Jazini v. Nissan Motor Co., Ltd.

Decision Date29 June 1998
Docket NumberD,No. 686,686
PartiesPeyman JAZINI, a minor, by his parents, Ali Jazini and Mina Mahmoudieh; Ali Jazini, individually; Mina Mahmoudieh, individually, Plaintiffs-Appellants, v. NISSAN MOTOR COMPANY, LTD., Defendant-Appellee. ocket 97-7611.
CourtU.S. Court of Appeals — Second Circuit

Robert Ian Goodman, New York City, (Tomas L. Ryan, Ryan and Ryan, New York City, on the briefs) for Plaintiffs-Appellants.

Joel A. Dewey, Baltimore, MD (Loren H. Brown, Piper & Marbury, New York City, on the brief) for Defendant-Appellee.

Before: KEARSE, LEVAL and FRIEDMAN *, Circuit Judges.

FRIEDMAN, Circuit Judge:

This appeal challenges the decision of the district court dismissing a product liability suit against a Japanese automobile manufacturer because the court lacked personal jurisdiction over the defendant. We affirm.

I.

The appellants, a married couple and their minor son (collectively the Jazinis), all residents of New York state, brought this damage suit in the United States District Court for the Southern District of New York against Nissan Motor Co., Ltd. (Nissan Japan), a Japanese Corporation. The amended complaint alleged that they were injured when a Nissan Patrol automobile, which one of the Jazinis was driving in Iran, lost its rear wheel assembly and crashed; that the accident was caused by a defective part of the assembly, which broke while the automobile was running; and that Nissan Japan was careless and negligent in the design, manufacture and testing of the part. (The Jazinis conceded that the vehicle involved in the accident was manufactured in Japan and that Patrol automobiles were not marketed or distributed in the United States.)

The subject matter jurisdiction of the district court rested on the diversity provision, 28 U.S.C. § 1332(a) (1994). The principal allegations in the amended complaint relating to personal jurisdiction were as follows:

1. Nissan Japan "maintains a presence" in New York state "through the actions and presence of its wholly-owned subsidiary, Nissan Motor Corporation in U.S.A." (Nissan U.S.A.), and two wholly-owned subsidiaries of the latter corporation. (Par. 3).

2. Nissan U.S.A. is "wholly controlled" by Nissan Japan and "is wholly dependent on its parent, among other things, for its business plan and financing." (Par. 6).

3. Nissan U.S.A. "is able to act as would its parent, were [Nissan Japan] directly present in the State of New York." (Par. 6).

In the proceedings before the district court, the Jazinis further alleged that according to Nissan Japan's annual report, one of that company's four executive directors is the chairman of the board of Nissan U.S.A. and that the report "refers to how [Nissan Japan] directs the manufacturing operations of the American subsidiary."

On Nissan Japan's motion pursuant to Rule 12(b) of the Federal Rules of Civil Procedure and before discovery, the district court dismissed the complaint for lack of jurisdiction over that company. After summarizing the foregoing jurisdictional allegations, the court, applying New York law, which it categorized as "well established," ruled that the Jazinis had failed to show "the degree of domination which the parent must exert over the domestic subsidiary before the parent will be subject to personal jurisdiction solely because of the presence of the subsidiary." The court concluded:

Indeed, if allegations as sparse as those advanced by plaintiffs would be enough to subject the foreign parent to "extensive discovery" in the United States, the scope of jurisdiction of courts sitting in New York over multi-national corporations would be vastly increased contrary to established law and to the understanding of the commercial community.

II.

In diversity cases the federal courts generally apply state law in deciding substantive questions and federal law in deciding procedural ones. See Hanna v. Plumer, 380 U.S. 460, 465, 471, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965). "[T]he amenability of a foreign corporation to suit in a federal court in a diversity action [, however,] is determined in accordance with the law of the state where the court sits, with 'federal law' entering the As the district court indicated, the requirements the New York courts apply in determining whether they have jurisdiction over a foreign corporation on the basis of the intrastate activities of that corporation's subsidiaries are "well established." The issue in the present case, however, is not whether the Jazinis had satisfied those standards, but the preliminary question whether what they have shown is sufficient to entitle them to discovery on those questions.

                picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee."  Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir.1963) (in banc) (footnote omitted).  The rationale for that ruling was that "neither the federal legislature nor the federal rule-makers have had any intention to displace state statutes as to the taking of jurisdiction over foreign corporations in ordinary diversity cases."  Id. at 227.   Accordingly, we look to New York law to ascertain the standard for determining whether the district court in this case had jurisdiction over the Japanese corporation, Nissan Japan
                

Our cases show that "[p]rior to discovery, a plaintiff challenged by a jurisdiction testing motion may defeat the motion by pleading in good faith, see Fed.R.Civ.P. 11, legally sufficient allegations of jurisdiction," i.e., by making a "prima facie showing" of jurisdiction. Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 111 S.Ct. 150, 112 L.Ed.2d 116 (1990); Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985); Fed.R.Civ.P. 12(b)(2). We conclude, as apparently the district court did, that the Jazinis did not make a prima facie showing that the district court had jurisdiction over Nissan Japan. New York courts may exercise personal jurisdiction over a foreign corporation that is "engaged in such a continuous and systematic course of 'doing business' in New York as to warrant a finding of its 'presence' in [the state]," Delagi v. Volkswagenwerk A.G. of Wolfsburg, Germany, 29 N.Y.2d 426, 430-31, 328 N.Y.S.2d 653, 278 N.E.2d 895 (1972) (applying N.Y. C.P.L.R. § 301), even if the cause of action is unrelated to the defendant's New York activities. See Taca Int'l Airlines, S.A. v. Rolls-Royce of England, Ltd., 15 N.Y.2d 97, 102, 256 N.Y.S.2d 129, 204 N.E.2d 329 (1965) (New York courts had personal jurisdiction over a foreign corporation even though the cause of action arose from an accident in Nicaragua).

Where, as here, the claim is that the foreign corporation is present in New York state because of the activities there of its subsidiary, the presence of the subsidiary alone does not establish the parent's presence in the state. See Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir.1984). For New York courts to have personal jurisdiction in that situation, the subsidiary must be either an "agent" or a "mere department" of the foreign parent. See Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d Cir.1996).

To establish that a subsidiary is an agent of the parent, the plaintiff must show that the subsidiary "does all the business which [the parent corporation] could do were it here by its own officials." Frummer v. Hilton Hotels Int'l, Inc., 19 N.Y.2d 533, 537, 281 N.Y.S.2d 41, 227 N.E.2d 851, remittitur amended, 20 N.Y.2d 737, 283 N.Y.S.2d 99, 229 N.E.2d 696, and cert. denied, 389 U.S. 923, 88 S.Ct. 241, 19 L.Ed.2d 266 (1967). The Jazinis alleged only that Nissan U.S.A. "is able to act as would its parent, were [Nissan Japan] directly present in the State of New York." This conclusory statement is but a restatement, with slight changes, of the legal standard for determining agency enunciated in Frummer. It states no facts supporting that conclusion and does not constitute a prima facie showing of agency. Moreover, a foreign car manufacturer is not "present" in New York simply because it sells cars through a New York distributor. See Delagi, 29 N.Y.2d at 433, 328 N.Y.S.2d 653, 278 N.E.2d 895. The Jazinis have thus failed to make any showing that Nissan U.S.A. is the defendant's agent within the meaning of...

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