Bowers, et al. v. Wurzburg, et al.
Annotate this Case IN THE SUPREME COURT OF APPEALS OF
WEST VIRGINIA
January 1998 Term
No. 24201
MARVIN T. BOWERS, BESSIE C. BOWERS, ESTA M.
BELL,
JOHN R. BELL, AS CLASS REPRESENTATIVES
FOR OTHER UNNAMED INDIVIDUALS,
Plaintiffs Below, Appellants,
V.
GRETCHEN WURZBURG; SOUTHLAND CORPORATION,
A CORPORATION; ITO-YOKADO CO., LTD., A CORPORATION;
IYG HOLDING COMPANY, A CORPORATION;
SEVEN-ELEVEN JAPAN CO., LTD., A CORPORATION;
DARRELL V. MCGRAW, JR., ATTORNEY GENERAL OF THE STATE OF WEST
VIRGINIA; JOHN DOE #1, DESIGNOR; JOHN DOE #2, MANUFACTURER OF
PIPE AND FITTINGS; JOHN DOE #3,
INSTALLER OF PIPE AND FITTINGS; AND JOHN DOE #4,
PAVER OF DRIVEWAY,
Defendants Below, Appellees.
Appeal from the Circuit Court of Jefferson
County
Honorable David H. Sanders, Judge
Civil Action No. 96-C-73
REVERSED AND REMANDED
Submitted: January 20, 1998
Filed: February 26, 1998
Paul G. Taylor, Esq.
Martinsburg, West Virginia
Attorney for the Appellants
Charles F. Printz, Jr.
Bowles Rice McDavid Graff & Love
Martinsburg, West Virginia
Laurie Plessala Duperier
Arnold & Porter
Washington, District of Columbia
Attorneys for Appellees Ito-Yokado Co., Ltd.,
Seven-Eleven Japan Co., Ltd., and IYG Holding Company
CHIEF JUSTICE DAVIS delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. It
is within the trial court's sound discretion whether to permit
discovery to aid its decision of a motion to dismiss for lack of
personal jurisdiction, made pursuant to Rule 12(b)(2) of the West
Virginia Rules of Civil Procedure, or whether to decide such a
motion based solely upon the pleadings, affidavits and other
documentary evidence. The court's decision will not be overturned
absent an abuse of discretion.
2. "When
a defendant files a motion to dismiss for lack of personal
jurisdiction under W. Va. R. Civ. P. 12(b)(2), the
circuit court may rule on the motion upon the pleadings,
affidavits and other documentary evidence or the court may permit
discovery to aid in its decision. At this stage, the party
asserting jurisdiction need only make a prima facie
showing of personal jurisdiction in order to survive the motion
to dismiss. In determining whether a party has made a prima
facie showing of personal jurisdiction, the court must view
the allegations in the light most favorable to such party,
drawing all inferences in favor of jurisdiction. If, however, the
court conducts a pretrial evidentiary hearing on the motion, or
if the personal jurisdiction issue is litigated at trial, the
party asserting jurisdiction must prove jurisdiction by a
preponderance of the evidence.
Syllabus point 4, State ex rel. Bell Atl.-W. Va., Inc. v.
Ranson, ___ W. Va. ___, ___ S.E.2d ___ (No. 23942 July
16, 1997).
3. A plaintiff
asserting personal jurisdiction over a nonresident defendant must
establish that his or her claim is not frivolous. To do so, the
plaintiff must allege the requisite jurisdictional contact in his
or her complaint and must assert more than bare allegations of
jurisdictional facts in response to a motion to dismiss under
Rule 12(b)(2) of the West Virginia Rules of Civil Procedure. Once
these threshold criteria have been met, the court generally
should permit limited jurisdictional discovery, unless the
court's jurisdiction, or lack thereof, is clear.
4. "A
court must use a two-step approach when analyzing whether
personal jurisdiction exists over a foreign corporation or other
nonresident. The first step involves determining whether the
defendant's actions satisfy our personal jurisdiction statutes
set forth in W. Va. Code, 31-1-15 [1997] and W. Va.
Code, 56-3-33 [1997]. The second step involves determining
whether the defendant's contacts with the forum state satisfy
federal due process." Syllabus point 5, Abbott v.
Owens-Corning Fiberglas Corp., 191 W. Va. 198, 444 S.E.2d 285 (1994).
5. "A parent-subsidiary relationship between corporations, one of which is "doing business" in West Virginia, does not without the showing of additional factors subject the nonresident corporation to this state's jurisdiction. However, if the parent and its subsidiary operate as one entity, their formal separate corporate structures will not
prevent the assertion of jurisdiction over the
non-resident corporation. The extent of control exercised by the
non-resident corporation over the corporation doing business in
this state determines whether the non-resident corporation is
subject to this state's jurisdiction." Syllabus point 2, Norfolk
S. Ry. Co. v. Maynard, 190 W. Va. 113, 437 S.E.2d 277
(1993).
