Griffith v. SSC Pueblo Belmont Operating Co.

• Decision Date: 26 September 2016
• Docket Number: Supreme Court Case No. 16SA114
• Citation: 381 P.3d 308
• Parties: In re Christine GRIFFITH, individually and as personal representative of the Estate of Antonio Jimenez, Jr., Plaintiff, v. SSC PUEBLO BELMONT OPERATING COMPANY LLC d/b/a Belmont Lodge Health Care Center ; SavaSeniorCare Administrative Services; SavaSeniorCare Consulting LLC; SSC Disbursement Company LLC; SSC Special Holdings LLC; SavaSeniorCare LLC; SVCare Holdings LLC; Canyon Sudar Partners LLC; Special Holdings Parent Holdco LLC; Proto Equity Holdings LLC; Terpax Inc. ; Michael Dunn, in his capacity as Administrator of Belmont Lodge Health Care Center ; and Cynthia Kovalcik, in her capacity as Administrator of Belmont Lodge Health Care Center, Defendants.
• Court: Colorado Supreme Court

381 P.3d 308

In re Christine GRIFFITH, individually and as personal representative of the Estate of Antonio Jimenez, Jr., Plaintiff,
v.
SSC PUEBLO BELMONT OPERATING COMPANY LLC d/b/a Belmont Lodge Health Care Center ; SavaSeniorCare Administrative Services; SavaSeniorCare Consulting LLC; SSC Disbursement Company LLC; SSC Special Holdings LLC; SavaSeniorCare LLC; SVCare Holdings LLC; Canyon Sudar Partners LLC; Special Holdings Parent Holdco LLC; Proto Equity Holdings LLC; Terpax Inc. ; Michael Dunn, in his capacity as Administrator of Belmont Lodge Health Care Center ; and Cynthia Kovalcik, in her capacity as Administrator of Belmont Lodge Health Care Center, Defendants.

Supreme Court Case No. 16SA114

Supreme Court of Colorado.

September 26, 2016
As Modified on Denial of Rehearing October 17, 2016

Attorneys for Plaintiff: Reddick Moss, PLLC, Brent L. Moss, Brian D. Reddick, Robert W. Francis, Joshua K. Smith, Little Rock, Arkansas

Attorneys for Defendants: Gordon & Rees LLP, Thomas B. Quinn, Joshua G. Urquhart, David M. Clarke, Denver, Colorado

Attorneys for Amicus Curiae Colorado Health Care Association: Kittredge LLC, Daniel D. Domenico, Denver, Colorado, MRDLaw, Michael Francisco, Denver, Colorado

En banc

CHIEF JUSTICE RICE delivered the Opinion of the Court.

¶1 This case raises the following question: When may a nonresident parent company be haled into a Colorado court based on the activities of its resident subsidiary? We hold that, to exercise personal jurisdiction over a nonresident parent company, a trial court shall perform the following analysis: First, the trial court shall determine whether it may pierce the corporate veil and impute the resident subsidiary's contacts to the nonresident parent company. If the resident subsidiary's contacts may be imputed to the nonresident parent company, the court shall analyze all of the nonresident company's contacts with Colorado—including the resident subsidiary's contacts—to determine whether exercising either general or specific

381 P.3d 311

personal jurisdiction over the company comports with due process. However, if the trial court concludes that it may not pierce the corporate veil, it shall treat each entity separately and analyze only the contacts that each parent company has with the state when performing the personal jurisdiction analysis. Because the trial court did not perform this two-step analysis when it determined that the petitioners were subject to personal jurisdiction in Colorado, we make our rule to show cause absolute and remand the case for further proceedings consistent with this opinion.

I. Facts and Procedural History

¶2 The plaintiff, Christine Griffith, filed a complaint against eleven entities and two individuals alleging that they injured her father, who was a resident of a nursing home operated by defendant SSC Pueblo Belmont Operating Company d/b/a Belmont Lodge Health Care Center (“Belmont Lodge”). She alleges that her father's injuries eventually caused his death, and she seeks relief based on three causes of action: negligence, wrongful death, and violations of the Colorado Consumer Protection Act, sections 6–1–101 to –1121, C.R.S. (2016). The individuals and four of the nine entities conceded jurisdiction and answered the complaint. Five of the entities, however, contested jurisdiction, arguing that they are nonresident companies who are not subject to personal jurisdiction in Colorado.

