Summary
holding that service of process on a parent corporation does not constitute service of process on a subsidiary
Summary of this case from COTY INC. v. L'ORÉAL S.AOpinion
04cv1191 (GBD).
July 21, 2004
MEMORANDUM OPINION ORDER
Plaintiff brings this action against her health insurance provider, Pioneer Life Insurance Company ("Pioneer"), alleging breach of contract and fraud. Pioneer moves to dismiss the complaint for, inter alia, lack of jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). For the reasons stated below, defendant's motion is granted.
I. BACKGROUND
In December, 1990, Pioneer issued a Limited Benefit Home Health Care insurance policy to plaintiff Hilda Gradinger. The policy was dated December 26, 1990, and issued in the State of Florida. Plaintiff paid an initial premium of $581.70, and annual premiums of $3,394.70. This policy insured plaintiff for: 1) home health care daily benefits of $180.00 per day; 2) lifetime maximum benefits of $250,000.00; 3) per occurrence maximum benefits of $150,000.00; and 4) automatic benefit increase of 8% per year on her home health care daily benefits.
According to plaintiff, Pioneer "terminated the insurance payments under the policy on April 26, 2003 without payment of the amount stated in the insurance policy in the sum of $250,000.00." Complaint at 2, ¶ 9. Plaintiff states that although she furnished Pioneer with proof of her illness and disability pursuant to the terms of the policy, she "really only got a small portion" of the benefits she should have received. Transcript of Oral Argument dated May 5, 2004 ("Tr."), p. 14. Instead, she claims, Pioneer made "most of" the benefit payments to "certain nursing services" not named in the complaint, without plaintiff's authorization. Tr. p. 14. Additionally, plaintiff asserts that Pioneer failed to increase her benefits 8% yearly as it was obligated under the policy.
Plaintiff further argues that Pioneer's representations as to the insurance policy were false, misleading, and constituted fraud. According to plaintiff, defendants "falsely and fraudulently stated and represented to the plaintiff that she would be paid in full for any illness. . . ." Complaint at 3, ¶ 15. Plaintiff states that she relied on the representations, and was thereby induced to purchase the insurance policy, but that "these payments were not obtainable and were misleading to the plaintiff." Id. According to plaintiff, "in truth the facts were that the payments were never intended to be made pursuant to the terms of the policy." Id. at 3, ¶ 16.
Plaintiff filed a complaint against Pioneer and Conseco Company, the alleged corporate parent of Pioneer, on January 8, 2004 in the Supreme Court of the State of New York, County of New York. In her complaint, plaintiff alleged breach of contract and fraud. On February 13, 2004, Pioneer removed the case from the state court to this Court. On February 21, 2004, Pioneer moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(2), lack of personal jurisdiction; Fed.R.Civ.P. 9(b), failure to state fraud with particularity; and Fed.R.Civ.P. 12(b)(6), failure to state a claim on which relief can be granted.
In the complaint, plaintiff named as the second defendant "Conseco Company" and served process with the New York Office of the Superintendent of Insurance. The New York Insurance Department, in turn, accepted service on behalf of a different entity, Conseco Life Insurance Company of New York, which is not involved in this case. The parent company is in fact Conseco, Inc. whom defendant claims was never served.
II. DISCUSSION
a. Personal Jurisdiction
In its Fed.R.Civ.P. 12(b)(2) motion to dismiss, Pioneer argues that the Court does not have jurisdiction because this case bears no relationship to New York. Plaintiff is a citizen of the state of Florida. Pioneer is an Illinois corporation with its principal place of business in Indiana. Conseco, Inc., the parent corporation of Pioneer, is an Indiana corporation with its principal place of business in Indiana. It is alleged that Conseco, Inc. is licensed to do business in New York, but Pioneer is not. Plaintiff made no allegation that her claims arose out of any business conducted by Pioneer in New York, or that Pioneer had a substantial and continuous presence in New York justifying the exercise of personal jurisdiction.