6. The following factors must be considered by a circuit court, in addition to any other factors relevant to a particular case, in determining whether to assert personal jurisdiction over the parent company of a subsidiary doing business in West Virginia: (1) Whether the parent corporation owns all or most of the capital stock of the subsidiary; (2) Whether the parent and subsidiary corporations have common directors and officers; (3) Whether the parent corporation finances the subsidiary; (4) Whether the parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation; (5) Whether the subsidiary has grossly inadequate capital; (6) Whether the parent corporation pays the salaries and other expenses or losses of the subsidiary; (7) Whether the subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation; (8) Whether in the papers of the parent corporation or in the statement of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporation's own; (9) Whether the parent
corporation uses the property of the subsidiary as its own; (10) Whether the directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take their orders from the parent corporation in the latter's interest; and (11) Whether the formal legal requirements of the subsidiary are not observed.
Davis, Chief Justice:
In this class action suit against foreign
companies and their Texas subsidiary, the appellants, plaintiffs
below, argue that the circuit court erred by failing to provide
them sufficient time to conduct jurisdictional discovery before
dismissing the foreign companies for lack of personal
jurisdiction. Due to the complexity of the jurisdictional facts
of this case, and the initial showing by the plaintiffs that
there is the potential to establish personal jurisdiction over
the foreign companies, we find the circuit court erred in failing
to permit time for jurisdictional discovery. Consequently, we
reverse the circuit court's order and remand the case.
I.
FACTUAL AND PROCEDURAL HISTORY
On December 5, 1994, an explosion and
fire occurred at the home of Marvin and Bessie Bowers, plaintiffs
below and appellants. A subsequent investigation revealed that
the explosion and fire resulted from gasoline that had seeped
into the Bowerses's basement and was ignited by a sump pump. The
gasoline had apparently migrated underground from a 7-Eleven
convenience store situated several thousand feet from the
Bowerses's home, in Shepherdstown, West Virginia. The gasoline
had also seeped into the basements of other nearby homeowners,
and large quantities of gasoline were found on the surface and in
the subsurface of other residential property in the surrounding
area.
Unsafe conditions created by the presence of
the gasoline required several individuals, who are also
plaintiffs in this class action, to vacate their homes. The
Bowerses, in particular, could not return to their home for five
months following the fire. During the clean-up, remediation
contractors engaged to remove the gasoline, determined that
approximately 10,000 gallons of gasoline had leaked from a broken
pipeline between an underground gasoline storage tank and one of
the gasoline pumps at the 7-Eleven convenience store.
Thereafter this class action suit was filed, with the Bowerses named as class representatives,See footnote 1 1 against Gretchen Wurzburg, the owner of the land upon which the 7- Eleven Store was situated,See footnote 2 2 and The Southland Corporation [hereinafter "Southland"]. Southland is a Texas corporation with its principal office in Dallas, Texas. Southland has a certificate of authority authorizing it to do business in West Virginia,See footnote 3 3 and is the owner and operator of the 7-Eleven store where the gasoline leak occurred.See footnote 4 4 Also named as defendants in this class action suit were Ito-Yokado Co., Ltd. [hereinafter "Ito"], a
Japanese corporation with its principal office
located in Tokyo, Japan; Seven-Eleven Japan [hereinafter
"SEJ"], a Japanese corporation that is a subsidiary of
Ito; and IYG Holding Company [hereinafter "IYG"], a
Delaware corporation that is also a subsidiary of Ito. Ito, SEJ
and IYG [collectively referred to as "the Japanese
companies" or "the Japanese defendants"] all held
either a direct or indirect ownership interest in Southland at
the time relevant to this suit.See footnote 5 5
Shortly after receiving the summons and complaint, the Japanese defendants filed a motion to dismiss pursuant to Rules 12(b)(2) and 12(b)(5) of the West Virginia Rules of Civil Procedure alleging lack of personal jurisdiction and insufficiency of service of process.See footnote 6 6 The motion was accompanied by two affidavits, one from an Ito executive,
and another from a Southland executive.See footnote 7 7 The
Bowerses then filed their response and supporting memorandum
opposing dismissal. In their response, the Bowerses requested, in
part, that the circuit court delay final disposition of the
defendants' motion to dismiss in order to permit them reasonable
time to conduct discovery on the issue of personal jurisdiction.
The circuit court did not grant the Bowerses' request. Following
a subsequent hearing, the circuit court entered an order, on
December 5, 1996, granting dismissal due to lack of personal
jurisdiction. The circuit court found:
The Court lacks in personam jurisdiction
over the Japanese defendants due to a lack of minimum contacts so
as to comport with fair play and substantial justice.
Additionally, the court finds that the Plaintiffs did not carry
their burden regarding Southland as an alter ego of the Japanese
defendants. Norfolk Southern Railway Co. v. Superior Court,
480 U.S. 102 (1987) [sic].See
footnote 8 8 The Court finds no need to reach the
issue of service of process as it has no jurisdiction over
defendants.