¶3 The parties agree that Belmont Lodge is one piece of a complex organizational structure. Belmont Lodge operates a nursing home in Pueblo, Colorado. It is a limited liability company (“LLC”) whose sole member is SSC Special Holdings, LLC. SSC Special Holdings is a wholly owned subsidiary of Special Holdings Parent Holdco, LLC. Special Holdings Parent Holdco is, in turn, a wholly owned subsidiary of SavaSenior Care, LLC.¹ Proto Equity Holdings, LLC, is the sole member of SavaSenior Care. Finally, Terpax, Inc., sits at the top of this organization as the parent corporation for all of these entities. SSC Special Holdings, Special Holdings Parent Holdco, SavaSenior Care, Proto Equity Holdings, and Terpax (collectively, the “Nonresident Defendants”) filed a C.R.C.P. 12(b)(2) motion to dismiss for lack of personal jurisdiction.

¶4 After holding an evidentiary hearing, the trial court found that the Nonresident Defendants are all “Delaware limited liability companies with their principal place of business in Georgia (and Tennessee with respect to Terpax).” It also found that the Nonresident Defendants “(i) have never registered to do business in the State of Colorado, (ii) have never had a registered agent or other authorized representative in the State of Colorado, and (iii) have never transacted business in the State of Colorado.” None of the Nonresident Defendants ever maintained a bank account, had any employees, solicited business, or held themselves out as doing business in Colorado. Only Terpax incurred or filed a tax return with Colorado. The Nonresident Defendants did not do business as Belmont Lodge and did not hold the operating license for Belmont Lodge. The trial court also acknowledged that the Nonresident Defendants are all separate legal entities from Belmont Lodge.

¶5 Despite these findings, the trial court stated that it “must consider the totality of the circumstances, including whether the [Nonresident] Defendants operated as separate entities from the nursing home.” The trial court then found that the Nonresident Defendants operate out of the same office in Atlanta, Georgia, which is the same office as the entities that did not contest jurisdiction. It also found that the Nonresident Defendants all received “direct or indirect financial benefit from the Colorado nursing home operation” based on the “pyramid of ownership” running upstream from Belmont Lodge to Terpax.

381 P.3d 312

¶6 The trial court then cited Bolger v. Dial–A–Style Leasing Corp., 159 Colo. 44, 409 P.2d 517, 519 (1966) for the proposition that a “wholly owned subsidiary can shield its out-of-state parent company from jurisdiction in Colorado only ‘where the two companies are operated as distinct entities.’ ” Relying on this rule, the trial court concluded that the entities all “operated the Colorado nursing home as one business in which they collectively controlled the operations, planning, management, and budget of [Belmont Lodge] in Colorado.” Finally, the trial court concluded that jurisdiction over all the entities was proper because “a tort has been alleged in Colorado” and “the process which contributed to that tort is sufficient to invoke the jurisdiction of this court.” See First Horizon v. Wellspring Capital Mgmt., 166 P.3d 166, 174 (Colo. App. 2007). Thus, the trial court denied the Nonresident Defendants' motion to dismiss for lack of personal jurisdiction.

¶7 The Nonresident Defendants petitioned this court for relief under C.A.R. 21, arguing that the trial court failed to apply an agency or alter-ego test to determine whether they were subject to personal jurisdiction. Instead, they argue, the trial court misapplied language from a fifty-year-old case to conclude that the parties were not “distinct entities” and, therefore, are subject to personal jurisdiction in Colorado. We issued a rule to show cause why the trial court's order should not be vacated.

II. Original Relief

¶8 “Original relief under C.A.R. 21 is discretionary and limited in both purpose and availability.” Magill v. Ford Motor Co., 2016 CO 57, ¶ 9, 379 P.3d 1033 (quoting Dwyer v. State, 2015 CO 58, ¶ 4, 357 P.3d 185, 187 ). We often review challenges to personal jurisdiction under C.A.R. 21 because they raise the question of whether it is fair to require a nonresident party to defend itself here at all. Id. Determining when a court may exercise jurisdiction over a nonresident defendant not only affects the fairness of the proceedings in this case but also has far-reaching implications for corporations with subsidiaries that do business in Colorado. Therefore, original relief is appropriate in this case.

III. Standard of Review

¶9 Whether a court may exercise personal jurisdiction over a defendant is a question of law, which we review de novo. Id. at ¶ 11.

IV. Analysis

¶10 The Nonresident Defendants argue that, before a Colorado court may exercise personal jurisdiction...