In re Puerto Rico Air Disaster Litigation, M.D.L. No. 47

Citation340 F. Supp. 492
Decision Date07 March 1972
Docket Number70-76,70-62,Civ. A. No. 70-57,M.D.L. No. 47,70-61,70-58,70-77 to 70-79.
PartiesIn re PUERTO RICO AIR DISASTER LITIGATION. Michael J. HUDACEK, Executor of the Estate of Joseph J. Hudacek a/k/a Joseph Hudacek, Deceased, Plaintiffs, v. PUERTO RICO INTERNATIONAL AIRLINES, INC., et al., Defendants.
CourtUnited States District Courts. 1st Circuit. District of Puerto Rico

COPYRIGHT MATERIAL OMITTED

Arthur D. Dalessandro, Wilkes-Barre, Pa., Falvello, Ustynoski, Giuliani & Bernstein, Hazelton, Pa., Michael J. Hudacek, Plymouth, Pa., for plaintiffs; Anthony C. Falvello, Joseph J. Ustynoski, Hazelton, Pa., of counsel.

Haight, Gardner, Poor & Havens, New York City, for defendants; Walter E. Rutherford, Robert L. Alpert, New York City, of counsel.

EDWARD WEINFELD, District Judge.

Plaintiffs, in their representative capacities, commenced these wrongful death1 and survival2 actions to recover damages arising out of the deaths of their respective four decedents, who were killed on March 5, 1969, while passengers in an airplane which crashed in the El Junque mountain range in the vicinity of San Juan, Puerto Rico, enroute from the island of St. Thomas to San Juan. The defendant, Puerto Rico International Airlines, Inc. (herein PRINAIR), a Puerto Rican corporation, was the owner and operator of the aircraft. The decedents were residents of Pennsylvania, as are the plaintiff representatives, and the actions were commenced in the Middle District of Pennsylvania3 on February 19, 1970, based upon federal diversity jurisdiction.

Subsequently, on March 4, 1970, four additional actions were commenced, also in the Middle District of Pennsylvania, naming as additional defendants Great American Insurance Company and United States Aviation Underwriters, Inc. Thereafter, all eight actions were transferred to the District of Puerto Rico pursuant to the Multidistrict Litigation Act, 28 U.S.C., section 1407,4 where plaintiffs also have pending four actions based upon the same claims as advanced in their Pennsylvania actions. Following argument on a motion to dismiss the Pennsylvania actions on various grounds,5 plaintiffs consented to the dismissal with prejudice as to Union,6 Great American Insurance Company and the United States Aviation Underwriters, Inc. Thus, the sole remaining defendant is PRINAIR, which now moves to dismiss the Pennsylvania actions for lack of personal jurisdiction on the ground that it is a Puerto Rican corporation doing business exclusively there; that it is not registered to do business in Pennsylvania and does no business there.

Since federal jurisdiction is based upon diversity of citizenship, the law of Pennsylvania governs on the issue of "doing business" subject to federal constitutional limitations.7 Those federal constitutional limitations require that before a state may subject a foreign corporation to its jurisdiction upon a claim arising out of the state, the corporation's activities within the state must be sufficient in amount and kind so that it is "reasonable and just" to require it to respond to the lawsuit there.8 The plaintiffs have the burden of establishing the facts necessary to sustain their claim of jurisdiction,9 and the issue must be decided within the framework of the particular facts of this case.

Plaintiffs took extensive depositions of officers and directors of PRINAIR and Union, and these form a part of the record upon which plaintiffs seek to uphold, and the defendant resists, jurisdiction. A careful study of the voluminous depositions demonstrates that the traditional indicia of "doing business" are absent; further, that the principal ground advanced to uphold jurisdiction, the so-called interline arrangements which PRINAIR has with other carriers and its advertising in trade magazines and periodicals, hereafter discussed, is insufficient to subject PRINAIR to in personam jurisdiction in Pennsylvania. Tested under Pennsylvania's admittedly liberal foreign corporation jurisdiction law,10 the facts here presented do not make PRINAIR amenable to its jurisdiction. Section 1011, subd. C of its Business Corporation Law11 provides as follows:

"For the purposes of determining jurisdictions of courts within this Commonwealth, the doing by any corporation in this Commonwealth of a series of similar acts for the purpose of thereby realizing pecuniary benefit or otherwise accomplishing an object, or doing a single act in this Commonwealth for such purpose, with the intention of thereby initiating a series of such acts, shall constitute `doing business.' For the purposes of this subsection the shipping of merchandise directly or indirectly into or through this Commonwealth shall be considered the doing of such an act in this Commonwealth."

