holding that Otis Felvonó, which sold, installed, and maintained Otis Elevator products in Hungary, was an agent of Otis Elevator because Otis Felvonó functioned as an integral part of a united endeavor-a worldwide business in manufacturing, selling, installing, and servicing elevators and similar productsSummary of this case from In re Hydroxycut Mktg. & Sales Practices Litig.
99 Civ. 10496 (CSH)
January 3, 2002
MEMORANDUM OPINION AND ORDER
Plaintiff brings this negligence action against defendants Marriott International Hotels, Inc., Duna Szalluda Rt., Otis Elevator Company, and Otis Felvonó kft. Plaintiff claims that she was injured in June of 1998 while exiting an unleveled elevator in the Marriott Hotel in Budapest, Hungary. The Budapest Marriott Hotel is owned by Duna Szalluda and managed by Marriott International Hotels. The elevator in the Budapest Marriott Hotel is serviced by Otis Felvonó, which is a subsidiary of Otis Elevator Company. Initially, all defendants moved to dismiss the complaint, asserting (in accordance with their particular circumstances) one or more of the grounds of lack of personal jurisdiction, insufficient service of process, failure to join indispensable parties, forum non conveniens, and failure to state a claim. In a Memorandum and Order dated January 26, 2001 (2001 WL 69423), the Court denied defendants' motion to dismiss on the grounds of forum non conveniens and reserved decision on the other issues, permitting discovery on the subject of the corporate relationships between the defendants. The limited discovery permitted by the Court is now complete, and the parties have submitted new briefs in support of their motions to dismiss for lack of personal jurisdiction, insufficient service of process, failure to join indispensable parties, and failure to state a claim.
Although plaintiffs complaint names "Duna Szalloda Rt." and "Otis Felvonó kft.," these defendants identify themselves in their motion papers as "Duna Szalluda Rt." and "Otis Felvonó kft." I will spell these defendants' names as they spell them.
The Court converted Otis Elevator Company's motion to dismiss for failure to state a claim into a motion for summary judgment. 2001 WL 69423, at *2.
I. PERSONAL JURISDICTION
When a defendant brings a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), the plaintiff has the burden of showing that jurisdiction exists. Whitaker v. American Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001). "District courts are afforded considerable procedural leeway in deciding" motions to dismiss for lack of personal jurisdiction, Credit Lyonnais Securities (USA), Inc. v. Alcantara, 183 F.3d 151, 153 (2d Cir. 1999) (citation omitted), and the nature of "the plaintiffs obligation varies depending on the procedural posture of the litigation," Ball v. Metallergie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990); accord Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566-67 (2d Cir. 1996). When such a motion is brought on the pleadings, before any discovery has taken place, the plaintiff need only make a prima facie showing that personal jurisdiction exists, based on allegations of fact which will be taken as true. Ball, 902 F.2d at 197. When such a motion is brought after the parties have conducted discovery but before an evidentiary hearing on the issue or a trial, the plaintiff must aver facts which, if credited, would suffice to establish jurisdiction. Id. Finally, when the court conducts an evidentiary hearing on jurisdiction or a trial on the merits, the plaintiff must establish jurisdiction by a preponderance of the evidence. Id. In this case, since the Court has permitted the parties to conduct discovery on the issue of jurisdiction but has not held an evidentiary hearing, the Court will apply the summary judgment standard and examine whether the plaintiff has averred any facts that would suffice to establish personal jurisdiction over each of the defendants.
In a diversity case, a federal court exercises personal jurisdiction over a party in accordance with the law of the forum state, subject to the requirements of due process under the U.S. Constitution. Whitaker, 261 F.3d at 208; Metropolitan Life Ins. Co., 84 F.3d at 567; Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 901 (2d Cir. 1981). Under New York C.P.L.R. § 301, a foreign corporation is subject to a court's general jurisdiction if it is "engaged in such a continuous and systematic course of `doing business' here as to warrant a finding of its presence." Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d Cir. 1996), citing Frummer v. Hilton Hotels Int'l Inc., 19 N.Y.2d 533, 536, 227 N.E.2d 851, 281 N.Y.S.2d 41 (1967). Alternatively, a foreign corporation may be subject to specific, or long-arm, jurisdiction in New York with respect to a particular case if one of the several criteria in C.P.L.R. § 302 is met. Whitaker, 261 F.3d at 209.
New York C.P.L.R. § 301 states: "A court may exercise such jurisdiction over persons, property, or status as might have been exercised heretofore."
New York C.P.L.R. § 302 states:
(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, 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, except as to a cause of action for defamation of character arising from the act; or
3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, 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.
Ordinarily, the presence of a subsidiary in New York does not subject a foreign parent corporation to jurisdiction New York. Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998); Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984) ( citing Delagi v. Volkswagenwerk A.G., 29 N.Y.2d 426, 278 N.E.2d 895, 328 N.Y.S.2d 653 (1972)). In certain limited circumstances, however, the presence or activities of a subsidiary in New York may be attributed to its parent corporation. If the subsidiary functions as a "mere department" of the parent or acts as the parent's agent in New York, then the parent will be subject to jurisdiction in New York. Jazini, 148 F.3d at 184; Koehler, 101 F.3d at 865; Frummer, 19 N.Y.2d 533, 537-38 (agent); Taca Int'l Airlines, S.A. v. Rolls-Royce of England, Ltd., 15 N.Y.2d 97, 102, 204 N.E.2d 329, 256 N.Y.S.2d 129 (1965) (mere department).
Courts have also held the converse to be true: Where a parent corporation is present in New York, its foreign subsidiary may be subject to New York jurisdiction if the subsidiary is a "mere department" of the parent or if the parent acts as the subsidiary's agent in New York. Drucker Cornell v. Assicurazioni Generali S.p.A., No. 97 Civ. 2262, 2000 WL 284222, at *3 (S.D.N.Y. Mar. 16, 2000); Esi, Inc. v. Coastal Corp., 61 F. Supp.2d 35, 57 (S.D.N.Y. 1999); Palmieri v. Estefan, 793 F. Supp. 1182, 1187 (S.D.N.Y. 1992); Titu-Serban Ionescu v. E.F. Hutton Co., 434 F. Supp. 80, 81-82 (S.D.N.Y. 1977); Freeman v. Gordan Breach, Science Publishers, Inc., 398 F. Supp. 519, 521 (S.D.N.Y. 1975); Public Adm'r of New York v. Royal Bank of Canada, 19 N.Y.2d 127, 131, 224 N.E.2d 877, 278 N.Y.S.2d 378 (1967).
In deciding whether a corporation is a "mere" department of a related corporation, courts require that there be "common ownership," which is satisfied in the case of a parent-subsidiary relationship. Jazini, 148 F.3d at 184-85; Beech Aircraft, 751 F.2d at 120. Beyond this threshold requirement, courts also consider 1) the "financial dependency of the subsidiary on the parent corporation," 2) "the degree to which the parent corporation interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities," and 3) "the degree of control over the marketing and operational policies of the subsidiary exercised by the parent." Jazini, 148 F.3d at 184-85; accord Beech Aircraft, 751 F.2d at 120-22, citing Royal Bank of Canada, 19 N.Y.2d at 131-32; Palmieri, 793 F. Supp. at 1187-88.
