Laborers Loc. 17 Health Benef. Fund v. Philip Morris

• Decision Date: 27 August 1998
• Docket Number: No. 97 Civ. 4676(SAS).,No. 97 Civ. 4550(SAS).,97 Civ. 4550(SAS).,97 Civ. 4676(SAS).
• Citation: 26 F.Supp.2d 593
• Parties: LABORERS LOCAL 17 HEALTH AND BENEFIT FUND, and the Transport Workers Union New York City Private Bus Lines Health Benefit Trust, on behalf of themselves and all others similarly situated, Plaintiffs, v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; Bat Industries P.L.C.; Lorillard Tobacco Company, Inc.; Liggett & Myers Inc.; the American Tobacco Company; United States Tobacco Company; the Council for Tobacco Research — U.S.A., Inc.; the Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc.; Hill & Knowlton, Inc., Defendants. UNITED FEDERATION OF TEACHERS WELFARE FUND; Communication Workers of America Local 1180 Security Benefits Fund; International Union of Operating Engineers, Local 891 Welfare Fund; Social Service Employees Union Local 371 Welfare Fund, on behalf of themselves and all others similarly situated, Plaintiffs, v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; Bat Industries P.L.C.; Lorillard Tobacco Company, Inc.; Liggett & Myers Inc.; the American Tobacco Company; United States Tobacco Company; the Council for Tobacco Research — U.S.A., Inc.; the Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc.; Hill & Knowlton, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

Page 593

26 F.Supp.2d 593

LABORERS LOCAL 17 HEALTH AND BENEFIT FUND, and the Transport Workers Union New York City Private Bus Lines Health Benefit Trust, on behalf of themselves and all others similarly situated, Plaintiffs, v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; Bat Industries P.L.C.; Lorillard Tobacco Company, Inc.; Liggett & Myers Inc.; the American Tobacco Company; United States Tobacco Company; the Council for Tobacco Research — U.S.A., Inc.; the Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc.; Hill & Knowlton, Inc., Defendants.

UNITED FEDERATION OF TEACHERS WELFARE FUND; Communication Workers of America Local 1180 Security Benefits Fund; International Union of Operating Engineers, Local 891 Welfare Fund; Social Service Employees Union Local 371 Welfare Fund, on behalf of themselves and all others similarly situated, Plaintiffs, v. PHILIP MORRIS, INC.; R.J. Reynolds Tobacco Company; Brown & Williamson Tobacco Corporation; Bat Industries P.L.C.; Lorillard Tobacco Company, Inc.; Liggett & Myers Inc.; the American Tobacco Company; United States Tobacco Company; the Council for Tobacco Research — U.S.A., Inc.; the Tobacco Institute, Inc.; Smokeless Tobacco Council, Inc.; Hill & Knowlton, Inc., Defendants.

No. 97 Civ. 4550(SAS).

No. 97 Civ. 4676(SAS).

United States District Court, S.D. New York.

August 27, 1998.

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Melvyn I. Weiss, David J. Bershad, Michael C. Spencer, Kenneth J. Vianale, Beth A. Kaswan, Joan T. Brown, Milberg Weiss Bershad Hynes & Lerach, LLP., One Pennsylvania Plaza, New York City, for Plaintiffs.

Mark G. Cunha, Jacob S. Pultman, Ronald M. Neuman, Simpson Thacher & Bartlett, New York City, for Defendants.

OPINION AND ORDER

SCHEINDLIN, District Judge.

I. Introduction

In June of 1997, plaintiffs, consisting of several employee benefit trust funds ("the Funds"), filed these parallel class-action law-suits to seek relief for purported fraud and other tortious conduct by several domestic cigarette manufacturers and related defendants.¹ B.A.T. Industries p.l.c. ("BAT Industries") is one of the defendants named in the Complaint, along with one of BAT Industries' subsidiaries, Brown & Williamson Tobacco Corporation ("B & W").

The case revolves around the central allegation that for several decades, defendants concealed crucial information concerning the dangers of cigarette smoking and other kinds of exposure to tobacco products. See Class Action Complaint and Demand for Jury Trial at ¶ 7, Laborers Local 27 Health & Benefit Fund et al. v. Philip Morris. Inc. et al., No. 97 Civ. 4550 (S.D.N.Y. filed June 19, 1997) [hereinafter "Compl."] at ¶¶ 1-8.

Plaintiffs claim that as a result of this widespread industry deceit, they and other funds have spent millions of dollars more than they otherwise would have paid to provide medical benefits to fund beneficiaries. See id. The Funds have brought this action "to recover money expended ... to provide medical treatment to their participants and beneficiaries who have suffered and are suffering from tobacco-related illnesses and to obtain appropriate injunctive relief." Id. at ¶ 7.

