Opinion
CIVIL ACTION NO. 3:01-CV-2529-G.
February 26, 2002
MEMORANDUM ORDER
Before the court are the following motions: (1) the motion of the defendant Lee Blaylock ("Blaylock") to dismiss the claims against him for failure to state a claim, (2) the motion of the defendants Chuck Stein ("Stein"), Glen Hiner ("Hiner"), and David Brown ("Brown") (collectively, "the defendants") to dismiss the claims against them for lack of personal jurisdiction, (3) the motion of the defendants to transfer venue to the Delaware bankruptcy court, and (4) the motion of the plaintiffs Michael Burchfield ("Burchfield") and RQ Whitmire ("Whitmire") (collectively, "the plaintiffs") to remand this case to the state court from which it was previously removed. For the reasons discussed below, Blaylock's motion to dismiss for failure to state a claim is granted. The motion of the other defendants to dismiss for lack of personal jurisdiction is also granted. The defendants' motion to transfer venue and the plaintiffs' motion for remand are both denied as moot.
The motion to dismiss for lack of personal jurisdiction was also brought by the defendant Dom Cecere, whom the plaintiffs have voluntarily dismissed from the case. See Order of Dismissal, January 7, 2002.
I. BACKGROUND
The plaintiffs were employees of ServiceLane Holdings Corp., d/b/a ServiceLane Home Improvement ("ServiceLane"), a Texas Corporation created through the combination of Owens Corning's Sale Furnish and Install ("SFI") division and ServiceLane.com, Inc., an internet and wireless technology company. Brief in Support of Plaintiffs' Response to Defendants' Motion for Dismissal Under FED. R. Civ. P. 12(b)(2) for Lack of Personal Jurisdiction ("12(b)(2) Response") at 1-2. Owens Corning owned 52.7% of ServiceLane. Id. at 2; Plaintiffs' Original Petition ("Petition") ¶¶ 11-12. ServiceLane had its principal place of business in Dallas, Texas. 12(b)(2) Response at 2; Petition ¶ 11. Prior to their employment with ServiceLane, the defendants were employees of Owens Corning. 12(b)(2) Response at 2. Stein was the chief executive officer of ServiceLane and also served as Vice-President of Owens Corning SFI. Id. Blaylock was the president of ServiceLane. Id. Although Blaylock resides in Dallas, Texas, the other defendants have resided in Ohio at all relevant times. Id.; Defendants' Motion for Dismissal Under FED. R. Civ. P. 12(b)(2) for Lack of Personal Jurisdiction ("12(b)(2) Motion") at 2. Burchfield and Whitmire were vice-presidents of ServiceLane. 12(b)(2) Response at 2. Each of them allegedly signed employment agreements and key management severance agreements, dated December 15, 2000. Id.; Id., Exhibit "B".
The plaintiffs contend that they became employees of Owens Corning and signed a one-year contract with Owens Corning with the promise that they would become employees of a home improvement service business, which ultimately was ServiceLane. Petition ¶¶ 10, 16. However, a review of the employment agreements that the plaintiffs attached to their 12(b)(6) Response reveals that the employment was at will. The plaintiffs allege that Owens Corning did not pay full services benefits under the employment contracts between the plaintiffs and ServiceLane. Petition ¶ 16; Defendant Blaylock's Motion to Dismiss Under FED. R. Civ. P. 12(b)(6) for Failure to State a Claim ("12(b)(6) Motion") at 3. Additionally, plaintiff Burchfield claims that he was encouraged to invest in the Owens Corning retirement fund. Petition ¶ 15. As for Blaylock, the only allegation directed at him is that he made unspecified "false representations to [the plaintiffs] in order to induce them to continue to work for ServiceLane, even though Owens Corning, majority shareholder of ServiceLane, had no intention of funding the business or keeping it operating long-term." Petition ¶ 12. The plaintiffs do not allege, however, that they have not been paid all of their employment compensation under their agreements with Owens Corning and ServiceLane. 12(b)(6) Motion at 4 n. 3.
The employment agreements of each plaintiff state in paragraph 4:
You should be aware that your employment with the Company is for no specific period and constitutes "at-will" employment. As a result, you are free to terminate your employment at any time, for any reason or no reason. Similarly, the Company is free to terminate your employment at any time, for any reason or no reason.