To establish that a corporation doing business in New York is an agent of a related foreign corporation, the plaintiff must show that the former "does all the business which [the foreign corporation] could do were it here by its own officials." Frummer, 19 N.Y.2d at 537; accord Jazini, 148 F.3d at 184; Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116, 120-21 (2d Cir. 1967); Drucker Cornell, 2000 WL 284222, at *3; Palmieri, 793 F. Supp. at 1190. Common ownership "gives rise to a valid inference as to the broad scope of the agency," Frummer, 19 N.Y.2d at 538, but the services performed by the corporation in New York on behalf of the foreign corporation must be important to the foreign corporation, extending beyond "mere solicitation," to subject the foreign corporation to jurisdiction, Frummer, 19 N.Y.2d at 536; accord Gelfand, 385 F.2d at 120-21; Drucker Cornell, 2000 WL 284222, at *3.
A. Otis Elevator Company and Otis Felvonó
Otis Elevator Company is a New Jersey corporation. Otis Felvonó is a Hungarian corporation that was originally established under the name GFV-Otis Felvonó by a joint venture between Otis Elevator and Gép-és Felvonószerlö Vállalat ("GFV"), a Hungarian company, in 1990. Since 1991, Otis Felvonó has been a 100% subsidiary of Otis Elevator. Otis Felvonó sells, installs, and maintains Otis products in Hungary, pursuant to several agreements with Otis Elevator. Otis Elevator does not contest the Court's personal jurisdiction over it, but both companies challenge the Court's personal jurisdiction over Otis Felvonó. Specifically, they contend that Otis Felvonó is not subject to jurisdiction in New York, because it was not served with process, it has not systematically and continuously done business in New York as required by C.P.L.R. § 301, none of the criteria for long-arm jurisdiction under C.P.L.R. § 302 are met, and it cannot be subject to jurisdiction through the presence of Otis Elevator in New York. Building on these arguments, they contend that plaintiff's service of process on Otis Elevator does not constitute service of process on Otis Felvonó. Plaintiff responds that the presence of Otis Elevator in New York does subject Otis Felvonó to jurisdiction in New York, and that service of process on Otis Elevator is sufficient, because Otis Felvonó functions as a department of Otis Elevator or alternatively because there is an agency relationship between the two companies.
"Felvonó" is the Hungarian noun for "elevator."
Otis Elevator and Otis Felvonó both have submitted briefs and both argue that Otis Felvonó is not subject to jurisdiction in New York. The arguments by Otis Elevator do not add anything significant to the arguments of Otis Felvonó on this issue, and so for simplicity's sake I will refer only to Otis Felvonó's arguments.
In support of their arguments, the plaintiff and Otis Felvonó rely on evidence elicited during the limited jurisdictional discovery granted by the Court. That evidence includes five contracts that established the corporate relationship between Otis Elevator and Otis Felvonó: a Joint Venture Agreement ("JVA") between Otis Elevator and GFV, a Technical Cooperation Agreement ("TCA") between Otis Elevator and Otis Felvonó, a Trade Mark and Trade Name License Agreement ("TMLA") between Otis Elevator and Otis Felvonó, a Distributorship Agreement Within Hungary ("DAWH") between Otis Elevator and Otis Felvonó, and a Distributorship Agreement Outside Hungary ("DAOH") between Otis Elevator and Otis Felvonó. The record also contains two affidavits by Kornél Apatini, the General Manager of Otis Felvonó, and a transcript of a deposition of Douglas J. Pew, an Associate General Counsel for Otis Elevator.
The JVA is dated June 28, 1990, and the other agreements are dated October 3, 1990. The agreements are attached as Exhibits F, G, H, and I to the Affirmation of Karen I. Greenberger in support of Otis Felvonó's motion.
The affidavits are dated March 31, 2000 ("Apatini Aff. I") and April 12, 2001 ("Apatini Aff. II"), and are attached as Exhibits C and B, respectively, to the Greenberger Affirmation.
The deposition took place on March 15, 2001; the transcript is attached as Exhibit D to the Greenberger Affirmation.
In determining whether there is sufficient evidence to support a finding that Otis Felvonó is subject to this Court's jurisdiction, I consider the evidence in the light most favorable to plaintiff and resolve all conflicts in the evidence in favor of plaintiff. See A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993); Ball v. Metallergie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990); Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985); Mayatextil, S.A. v. Liztex U.S.A., Inc., No. 92 Civ. 4528, 1995 WL 131774, at *2 (S.D.N.Y. Mar. 23, 1995). The following evidence tends to show that Otis Elevator and Otis Felvonó are engaged in a joint enterprise, with Otis Felvonó responsible for work in Hungary and Otis Elevator responsible for worldwide management and international coordination.
The business of Otis Elevator is "selling and servicing elevators, escalators, and the like transportation systems throughout the world." TCA ¶ 1.1. "OTIS has a worldwide network of SUBSIDIARIES and AFFILIATES which manufacture, market, install, service, repair and modernize [elevators and the like transportation systems] throughout the world." TCA ¶ 1.2. The webpage of Otis Elevator states that Otis Elevator has "over 60,000 employees in more than 1,700 worldwide locations" and that Otis Elevator's "mechanics and agent representatives maintain in excess of 700,00 elevators and escalators in virtually every country of the world." Otis Elevator once conducted its worldwide operations through branch offices but then converted those offices into subsidiary corporations to save money. Pew Dep. at 8-9. Formerly, Otis Elevator had a branch office in Paris called European Transcontinental Operations; now, an Otis subsidiary in Germany "has general oversight" over, or serves as "a gathering focal point of information" for, subsidiaries in the central Europe area. Pew Dep. at 23-25.
The webpage is attached as Exhibit B to the declaration of Lawrence Goldhirsch dated March 28, 2000, which was submitted in support of plaintiff's original opposition to defendants' motion to dismiss, prior to jurisdictional discovery. The statements on the webpage are also referenced in the Pew Deposition at 18-22.
The purpose of Otis Felvonó, in Hungary, is to "manufacture, assemble, sell, install, repair, modernize, maintain, import and export Elevator Products and to install, repair and maintain escalators and moving walkways." JVA ¶ 2. Otis Felvonó is the "exclusive distributor for selling, installing and maintaining OTIS PRODUCTS, within Hungary" and may not "purchase from any source outside [Hungary] any products competitive with OTIS PRODUCTS." DAWH ¶ 1.1-1.2. Otis Felvonó buys Otis products from other subsidiaries of Otis Elevator in Europe. Pew Dep. at 28-29. When Otis Felvonó requires technical assistance, it contacts Otis Austria or Otis Germany. Pew Dep. at 17. If Otis Felvonó ever manufactures elevator products, then Otis Elevator will be the exclusive distributor of those products outside of Hungary. DAOH ¶ 1.
The following evidence tends to show that Otis Elevator is deeply involved in the management of Otis Felvonó. The section of the Joint Venture Agreement entitled "Management control" states that:
Otis will have management control of [Otis Felvonó] from the beginning of any business activities. By exercising this management control, OTIS will implement the "OTIS policies and procedures' in [Otis Felvonó]. . . . The OTIS policies and procedures specifically contain provisions about the following areas of management: management by objectives, manufacturing standards, marketing products and services, finance and bookkeeping, software programs, international reporting system.
The parties agree that OTIS will not only select the General Manager, but also together with the General Manager choose other management personnel of [Otis Felvonó]. The management structure of [Otis Felvonó] will be adopted according to OTIS practices, policies and procedures, and OTIS will provide the management board with all the information required in connection with those policies and procedures.