It is from the December
5, 1996, order of the Circuit Court of Jefferson County that the
Bowerses appeal.
II.
STANDARD OF REVIEW
Procedurally, this case is before this
Court pursuant to the circuit court's order granting the
defendant's motion to dismiss. Generally, "'[a]ppellate
review of a circuit court's order granting a motion to dismiss a
complaint is de novo.' Syl. pt. 2, State ex rel. McGraw v.
Scott Runyan Pontiac-Buick, Inc., 194 W. Va. 770, 461 S.E.2d 516 (1995)." Syl. pt. 1, State ex rel. Smith v.
Kermit Lumber & Pressure Treating Co., 200 W. Va.
221, 488 S.E.2d 901 (1997).
We are also asked to
consider whether the circuit court should have provided the
Bowerses the opportunity to engage in discovery, limited to the
issue of jurisdiction, to obtain facts and information to support
their allegations that Southland is the alter-ego of the Japanese
companies. By showing that Southland is the alter-ego of the
Japanese companies, the Bowerses can establish that the Japanese
companies have sufficient minimum contacts with the State of West
Virginia to warrant this State's assertion of personal
jurisdiction.
It is well established that discovery is available for the limited purpose of developing jurisdictional facts when the trial court's jurisdiction has been challenged. See W. Va. R. Civ. P. 26(b)(1) (permitting, in general, "discovery regarding any matter, not
privileged, which is relevant to the subject matter involved in the pending action, . . . [and related] to the claim or defense of any other party" (emphasis added)); W. Va. R. Civ. P. 12(b) (identifying "lack of jurisdiction over the person" as a defense which may be raised by motion (emphasis added)); Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351 n.13, 98 S. Ct. 2380, 2389 n.13, 57 L. Ed. 2d. 253, 265 n.13 (1978) (observing that "where issues arise as to jurisdiction or venue, discovery is available to ascertain the facts bearing on such issues"); Renner v. Lanard Toys Ltd., 33 F.3d 277, 283 (3d Cir. 1994) (recognizing that "[n]umerous cases have sustained the right of plaintiffs to conduct discovery before the district court dismisses for lack of personal jurisdiction" (citations omitted)); Edmond v. United States Postal Serv. Gen. Counsel, 949 F.2d 415, 425 (D.C. Cir. 1991) (stating "[a]s a general matter, discovery under the Federal Rules of Civil Procedure should be freely permitted, and this is no less true when discovery is directed to personal jurisdiction"); Filus v. Lot Polish Airlines, 907 F.2d 1328, 1332 (2d Cir. 1990) (explaining that "generally a plaintiff may be allowed limited discovery with respect to the jurisdictional issue; but until she has shown a reasonable basis for assuming jurisdiction, she is not entitled to any other discovery"); Wyatt v. Kaplan, 686 F.2d 276, 283 (5th Cir. 1982) (noting that "[w]hen a defendant challenges personal jurisdiction, courts generally permit depositions confined to the issues raised in the motion to dismiss"); Hansen v. Neumueller GmbH, 163 F.R.D. 471, 473 (D. Del. 1995) (recognizing that "Fed. R. Civ. P. 26 permits liberal discovery of any facts which are relevant and not
privileged" and further recognizing that
"[t]his rule also applies where the plaintiff seeks
discovery to establish personal jurisdiction"); United
Mine Workers of Am. Int'l Union v. Arch Mineral Corp., 145 F.R.D. 3 (D.D.C. 1992) (holding that plaintiff was entitled to
limited discovery on the question of defendant's corporate
structure where jurisdiction was claimed on alternate theories of
single employer or alter-ego).See footnote 9 9
While discovery is available to ascertain jurisdictional facts relative to a motion to dismiss for lack of personal jurisdiction, it is not mandatory. Whether to permit discoverySee footnote 10 10 to aid its decision of a motion to dismiss for lack of personal jurisdiction, or whether to decide such a motion based solely upon the pleadings, affidavits and other documentary evidence, is within the trial court's sound discretion. See 2 James Wm. Moore, Moore's Federal Practice ¤ 12.31[7] (3d ed. 1997). The court's decision will not be overturned absent an abuse of discretion. Id. This standard was made clear in our recent decision in State ex rel. Bell Atl.-W. Va., Inc. v. Ranson, ___ W. Va. ___, ___
S.E.2d ___ (No. 23942 July 16, 1997):
When a defendant
files a motion to dismiss for lack of personal jurisdiction under
W. Va. R. Civ. P. 12(b)(2), the circuit court may
rule on the motion upon the pleadings, affidavits and other
documentary evidence or the court may permit
discovery to aid in its decision. At this stage, the party
asserting jurisdiction need only make a prima facie
showing of personal jurisdiction in order to survive the motion
to dismiss. In determining whether a party has made a prima
facie showing of personal jurisdiction, the court must view
the allegations in the light most favorable to such party,
drawing all inferences in favor of jurisdiction. If, however, the
court conducts a pretrial evidentiary hearing on the motion, or
if the personal jurisdiction issue is litigated at trial, the
party asserting jurisdiction must prove jurisdiction by a
preponderance of the evidence.
