Nixon v. Celotex Corp., G85-628 CA.

• Decision Date: 04 March 1988
• Docket Number: No. G85-628 CA.,G85-628 CA.
• Parties: Donald NIXON and Claire Nixon, Plaintiffs, v. The CELOTEX CORPORATION, et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

693 F. Supp. 547

Donald NIXON and Claire Nixon, Plaintiffs, v. The CELOTEX CORPORATION, et al., Defendants.

No. G85-628 CA.

United States District Court, W.D. Michigan, S.D.

March 4, 1988.

COPYRIGHT MATERIAL OMITTED

Parmenter, Forsythe, Rude, Van Epps, Briggs & Fauri by Arthur M. Rude, Muskegon, Mich. (Bergevin and Goodman, Dennis J. Bergevin, of counsel), Bay City, Mich., for plaintiffs.

Varnum, Riddering, Schmidt, & Howlett, Richard Kay, Myra Willis, Grand Rapids, Mich., for defendants.

OPINION

BENJAMIN F. GIBSON, District Judge.

Donald Nixon is a former sales representative of The Celotex Corporation ("Celotex") who was discharged by the company during a "reduction in force." The reduction was allegedly the result of economic conditions that required the company to consolidate its sales staff. After his discharge, Nixon filed a charge with the Michigan Department of Civil Rights ("MDCR") and the Equal Employment Opportunity Commission ("EEOC") claiming that he had been terminated because of his age. While the charges were pending, Nixon filed this lawsuit, along with his wife, Claire Nixon, re-alleging the claims for age discrimination under the Michigan Elliott-Larsen Civil Rights Act ("Elliott-Larsen"), M.C.L.A. § 37.2101 et seq. and the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et seq., as well as asserting other causes of action, including breach of employment contract, violation of the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., and loss of consortium. After investigation, the charges pending before the MDCR were dismissed.

Presently pending before the Court are defendant Jim Walter Corporation's ("JWC") motion to dismiss and defendants JWC and Celotex's motion for summary judgment. Alternatively, defendants seek a stay of proceedings. Plaintiffs have filed a motion for leave to amend their complaint to add a count for negligent supervision. The motions will be discussed seriatim.

JWC'S MOTION TO DISMISS

Defendant JWC has moved for dismissal on the ground that the Court lacks both general and limited personal jurisdiction over the company. In support of its motion for dismissal, defendant contends that it does not now, nor has it ever, maintained any business relationship with the State of Michigan. The burden is on the plaintiff to establish that the court has jurisdiction. In determining whether the court has personal jurisdiction over a defendant, the pleadings and affidavits are to be considered in a light most favorable to the plaintiff and, in the absence of an evidentiary hearing on the jurisdictional issue, the plaintiff need only make out a prima facie case. Welsh v. Gibbs, 631 F.2d 436, 438 (6th Cir.1980).

In the instant cause of action, plaintiffs allege causes of action under both federal and state law. In a diversity case, a federal court must look to the law of the forum state to determine whether it has personal jurisdiction over a foreign corporation. 28 U.S.C.A. § 1332(c); Velandra v. Regi National Des Usines Renault, 336 F.2d 292, 297 (6th Cir.1964). This Court can constitutionally exercise in personam jurisdiction over a non-resident defendant if two basic requirements are met. First, the defendant must come within the reach of one of Michigan's long-arm statutes. Here, the relevant statute is M.C.L.A. § 600.715 which provides that Michigan courts may assert limited personal jurisdiction over a non-resident corporation and enter personal judgments against such corporation arising out of any act or acts which create certain relationships with Michigan. Michigan's long arm statute is also applicable in a cause of action under federal law. Plaintiffs claim that JWC's conduct creates the following relationships recognized under the Michigan long-arm statute: 1) the transaction of business within the state; 2) the doing or causing of any act to be done, or consequences to occur, in the state resulting in an action for tort; and 3) entering into a contract for services to be performed or for material to be furnished in the state by the defendant.

