Central States Pension v. Phencorp Reinsur.

• Decision Date: 13 March 2006
• Docket Number: No. 05-2058.,05-2058.
• Citation: Central States Pension v. Phencorp Reinsur., 440 F.3d 870 (7th Cir. 2006)
• Parties: CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND and Howard McDougall, Plaintiffs-Appellants, v. PHENCORP REINSURANCE COMPANY, INC. and American Industrial Assurance Company, Defendants-Appellees.
• Writing for the Court: Flaum
• Court: U.S. Court of Appeals — Seventh Circuit

440 F.3d 870

CENTRAL STATES, SOUTHEAST AND SOUTHWEST AREAS PENSION FUND and Howard McDougall, Plaintiffs-Appellants, v. PHENCORP REINSURANCE COMPANY, INC. and American Industrial Assurance Company, Defendants-Appellees.

No. 05-2058.

United States Court of Appeals, Seventh Circuit.

Argued January 5, 2006.

Decided March 13, 2006.

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John J. Franczyk, Jr. (argued), Rosemont, IL, for Plaintiffs-Appellants.

Christopher E. Paetsch (argued), Brent I. Clark, Seyfarth & Shaw, Chicago, IL, for Defendants-Appellees.

Before FLAUM, Chief Judge, and ROVNER and WILLIAMS, Circuit Judges.

FLAUM, Chief Judge.

This appeal concerns whether the district court had personal jurisdiction over Defendant-Appellee Phencorp Reinsurance Company ("Phencorp"), a Barbados corporation. At all times relevant to this appeal, Phencorp was a wholly owned subsidiary of Philip Services Corporation ("PSC"), a U.S. corporation. Until 2003, PSC was subject to a collective bargaining agreement, which required PSC to make contributions on behalf of certain employees to Plaintiff-Appellant Central States, Southeast and Southwest Areas Pension Fund ("Central States"). In 2003, PSC declared bankruptcy and withdrew from the pension fund. Pursuant to the Employee Retirement Income Security Act ("ERISA"), PSC and other entities constituting PSC's "control group" were required to make withdrawal liability payments to Central States. 29 U.S.C. §§ 1301(b)(1) and 1381. PSC did not make any payments.

Central States therefore brought suit against Phencorp and American Industrial Assurance Company ("AIAC")—both subsidiaries of Phencorp and members of PSC's "control group"—to recover the payments. On August 27, 2004, Central States served Kevin Brindley ("Brindley"), a United States resident whom Central States believed to be a director of Phencorp, with a complaint and summons for Phencorp. Unbeknownst to Central States, Brindley had not been a Phencorp director in the last three years.

Phencorp filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), alleging that the district court lacked personal jurisdiction over it. According to Phencorp, its only contact with the United States was through its parent company PSC, and this contact was insufficient to establish the "minimum contacts" required for personal jurisdiction. Phencorp also moved to dismiss under Federal Rule of Civil Procedure 12(b)(5), on the ground that service of process was insufficient because Brindley was not affiliated with Phencorp at the time he was served. In response to Phencorp's motion to dismiss, Central States filed a motion for extension of time in which to effect service on Phencorp. Central States also requested discovery concerning the personal jurisdiction issue.

On February 3, 2005, the district court granted Phencorp's motion to dismiss for lack of personal jurisdiction, denied Central States's request to conduct discovery, and denied Central States's motion for extension of time to effect service on Phencorp. Central States appeals. For the following reasons, we reverse the order and opinion of the district court and remand for further proceedings consistent with this opinion.

I. Background

Central States is considered a multiemployer pension plan under ERISA. See 29 U.S.C. §§ 1002(37) and 1301(a)(3). When an employer that participates in a pension plan decides to withdraw, see id. § 1383, it is required to pay withdrawal liability, see id. § 1381. For purposes of determining withdrawal liability, ERISA defines an "employer" as the business that directly participates in the plan, as well as those entities that constitute the business's "control group." See id. § 1301(b)(1). All entities constituting the control group incur withdrawal liability.

Under the terms of a collective bargaining agreement, PSC was required to make contributions to Central States's pension plan. PSC withdrew from the pension plan, and its obligation to contribute to the plan ended on November 29, 2003. On February 9, 2004, PSC and other members of the control group received a notice and demand for payment of withdrawal liability from Central States. See id. §§ 1382(2) and 1399(b)(1). On March 22, 2004, members of the control group received notice that their withdrawal liability payments were past due. PSC and other members of the control group never made the payments.