Syl. pt. 4, id. (emphasis added). Simply stated, we hold
that it is within the trial court's sound discretion whether to
permit discovery to aid its decision of a motion to dismiss for
lack of personal jurisdiction, made pursuant to Rule 12(b)(2) of
the West Virginia Rules of Civil Procedure, or whether to decide
such a motion based solely upon the pleadings, affidavits and
other documentary evidence. The court's decision will not be
overturned absent an abuse of discretion.
III.
DISCUSSION
A.
Discovery
Considering the
standard set forth above, we interpret the Bowerses's argument to
be that the circuit court abused its discretion by determining
that it lacked personal jurisdiction over the Japanese companies
based upon only the pleadings and affidavits before it, rather
than postponing its decision until reasonable jurisdictional
discovery could be completed. We agree.
In response, the
Japanese companies argue, in essence, that the circuit court did
not abuse its discretion by not permitting discovery because the
plaintiffs failed to make a showing of what discovery they needed
and how they believed that discovery would contradict the
affidavits submitted by the Japanese defendants.
While many courts have required some showing of jurisdiction before discovery would be allowed, there is no bright-line standard.See footnote 11 11 It is quite clear, however,
that discovery will be denied when the assertion of personal jurisdiction is frivolous, the complaint failed to plead the requisite jurisdictional contact, or the plaintiff has asserted only bare allegations of jurisdictional facts in response to a 12(b)(2) motion to dismiss. See Terracom v. Valley Nat. Bank, 49 F.3d 555, 562 (9th Cir. 1995) (noting that plaintiff "failed to demonstrate how further discovery would allow it to contradict the [defendants'] affidavits" and recognizing that "[w]here a plaintiff's claim of personal jurisdiction appears to be both attenuated and based on bare allegations in the face of specific denial made by defendants, the Court need not permit even limited discovery" (citation omitted)); Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d. 56 (4th Cir. 1993) (finding lower court did not abuse its discretion in refusing to allow discovery where the pleadings contained no specific facts that could establish requisite contacts); McLaughlin v. McPhail, 707 F.2d 800, 806 (4th Cir. 1983) (concluding that district court did not abuse its discretion by finding jurisdictional discovery was not warranted where plaintiff offered "'nothing beyond his bare allegations' that the defendants had significant contacts with the [forum] state"); Wyatt v. Kaplan, 686 F.2d at 284 (affirming denial of discovery "where the discovery sought
'could not have added any significant
facts'" in case where discovery sought by plaintiff would
not establish personal jurisdiction, and stating "[w]hen the
lack of personal jurisdiction is clear, discovery would serve no
purpose and should not be permitted" (citations omitted)).
When assertion of
personal jurisdiction is not clearly frivolous, courts have
applied different standards to determine whether discovery
limited to jurisdictional facts should be permitted. A case from
the United States Court of Appeals for the Third Circuit
indicates that, when assertion of personal jurisdiction is not
frivolous, there is little burden on the plaintiff to establish
jurisdiction prior to engaging in discovery for that purpose. In
that case the court, relying on prior cases, held:
In any action the
plaintiff bears the burden of demonstrating contacts with the
forum state sufficient to give the court in personam
jurisdiction. Where the plaintiff's claim is not clearly
frivolous, the district court should ordinarily allow discovery
on jurisdiction in order to aid the plaintiff in discharging
that burden.
Compagnie des Bauxites de Guinee v. L'Union Atlantique S.A.
d'Assurances, 723 F.2d 357, 362 (3d Cir. 1983) (citations
omitted) (emphasis added).
In Renner v. Lanard Toys Ltd., 33 F.3d 277 (3d Cir. 1994), another Third Circuit case, the court found that a plaintiff should have been afforded a reasonable
opportunity to conduct jurisdictional discovery
where the record was ambiguous and incomplete with respect to
personal jurisdiction. The plaintiffs in Renner alleged
injuries that resulted from a toy that was purchased at a
McCrory's store in Pennsylvania. The defendant was the Hong Kong
manufacturer of the toy. The court noted that, in response to the
defendant's motion to dismiss for lack of personal jurisdiction,
the plaintiffs presented "little evidence that would connect
[the toy manufacturer] with Pennsylvania." Renner at
278. The evidence submitted by the plaintiffs consisted of two
affidavits stating that the defendant's toys were sold in
Pennsylvania, and two "Test Report[s]" that resulted
from testing performed by a Hong Kong laboratory to determine
whether the injury causing toy complied with "the 'McCrory
Stores Protocol.'" Id. at 278-79. The reports did not
clearly indicate for whom they were prepared. Id. The
court concluded, however, "it is possible that if [the
defendant toy company] was involved in having its products tested
to meet the 'McCrory Stores
Protocol' . . . that would show that [the
defendant] intentionally markets or even designs its toys for the
Pennsylvania market." Id. at 283. The court further
noted that the record was unclear whether the relationship
between the defendant and McCrory's buying agent created
sufficient contacts to assert jurisdiction. Id. Thus, the Renner
court permitted jurisdictional discovery, when faced with an
ambiguous and incomplete record, based upon the possibility that
jurisdiction could be established.