OTIS will train the management personnel of [Otis Felvonó] in accordance with the OTIS practices, policies and procedures. . . .
JVA ¶ 7. Otis Elevator has established procedures for estimating, pricing, and ordering Otis products from other Otis subsidiaries. TCA ¶ 3.1.7. If Otis Felvonó requests technical assistance, Otis Elevator sends staff from another Otis company to Hungary to help Otis Felvonó. JVA ¶ 9. Otis Elevator must approve the quality of work performed by Otis Felvonó and specifically has the right to conduct "quality control inspection" of Otis Felvonó's products, services, and facilities. TMLA ¶¶ 6-6.2. If any work "does not meet the standards of OTIS," then Otis Felvonó must "make such changes in the work as may be required by OTIS." DA ¶ 11.3 Also, Otis Felvonó must submit all advertising and packaging material to Otis Elevator for prior written approval. DA ¶ 13; TMLA ¶ 6.3. Furthermore, the licensing agreement is subject to termination if "OTIS, or one of OTIS' subsidiaries, becomes unable in a practical way to fully manage or control the operations of [Otis Felvonó]." TMLA ¶ 7.2.5.
Otis Felvonó presents contrary evidence to show that it operates completely independently of Otis Elevator. Kornél Apatii states that, as General Manager of Otis Felvonó, he conducts the day-to-day operations and business dealings of the company with strategic direction from the Board of Directors of Otis Felvonó. Apatini Aff. II ¶ 8. He states that Otis Felvonó trains its own employees and prepares its own advertising without any involvement by Otis Elevator. Id. ¶ 7, 12. Furthermore, he states that, notwithstanding the Distributorship Agreement Outside Hungary, Otis Felvonó has never manufactured any products for export from Hungary. Id. ¶ 25. Since I must resolve all conflicts and draw all reasonable inferences in favor of plaintiff, the nonmoving party, at this stage in the proceedings, I disregard this evidence to the extent that it is contrary to evidence offered by plaintiff.
In that regard, it is apparent that a number of factual assertions in the Apatini affidavit are totally contrary to the provisions for "management control" found in the JVA at ¶ 7.
Otis Felvonó offers other evidence, uncontradicted by plaintiff, that tends to show that Otis Felvonó maintains corporate formalities with respect to the activities of its board of directors and its finances. The Board of Directors of Otis Felvonó has its own meetings, and none of its members are also members of the Board of Directors of Otis Elevator, nor are any officers of Otis Felvonó also officers of Otis Elevator. Apatini Aff. I ¶ 14. Otis Felvonó maintains its own financial records, pays for its expenses and taxes, and pays the salaries of its employees. Id. ¶¶ 13-14; Apatini Aff. II ¶ 14. Otis Felvonó pays 3.5% of its annual revenue to Otis Elevator in exchange for assistance provided by Otis Elevator. Apatini Aff. I ¶ 20. Otis Elevator has never loaned money to Otis Felvonó. Apatini Aff. II ¶ 11.
I do not regard as conclusive the contractual provision disclaiming any agency relationship between Otis Elevator and its subsidiaries, TCA ¶ 21.3, just as I do not regard as conclusive the fact that Otis Felvonó is separately incorporated. Rather, I will consider the facts of the corporate relationship in light of the legal principles relating to personal jurisdiction. As explained below, I conclude that there is sufficient evidence to support a finding that Otis Felvonó is subject to jurisdiction based on the presence of Otis Elevator in New York, either because Otis Felvonó is a mere department of Otis Elevator or because there is an agency relationship between the two companies.
In determining whether a subsidiary functions as a "mere department" of a parent, courts examine whether the control exercised by the corporate parent substantially exceeds the level of control inherent in the parent-subsidiary relationship. See Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984) ("Beech's control of East extends far beyond mere ownership and is enough to permit New York to assert jurisdiction over Beech on the grounds that East is a `mere department' of Beech under New York law."); Saraceno v. S.C. Johnson and Son, Inc., 83 F.R.D. 65, 71 (S.D.N.Y. 1979) ("[U]nder New York law a parent of a multinational corporate enterprise may make broad policy decisions for its subsidiaries. Such control is inherent in the parent-subsidiary relationship and does not justify labeling a subsidiary a `mere department' of the parent."); see also Jerge v. Potter, No. 99-CV-0312E(F), 2000 WL 1160459, at *3 (W.D.N.Y. Aug. 11, 2000) ("Having common directors and officers is a normal business practice of a multi-national corporation and absent complete control there is no justification to labeling a subsidiary a `mere department' of the parent.") (quotations omitted); cf. Bellomo v. Penn. Life Co., 488 F. Supp. 744 (S.D.N.Y. 1980) (in applying "agency" test of jurisdiction, distinguishing ownership of subsidiaries for investment purposes and ownership of subsidiaries as part of business operations).
As noted supra, when courts evaluate the level of control exercised by a parent over a subsidiary, they consider, in addition to the required element of common ownership, 1) the "financial dependency of the subsidiary on the parent corporation," 2) "the degree to which the parent corporation interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities," and 3) "the degree of control over the marketing and operational policies of the subsidiary exercised by the parent." Jazini, 148 F.3d at 184-85.
Where a plaintiffs allegations of corporate control are supported by evidence of common ownership and little else, courts refuse to treat a subsidiary as a "mere department" for jurisdictional purposes. See Jazini v. Nissan Motor Co., 148 F.3d 181, 185-86 (2d Cir. 1998) (plaintiffs made conclusory allegations of control and dependency, supported only by fact that corporations had one director in common and that parent's annual report referred to "global operations"); Drucker Cornell v. Assicurazioni Generali S.p.A, No. 97 Civ. 2262, 2000 WL 284222, at *5 (S.D.N.Y. Mar. 16, 2000) (plaintiff alleged only common ownership and consolidated financial reporting); Weiss v. La Suisse, 69 F. Supp.2d 449, 458-59 (S.D.N Y 1999) (plaintiffs alleged common directors and officers and pointed to isolated meeting between officers of parent and aggrieved clients of subsidiary); Insight Data Corp. v. First Bank Systems, Inc., No. 97 Civ. 4896, 1998 WL 146689, at *5-6 (S.D.N.Y. Mar. 25, 1998) (apart from common ownership, plaintiff only alleged that parent referred to itself as "First Bank" and that journalist referred to both parent and subsidiary as "First Bank").
Other than common ownership, however, no single factor is required for a court to find that a parent corporation exercises substantial control over a subsidiary. See Beech Aircraft, 751 F.2d at 120 ("New York courts regard one factor as essential to the assertion of jurisdiction over a foreign related corporation and three others as important."); Esi, Inc. v. Coastal Corp., 61 F. Supp.2d 35, 51-52 (S.D.N.Y. 1999) ("The first factor, common ownership, is essential to the assertion of jurisdiction over a foreign related corporation, while the other three factors are important. The overall weighing of the various factors thus necessitates a balancing process, and not every factor need weigh entirely in the plaintiffs' favor.") (quotations and citations omitted); Mayatextil, 1995 WL 131774, at *5 (same).