Relying on the foregoing allegations, the plaintiffs assert three causes of action against the individual defendants: breach of fiduciary duty, breach of their employment agreements, and tortious interference with their employment agreements with Owens Corning. Petition ¶¶ 17-19.
Owens Corning has filed for protection under Chapter 11 of the Bankruptcy Code in the District of Delaware, and ServiceLane has filed for protection under Chapter 7 of the Bankruptcy Code in the Northern District of Texas. 12(b)(2) Response at 2. As a result of the bankruptcy filings, the automatic stay provided by § 362 of the Bankruptcy Code prohibits the plaintiffs from prosecuting these claims against Owens Corning or ServiceLane without leave of the bankruptcy courts in which their respective cases are pending. Id. Owens Corning continues to run its business as a debtor in possession under the provision of 11 U.S.C. § 1107-08. Id.
A. Motion to Dismiss for Failure to State a Claim 1. Standard for Dismissal Under Rule 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." However, a motion under Rule 12(b)(6) should be granted only if it appears beyond doubt that the plaintiffs could prove no set of facts in support of their claims that would entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Leffall v. Dallas Independent School District, 28 F.3d 521, 524 (5th Cir. 1994); see also Kaiser Aluminum Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982) (citing WRIGHT MILLER, Federal Practice and Procedure: Civil § 1357 at 598 (1969), for the proposition that "the motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted"), cert. denied, 459 U.S. 1105 (1983). In determining whether dismissal should be granted, the court must accept all well-pleaded facts as true and view them in the light most favorable to the plaintiffs. See Capital Parks, Inc. v. Southeastern Advertising and Sales System, Inc., 30 F.3d 627, 629 (5th Cir. 1994); Norman v. Apache Corporation, 19 F.3d 1017, 1021 (5th Cir. 1994); Chrissy F. by Medley v. Mississippi Department of Public Welfare, 925 F.2d 844, 846 (5th Cir. 1991).
2. Blaylock's Grounds for Dismissal
Blaylock contends that the plaintiffs' claims should be dismissed in their entirety under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on which relief can be granted. 12(b)(6) Motion at 5. First, he contends that he cannot be held liable individually for the obligations of Owens Corning and ServiceLane. Id. Second, Blaylock contends that the plaintiffs have failed to state a claim against him for breach of fiduciary duty. Id. at 7. Third, Blaylock asserts that the plaintiffs have failed to state a claim against him for breach of employment contract. Id. at 9. Fourth, Blaylock maintains that the plaintiffs have failed to state a claim against him for tortious interference with their employment contracts. Id. at 10.
Blaylock's first contention is that the plaintiffs' claims against him must be dismissed because they ignore the fundamental principle of corporate law that corporate officers are not liable for the obligations of the corporations they serve. Id. at 6. As a general rule, the acts of a corporate agent on behalf of the corporation are treated as the acts of the corporation. See Holloway v. Skinner, 898 S.W.2d 793, 795 (Tex. 1995). With limited exceptions, an officer or director of a corporation may not be held individually liable for inducing the corporation not to perform contractual obligations. See id. The Texas Supreme Court explained this rationale in Maxey v. Citizens National Bank of Lubbock, 507 S.W.2d 722 (Tex. 1974):
In so immunizing corporate directors from personal liability the law has proceeded on the theory that in so acting they are but the agents of the corporation and that the breach is that of the corporation, and hence it alone is answerable therefore, and further, that to hold otherwise would tend to hinder directors of a corporation from acting on their judgment for the interest of their corporation and that they should be left free from possible liability of that kind.Id. at 726 (citation omitted). A clear distinction should be maintained between individual liability as distinguished from that of a corporate employer. Id. at 725; see also Horizontal Drilling, Inc. v. Jonnet Energy Corporation, 11 F.3d 65, 67 (5th Cir. 1994) (applying Texas law).
Thus, the court agrees with Blaylock's assertion that the claims against him should be dismissed because he cannot be held individually liable for the obligations of ServiceLane or Owens Corning. See Holloway, 898 S.W.2d at 795. The plaintiffs' claims all relate to and arise from their employment agreements with Owens Corning and ServiceLane. 12(b)(6) Motion at 6. The petition specifically alleges that Blaylock was acting in his capacity as president of ServiceLane. Petition ¶ 12. His actions must thus be deemed the actions of the corporation, and as an officer of the corporation, he is protected from personal liability. See Holloway, 898 S.W.2d at 795. Whatever obstacles the plaintiffs face in suing Owens Corning and ServiceLane directly does not alter this analysis.