The determination of the amenability of a foreign corporation to suit in a federal diversity action is a two-part analysis. The court must first determine whether the defendant is amenable to service of process under the forum state's laws. If so, the court then asks whether personal jurisdiction under the state laws would comport with federal requirements of due process.Metropolitan Life Ins. Co. v. Robertson-Ceco. Corp., 84 F.3d 560, 567 (2d Cir. 1996); Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963). When the defendant is not within the jurisdiction of the court according to the forum state's laws, the question of federal due process does not arise, and jurisdiction is not proper. "There is nothing to compel a state to exercise jurisdiction over a foreign corporation unless it chooses to do so, and the extent to which it so chooses is a matter for the law of the state as made by its legislature"Arrowsmith, 320 F.2d at 222.
Personal jurisdiction in New York State is codified under N.Y. CPLR § 301, New York's general jurisdiction statute. Furthermore, New York's long-arm statute, CPLR § 302 allows for personal jurisdiction under the "minimum contact" theory formulated by the Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
1. Doing Business in New York
Personal jurisdiction will exist over a foreign corporation pursuant to N.Y. CPLR § 301, if that corporation is "doing business" in New York. Foreign corporations are held amenable to jurisdiction with respect to all causes of action if engaged in "such a continuous and systematic course of 'doing business' here as to warrant a finding of its 'presence'" in New York State. Simonson v. International Bank, 14 N.Y.2d 281, 285 (N.Y. 1964). See also Landoil Resources Corp. v. Alexander Alexander Services, Inc., 77 N.Y.2d 28, 33 (N.Y. 1990); Laufer v. Ostrow, 55 N.Y.2d 305, 309-310 (N.Y. 1982);Frummer v. Hilton Hotels Intl., 19 N.Y.2d 533, 536 (N.Y. 1967). The test for "doing business" in New York is a "simple and pragmatic one." Landoil Resources Corp., 77 N.Y.2d at 33 (alteration in original) (quoting Bryant v. Finnish Nat'l Airline, 15 N.Y.2d 426, 432 (N.Y. 1965)). There must be a showing that allows the court to find that the corporation is "present" in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Domond v. Great American Recreation, Inc., 116 F. Supp.2d 368, 372 (S.D.N.Y. 2000). See also Ugalde v. Dyncorp, Inc., 2000 U.S. Dist. LEXIS 1745 (S.D.N.Y., 2000).
CPLR 301 provides that "[a] court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore." N.Y. CPLR § 301 (McKinney 2001)
In the instant case, there is no personal jurisdiction over defendant Pioneer under CPLR § 301. Plaintiff has not alleged that Pioneer has any business relationships, or made any transactions whatsoever, in New York, nor has she put forward any argument that Pioneer "does business" in New York State. Thus, Pioneer cannot be considered "present" in New York such that Pioneer could be amenable to jurisdiction in cases arising from all causes of action.
2. Personal Jurisdiction under New York's Long-Arm Statute
Furthermore, New York's long-arm statute allows for personal jurisdiction over a non-domiciliary who in person or through an agent
(1) transacts any business within the state or contracts anywhere to supply goods or services in the state; or (2) commits a tortious act within the state . . .; or (3) commits a tortious act without the state causing injury to person or property within the state . . ., if he (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; or (4) owns, uses or possesses any real property situated within the state.
CPLR § 302. New York's long-arm statute "is designed to take advantage of the constitutional power of the state of New York to subject nonresidents to personal jurisdiction when they commit acts within the state." Advisory Committee Notes, N.Y. CPLR § 302 (McKinney 2001). The statute allows New York courts to exercise jurisdiction when the cause of action arises from certain listed in-state acts of non-domiciliary defendants.
In insurance cases, the basis for specific jurisdiction are further defined by N.Y. CLS Ins. § 1101. Advisory Committee Notes, N.Y. CPLR § 302 (McKinney 2001). This statute lists the particular acts that, when taken by non-domiciliary insurance companies, constitute a basis for specific jurisdiction under CPLR 302.