In this case, plaintiff has produced ample evidence beyond the fact of common ownership to support an inference that Otis Elevator exercises substantial control over Otis Felvonó. Plaintiffs evidence shows that Otis Felvonó was established to conduct the business of Otis Elevator in Hungary. See Public Adm'r of New York v. Royal Bank of Canada, 19 N.Y.2d 127, 131-32, 224 N.E.2d 877, 278 N.Y.S.2d 378 (1967) ("[T]he French branch was established to conduct the business of the Bank in Paris.") (quotation marks omitted); Boryk v. deHavilland Aircraft Co., 341 F.2d 666, 667 (1965) ("[The subsidiary] substantially took over the activities [the parent] had been carrying on. . . ."). While there is no suggestion that the companies disregard corporate formalities with respect to finances or corporate governance, there is strong evidence that Otis Elevator retains tight control over Otis Felvonó's personnel, operations, and marketing, ensuring that the subsidiary functions just as a branch office would. See Jayne v. Royal Jordanian Airlines Corp., 502 F. Supp. 848, 860 (S.D.N.Y. 1980) ("[T]he public association of the two companies, together with their other points of interrelatedness, . . . overcomes their corporate and operational separateness and tips the balance in favor of their constituting a single enterprise for jurisdictional purposes."). The evidence construed in the light most favorable to plaintiff shows that Otis Elevator supervises the activities of Otis Felvonó not as a stockholder watching over its investment but as the headquarters of a worldwide business making sure that its products and services meet uniform company standards. See Bulova Watch Co. v. K Hattori Co., 508 F. Supp. 1322, 1341 (E.D.N.Y. 1981) ("The use of the wholly-owned subsidiary form . . . reflects the desire for `unambiguous control' over sales and marketing subsidiaries to insure uniform quality and promotion of the product sold."); Jayne, 502 F. Supp. at 860 ("There is in [the companies' promotional materials] the projection of a unified public persona, despite formal separateness, by which a quality service on the part of the subsidiary is suggested by identification with the parent.").
Courts have frequently drawn an inference of substantial control from the fact that a subsidiary is engaged in a common business endeavor with its parent corporation. As the court in Freeman explained,
Each corporation, in our view, apparently functions as an integral part of a united endeavor. . . . [W]hile two separate corporate entities have been established, only one commonly owned enterprise exists which, in order to function, must rely upon the joint endeavors of each constituent part.Freeman v. Gordan Breach, Science Publishers, Inc., 398 F. Supp. 519, 522 (S.D.N.Y. 1975); accord Esi., 61 F. Supp.2d at 56-57; Titu-Serban Ionescu v. E.F. Hutton Co., 434 F. Supp. 80, 82 (S.D.N.Y. 1977). Where a subsidiary's business is dependent on the parent's business, or vice versa, an inference may often be drawn that the parent controls the subsidiary as it would a department. See Boryk, 341 F.2d at 668 (holding that subsidiary is mere department of parent where "[s]ubstantially all of [the subsidiary's] income derives from the sale and servicing of products manufactured by [the parent] or other . . . subsidiaries"); Bulova Watch Co., 508 F. Supp. at 1344 ("The New York subsidiaries [which market timepieces manufactured by parent] are the means by which Hattori has established and seeks to maintain its base in the country that is its single largest export market."); DCA Food Industries Inc. v. Hawthorn Mellody, Inc., 470 F. Supp. 574, 584 (S.D.N.Y. 1979) (holding that subsidiary was mere department of parent where subsidiary's business was processing and production of all of parent's brand products).
I am aware of no case directly addressing the question whether, with respect to the factor of the financial dependency of the subsidiary on the parent corporation, it is proper to consider the fact that a subsidiary depends principally on transactions or contracts with its parent corporation or other affiliated corporations to generate income. Typically, when courts consider "financial dependency," they consider whether the companies have disregarded corporate formalities with respect to finances, i.e. whether the two companies' accounts have been intermingled, the parent has paid the subsidiary' expenses, the parent has loaned money to the subsidiary without interest, or the parent has guaranteed the subsidiary's obligations. E.g., Ugalde v. Dyncorp, Inc., No. 98 Civ. 5459, 2000 WL 217502, at *3 (S.D.N.Y. Feb. 23, 2000); Esi., 61 F. Supp.2d at 53-54; Morse Typewriter Co. v. Samanda Office Communications Ltd., 629 F. Supp. 1150, 1153 (S.D.N.Y. 1986). Regardless of whether a close connection between a subsidiary's business and its parent's business shows "financial dependency," such a connection may support an inference of substantial control by the parent, as the cases cited in the text demonstrate.
The fact that the parent characterizes its subsidiary as part of the parent's business tends to show that the parent treats the subsidiary as a department. See Boryk, 341 F.2d at 668 ("[The subsidiary's name is listed on [the parent's] letterhead and [the parent] is listed in the World Aviation Directory as having an office in New York at [the subsidiary's] address. . . ."); Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 864 (2d Cir. 1996) (declining to review on interlocutory appeal district court's holding that subsidiary was mere department of parent where parent's annual report and promotional materials portrayed subsidiary "as part of a unified global banking network"); Jayne, 502 F. Supp. at 859 (holding that subsidiary was mere department of parent where "[t]heir aircraft have similar markings, [the subsidiary's] services are generally represented to be backed by [the parent's] resources, [and the subsidiary] was described . . . as `our business jet charter service.'"); DCA Food Industries, Inc., 470 F. Supp. at 585 ("[T]he numerous references by White to Hawthorn Wisconsin as a `division' of the corporate "we' add to the picture created by the total fiscal integration of the parent and subsidiaries and the executive overlap among them."); Titu-Serban Ionescu, 434 F. Supp. at 83 ("Hutton's description of Hutton (France) [as a `branch or international division office operated by Hutton'] is a factor to be considered."); see also Munsell v. La Brasserie Molson du Quebec Limitee, 618 F. Supp. 1383, 1386 (E.D.N.Y. 1985) (stating that plaintiff had made sufficient jurisdictional allegations on agency theory to warrant discovery where plaintiff alleged that officer of parent corporation said that subsidiary and parent were same company), amended by 623 F. Supp. 100 (1985); but see Jerge, 2000 WL 1160459, at *3 (disregarding statement on webpage that subsidiary was "one of the operating units or divisions" of its parent corporation).
A subsidiary may function as a mere department of its parent even where the companies observe corporate formalities. The Second Circuit has noted that New York state courts have moved steadily toward holding "that in determining whether a corporation has engaged in activities in the state, it is immaterial whether these are conducted through a branch or through a subsidiary corporation, even though the latter's formal independence has been scrupulously preserved." Boryk, 341 F.2d at 668 (emphasis added); see also Esi., 61 F. Supp.2d at 55 ("ESI and Delasa need not prove that the Affiliates disregard corporate formalities in order to establish a prima facie showing that they are `mere departments' of Coastal Corp., Coastal Power and/or LCC."); Mayatextil, 1995 WL 131774, at *5 (noting that mere department test "requires an examination of economic realities, not formal relationships"); Bulova Watch Co., 508 F. Supp. at 1334 ("The two tests that have been utilized in determining the closeness of the economic connection both look to realities rather than to formal relationships."); Jayne, 502 F. Supp. at 859 (holding that subsidiary was mere department of parent despite formal separateness, because "[t]o find otherwise would be to exalt form over substance and to ignore the aggregate effect of activities and relationships that, taken singly, would not satisfy the `mere department' rule."); Freeman, 398 F. Supp. at 522 ("G B Ltd. is `in fact, if not in name' a branch of G B Inc. whose formal "independence has been scrupulously preserved. . . ."); cf. Cutco Industries, Inc. v. Naughton, 806 F.2d 361, 366 (2d Cir. 1986) ("In determining whether an agency exists [for jurisdictional purposes] under [N.Y. C.P.L.R.] § 302, courts have focused on the realities of the relationship in question rather than the formalities of agency law.").