JWC contends that plaintiffs have failed to put forth sufficient facts to support either general or limited personal jurisdiction in this matter. Defendant contends that the only nexus between JWC and the state of Michigan is the fact that the company is the sole shareholder in Celotex, which conducts local activities in Michigan. Plaintiffs, however, negate this contention. In rebuttal, plaintiffs contend that JWC was integrally involved in every step of Celotex's management and supervision of plaintiff Don Nixon. Plaintiffs further contend that the cause of action asserted is directly related to JWC's contacts with the state. Plaintiffs have offered undisputed evidence that Nixon's managers, Herman "Doc" Eckstein and Chuck Ferris, both were employees of JWC. There is also evidence that the personnel manual and employment policies which govern Celotex personnel were developed and set by JWC. Employee salary and pension benefits were paid with checks drawn on JWC accounts. There is further evidence that the initial decision to eliminate employee positions at Celotex was made by JWC. In addition, plaintiffs have alleged that defendants have failed to provide discoverable information which is needed to enable plaintiffs to conclusively establish the propriety of the Court's exercise of jurisdiction. The Court finds that the evidence offered is sufficient to satisfy the requirements of the Michigan long-arm statute for purposes of limited jurisdiction.

The second requirement for the assertion of personal jurisdiction is that the defendant must have sufficient minimum contacts with the forum state such that the assumption of jurisdiction over the non-resident does not offend traditional notions of fair play and substantial justice embodied in the Due Process Clause. Rush v. Savchuk, 444 U.S. 320, 327, 100 S.Ct. 571, 576, 62 L.Ed.2d 516 (1980); Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Since the Michigan Supreme Court has construed Michigan's long-arm statutes to provide the broadest possible reach consistent with due process requirements, see, e.g., Witbeck v. Bill Cody's Ranch Inn, 428 Mich. 659, 411 N.W.2d 439 (1987), this Court's dual inquiry into whether it may assert personal jurisdiction over JWC merges into a single question: Would due process guarantees be violated by the exercise of limited personal jurisdiction over the defendant? Davis H. Elliot Co. v. Caribbean Utilities Co., 513 F.2d 1176, 1179 (6th Cir.1975); Herman Miller v. Mr. Rents, Inc., 545 F.Supp. 1241, 1244 (W.D.Mich.1982).

Additionally, when determining whether personal jurisdiction exists, the Court should evaluate the following factors: 1) the burden on defendant; 2) the interest of the forum state; 3) the interest of the plaintiff in obtaining relief; 4) the interstate judicial system's interest in promoting a judicially efficient resolution; and 5) the shared interest of the several states in furthering fundamental substantive social policies. Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102, 107 S.Ct. 1026, 1034, 94 L.Ed.2d 92 (1987); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985); World-Wide Volkswagen v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980).

After a review of the record in light of the inquiries set forth by the Supreme Court, the Court finds that the exercise of personal jurisdiction in this case would be proper. JWC claims that an independent subsidiary's conduct is not attributable to the parent for purposes of personal jurisdiction. In deciding this issue, the Sixth Circuit Court of Appeals, in Velandra v. Regie Nationale Des Usines Renault, 336 F.2d 292 (6th Cir.1964), has stated that "the law relating to the fictions of agency and of separate corporate entity was developed for purposes other than determining amenability to personal jurisdiction, and the law of such amenability is merely confused by reference to the inapposite matters." Velandra, 336 F.2d at 297. "An analytical rather than a mechanical or formalistic approach is appropriate upon the issue of personal jurisdiction based upon ownership of the stock of a corporation carrying on local activities." Velandra, 336 F.2d at 297, n. 21.

The essential question with respect to personal jurisdiction is one of due process. The due process inquiry focuses on notions of fairness and substantial justice. Corporate law theories of agency and "alter ego" are not entirely congruent with this inquiry because to some extent they invoke fictional notions of separateness. There may be some situations where a subsidiary could not be considered an agent or alter ego under corporate law, but it would nonetheless be fair to subject the parent to jurisdiction for some its subsidiary's activities. "The parent-subsidiary distinction represents merely one contact or factor to be considered in assessing the existence or non-existence of the requisite minimum contacts with the State of Michigan." Velandra, 336 F.2d at 297.

It is the opinion of the Court that in light of JWC's alleged active participation in Celotex's employment, pension and sales decisions, Celotex's contacts with Michigan may fairly be attributed to JWC for purposes of an action arising out the employment relationship and relating to employment and personnel decisions made jointly by JWC and Celotex. Because Celotex has substantial contacts with the state of Michigan which are allegedly controlled by JWC and because the action arose out of those contacts, this Court may properly exercise "specific" jurisdiction over JWC. The relevant facts are as follows:

1. Employees carried business cards that identified them as representatives of both Celotex and JWC;

2. Checks, memoranda, and personnel manuals are all from JWC;

3. Regional sales

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