Presently before the Court is defendant BAT Industries' motion to dismiss the Complaint for lack of personal jurisdiction. For the reasons set forth below, this motion is granted with leave to amend.²

II. Factual Background

BAT Industries is a holding company incorporated under the law of England and Wales and based in London, England. See Affidavit of Peter L. Clarke, BAT Industries Company Secretary, dated April 9, 1998 ("Clarke Aff.") at ¶ 2. BAT Industries presently has more than 500 subsidiaries, most of which are in the financial services and tobacco businesses. See id. at ¶ 8. BAT Industries is neither licensed nor qualified to conduct business in New York and does not do business within New York. See id. at ¶ 11. In addition, BAT Industries has no offices, places of business, mailing addresses, bank accounts or telephone listings in New York. See id. at ¶¶ 14, 16. BAT Industries pays no taxes in New York, does not contract to supply goods and services in New York, nor does it own, use or possess real or personal property in New York. See id. at ¶¶ 13, 15, 17. BAT Industries is not presently nor has it ever been a member of the tobacco industry research groups or industry associations named in plaintiffs' Complaint. See id. at ¶ 18. Finally, BAT Industries has never manufactured, marketed, packaged, sold, distributed, or advertised any tobacco products in New York, or anywhere else. See id. at ¶ 4.

On July 23, 1976, BAT Industries became a holding company for hundreds of subsidiaries, including co-defendant B & W and nonparty British-American Tobacco Company Limited ("BATCo").³ See id. Prior to this date, BAT Industries was an investment company named Tobacco Securities Trust Company Limited ("TST"). See id. As part of what is known in the United Kingdom as a "Scheme of Arrangement," on July 23, 1976, TST became the sole ordinary shareholder of BATCo. See id. at ¶ 5. TST then changed its name to BAT Industries Limited, and later to BAT Industries p.l.c., the present defendant. See id. B & W, BATCo and BAT Industries p.l.c. have been and remain separate corporate entities. See id. at ¶ 6; Reply Affidavit of Peter L. Clarke ("Clarke Reply Aff."), dated May 25, 1998, at ¶ 9.

III. Discussion

Upon motion, the Court is obligated to dismiss actions against defendants over whom it has no in personam jurisdiction. See Fed.R.Civ.P 12(b)(2). A plaintiff bears the ultimate burden of showing by a preponderance of the evidence that jurisdiction over a defendant is proper. See Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.1981). However, when a defendant brings a Rule 12(b)(2) motion prior to discovery, a plaintiff is only required to make out a prima facie case of jurisdiction through the pleadings and affidavits. See Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.1990); CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir.1986); Kinetic Instruments, Inc. v. Lares, 802 F.Supp. 976, 981 (S.D.N.Y.1992) (when jurisdiction challenged prior to discovery, plaintiff may defeat the motion by good faith pleading of legally sufficient allegations). Such pleadings and affidavits are to be construed in the light most favorable to plaintiffs with all doubts resolved in plaintiffs' favor. See Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 57 (2d Cir.1985).

BAT Industries does not reside nor was it served in New York. However, a federal court can assert jurisdiction over a non-resident defendant under the long-arm statute of the state in which it sits, provided that doing so comports with due process. See United States v. Montreal Trust Co., 358 F.2d 239, 240 (2d Cir.1966); see also Hoffritz, 763 F.2d at 57 ("Personal jurisdiction over a defendant in a diversity action is determined by reference to the law of the jurisdiction in which the court sits."); Pilates, Inc. v. Pilates Institute, Inc., 891 F.Supp. 175, 179 (S.D.N.Y.1995) (personal jurisdiction in federal question action depends on state law of jurisdiction).

A. Due Process Requirements

Due process requirements prevent a court from exercising personal jurisdiction over a defendant unless the defendant has "certain minimum contacts with the forum state such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). These "minimum contacts" must rise to a level such that the defendant should reasonably anticipate being haled into court in the forum state. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980).

1. Minimum Contacts

To establish minimum contacts necessary to justify "specific" jurisdiction over BAT Industries, the plaintiffs first must show that their claims arise out of or relate to BAT Industries' contacts with New York. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). Plaintiffs must also show that BAT Industries "purposefully availed" itself of the privilege of doing business in New York and that it could foresee being "haled into court" there. See Woodson, 444 U.S. at 297, 100 S.Ct. 559; Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). As the facts alleged in the Complaint and drawn from the Clarke Affidavit make clear, BAT Industries simply does not have minimum contacts with New York. Plaintiffs' failure to controvert Clarke's sworn testimony precludes the exercise of jurisdiction over BAT Industries.

2. Reasonableness

Even if a defendant has "minimum contacts" with the state, a court also must consider whether the assertion of jurisdiction "comports with `traditional notions of fair play and substantial justice' — that is, whether it is reasonable under the circumstances of a particular case." Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 568 (2d Cir.1996) (quoting International Shoe, 326 U.S. at 316, 66 S.Ct. 154). Whether it is "reasonable" to exercise jurisdiction in a particular case depends on

(1) the burden that the exercise of the jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies.

Metropolitan Life, 84 F.3d at 568 (citing Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113-14, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1...