The fact that the parent imposes operational policies and procedures on the subsidiary provides evidence that the parent controls the subsidiary as part of its business, not just as an investment. See Ugalde v. Dyncorp, Inc., No. 98 Civ. 5459, 2000 WL 217502, at *3 (S.D.N Y Feb. 23, 2000) (considering fact that parent imposed standard operating procedures on subsidiaries in support of holding that subsidiaries were mere departments of parent); Taca Int'l Airlines, S.A. v. Rolls-Royce of England, Ltd., 15 N.Y.2d 97, 204 N.E.2d 329, 256 N.Y.S.2d 129 (1965) (holding that scattered subsidiaries were mere departments of parent corporation where subsidiaries were organized like parent corporation and policies were jointly developed for all subsidiaries). On the other hand, the fact that a parent is involved in its subsidiary's major financial decisions does not show that the parent exercises more control than is inherent in its role as stockholder. See Larball Publ'g Co. v. CBS Inc., 664 F. Supp. 704, 707 (S.D.N.Y. 1987) (holding that subsidiaries were not mere departments of parent where parent only approved major expenditures); Morse Typewriter Co. v. Samanda Office Communications Ltd., 629 F. Supp. 1150, 1154 (S.D.N.Y. 1986) (holding that subsidiary was not mere department of parent where parent's express approval was only required for major expenditures); Saraceno, 83 F.R.D. at 68-71 (holding that subsidiary was not mere department of parent where parent approved major financial decisions). In Beech Aircraft, the Second Circuit explained, "The officers of any corporation that owns the stock of another necessarily exercise a considerable degree of control over the subsidiary corporation and the discharge of that supervision alone is not enough to subject the parent to New York jurisdiction." 751 F.2d at 120.
Since there is no single model of how a corporate department functions, it is sometimes difficult to determine whether a subsidiary functions just as a department would. The level of autonomy exercised by corporate departments can be expected to vary. Some departments may serve only to transmit business to the main office, while others may transact routine business independently with strategic direction from top executives. Courts have differed over whether a parent corporation must be involved in the day-to-day activities of its subsidiary in order for the subsidiary to be treated as a mere department of the parent. Compare Jayne, 502 F. Supp. at 859 (holding that subsidiary was mere department of parent even though "[t]he day-to-day operation of [the subsidiary] is not supervised by [the parent] and is conducted independently of [the parent]," because facts showed that parent "considers [the subsidiary] to be a part of its total airline services offering."); with Bellomo, 488 F. Supp. at 745 (holding that subsidiary was not mere department of parent because plaintiff had failed to establish "day to day control by the parent").
In a few cases, courts have held both 1) that a subsidiary was not a mere department of its parent because the parent was not involved in the day-to-day activities of its subsidiary or because the companies observed formalities and 2) that the subsidiary and its parent had an agency relationship because the companies were engaged in a common business enterprise. For example, in Bellomo, the court held that the subsidiaries of Pennsylvania Life Company were not mere departments of the parent corporation because the companies had not "disregarded the formal indicia of corporate separation" and because the parent was "not involved in the management of the daily affairs" of the subsidiaries. 488 F. Supp. at 745. The court then went on to decide, however, that the subsidiaries were agents of the parent because the subsidiaries were not just investments of the parent but rather were created to carry on the parent's business. Id. at 745-47. The court reasoned that, considering the companies' common business endeavor, "[t]here is a presumption . . . that the parent is sufficiently involved in the operation of the subsidiaries to become subject to jurisdiction." Id. at 746.
As previously noted, see page 4 supra, a corporate parent may act as an agent for a foreign subsidiary, thereby subjecting the latter to jurisdiction in the forum inhabited by the parent. Thus, in Palmieri, the court noted that the defendant, Sony Corporation, approved major financial decisions of its foreign affiliates, occasionally guaranteed their obligations, approved key personnel decisions, and assisted its affiliates with formulating business policies and strategies for negotiations with recording artists. Palmieri v. Estefan, 793 F. Supp. 1182, 1188 (S.D.N.Y. 1992). The court held that the foreign affiliates of Sony were not mere departments because their day-to-day finances were independent, they made most of their own personnel decisions, and they decided independently which artists to sign and which records to release within their territories. Id. The court then held, however, that Sony Corporation acted as an agent for its foreign affiliates because the related companies did business through a network of licensing agreements with each other. Id. at 1190-94; see also Larball Publishing Co., 664 F. Supp. at 707-08 (holding that CBS, predecessor in interest to Sony Corporation, was agent of foreign affiliates, though foreign affiliates were not mere departments). The court rejected the argument that a parent could not serve as an agent for its subsidiary: "[W]hen two corporations have common ownership and their activities are interrelated as here, they may have an agency relationship for jurisdictional purposes, even if the resident corporation is not controlled by the nonresident entity." Id. at 1194; cf. Cutco Industries, Inc., 806 F.2d at 366 (criticizing district court for overstating requisite level of control in agency relationship among business associates and explaining that "joint participation in a partnership or joint venture establishes `control' sufficient to make each partner or joint venturer an agent of the others").
In this case, I hold that Otis Elevator exercises sufficient control over the operations of Otis Felvonó, despite the maintenance of corporate formalities, that Otis Felvonó functions as a mere department of Otis Elevator. In the alternative, I hold there is an agency relationship between Otis Elevator and Otis Felvonó. The companies are engaged in a single business enterprise that relies on the joint efforts of various Otis affiliates, which are coordinated and controlled by Otis Elevator. See Palmieri, 793 F. Supp. at 190-94; Bellomo, 488 F. Supp. at 745-47; see also Munsell, 618 F. Supp. at 1385-86 (holding that plaintiff had sufficiently alleged that importing subsidiary was regional agent of brewery subsidiary, where sales of parent corporation's brand products were accomplished through "web-work" of affiliates); Bialek v. Racal-Milgo, Inc., 545 F. Supp. 25, 32-33 (S.D.N.Y. 1982) (holding that sales and service subsidiary was agent of parent because subsidiary functioned as component of tightly knit organization). As a component of a worldwide business in manufacturing, selling, installing, and servicing elevators and similar products, Otis Felvonó could not function without the management and coordination carried out by Otis Elevator. This is one of those cases in which the distinction between the mere department test and the agency test, as applied, is not great. See Mayatextil, S.A. v. Liztex U.S.A., Inc., No. 92 Civ. 4528, 1995 WL 131774, at *4 (S.D.N.Y. Mar. 23, 1995) (noting that "distinction between the two [tests] is not always great"); Bulova, 508 F. Supp. at 1334 (noting that "a line cannot be simply drawn between the two [tests]"). Since Otis Felvonó is subject to jurisdiction on the basis that it is a mere department of Otis Elevator or that there is an agency relationship between the two companies, plaintiffs service of process on Otis Elevator sufficed to establish jurisdiction over Otis Felvonó.