In El Fadl v. Central Bank of Jordan, 75 F.3d 668 (D.C. Cir. 1996), the court was asked to determine whether the trial court should have permitted jurisdictional discovery in a wrongful termination case that, similar to the case sub judice, also involved an alter-ego theory of personal jurisdiction.See footnote 12 12 The court found that the plaintiff should have been afforded the opportunity to conduct jurisdictional discovery. Although the court observed that the plaintiff had not made a prima facie showing of sufficient contacts to warrant the trial court's assertion of jurisdiction, it concluded that "[e]ven though [the plaintiff's] present jurisdictional allegations are insufficient, he has sufficiently demonstrated that it is possible that he could supplement them through discovery." Id. at 676 (emphasis added). The evidence before the court indicated that the defendant bank had the following contacts with the forum district: (1) it issued a commercial loan of over $500,000; (2) in litigation concerning that loan, it filed a counter-claim; (3) it entered into collateral agreements covering loans in the District of Columbia using a form contract that designated District of Columbia law as the governing law; (4) it owned 70% of the defendant subsidiary; (5) millions of dollars sent by wire transfers from the subsidiary's Jordan office to its District of Columbia office went through the defendant bank; (6) the defendant had joint loans with its subsidiary and the subsidiary acted as defendant's collection agent in the District of Columbia. Id. at 675. The court commented further that
"[a] plaintiff faced with a motion to
dismiss for lack of personal jurisdiction is entitled to
reasonable discovery, lest the defendant defeat the jurisdiction
of a federal court by withholding information on its contacts
with the forum." Id. at 676.
The United States
District Court, for the District of Delaware, has recognized that
"[a]s a general rule, courts are wary of allowing discovery
absent some showing of personal jurisdictional facts if a
defendant has challenged plaintiff's assertion of personal
jurisdiction over him, because the basic fact-finding should
precede discovery." Hansen v. Neumueller GmbH, 163 F.R.D. 471, 474 (D. Del. 1995). The court also observed
that:
Courts have
recognized that facts which would establish personal jurisdiction
over the defendant are often in the exclusive control of the
defendant. . . . As such, a plaintiff may be
unable, without some discovery, to properly respond to a motion
to dismiss pursuant to 12(b)(2), and a court will therefore allow
some discovery. . . . On the other hand, a
court cannot permit discovery as a matter of course simply
because a plaintiff has named a particular party as a defendant.
The court must be satisfied that there is some indication that
this particular defendant is amenable to suit in this forum.
Id. at 475 (citations omitted). The United States District
Court for the Middle District of North Carolina has also
addressed this issue. In Rich v. KIS Cal., Inc., the
district court commented that:
When plaintiff
can show that discovery is necessary in order to meet defendant's
challenge to personal jurisdiction, a court should ordinarily
permit discovery on that issue unless plaintiff's claim appears
to be clearly frivolous. . . . However,
where a plaintiff's claim of personal
jurisdiction appears to be both attenuated and based on bare
allegations in the face of specific denials made by defendants,
the Court need not permit even limited discovery confined to
issues of personal jurisdiction should it conclude that such
discovery will be a fishing expedition.
121 F.R.D. 254, 259 (M.D.N.C. 1988) (citations omitted). The
plaintiffs in Rich sought discovery from two defendants,
an individual and a foreign corporation. In an opinion that did
not state the factual circumstances surrounding the case, the
court concluded that discovery was not warranted against the
individual defendant because "[n]either in the complaint nor
otherwise have plaintiffs identified any basis for concluding
that the Court has personal jurisdiction over [the individual
defendant]." Id. However, with respect to the foreign
corporation, the court found that discovery should be allowed.
The court determined that a sufficient showing of jurisdiction
had been made through the plaintiffs' allegations that the
foreign corporation had manufactured certain equipment that
plaintiffs purchased from a wholly owned subsidiary of the
foreign corporation.
From our review of the above cases, we hold that a plaintiff asserting personal jurisdiction over a nonresident defendant must establish that his or her claim is not frivolous. To do so, the plaintiff must allege the requisite jurisdictional contact in his or her complaint and must assert more than bare allegations of jurisdictional facts in response to a motion to dismiss under Rule 12(b)(2) of the West Virginia Rules of Civil
Procedure. Once these threshold criteria have
been met, the court generally should permit limited
jurisdictional discovery, unless the court's jurisdiction, or
lack thereof, is clear.
