Gardemal v. Westin Hotel Co.

• Decision Date: 17 August 1999
• Docket Number: No. 98-50119,98-50119
• Citation: 186 F.3d 588
• Parties: (5th Cir. 1999) LISA CERZA GARDEMAL, Administrator of the Estate of John W. Gardemal, Deceased, Plaintiff-Appellant, v. WESTIN HOTEL COMPANY, doing business as Westin Regina Resort; WESTIN MEXICO SA DE CV, Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 588

186 F.3d 588 (5th Cir. 1999)

LISA CERZA GARDEMAL, Administrator of the Estate of John W. Gardemal, Deceased, Plaintiff-Appellant, v. WESTIN HOTEL COMPANY, doing business as Westin Regina Resort; WESTIN MEXICO SA DE CV, Defendants-Appellees.

No. 98-50119

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

August 17, 1999

Rehearing Denied Sept. 29, 1999.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Appeal from the United States District Court For the Western District of Texas

Before EMILIO GARZA, DeMOSS, and PARKER, Circuit Judges.

DeMOSS, Circuit Judge:

Plaintiff-appellant, Lisa Cerza Gardemal ("Gardemal"), sued defendants-appellees, Westin Hotel Company ("Westin") and Westin Mexico, S.A. de C.V. ("Westin Mexico"), under Texas law, alleging that the defendants were liable for the drowning death of her husband in Cabo San Lucas, Mexico. The district court dismissed the suit in accordance with the magistrate judge's recommendation that the court grant Westin's motion for summary judgment, and Westin Mexico's motion to dismiss for lack of personal jurisdiction. We affirm the district court's rulings.

I.

In June 1995, Gardemal and her husband John W. Gardemal, a physician, traveled to Cabo San Lucas, Baja California Sur, Mexico, to attend a medical seminar held at the Westin Regina Resort Los Cabos ("Westin Regina"). The Westin Regina is owned by Desarollos Turisticos Integrales Cabo San Lucas, S.A. de C.V. ("DTI"), and managed by Westin Mexico. Westin Mexico is a subsidiary of Westin, and is incorporated in Mexico. During their stay at the hotel, the Gardemals decided to go snorkeling with a group of guests. According to Gardemal, the concierge at the Westin Regina directed the group to "Lovers Beach" which, unbeknownst to the group, was notorious for its rough surf and strong undercurrents. While climbing the beach's rocky shore, five men in the group were swept into the Pacific Ocean by a rogue wave and thrown against the rocks. Two of the men, including John Gardemal, drowned.

Gardemal, as administrator of her husband's estate, brought wrongful death and survival actions under Texas law against Westin and Westin Mexico, alleging that her husband drowned because Westin Regina's concierge negligently directed the group to Lovers Beach and failed to warn her husband of its dangerous condition.¹ Westin then moved for summary judgment, alleging that although it is the parent company of Westin Mexico, it is a separate corporate entity and thus could not be held liable for acts committed by its subsidiary. The magistrate judge agreed with Westin, and recommended that Westin be dismissed from the action. In reaching its decision the magistrate judge rejected Gardemal's assertion that the state-law doctrines of alter-ego and single business enterprise allowed the court to disregard Westin's separate corporate identity. After Westin filed its motion for summary judgment, Westin Mexico also moved to dismiss the suit. In a Rule 12(b)(2) motion, Westin Mexico alleged that there were insufficient minimum contacts to bring it within the personal jurisdiction of the court. Finding that there was neither general nor specific jurisdiction over Westin Mexico, the magistrate judge concluded that personal jurisdiction was in fact lacking and recommended that Westin Mexico be dismissed.

Gardemal timely objected to the magistrate judge's two recommendations. Applying a de novo standard of review, the district court accepted the magistrate judge's recommendations and dismissed Gardemal's suit. Gardemal now appeals, alleging that the district court erred in granting Westin's motion for summary judgment, and Westin Mexico's motion to dismiss. We affirm.

II.

We review a district court's grant of summary judgment de novo. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th Cir. 1995). Summary judgment is appropriate if the record reveals "that there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In making this determination, we must evaluate the facts in the light most favorable to the non-moving party. Matsushita, 475 U.S. at 587; Todd, 47 F.3d at 1451.