The finding that Otis Felvonó functions as a mere department of Otis Elevator is made for jurisdictional purposes only. Different standards apply when evaluating whether or not to pierce the corporate veil for liability purposes. See Marine Midland Bank v. Miller, 664 F.2d 899, 903 (2d Cir. 1981) (holding that "very stringent test" for piercing corporate veil, applicable in liability context, should not be applied to jurisdictional determinations); Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 469-70, 522 N.E.2d 40, 527 N.Y.S.2d 195 (1988) (stating that arguments about piercing corporate veil were relevant to liability, not jurisdiction); see also Mayatextil, 1995 WL 131774, at *5; Bulova Watch Co., 508 F. Supp. at 1342; Bellomo, 488 F. Supp. at 746 n. 4.
Exercise of personal jurisdiction over Otis Felvonó in this case comports with constitutional due process. Otis Felvonó does not argue that an assertion of jurisdiction, on the basis that Otis Felvonó is a mere department of Otis Elevator or that there is an agency relationship between the parent and subsidiary, would offend due process. Nevertheless, I am obliged to consider the issue of due process. When a court asserts general jurisdiction over a foreign defendant, the court must be satisfied that the defendant has "continuous and systematic general business contacts" with the forum and that assertion of jurisdiction is reasonable in the circumstances of the case. Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567-68 (2d Cir. 1996), citing, inter alia, Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), and Int'l Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). With respect to reasonableness, courts evaluate:
(1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiffs interest in obtaining convenient and effective relief (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies.Metropolitan Life, 84 F.3d at 568.
The close operational relationship between Otis Felvonó and Otis Elevator demonstrates that Otis Felvonó has continuous and systematic business contacts with this jurisdiction and that Otis Felvonó, through its parent corporation, has purposefully availed itself of the privilege of doing business here. Other courts that have found jurisdiction by applying the "mere department" test or the agency test also have come to the same conclusion. E.g., Welinsky v. Resort of the World D.N.V, 839 F.2d 928, 930 (2d Cir. 1988); Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116, 121 (2d Cir. 1967); Esi, 61 F. Supp.2d at 62; Palmieri, 793 F. Supp. at 1194; Freeman, 398 F. Supp. at 523 n. 4. Furthermore, it is fair and reasonable to require Otis Felvonó to litigate here. The Court's prior opinion on the issue of forum non conveniens weighed public interests, the difficulties plaintiff would face litigating in Hungary, and the burdens Otis Felvonó would bear litigating here in New York, and those considerations apply equally in this context. 2001 WL 69423, at *7-9 (Jan. 29, 2001).
B. Marriott International Hotels and Duna Szalluda
Marriott International Hotels is a Delaware corporation with its principal place of business in Bethesda, Maryland. It manages Marriott hotels located outside the United States. Duna Szalluda is a Hungarian corporation. It owns the Budapest Marriott Hotel. Duna Szalluda and Marriott International have entered into a management contract pursuant to which Marriott International Hotels operates the Budapest Marriott Hotel. Marriott International and Duna Szalluda both assert that they are not subject to personal jurisdiction in New York.
Duna Szalluda contends that it was not served with process, that it has never transacted any business in the United States, and that it has no relation to Marriott International other than the management contract between the two companies. Plaintiff consents to dismissal of her claims against Duna Szalluda. Declaration of Lawrence Goldhirsch ¶ 2. Therefore, the Court grants Duna Szalluda's motion that plaintiff's claims against it be dismissed.
Marriott International contends that it is not subject to jurisdiction in New York, because it has not systematically and continuously done business in New York as required by C.P.L.R. § 301, and because none of the criteria under C.P.L.R. § 302 are met. With respect to § 302, Marriott International argues that it has not transacted any business in New York, that plaintiff has not alleged any tort committed in New York or any injury inflicted in New York, and that this case does not involve real estate in New York.
Plaintiff concedes that Marriott International is not itself "doing business" in New York as required by C.P.L.R. § 301 (Pl. Mem. of Law at 5), and plaintiff does not challenge Marriott International's assertion that C.P.L.R. § 302 does not provide a basis for jurisdiction. Plaintiff argues that Marriott International should nevertheless be treated as "doing business" in New York, because Marriott hotels doing business in New York act as agents of Marriott International in making reservations for Marriott hotels outside the United States. See, e.g., Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116 (2d Cir. 1967) (holding that activities of reservation service in New York subjected foreign tour company to jurisdiction); Frummer v. Hilton Hotels Int'l Inc., 19 N.Y.2d 533, 227 N.E.2d 851, 281 N.Y.S.2d 41 (1967) (holding that activities of Hilton Reservation Service in New York subjected Hilton Hotels (U.K.) Ltd. to jurisdiction).
In support of her contention that Marriott hotels in New York act as agents for Marriott International, plaintiff alleges that the Brooklyn Marriott Hotel has authority to make binding reservations for the Budapest Marriott. Counsel for plaintiff states in his declaration that he looked up "Marriott Hotel" in the Brooklyn telephone directory and found listed a local telephone number for the Brooklyn Marriott and a national toll-free number. Goldhirsch Decl. ¶¶ 24-25. He called the local number and asked for "Reservations." Id. ¶ 26. He was transferred to a reservations representative who accepted his reservation for a room at the Budapest Marriott and told him that the reservation was binding. Id. ¶ 26. Counsel received a written confirmation of the reservation in the mail from the Marriott Reservation Center in Nebraska. Id. ¶ 29. This confirmation notice, attached as an exhibit to counsel's affidavit, provides the same toll-free number that is listed in the Brooklyn telephone directory. Later, counsel again called the Brooklyn Marriott local telephone number and was transferred to a reservations representative who accepted his cancellation of his reservation. Id. at ¶ 29. This reservations representative told counsel that she was in Manhattan. Id. ¶ 29.
After having had the opportunity to conduct full discovery on the issue of jurisdiction, plaintiff has failed to present sufficient evidence to sustain her burden of establishing jurisdiction over Marriott International Hotels. Plaintiff's evidence, if credited, shows only that employees of the Brooklyn Marriott transfer phone calls from persons inquiring about reservations to reservations representatives. Although plaintiff alleges that the Brooklyn Marriott has authority to make binding reservations for the Budapest Marriott, Pl. Mem. of Law at 5, 7, she presents no evidence showing that the reservations representatives to whom counsel's tactical telephone calls were transferred are employees of the Brooklyn Marriott.
Plaintiff also submits a transcript of her deposition of Brendan Ross, who is a corporate attorney for Marriott International, Inc. It is difficult to discern in Ross's testimony any support for plaintiff's jurisdictional contention. According to Ross, Marriott's worldwide Reservation Center is located in Salt Lake City, and representatives in the Salt Lake City office answer calls to Marriott's national phone number for reservations. Ross Dep. at 25. Plaintiff does not address the natural inference that employees of the Brooklyn Marriott transfer inquiries regarding reservations in other Marriott hotels to Marriott's Worldwide Reservation Center.
Plaintiff's counsel states in his declaration that the second reservations representative with whom he spoke told him that she was in Manhattan. Goldhirsch Decl. ¶ 29. Plaintiff does not attempt to identify any particular Marriott office in Manhattan that may perform reservation services. In fact, she does not even mention in her memorandum of law that the second reservations representative was in Manhattan; rather, she argues only that employees of the Brooklyn Marriott make binding reservations for the Budapest Marriott. There is not sufficient evidence to support such an inference. Nor is there any evidence that the Brooklyn Marriott confirms reservations or performs any other services on behalf of Marriott hotels abroad.
