Gammill v. Lincoln Life and Annuity Distributors

• Decision Date: 28 March 2001
• Docket Number: No. CIV.A. 399CV912WS.,CIV.A. 399CV912WS.
• Parties: Dave and Virginia GAMMILL and Robert Patrick, For Themselves and Others Similarly Situated Plaintiffs v. LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC., Lincoln National Life Insurance Company, and Lincoln National Corporation Defendants
• Court: U.S. District Court — Southern District of Mississippi

Page 632

200 F.Supp.2d 632

Dave and Virginia GAMMILL and Robert Patrick, For Themselves and Others Similarly Situated Plaintiffs v. LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC., Lincoln National Life Insurance Company, and Lincoln National Corporation Defendants

No. CIV.A. 399CV912WS.

United States District Court, S.D. Mississippi, Jackson Division.

March 28, 2001.

Joe Clay Hamilton, Hamilton & Linder, Meridian, MS, Ingrid Blackwelder Erwin, Ogletree, Deakins, Nash, Smoak & Stewart, Greenville, SC, G. Richard Baker, Thomas F. Campbell, Campbell & Baker, LLP, K. Stephen Jackson, Jeff S. Daniel, Jackson, Fraley & Shuttlesworth, P.C., Birmingham, AL, for Plaintiffs.

Phillip B. Abernethy, Robert M. Frey, Emerson Barney Robinson, III, P. Ryan Beckett, Butler, Snow, O'Mara, Stevens & Cannada, Jackson, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

WINGATE, District Judge.

Before the court is the motion of Lincoln National Corporation (hereinafter "LNC"), the parent company of Lincoln National Life Insurance Company, to dismiss the plaintiffs' complaint against it for lack of in personam jurisdiction. This case involves a complaint asserting that the insurer, Lincoln National Life Insurance Company, and a marketing firm called Lincoln Life & Annuity Distributors, Inc., are responsible for selling the plaintiffs an insurance policy to be funded by the cash value of a previously existing policy and interest and/or dividend contributions, a policy also known as a "vanishing premiums" policy. The plaintiffs contend that this court's personal jurisdiction over LNC may be predicated on three documents showing that LNC is the parent company of the insurer, Lincoln National Life Insurance Company, and upon the contention that the insurer, Lincoln National Life Insurance Company, is merely the alter ego of LNC. The three documents are letterheads and forms generated by the insurer, Lincoln National Life Insurance Company, stating that the insurer is a part of LNC. LNC raises no dispute with these documents and readily admits that it is the parent company of Lincoln National Life Insurance Company.

The subject matter jurisdiction of this court over this matter is predicated on diversity of citizenship and an amount in controversy in excess of $75,000.00 in accordance with Title 28 U.S.C. § 1332.¹ Pursuant to Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), the applicable substantive law for this dispute is taken from the forum in which the federal court sits, the law of the State of Mississippi. Rittenhouse v. Mabry, 832 F.2d 1380, 1382 (5th Cir.1987); DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1264 (5th Cir.1983) (in a federal diversity case, the federal court must apply the substantive law of the state in which it sits).

The plaintiffs reach out for LNC pursuant to Mississippi's long-arm statute which provides in relevant part that "[a]ny nonresident person, firm, general or limited partnership, or any foreign or other corporation not qualified under the Constitution and laws of this state as to doing business herein, who shall make a contract with a resident of this state to be performed in whole or in part by any party in this state or who shall commit a tort in whole or in part in this state against a resident or nonresident of this state, or who shall do any business or perform any character of work or service in this state, shall by such act or acts be deemed to be doing business in Mississippi and shall thereby be subjected to the jurisdiction of the courts of this state." See Mississippi Code Annotated § 13-3-57. LNC contends that it has no contacts with Mississippi, has made no contracts in Mississippi, has committed no torts in Mississippi, and has always observed proper corporate formality regarding its subsidiaries. For the reasons which follow, this court, over plaintiffs' objection, is persuaded to grant LNC's motion to dismiss it from this lawsuit for lack of in personam jurisdiction.

THE ALTER EGO STANDARD

When a nonresident defendant as LNC moves to dismiss for lack of personal jurisdiction, it is the plaintiff who bears the burden of demonstrating the district court's jurisdiction over the defendant seeking dismissal. Gardemal v. Westin Hotel Company, 186 F.3d 588, 592 (5th Cir.1999), citing Wilson v. Belin, 20 F.3d 644, 649 (5th Cir.1994). A plaintiff satisfies this burden by presenting a prima facie case for jurisdiction. Id., citing Felch v. Transportes Lar-Mex SA De CV., 92 F.3d 320, 326 (5th Cir.1996). In deciding whether a prima facie case has been made, "uncontroverted allegations in the plaintiff's complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor." Id., citing Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir.1990).

The rationale behind the "alter ego" theory is that if the shareholders themselves, or the corporations themselves, disregard the legal separation, distinct properties, or proper formalities of the different corporate enterprises, then the law likewise will disregard them. See Gundle Lining Const. Corp. v. Adams County Asphalt, Inc., 85 F.3d 201, 209 (5th Cir.1996). In North American Plastics v. Inland Shoe Manufacturing Company, 592 F.Supp. 875, 877 (N.D.Miss.1984) (applying Mississippi law), the Honorable Judge Neil Biggers stated that "[t]he corporate veil should not be `pierced' unless the corporation exists to perpetrate a fraud or is a mere instrumentality, agent, adjunct, or sham designed to subvert the ends of justice." Id. at 877-78, citing Johnson & Higgins of Mississippi, Inc. v. Commissioner of Insurance of Mississippi, 321 So.2d 281, 285 (Miss.1975). Judge Biggers noted that the piercing doctrine is to be applied "with great caution and not precipitately, and will not be applied where those in control have deliberately adopted the corporate form in order to secure its advantages in the absence of any violence to the legislative purpose by treating the corporate entity as a separate legal entity," id., citing T.C.L., Inc. v. Lacoste, 431 So.2d 918, 922 (Miss.1983). Judge Biggers concluded that, "absent a sufficient allegation of particularized facts, judicial economy requires that the corporate veil should not be preliminarily pierced for long-arm jurisdiction on the mere unsubstantiated allegations in the pleadings." Id. at 879, quoting from Fish v. East, 114 F.2d 177, 191 (10th Cir.1940), and Johnson v. Warnaco, Inc., 426 F.Supp. 44, 49 (S.D.Miss. 1976).

Then, Judge Biggers set forth the factors relevant to the determination of whether plaintiff has made sufficiently particularized allegations demonstrating the applicability of the piercing doctrine to the facts of the case: (1), the parent corporation owns all or a majority of the capital stock of the subsidiary; (2), the parent and subsidiary corporations have common directors or officers; (3), the parent corporation finances the subsidiary; (4), the parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation; (5), the subsidiary has grossly inadequate...