisdiction
When specific jurisdiction is at issue, the minimum contacts inquiry focuses on whether the nonresident defendant has "purposefully directed' his activities at residents of the forum" state. Spademan, 772 F.2d at 1190 (quoting Burger King, 471 U.S. at 472). The purposeful availment requirement "ensures that a defendant will not be haled into a jurisdiction solely as a result of `random,' `fortuitous,' or `attenuated' contacts . . . or of the `unilateral activity of another party or a third person.'" Spademan, 772 F.2d at 1191.
(b) General Jurisdiction
The minimum contacts analysis is even more demanding for general jurisdiction than for specific jurisdiction and requires a showing of substantial activities in the forum state. Guardian Royal Exchange Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 228 (Tex. 1991).
St. Claire maintains that the defendants are subject to the jurisdiction of this court because they have engaged in business either directly or indirectly in Texas through various corporate entities or alter ego identities. Complaint ¶ 8a-b. According to St. Claire, the court's assertion of personal jurisdiction over the defendants, under a specific and/or general jurisdiction analysis, is proper since the defendants entered into an employment agreement with St. Claire, which was to be performed in Dallas, Texas. Id. The complaint, however, fails to allege facts showing that the defendants have conducted substantial activities with the forum state. The court will therefore discuss only the exercise of specific jurisdiction over the defendants.
The defendants argue that they lack the requisite minimum contacts to support assertion of personal jurisdiction by this court. Corradini's Motion ¶ 15; Anderson's Motion ¶ 15. According to the defendants, they lack contacts with Texas in their individual capacities. Corradini's Motion ¶ 15; Anderson's Motion ¶ 15. Specifically, they contend that their only contact with Texas has been communications with St. Claire while he served as CEO of EnsureLink and performed his job duties in Texas. Corradini's Motion ¶ 14; Anderson's Motion ¶ 14. When communicating with St. Claire in Texas, the defendants assert that they were acting on behalf of EnsureLink and were functioning in their capacities as corporate officers of EnsureLink. Corradini's Motion ¶ 14; Anderson's Motion ¶ 14.
To support their argument that they lack minimum contacts with Texas, the defendants rely upon the fiduciary shield doctrine articulated by the Fifth Circuit in Spademan, 772 F.2d at 1197. The doctrine holds that "an individual's transaction of business within the state solely as a corporate officer does not create personal jurisdiction over that individual though the state has in personam jurisdiction over the corporation . . . ." Id. The doctrine is justified on the basis that "`it is unfair to force an individual to defend a suit brought against him personally in a forum with which his only relevant contacts are acts performed not for his own benefit but for the benefit of his employer.'" Saktides v. Cooper, 742 F. Supp. 382, 385 (W.D. Tex. 1990) (quoting Marine Midland Bank v. Miller, 664 F.2d 899, 902 (2d Cir. 1981)).
In his complaint, St. Claire alleges that the defendants engaged in business either directly or indirectly in Texas and, therefore, are subject to in personam jurisdiction. Complaint ¶ 8a. The defendants counter, however, that their business activities represent contacts with Texas performed for the benefit of EnsureLink, their employer, not for themselves. Corradini's Motion ¶ 14; Anderson's Motion ¶ 14. Based on the facts and circumstances of this suit, the court finds that the fiduciary shield doctrine applies and protects the defendants from being subject to personal jurisdiction in Texas because they were acting in their capacities as corporate officers. Aside from the general allegation that the defendants conducted business activities in Texas, St. Claire fails to assert more specific facts that would establish contacts with Texas by the defendants in their individual capacities. See Saktides, 742 F. Supp. at 387 (holding that the defendant's dealings with the forum state while in the course and scope of his employment were not enough to satisfy the minimum contacts analysis). Since a nexus is lacking between the defendants in their individual capacities. the forum, and this litigation, the court finds that specific jurisdiction is lacking.
Courts have recognized an exception to the general rule that jurisdiction over an individual cannot be predicated upon jurisdiction over a corporation. See Spademan, 772 F.2d at 1197; Saktides, 742 F. Supp. at 386. This exception applies when the corporation is the alter ego of the defendants. See, e.g., Spademan, 772 F.2d at 1197. In determining whether a corporation is the alter ego of the defendants, the court will consider whether the corporation (1) is undercapitalized, (2) keeps separate books, (3 commingles its finances with individual finances, (4) is used to promote fraud or illegality, (5) fails to observe corporate formalities, and (6) is merely a sham. Id. (citing Lakota Girl Scout Council, Inc. v. Havey Fund-Raising Management, Inc., 519 F.2d 634, 638 (8th Cir. 1975)). In the complaint, St. Claire alleges that the court should pierce the corporate veil of EnsureLink because the individual defendants have embarked upon a scheme to obtain the services of St. Claire with the intent not to pay for such services, segmenting corporate assets for the purpose of undercapitalizing EnsureLink and utilizing corporate assets for personal expenses, among other activities, thereby using EnsureLink as an alter ego. Complaint ¶ 21. St. Claire. however, has failed to clearly allege specific facts indicating that EnsureLink is but a facade for the individual defendants' activities. St. Claire's conclusory allegations are insufficient to overcome the fiduciary shield doctrine.
2. Fair Play and Substantial Justice
The second prong of the due process analysis limits the court's power to exercise personal jurisdiction over a nonresident if the exercise of jurisdiction under the circumstances would offend "traditional notions of fair play and substantial justice." International Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). Because St. Claire has not established that the defendants have sufficient minimum contacts with Texas to subject them to personal jurisdiction in this forum, the court "need not determine whether the exercise of personal jurisdiction here would comport with notions of fair play and substantial justice." Ham v. La Cienega Music Company, 4 F.3d 413, 416 n. 15 (5th Cir. 1993).
III. CONCLUSION
For the reasons discussed above, the motions to dismiss for lack of personal jurisdiction are GRANTED. St. Claire's claims against Corradini, Anderson, and Jarson are dismissed without prejudice for lack of personal jurisdiction.
SO ORDERED.