In certain circumstances, common ownership of a New York corporation and a related foreign corporation "gives rise to a valid inference as to the broad scope of the agency," Frummer, 19 N.Y.2d at 538, but only if the services performed by the corporation in New York on behalf of the foreign corporation are significant, id. at 536. In Frummer, the New York Court of Appeals held that Hilton Hotels, Ltd., a British corporation, was subject to jurisdiction in New York because of the activities of a related corporation, the Hilton Reservation Service, which had an office in New York. The Hilton Reservations Service was established as a liaison between travel agencies and Hilton hotels and had responsibility for doing publicity work and for making and confirming reservations. Id. at 537. The Court of Appeals concluded: "In short — and this is the significant and pivotal factor — the Service does all the business which Hilton (U.K.) could do were it here by its own officials." Id. Interpreting Frummer, the Second Circuit stated in Gelfand:
In our view, the decisive test is that upon which the court in Frummer relied, `the (reservation) Service does all the business which (defendant corporation) could do were it here by its own officials.' In the context of the Frummer case, we take this to mean that a foreign corporation is doing business in New York `in the traditional sense' when its New York representative provides services beyond `mere solicitation' and these services are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially similar services.385 F.2d at 120-21 (citation omitted).
It cannot be said, based on the evidence presented by plaintiff in this case, that the Brooklyn Marriott has been authorized to do any significant business on behalf of Marriott hotels outside the United States. Rather, the evidence shows that the Marriott Worldwide Reservation Center in Salt Lake City and the Marriott Reservation Center in Nebraska have been established to make and confirm reservations in Marriott hotels, and customers are directed to use a toll-free phone number to request reservations. If a client calls the Brooklyn Marriott on its local phone number and asks to make a reservation for another Marriott hotel, the only role played by the Brooklyn Marriott, at least as far as plaintiff's evidence shows, is to transfer the phone call.
The Court in Frummer distinguished the facts in that case from those in Miller v. Surf Properties, Inc., 4 N.Y.2d 475, 151 N.E.2d 874, 176 N.Y.S.2d 318 (1958). In Miller, the defendant Surf Properties operated a hotel in Miami Beach and contracted with a New York company called Broadway Resort Service, which provided telephone answering services for several dozen hotels. Surf Properties maintained a listing under its own name in the New York City telephone directory with the phone number for Broadway Resort Services. Employees of Broadway Resort Services answered questions about the Surf Properties hotel, mailed brochures upon request, provided reservations information, and accepted reservation deposits by mail. After forwarding the reservations request to the hotel and obtaining approval, they would then mail written confirmations. Id. at 478-79. The Court of Appeals held that the activities performed by Broadway Resort Services on behalf of Surf Properties constituted "mere solicitation," which is an inadequate basis for jurisdiction. Id. at 480-81.
If the services performed by Broadway Resort Services for Surf Properties were inadequate to establish jurisdiction, then the considerably lesser services performed by the Brooklyn Marriott for Marriott International cannot suffice to establish jurisdiction. See also Tripmasters, Inc. v. Hyatt Int'l Corp., 696 F. Supp. 925 (S.D.N.Y. 1988) (Acapulco Continental Hotel was not subject to jurisdiction on basis of presence of Hyatt's Worldwide Sales Office in New York, where Worldwide Sales Office only provided information about group tours and conventions); Kopolowitz v. Deepdene Hotel Tennis Club, 464 F. Supp. 677, 679-80 (S.D.N.Y. 1979) (activities of representation service in New York on behalf of defendant hotel, including promotion and handling of requests for reservations, were insufficient to subject hotel to jurisdiction, because representation service did not have "absolute power to confirm reservations"); Ziperman v. Frontier Hotel of Las Vegas, 50 A.D.2d 581, 374 N.Y.S.2d 697, 700 (2d Dep't 1975) ("The solicitation of guests by the listing in a local telephone directory of the toll-free direct-line telephone number of the Nevada Hotel is not enough to support a finding that the corporate owner of the hotel was within our jurisdiction.") (citations omitted).
The cases cited by plaintiff, in which courts found that the presence of agents in New York subjected foreign corporations to jurisdiction, involved purposeful establishment of reservations and publicity services in New York by the foreign corporations. Such services are far more significant than the incidental services performed by the Brooklyn Marriott for Marriott hotels abroad. See Welinsky v. Resort of the World D.N.V., 839 F.2d 928, 930 (2d Cir. 1988) (motion to dismiss prior to full discovery denied, because plaintiff alleged that reservation service in New York, which was owned in part by defendant hotel, was responsible for marketing and had authority to confirm reservations); Gelfand, 385 F.2d at 121 (reservation service in New York confirmed reservations and performed broad array of services, generating three-sevenths of business of defendant tour company); Feinstein v. Curtain Bluff Resort, No. 96 Civ. 8860, 1998 WL 458060, at *3-4 (S.D.N.Y. Aug. 5, 1998) (defendant hotel's representative in New York solicited business, handled public relations, arranged reservations subject to defendant's authorization, received mail for defendant, and deposited checks into defendant's New York bank account); Sankaran v. Club Mediterranee, S.A., No. 97 Civ. 8318, 1998 WL 433780, at *3-4 (S.D.N.Y. July 31, 1998) (Club Med Sales, Inc. booked all Club Med vacations and performed all marketing for Club Med resorts, while Club Med Management Services, Inc. performed all financial functions related to booking and marketing; therefore they acted as agents in New York for owner of Club Med Guadeloupe resort); Terris-Feldman v. Dan Hotels of Israel, No. 95 Civ. 9666, 1997 WL 109441, at *3 (S.D.N.Y. Mar. 11, 1997) (representative in New York acted as sole agent in North America for defendant hotel, making and confirming all reservations); Darby v. Compagnie Nationale Air France, 769 F. Supp. 1255, 1258-59, 1261 (S.D.N.Y. July 12, 1991) (New York corporation answered telephone calls to toll-free reservations number and made final reservations for Meridien hotels, including defendant hotel); I. Oliver Engebretson, Inc. v. Aruba Palm Beach Hotel Casino, 587 F. Supp. 844, 847, 850-51 (S.D.N.Y. 1984) (New York representative was responsible for promoting defendant hotel and soliciting and confirming reservations); Weston v. Club Mediterranee, S.A., 197 A.D.2d 453, 602 N.Y.S.2d 616 (1st Dep't 1993) (Club Med Sales, Inc. sold vacation packages for all Club Med resorts; therefore it acted as agent in New York for resort owner, resort manager, and Club Med parent corporations).
Before conducting any discovery, plaintiff's allegation that the Brooklyn Marriott made binding reservations for the Budapest Marriott may have sufficed to defeat a motion to dismiss for lack of jurisdiction, see Russell v. Hilton Int'l of Puerto Rico, Inc., No. 93 Civ. 2552, 1994 WL 38516 (S.D.N.Y. 1994) (denying motion to dismiss for lack of jurisdiction where plaintiff alleged that New York Hilton and Towers acted as agent for Caribe Hilton and where parties had not yet conducted discovery); but plaintiff has now had a full opportunity to conduct discovery and must present evidence to support her allegations. Since plaintiff has not presented sufficient evidence to support a finding of jurisdiction, the Court grants the motion to dismiss brought by Marriott International Hotels, Inc.