We find further support
for this view in the fact that Rule 26(b) of the West Virginia
Rules of Civil Procedure, pertaining to the scope and limits of
discovery, is broad in scope and should be liberally applied to
permit discovery, absent some restriction imposed by the rules.See footnote 13 13 8
Charles Alan Wright, et al., Federal Practice and Procedure
¤ 2007 (civil 2d 1994). Indeed, the United States Supreme Court
has stated generally: "the deposition-discovery rules are to
be accorded a broad and liberal treatment. No longer can the
time-honored cry of 'fishing expedition' serve to preclude a
party from inquiring into the facts underlying his opponent's
case." Hickman v. Taylor, 329 U.S. 495, 507, 67
S. Ct. 385, 392, 91 L. Ed. 451, 460 (1947). The United
States Court of Appeals for the First Circuit expressed the same
view, in the context of jurisdictional discovery, when it stated:
"A plaintiff
who is a total stranger to a corporation should not be required,
unless he has been undiligent, to try such an issue on affidavits
without the benefit of full discovery. If the court did not
choose to hear witnesses, this may well have been within its
province, but in such event plaintiff was certainly entitled to
file such further interrogatories as were reasonably necessary
and, if he wished, to take depositions. The condemnation of
plaintiff's proposed
further activities as a 'fishing expedition'
was unwarranted. When the fish is identified, and the question is
whether it is in the pond, we know no reason to deny a plaintiff
the customary license."
Compagnie des Bauxites de Guinee, 723 F.2d at 362 (quoting
Surpitski v. Hughes-Keenan Corp., 362 F.2d 254, 255-56
(1st Cir. 1966)).
Moreover, we find the
need for jurisdictional discovery particularly compelling when
the theory under which jurisdiction is sought is complex. See
6 James Wm. Moore, Moore's Federal Practice ¤ 26.41[6]
(3d ed. 1997) ("The district court may deny discovery and
dismiss the complaint when it is clear that discovery regarding
jurisdictional issues seems pointless, as when the complaint
itself offers no basis for jurisdiction. However, when the facts
surrounding jurisdiction are complex, it may be an abuse of a
trial court's discretion to dismiss the case before the plaintiff
has an opportunity for discovery." (Citing Majd-Pour v.
Geogiana Community Hosp., Inc., 724 F.2d 901, 903 (11th Cir.
1984)).
Finally, we note that "[w]hen a nonresident defendant files a Rule 12(b)(2) motion,. . . and offers 'affidavits or depositions, . . . the party resisting such motion may not stand on its pleadings [but] must come forward with affidavits or other proper evidence detailing specific facts demonstrating that the court has jurisdiction over the defendant.'"
State ex rel. Bell Atl.-W. Va., Inc.,
___ W. Va. at ___, ___ S.E.2d at ___, slip op. at 26
(citations omitted). We believe that it is inequitable to require
a plaintiff to come forward with "proper evidence detailing
specific facts demonstrating" personal jurisdiction, yet
deny him or her access to reasonable jurisdictional discovery
through which such evidence may be obtained, particularly in a
complex case such as this one.
In this case, the plaintiffs assert a complex theory of personal jurisdiction that requires details of the relationship between a foreign parent company and its domestic subsidiary.See footnote 14 14 This is information that is likely in the exclusive control of the defendant Japanese companies. In addition, we note that the Bowerses adequately pleaded the alter- ego theory of jurisdiction in their complaint, and have asserted the following factual allegations regarding the Japanese defendants' relationship with Southland: (1) the Japanese defendants either directly or indirectly possess the majority ownership interest in Southland; (2) six of the members of Southland's board of directors also serve on the boards of one or more of the Japanese defendants; (3) Ito guaranteed a four-hundred- million-dollar loan for Southland; and (4) Southland has apparently adopted Ito's inventory control methods. We also note that the record indicates that a large majority of
Southland's board of directors were appointed
by Ito.See footnote 15 15
Without expressing an opinion as to whether this evidence
establishes that the circuit court has personal jurisdiction over
the Japanese defendants, we believe that it is clearly sufficient
to establish that the Bowerses's assertion of jurisdiction is not
frivolous. Thus, we find that the circuit court abused its
discretion by failing to provide the Bowerses an opportunity to
conduct jurisdictional discovery.
We note, however, that on remand, jurisdictional discovery must be conducted in accordance with the West Virginia Rules of Civil Procedure as they pertain to discovery.See footnote 16 16 Once reasonable discovery has been completed, the circuit court may, in the exercise of its discretion, conduct a pretrial evidentiary hearing on the Japanese defendants' motion to dismiss, in which case the Bowerses must establish personal jurisdiction over each defendantSee footnote 17 17 by a preponderance of the evidence. Syl. pt. 4, State ex rel. Bell Atl.-W. Va., Inc. If the circuit court makes its decision without an evidentiary hearing, the Bowerses must make a prima facie showing of personal jurisdiction over each
defendant, and "the court must view
the allegations in the light most favorable to [the Bowerses],
drawing all inferences in favor of jurisdiction." Id. slip
op. at 26 (citations omitted). If the Bowerses successfully make
a prima facie showing of personal jurisdiction, thereby
convincing the court to deny the defendants' motion to dismiss,
they must nevertheless establish personal jurisdiction by a
preponderance of the evidence either at a full evidentiary
hearing or at trial. Id. slip op. at 31 n.9.