PRINAIR operates its planes between San Juan, Puerto Rico, and St. Thomas, St. Croix and other points in the Caribbean. The evidence abundantly establishes that it maintains no office or other place of business, nor has it any office address or telephone listing, in Pennsylvania; that it has no bank account there; that it has not shipped merchandise directly or indirectly to or through the state, nor has it bought or sold merchandise there; that it owns or leases no property there; that it has flown no airplanes in the Commonwealth; that it maintains no facility for the sale of tickets there; that its employees have never solicited business or advertised in the state. All of its activities, operational and executive, are carried on in and directed by its officers and personnel from its San Juan, Puerto Rico office, where its financial and corporate records are maintained, as well as those documents required by governmental authorities; most of the meetings of its board of directors are held there and some are held in New York City.

Plaintiffs' claim that PRINAIR's parent corporation, Union, a New Jersey corporation, with its principal place of business in Verona, Pennsylvania, is PRINAIR's alter ego is not borne out by the record. On the contrary, PRINAIR, subsequent to the acquisition of 100% of its stock by Union Corporation in December 1969, nine months after the accident, continued to carry on its corporate functions, operating and executive, as it did prior thereto. PRINAIR's corporate identity has been strictly preserved since it became Union's subsidiary; its activities and records and those of its parent are kept separate and distinct at all times. Each maintains the integrity of its corporate existence separate and apart from the other. In sum, there is "rigorous adherence to the formalities customarily associated with separate corporations ...."12

That Union is doing business and maintains its principal place of business in Pennsylvania does not subject a subsidiary to Pennsylvania jurisdiction so long as it is maintained as a separate and independent unit from Union.13 Nor is the fact that a number of directors and officers are the same for parent and the subsidiary in and of itself sufficient to subject the non-resident subsidiary to jurisdiction, absent a showing that the parent is the subsidiary's alter ego.14

Plaintiffs, however, contend that certain acts performed at Union's office in Verona, Pennsylvania on behalf of PRINAIR satisfy the test of doing business under Pennsylvania law. The Verona office is the center at which reports of Union's approximately twenty-six subsidiaries are received and considered by its executives. That Bernard Sabel, a vice president of PRINAIR and also a director of Union, resides in Pittsburgh, works there as well as at Verona, and receives a salary from PRINAIR for "taking part in its general overall management," does not establish that it is doing business in Pennsylvania absent a showing that he performed substantial services for PRINAIR there, and no such showing has been made. The services performed were on behalf of the parent corporation. And so, too, that John Moeller, executive vice president and a director of the parent corporation, whose services for it are performed by him at Verona, was elected a non-salaried vice president of PRINAIR, when in December 1969 Union acquired all the stock of PRINAIR, does not by itself subject PRINAIR to Pennsylvania jurisdiction. His duties there are exclusively performed on behalf of Union. In his capacity as its executive vice president and director, he reviews the financial reports of the various subsidiaries, including PRINAIR, generally oversees their operation, coordinates their functional requirements so that they fit in with the total picture and capabilities of Union in giving direction to its subsidiaries. In carrying out the overall policy of Union, he, as well as the parent's other officers, are acting for the parent and not for the subsidiary, which has its own directors and officers.15 That the parent exercised dominion over PRINAIR by reason of its 100% stock ownership does not mean that PRINAIR was doing business in Pennsylvania.16

Perhaps recognizing that they have failed to establish the traditional indicia of doing business, plaintiffs' principal reliance is upon PRINAIR's "interline" arrangements with other airlines and advertisements by PRINAIR in certain travel magazines. PRINAIR advertises the availability of its services in "Travel Trade," "Travel Age," "East Travel Age," and "West Travel Age," which are trade publications. The advertisements are placed by PRINAIR with the magazine publisher in New York and a New York address and phone number are listed for it. The magazines are distributed to travel agents throughout the United States and presumably in Pennsylvania. Assuming arguendo that this may be considered solicitation of business, it is clear that, without more, it does not constitute doing business under Pennsylvania law.17 Plaintiffs contend there is more based upon certain arrangements with other carriers.

PRINAIR does not sell tickets in any state of the United States; all its tickets are sold in Puerto Rico....

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