II. JOINDER OF INDISPENSABLE PARTIES
Marriott International Hotels and Duna Szalluda contend that Otis Felvonó is an indispensable party and therefore argue that if the Court dismisses plaintiff's claims against Otis Felvonó for lack of personal jurisdiction, the Court should dismiss plaintiff's claims against all the defendants. Since I have decided that Otis Felvonó is subject to this Court's jurisdiction, and since I am dismissing plaintiff's claims against Marriott International Hotels and Duna Szalluda, I need not decide whether, in different circumstances, Otis Felvonó would be an indispensable party.
III. PLAINTIFF'S CLAIMS AGAINST OTIS ELEVATOR COMPANY
Otis Elevator moved to dismiss plaintiff's claims against it under Rule 12(b)(6) for failure to state a claim upon which relief could be granted. The Court converted Otis Elevator's motion into one for summary judgment in its Order of January 26, 2001, and granted discovery on the issue "whether the American corporation is liable for the conduct of the Hungarian corporation." 2001 WL 69423, at *1-3, 6. Following discovery, Otis Elevator has submitted a brief reiterating its argument that plaintiff has not alleged any legally cognizable claim against it. Specifically, Otis Elevator asserts that plaintiff does not allege that Otis Elevator was negligent but only claims that Otis Elevator should be held liable for the negligence of Otis Felvonó. Otis Elevator contends that there is no basis for piercing the corporate veil in this case.
Plaintiff in her opposition to defendants' motions does not respond to Otis Elevator's arguments. Plaintiffs brief addresses the Court's personal jurisdiction over Marriott International, the Court's personal jurisdiction over Otis Felvonó, and the issue of indispensable parties. Plaintiff does not, however, consent to the dismissal of her claims against Otis Felvonó, as she does with respect to her claims against Duna Szalluda, but rather opposes such dismissal. Accordingly, I consider the arguments advanced by plaintiff on the issue of personal jurisdiction over Otis Felvonó as a mere department or agent of Otis Elevator insofar as those arguments are relevant to the issue of piercing the corporate veil between Otis Elevator and Otis Felvonó for liability purposes.
Plaintiff submits an affidavit by Lawrence Goldhirsch, which states, "This declaration is submitted in opposition to the motions to dismiss by the defendants Marriott Hotels International Inc. (MIHI), Otis Elevator Co. (OE) and Otis Felvono Kft. (OF). Plaintiff consents to the dismissal of Duna Szalloda Rt." ¶ 2.
I accept Otis Elevator's contention that plaintiff does not adequately allege that Otis Elevator itself owed any duty of care to the plaintiff. While the complaint generally asserts that all the defendants owed a duty of care to plaintiff, ¶ 17, the complaint does not allege any facts showing that Otis Elevator owed a duty of care to plaintiff. Rather, the complaint states that Otis Felvonó contracted to maintain the elevators at the Budapest Marriott. ¶ 16. Plaintiff's complaint does, however, allege that Otis Felvonó and Otis Elevator, while separately incorporated, are in effect the same company:
Defendant Otis Felvonó kft. is the name under which Otis Elevator Co. does business in Hungary, is merely a branch of defendant Otis Elevator Co. and is not a true subsidiary, due to common ownership, financial dependency, identity of personnel, failure to observe corporate formalities and other circumstances.
¶ 9. Thus, plaintiffs claims against Otis Elevator must be premised on a theory of piercing the corporate veil.
In order to prove that the corporate veil between Otis Elevator and Otis Felvonó should be pierced, plaintiff must show first "that the owner exercised complete domination over the corporation with respect to the transaction at issue," and second "that such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil." American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997); accord Mag Portfolio Consult, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58, 63 (2d Cir. 2001); Freeman v. Complex Computing Co., 119 F.3d 1044, 1052 (2d Cir. 1997); Morris v. New York State Dep't of Taxation and Fin., 82 N.Y.2d 135, 623 N.E.2d 1157, 603 N.Y.S.2d 807 (1993).
The evidence presented by plaintiff on the issue of whether to disregard the separate corporate form of Otis Felvonó for jurisdictional purposes is relevant to this first element in the test for whether to disregard the corporate form for liability purposes, although the standards for jurisdiction and liability are not necessarily identical. See Marine Midland Bank v. Miller, 664 F.2d 899, 903 (2d Cir. 1981) (stating that jurisdictional test is not identical to liability test). Compare Freeman, 119 F.3d at 1053 (listing ten factors considered by courts in determining whether to pierce corporate veil for liability purposes) with Jazini v. Nissan Motor Co., 148 F.3d 181, 184-85 (2d Cir. 1998) (listing four factors considered by courts in determining whether subsidiary is mere department of parent for jurisdictional purposes).
As for the second element, however, plaintiff's complaint does not allege any facts and plaintiff has not presented any evidence to show that Otis Elevator and Otis Felvonó abused the corporate form to defraud or commit any wrong against the plaintiff.
While complete domination of the corporation is the key to piercing the corporate veil, . . . such domination, standing alone, is not enough; some showing of a wrongful or unjust act toward [the party seeking piercing] is required. . . . The party seeking to pierce the corporate veil must establish that the owners, through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party. . . .Morris, 82 N.Y.2d at 141-42; accord Mag Portfolio Consult, 268 F.3d at 64; Thrift Drug, Inc. v. Universal Prescription Adm'rs, 131 F.3d 95, 97 (2d Cir. 1997); American Fuel Corp., 122 F.3d at 134; Freeman, 119 F.3d at 1053. This is not a case in which, for example, money was transferred from corporate accounts to avoid payment to a creditor. Mars Electronics of N.Y, Inc. v. U.S.A. Direct, Inc., 28 F. Supp.2d 91, 98-99 (E.D.N.Y. 1998) (sole shareholder withdrew money from corporate account in the form of checks payable to himself, his wife, and builders of his home). Any injury that plaintiff suffered exiting an elevator in the Budapest Marriott could not plausibly have resulted from abuse of the corporate form by Otis Elevator and Otis Felvonó.
Since plaintiff has not alleged sufficient facts or presented sufficient evidence to show that Otis Elevator and Otis Felvonó abused the corporate form to defraud or commit any wrong against plaintiff, which is required in order to pierce the corporate veil, I grant Otis Elevator's motion for summary judgment. See Fed.R.Civ.P. 56(c) ("The judgment sought shall be rendered forthwith if the [evidence] show[s] that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law.").
For the foregoing reasons, the Court grants the motions by defendants Marriott International Hotels and Duna Szalluda Rt. to dismiss plaintiff's claims against them for lack of personal jurisdiction, the Court denies Otis Felvonó's motion to dismiss plaintiff's claims against it for lack of personal jurisdiction, and the Court grants Otis Elevator's motion for summary judgment.
The Clerk of the Court is directed to dismiss the complaint against defendants Marriott International Hotels, Inc. and Duna Szalluda Rt. for lack of personal jurisdiction over these defendants. Because these dismissals are on jurisdictional grounds, they are without prejudice.
The Clerk of the Court is further directed to dismiss the complaint against defendant Otis Elevator Company with prejudice.
The case will continue against defendant Otis Felvonó kft. Counsel for the parties are directed to attend a status conference in Room 17C, 500 Pearl Street, at 4:00 p.m. on January 17, 2002.
It is SO ORDERED.