B.
Personal Jurisdiction
The Bowerses next contend that the
circuit court erred by concluding that it did not have
jurisdiction over the Japanese companies.See footnote 18 18 Because we find
that the court erred by failing to provide the Bowerses with a
reasonable opportunity to conduct discovery, we need not consider
whether the court's previous determination of jurisdiction was in
error. However, since the circuit court must revisit this issue,
we will provide some guidance.
With respect to a circuit court's determination of whether it can appropriately exercise personal jurisdiction over a foreign corporation, we have held:
A
court must use a two-step approach when analyzing whether
personal jurisdiction exists over a foreign corporation or other
nonresident. The first step involves determining whether the
defendant's actions satisfy our personal jurisdiction statutes
set forth in W. Va. Code, 31-1-15 [1997] and W. Va.
Code, 56-3-33 [1997]. The second step involves determining
whether the defendant's contacts with the forum state satisfy
federal due process.
Syl. pt. 5, Abbott v. Owens-Corning Fiberglas Corp., 191
W. Va. 198, 444 S.E.2d 285 (1994). In the case sub judice,
it is not disputed that the circuit court has jurisdiction over
Southland, a foreign corporation doing business in West Virginia.
However, the Bowerses attempt to also assert personal
jurisdiction over Southland's parent companies, by claiming that
Southland is merely the alter-ego of those parent companies. In
this context, although the first part of the Abbott
two-prong test has been satisfied as to Southland, the court must
also apply the Abbott analysis to Southland's parent
corporations. Thus, the court must determine whether it is
appropriate, under West Virginia law, to exercise jurisdiction
over the parent corporations. On the issue of whether a circuit
court has jurisdiction over the parent corporation of a
subsidiary doing business in this state, we have held:
A
parent-subsidiary relationship between corporations, one of which
is "doing business" in West Virginia, does not without
the showing of additional factors subject the nonresident
corporation to this state's jurisdiction. However, if the
parent and its subsidiary operate as one entity, their formal
separate corporate structures will not prevent the assertion of
jurisdiction over the non-resident corporation. The extent of
control exercised by the non-resident corporation over the
corporation doing business in this state determines whether the
non-resident corporation is subject to this state's
jurisdiction.
Syl. pt. 2, Norfolk S. Ry. Co. v. Maynard, 190 W. Va.
113, 437 S.E.2d 277 (1993) (emphasis added). The Norfolk
Southern Court explained that "the determination of when
a foreign parent corporation, whose subsidiary is present in this
state, is subject to the jurisdiction of this state's courts must
be made on a case by case basis." Id. at 118, 437 S.E.2d at 282. The Court also suggested eleven factors which may
be helpful in determining whether to pierce the corporate veil.
Id. We hold that the following factors must be considered by
a circuit court, in addition to any other factors relevant to a
particular case, in determining whether to assert personal
jurisdiction over the parent company of a subsidiary doing
business in West Virginia:
"(1) Whether
the parent corporation owns all or most of the capital stock of
the subsidiary;
"(2)
Whether the parent and subsidiary corporations have common
directors and officers;
"(3)
Whether the parent corporation finances the subsidiary;
"(4)
Whether the parent corporation subscribes to all the capital
stock of the subsidiary or otherwise causes its incorporation;
"(5)
Whether the subsidiary has grossly inadequate capital;
"(6)
Whether the parent corporation pays the salaries and other
expenses or losses of the subsidiary;
"(7)
Whether the subsidiary has substantially no business except with
the parent corporation or no assets except those conveyed to it
by the parent corporation;
"(8)
Whether in the papers of the parent corporation or in the
statement of its officers, the subsidiary is described as a
department or division of the parent corporation, or its business
or financial responsibility is referred to as the parent
corporation's own;
"(9)
Whether the parent corporation uses the property of the
subsidiary as its own;
"(10)
Whether the directors or executives of the subsidiary do not act
independently in the interest of the subsidiary but take their
orders from the parent corporation in the latter's interest; and
"(11)
Whether the formal legal requirements of the subsidiary are not
observed. [Citation omitted.]"
Id. (quoting Bielicki v. Empire Stevedoring Co., Ltd.,
741 F. Supp. 758, 761-62 (D. Minn. 1990)). We caution that
this is not an exhaustive list. Each case must be determined on
it own unique facts. If, after considering these and other
relevant factors, a circuit court concludes that it may properly
assert personal jurisdiction over the parent company, it must
then apply the second prong of the Abbott test and
determine whether such corporation's contacts with West Virginia
satisfy federal due process. Syl. pt. 5, Abbott.