N.Y. Ins. § 1101(b)(1) provides that ". . . any of the following acts in this state, effected by mail from outside this state or otherwise, by any person, firm, association, corporation or joint-stock company shall constitute doing an insurance business in this state and shall constitute doing business in the state within the meaning of section three hundred two of the civil practice law and rules: (A) making, or proposing to make, as insurer, any insurance contract, including either issuance or delivery of a policy or contract of insurance to a resident of this state or to any firm, association, or corporation authorized to do business herein, or solicitation of applications for any such policies or contracts; (B) making, or proposing to make, as warrantor, guarantor or surety, any contract of warranty, guaranty or suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the warrantor, guarantor or surety; (C) collecting any premium, membership fee, assessment or other consideration for any policy or contract of insurance; (D) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this chapter; (E) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this chapter."
However, it is unnecessary to discuss each basis for jurisdiction in CPLR 302 and N.Y. Ins. § 1101(b)(1), because plaintiff has failed to allege any specific act taken by Pioneer in or related to New York State, much less an act from which her cause of action arises. It is uncontested that Plaintiff's insurance policy was issued in Florida. Plaintiff does not allege that she was solicited to purchase the insurance in New York. There is, therefore, no specific jurisdiction over Pioneer in this case.
3. Jurisdiction by Corporate Parents
Plaintiff claims, however, that Pioneer is amenable to jurisdiction in New York because Conseco, Inc. is licensed to do business in this state. Plaintiff argued that "what Pioneer did reflects on Conseco because that is the parent corporation," and hence, "service on Conseco should be good . . . Pioneer is part and parcel of Conseco and they should all be brought together." Tr. p. 8.
Plaintiff's argument simply has no merit. It is well-settled law in New York that the fact that a subsidiary's corporate parent does business in the state cannot, without anything further, render the subsidiary subject to jurisdiction here.Giar v. Centea, 2003 U.S. Dist. LEXIS 6383 (S.D.N.Y. 2003). Furthermore, "[i]t is hornbook law that service of process on a subsidiary does not constitute service on a parent corporation, nor does service on a parent constitute service on a subsidiary. Except in exceptional circumstances not present here, the law respects separate corporate identities even where one corporation may wholly own another, or where they may share the same principals." Giar 2003 U.S. Dist. LEXIS at *6 (citing In re Matter of Crespo, 123 Misc.2d 862, 865, 475 N.Y.S.2d 319 (N.Y.Sup.Ct. 1984)). Therefore, Conseco, Inc.'s New York business license does not render its subsidiary Pioneer amenable to jurisdiction here.
Exceptional circumstances include situations where "the corporation is a 'dummy' for its individual stockholders who are in reality carrying on the business in their personal capacities for purely personal rather than corporate ends." See Walkovszky v. Carlton, 276 N.Y.S.2d 585 (Ct.App. 1966). Exceptional circumstances may also exist when a subsidiary is a mere department of the parent. See International Cultural Property Society v. Walter de Gryuter Co. 2000 WL 943319 (S.D.N.Y. 2000) (citing Jazini v. Nissan Motor Co. 148 F.3d 181, 184-85 (2d Cir. 1997 for the proposition that a subsidiary is a "mere department" of a parent after consideration of the following four factors: common ownership; financial dependency of the subsidiary to the parent; the degree of interference by the parent in the selection and assignment of the subsidiary's executive personnel; and the degree of control over the marketing and operational policies of the subsidiary by the parent).
Plaintiff has shown no jurisdictional facts sufficient to allow this Court to exercise jurisdiction over defendant Pioneer. Accordingly, the Court grants defendant Pioneer's motion to dismiss under Fed.R.Civ.P. 12(b)(2). Plaintiff's claims against defendant Pioneer are therefore dismissed.
Having found that jurisdiction is not proper, the Court need not address the Fed.R.Civ.P. 9(b) or 12(b)(6) arguments.