A district court's dismissal for want of personal jurisdiction is subject to de novo review. Jobe v. ATR Mktg., Inc., 87 F.3d 751, 753 (5th Cir. 1996). When a nonresident defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating the district court's jurisdiction over the defendant. Wilson v. Belin, 20 F.3d 644, 649 (5th Cir. 1994). When, as in this case, the district court rules on the motion without an evidentiary hearing, the plaintiff may satisfy its burden by presenting a prima facie case for jurisdiction. Felch v. Transportes Lar-Mex S.A. de C.V., 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." Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990).

III.

Two separate issues confront us in this appeal. The first is whether the district court properly granted Westin's motion for summary judgment. The second is whether the district court erred in granting Westin Mexico's motion to dismiss for lack of personal jurisdiction. We address each in turn.

A.

In this action Gardemal seeks to hold Westin liable for the acts of Westin Mexico by invoking two separate, but related, state-law doctrines. Gardemal first argues that liability may be imputed to Westin because Westin Mexico functioned as the alter ego of Westin. See Castleberry v. Branscum, 721 S.W. 2d 270, 272 (Tex. 1986) (explaining that under Texas law corporate form may be disregarded if corporation functions as alter-ego of another corporation). Gardemal next contends that Westin may be held liable on the theory that Westin Mexico operated a single business enterprise. See Old Republic Ins. Co. v. Ex-Im Servs. Corp., 920 S.W. 2d 393, 395-96 (Tex. App--Houston [1st Dist.] 1996, no writ) (explaining that under Texas law corporate form may be disregarded when corporations are not operated as separate entities but rather integrate their resources to achieve a common business purpose). We consider first the issue of whether Westin may be held liable on an alter-ego theory.

1.

Under Texas law the alter ego doctrine allows the imposition of liability on a corporation for the acts of another corporation when the subject corporation is organized or operated as a mere tool or business conduit. Hall v. Timmons, 987 S.W. 2d 248, 250 (Tex. App.--Beaumont 1999, no writ); Castleberry, 721 S.W. 2d at 272. It applies "when there is such unity between the parent corporation and its subsidiary that the separateness of the two corporations has ceased and holding only the subsidiary corporation liable would result in injustice." Harwood Tire--Arlington, Inc. v. Young, 963 S.W. 2d 881, 885 (Tex. App.--Fort Worth 1998, writ dism'd by agr.). Alter ego is demonstrated "by evidence showing a blending of identities, or a blurring of lines of distinction, both formal and substantive, between two corporations. Hideca Petroleum Corp. v. Tampimex Oil Int'l Ltd., 740 S.W. 2d 838, 843 (Tex. App.--Houston [1st Dist.] 1987, no writ). An important consideration is whether a corporation is underfunded or undercapitalized, which is an indication that the company is a mere conduit or business tool. Lucas v. Texas Indus., Inc., 696 S.W. 2d 372, 374 (Tex. 1984).²

On appeal Gardemal points to several factors which, in her opinion, show that Westin is operating as the alter ego of Westin Mexico. She claims, for example, that Westin owns most of Westin Mexico's stock; that the two companies share common corporate officers; that Westin maintains quality control at Westin Mexico by requiring Westin Mexico to use certain operations manuals; that Westin oversees advertising and marketing operations at Westin Mexico through two separate contracts; and that Westin Mexico is grossly undercapitalized. See United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691-92 (5th Cir. 1985) (listing the numerous factors used in alter ego analysis); Castleberry, 721 S.W. 2d at 272 (same). Gardemal places particular emphasis on the last purported factor, that Westin Mexico is undercapitalized. She insists that this factor alone is sufficient evidence that Westin Mexico is the alter ego of Westin. See Jon-T Chemicals, Inc., 768 F.2d at 692-93 (explaining that undercapitalization is an important factor in alter-ego analysis). We are not convinced.

The record, even when viewed in a light most favorable to Gardemal, reveals nothing more than a typical corporate relationship between a parent and subsidiary. It is true, as Gardemal points out, that Westin and Westin Mexico are closely tied through stock ownership, shared officers, financing arrangements, and the like. But this alone does not establish an alter-ego relationship. As we explained in Jon-T Chemicals, Inc., there must be evidence of complete domination by the parent.

The control necessary . . . is not mere majority or complete stock control but such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own and is but a business conduit for its principal.

Id. at 691 (citation and quotation omitted). Thus, "one-hundred percent ownership and identity of directors and officers are, even together, an insufficient basis for applying the alter ego theory to pierce the corporate veil." Id.

In this case, there is insufficient record evidence that Westin dominates Westin Mexico to the extent that Westin Mexico has, for practical purposes, surrendered its...