IV.
CONCLUSION
For the foregoing
reasons, we find that the circuit court abused its discretion by
not affording the Bowerses a reasonable opportunity to conduct
jurisdictional discovery, and, thus, erred in granting the
Japanese defendants' motion to dismiss. Consequently, we reverse
the December 5, 1996, order of the Circuit Court of Jefferson
County and remand this case for further proceedings consistent
with this opinion.
Reversed and remanded.
Footnote: 1 1 For ease of reference, the entire class of appellants, plaintiffs below, will be collectively referred to as the Bowerses.
Footnote: 2 2 Ms. Wurzburg leased the land and the buildings located thereon to The Southland Corporation, owner of the 7-Eleven store.
Footnote: 3 3 See W. Va. Code ¤ 31-1-49 (1979) (Repl. Vol. 1996).
Footnote: 4 4 Southland owns and/or operates 7-Eleven convenience stores in twenty-nine states. In 1994, Southland owned or operated 5,630 such stores, 1,981 of which included facilities for the retail sale of gasoline.
Footnote: 5 5 The Japanese companies and Southland became affiliated in 1991, when Southland was undertaking bankruptcy reorganization. As part of the reorganization, Ito and SEJ purchased 69.98% of Southland's publicly traded common stock. The purchase was made through IYG, a holding company formed by Ito and SEJ for that purpose. On December 31, 1994, IYG directly owned 64.32% of Southland's common stock. SEJ owned 49% of the IYG stock and Ito owned the other 51%. Ito also owns a majority of SEJ's stock.
Footnote:
6 6
W. Va. R. Civ. P. Rules 12(b)(2) and (b)(5)
provide:
(b) How Presented. Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: . . . (2) lack of jurisdiction over
the person,. . . (5) insufficiency of service of process.
Footnote: 7 7 The motion was also accompanied by a supporting memorandum.
Footnote: 8 8 This is an incorrect citation. It is not clear whether the circuit court intended to cite Asahi Metal Indus., Co. v. Superior Court of Ca., 480 U.S. 102, 107 S. Ct. 1026, 94 L. Ed. 2d 92 (1987), Norfolk S. Ry. Co. v. Maynard, 190 W. Va. 113, 437 S.E.2d 277 (1993), or some other case.
Footnote: 9 9 For a general discussion of jurisdictional discovery, see The Use of Discovery to Obtain Jurisdictional Facts, 59 Va. L. Rev. 533 (1973).
Footnote: 10 10 We note that typically a party is not required to obtain court approval to conduct discovery, and our resolution of this case does not create such a requirement. Most of the cases address gaining a trial court's permission to conduct jurisdictional discovery in the context of a motion to compel discovery from a defendant who is resisting such discovery or where, as here, reasonable time is needed for discovery. However, we recognize that some types of discovery do require court approval. See, e.g., W. Va. R. Civ. P. Rules 26(b)(4)(A)(ii) and 30(a).
Footnote:
11 11
We have recognized that:
"Because the West Virginia Rules of Civil Procedure are practically identical to the Federal Rules, we give substantial weight to federal cases, especially those of the
United States Supreme Court, in determining
the meaning and scope of our rules. See generally Burns v.
Cities Serv. Co., 158 W. Va. 1059, 217 S.E.2d 56 (1975);
Aetna Casualty & Sur. Co. v. Federal Ins. Co. of New York,
148 W. Va. 160, 133 S.E.2d 770 (1963)."
Painter v. Peavy, 192 W. Va. 189, 192 n.6, 451 S.E.2d 755, 761 n.6 (1994).
Footnote: 12 12 The plaintiff alleged that he was wrongfully terminated by a subsidiary of the defendant over whom he sought jurisdiction.
Footnote: 13 13 See, e.g., W. Va. R. Civ. P. Rule 26(c) (providing for protective orders under certain circumstances).
Footnote: 14 14 As previously mentioned, Southland has a certificate of authority authorizing it to do business in West Virginia. Moreover, there has been no challenge to the circuit court's exercise of jurisdiction over Southland.
Footnote: 15 15 A shareholders agreement entered into following Ito's purchase of a majority ownership interest in Southland provided that Ito would appoint ten of the fourteen directors on Southland's board.
Footnote: 16 16 See W. Va. R. Civ. P. Rules 26 through 37.
Footnote: 17 17 See Clark v. Milam, 830 F. Supp. 316, 319 (S.D. W. Va. 1993) (stating "the Court must . . . decide whether Plaintiff has met its burden of establishing . . . personal jurisdiction with respect to each Defendant" (citations omitted)).
Footnote: 18 18 In addition, the Bowerses urge us to adopt the Multinational Enterprise Parent Liability doctrine utilized by Indian courts with respect to the devastating chemical leak that occurred in Bhopal, India. We are unpersuaded by their meager argument on this point and decline to adopt the doctrine. The Bowerses also assigned various other errors. We find these errors were inadequately briefed and decline to address them.
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