The plaintiffs have pled no exception to this general rule. They do not allege that Blaylock was acting in his own personal interest or contrary to the interests of Owens Corning or ServiceLane. See Maxey, 507 S.W.2d at 726. Nor do the plaintiffs allege facts that Blaylock is liable as an alter ego or that the corporate veil may be pierced. See In re Great Southern Life Insurance Company Sales Practices Litigation, 1999 WL 721968 (N.D. Tex. Sept. 15, 1999) at *5. There is no basis for imposing individual liability against Blaylock. Accordingly, because Blaylock cannot be held personally liable for the obligations of Owens Corning and ServiceLane, and because plaintiffs have not alleged a colorable claim against him individually, there is no set of facts that would enable the plaintiffs to recover against Blaylock and he is entitled to dismissal under FED. R. Civ. P. 12(b)(6). Great Southern Life, 1999 WL 721968 at *5. Blaylock's motion to dismiss for failure to state a claim is granted. The court will not analyze Blaylock's other bases for dismissal, as they are moot.
It should be noted that in the 12(b)(6) Response, the plaintiffs do not refute Blaylock's motion to dismiss on this point. They merely reiterate their factual assertions and seek leave to amend their claim against Blaylock if the claim against him is dismissed.
B. Motion to Dismiss for Lack of Personal Jurisdiction 1. 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.
2. 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 it 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).
3. Due Process Requirements
Due process requires the satisfaction of two elements to exercise personal jurisdiction over a nonresident: (a) the nonresident must have some minimum contact with the forum which results from an affirmative act on his part; and (b) 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. Denekla, 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.
(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, above, 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).
The plaintiffs maintain that the defendants are subject to the jurisdiction of this court because the principal office of ServiceLane was located in Dallas and because Stein, CEO of ServiceLane, performed many duties on behalf of the company in Texas. Additionally, Brown and Hiner, executives of Owens Corning and supervisors of Stein and Blaylock, also directly communicated with persons in Texas, benefitting Owens Corning, the majority shareholder of ServiceLane. 12(b)(2) Response at 3. Finally, the plaintiffs point out that they are suing the defendants in their individual capacities for fraud and misrepresentation, and that the fiduciary shield doctrine, under which employees and agents of a corporation are not subject to a court's jurisdiction due to activities on behalf of the corporation, does not apply to allegations of fraud. 12(b)(2) Response at 4, citing Intermed Laboratories, Inc. v. Perbadanan Geta Felda, 898 F. Supp. 417, 420 (E.D. Tex. 1995). The plaintiffs also baldly assert in their 12(b)(2) Response that "the activities of the Defendants were continuous, systematic, and fairly extensive within the State of Texas," id., but they provide no support for this assertion. The court will therefore discuss only the exercise of specific jurisdiction over the defendants.
To establish a prima facie case for personal jurisdiction over the defendants, the plaintiffs must provide some factual basis. See Bullion v. Gillespie, 895 F.2d 213, 216-17 (5th Cir. 1990). The court agrees with the defendants, 12(b)(2) Motion at 4, that the plaintiffs have wholly failed to meet this burden.
The plaintiffs' petition alleges no facts which would support jurisdiction over the defendants in Texas. It is undisputed that the defendants are individuals and residents of Ohio. 12(b)(2) Motion at 2. The majority of the allegations against the plaintiffs are in their official capacities. It is well settled, however, under the fiduciary shield doctrine, that an individual's connection with the forum state solely as a corporate officer does not by itself create personal jurisdiction over that individual — even though the forum state may have personal jurisdiction over the corporation. See Spademan, 772 F.2d at 1197. Thus, any contacts of Owens Corning and ServiceLane with Texas may not be imputed to the individual defendants in order to create jurisdiction over them. Also, any activities conducted by the defendants in the course of performing their duties for Owens Corning are not relevant and should not be considered as grounds for imposing jurisdiction over them in Texas. Id.
As for allegations against the defendants in their individual capacities, the plaintiffs' bare allegations of fraud against the defendants in their "individual capacities" do not satisfy the prima facie requirements for jurisdiction. See, e.g., Marathon Oil Company v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir. 1999) (finding that absent evidence that the false statements were made at a meeting in Texas, there was an insufficient basis for personal jurisdiction to attach).