On June 16, 2004, Central States began an investigation of the control group. At this time, PSC provided Central States with access to records for PSC's subsidiaries, including Phencorp. Phencorp's records included a list of its officers and directors serving from January 1, 2000, through June 15, 2004. The list indicated that Brindley was a director of Phencorp. According to Central States, it contacted PSC and confirmed that the list of officers and directors was current.

On August 27, 2004, Central States filed suit against Phencorp and AIAC. Central States served Brindley, a United States resident, with Phencorp's complaint and summons. Phencorp did not answer the complaint or otherwise plead before the 20-day time limit expired. See F.R.C.P. 12(a). Central States filed a motion for entry of default and default judgment against Phencorp. On September 22, 2004, Brindley telephoned Central States and stated that although he used to be the treasurer of Phencorp, his relationship with the company ended more than three years earlier.

Phencorp filed an opposition to Central States's motion for default judgment, arguing that service was improper because Brindley was not an agent of Phencorp. Phencorp maintains that Brindley was never an employee of Phencorp; that he had not been an officer or board member of Phencorp since November 14, 2001; and that he was served at his home address, which is not owned by or affiliated with Phencorp.

Phencorp also filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(2), alleging a lack of personal jurisdiction. Phencorp states that it is an insurance company organized under the laws of Barbados, with its principal place of business in St. Michael, Barbados. According to Phencorp, it does not have any employees, real estate, or a physical place of business in the United States, and it does not maintain a website. Phencorp states that although in the past it provided insurance for five companies with operations in the United States, it currently does not conduct business in the United States and its only connection to the United States is that it is owned by PSC.

Central States responded to the motion to dismiss and also filed a motion for extension of time to effectuate service, in the event that the district court ruled that the prior service was ineffective. Additionally, Central States requested discovery concerning personal jurisdiction.

On February 3, 2005, the district court denied Central States's motion for entry of default and default judgment and held that service was ineffective because Brindley was not a director of Phencorp at the time of service. The district court also granted Phencorp's motion to dismiss for lack of personal jurisdiction, without prejudice, finding that Phencorp lacked sufficient minimum contacts with the United States. The district court denied discovery to Central States, finding that Central States's evidence did not establish a "colorable basis for jurisdiction" and thus that Central States was not entitled to discovery. Finally, the district court denied Central States's motion for extension of time to effect service on Phencorp, because Phencorp did not have sufficient contacts with the United States to establish personal jurisdiction. Central States appeals.

II. Discussion

A. Standard of Review

We review de novo the district court's dismissal of Central States's claim for lack of personal jurisdiction. See, e.g., Claus v. Mize, 317 F.3d 725, 727 (7th Cir.2003). In the proceedings below, Central States had the burden to show that personal jurisdiction over Phencorp exists. See, e.g., Steel Warehouse of Wis., Inc. v. Leach, 154 F.3d 712, 714 (7th Cir.1998).

We review the district court's decision on discovery matters for an abuse of discretion. Commonwealth Ins. Co. v. Titan Tire Corp., 398 F.3d 879, 888 (7th Cir.2004). "A court does not abuse its discretion unless . . . (1) the record contains no evidence upon which the court could have rationally based its decision; (2) the decision is based on an erroneous conclusion of law; (3) the decision is based on clearly erroneous factual findings; or (4) the decision clearly appears arbitrary." Musser v. Gentiva Health Servs., 356 F.3d 751, 755 (7th Cir.2004) (quoting Sherrod v. Lingle, 223 F.3d 605, 610 (7th Cir.2000)) (internal quotation marks omitted).

B. Personal Jurisdiction Under ERISA

"[A]ny district court in which a plaintiff brings an action under Title I of ERISA will have personal jurisdiction over the defendant," if the defendant is properly served and has sufficient minimum contacts with the United States. Waeltz v. Delta Pilots Retirement Plan, 301 F.3d 804, 808 n. 3 (7th Cir.2002); see also 29 U.S.C. § 1132(e)(2) ("Where an action under this subchapter is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found."). Thus, in our personal jurisdiction analysis, we must determine if Phencorp had sufficient contacts with the United States as a whole.

These contacts "may be related or unrelated to the facts forming the basis for the lawsuit." Int'l Med. Group, Inc. v. Am. Arbitration Ass'n, Inc., 312 F.3d 833, 846 (7th Cir.2002). "Contacts related to the subject matter of the lawsuit may give rise to specific personal jurisdiction, that is, jurisdiction over the person for a case arising...