The sole allegation by the plaintiffs against Hiner and Brown is that as "[e]xecutives of Owens Corning and [s]upervisors" of defendants Stein and Blaylock, they made unspecified "communications" and "supervisions" and "participated in" and "supervised" Stein and Blaylock in making "false, misleading and fraudulent statements." Reply Brief in Support of Defendants' Motion for Dismissal under F.R. Civ. P. 12(b)(2) for lack of Personal Jurisdiction ("12(b)(2) Reply") at 3. With respect to defendant Stein, the sole allegation against him is that he made unspecified false representations in order to induce the plaintiffs to continue to work for ServiceLane. Id. These assertions, whose factual basis is tenuous at best, are insufficient to satisfy due process. This court recently held that mere allegations of fraud by an out of state defendant without a showing of minimum contacts will not confer jurisdiction. See Southern Bleacher Company, Inc. v. Husco, Inc., 2001 WL 497772 (N.D. Tex. May 7, 2001) at *5.
Rule 9(b) of the Federal Rules of Civil Procedure requires pleading of specific facts and circumstances of the alleged fraud, i.e., the time, the place and contents of the misrepresentation, and the identity of the speaker. See Tuchman v. DSC Communications Corporation, 14 F.3d 1061, 1068 (5th Cir. 1994). The allegations in the plaintiffs' petition fail to comply with even one of Rule 9(b)'s requirements. Thus, the plaintiffs' bare assertions of fraud, without more, is insufficient to overcome the constitutional guarantee of minimum contacts with the state before the court can exercise personal jurisdiction.
Even if the fraud exception to the fiduciary shield doctrine were to be considered, however, the plaintiffs have not shown that it applies. The plaintiffs aver that Stein, as CEO of ServiceLane in Texas, communicated with the plaintiffs and with defendant Blaylock by telephone, email, and regular trips to Texas. 12(b)(2) Response at 3. All of these activities, however, were performed by Stein on behalf of ServiceLane and Owens Corning and were not performed in his individual capacity. Id.; 12(b)(2) Reply at 5. Thus, the fiduciary shield doctrine precludes jurisdiction over him individually. Spademan, 772 F.2d at 1198.
With respect to the defendants Hiner and Brown, the plaintiffs do not allege that these defendants ever traveled to Texas, committed any tortious acts in Texas, or even communicated with the plaintiffs in Texas. Additionally, it is undisputed that Hiner and Brown are only officers of Owens Corning, not of ServiceLane. 12(b)(2) Reply at 5; 12(b)(2) Response at 3. The fiduciary shield doctrine thus applies to them as well. Spademan, 772 F.2d at 1198.
The plaintiffs' contention that the fiduciary shield doctrine does not apply because "they are suing the Defendants in their individual capacities for fraud and misrepresentation," 12(b)(2) Response at 4, is preposterous since no such cause of action has been pled. The petition states three counts: (1) breach of fiduciary duty, (2) breach of contract, and (3) tortious interference. Petition ¶¶ 17-19. Allegations of fraud are completely absent from the petition.
In sum, the plaintiffs have not established a prima facie case that the defendants either committed a tort in Texas or have some other connection to Texas apart from their duties as corporate officers of Owens Corning and ServiceLane.
4. Fairness
Because the plaintiffs have not shown that the defendants have purposefully established the necessary minimum contacts in Texas, the court need not consider whether assertion of jurisdiction over the defendants comports with the principles of fair play and substantial justice. See Burger King, 471 U.S. at 476; Ham v. La Cienega Music Company, 4 F.3d 413, 416 n. 15 (5th Cir. 1993).
The plaintiffs have failed to show that the defendants have the requisite minimum contacts with Texas to permit the court to exercise personal jurisdiction over them. Accordingly, the defendants' motion to dismiss for lack of personal jurisdiction is granted.
III. CONCLUSION
For the reasons discussed above, Blaylock's motion to dismiss for failure to state a claim is GRANTED. The motion of the remaining defendants to dismiss for lack of personal jurisdiction is likewise GRANTED. The defendants' motion to transfer venue and the plaintiffs' motion to remand this case to the court from which it was removed are DENIED as moot.
SO ORDERED.
February 26, 2002.
A. JOE FISH Chief Judge