Pittsburgh Terminal Corp. v. Mid Allegheny Corp.

• Decision Date: 23 October 1987
• Docket Number: No. 86-1194,86-1194
• Citation: 831 F.2d 522
• Parties: PITTSBURGH TERMINAL CORPORATION, a Pennsylvania Corporation, Plaintiff-Appellant, v. MID ALLEGHENY CORPORATION; Garth E. Griffith and Carl C. Hawk, as Directors of Mid Allegheny Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 522

831 F.2d 522

56 USLW 2277

PITTSBURGH TERMINAL CORPORATION, a Pennsylvania Corporation Plaintiff-Appellant, v. MID ALLEGHENY CORPORATION; Garth E. Griffith and Carl C Hawk, as Directors of Mid Allegheny Corporation Defendants-Appellees.

No. 86-1194.

United States Court of Appeals Fourth Circuit.

Argued Jan. 6, 1987.

Decided Oct. 23, 1987.

Ellen M. Doyle (Michael P. Malakoff; Berger, Kapetan, Malakoff & Meyers, Pittsburgh, Pa., Gerard R. Stowers; Bowles, McDavid, Graff & Love, Charleston, W.Va., on brief), for plaintiff-appellant.

Thomas Henry Gilpin (Huddleston, Bolen, Beatty, Porter & Copen, Huntington, W.Va., on brief), for defendants-appellees.

Before WIDENER and CHAPMAN, Circuit Judges, and SIMONS, Senior District Judge for the District of South Carolina, sitting by designation.

WIDENER, Circuit Judge:

The plaintiff in this action, Pittsburgh Terminal Corporation, appeals from the order of the district court dismissing its claim for lack of in personam jurisdiction over the defendants. We vacate and remand. ¹

The dispute in this case arose from the approval by defendant Mid Allegheny Corporation of a transaction through which Mid Allegheny exchanged its majority interest in Western Maryland Corporation for shares of CSX Corporation, Mid Allegheny's parent corporation, as part of a merger between Western Maryland and CSX Minerals,, Inc., another CSX subsidiary. Pittsburgh Terminal is a minority stockholder in Mid Allegheny, 99% of whose stock is held by CSX Resources, Inc., which in turn is a wholly-owned subsidiary of CSX. Pittsburgh Terminal alleges that the transaction in question was unfair to Mid Allegheny since it did not receive fair value for its controlling shares of Western Maryland and that the transaction was undertaken and approved solely for the benefit of CSX, not Mid Allegheny and its shareholders.

Pittsburgh Terminal initiated this stockholder derivative suit in the United States District Court for the Southern District of West Virginia against Mid Allegheny and two of its directors, Garth Griffith and Carl Hawk, who were also officers of CSX at the time of the disputed transaction. ² Subject matter jurisdiction was based on diversity of citizenship. The district court dismissed the action as to Hawk and Griffith for lack of personal jurisdiction, holding that they had not established the requisite minimum purposeful contacts with West Virginia, so that the assertion of personal jurisdiction over them by West Virginia in this case did not accord with due process. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Subsequently, the court dismissed Mid Allegheny, since it had been named only as an indispensable party.

Both Hawk and Griffith are residents of the Commonwealth of Virginia, and are employed by CSX in the City of Richmond. At the time of the transaction, Hawk was Vice President and Corporate Secretary of CSX, and Vice President and Secretary of Mid Allegheny, CSX Minerals and CSX Resources; Griffith was General Counsel of CSX, Mid Allegheny and CSX Minerals. CSX, CSX Resources, and CSX Minerals all are Virginia corporations. Both were officers and directors of Western Maryland. Western Maryland is a Maryland corporation doing business in Maryland and West Virginia. Mid Allegheny, of which Hawk and Griffith were directors, is a West Virginia corporation doing business in West Virginia.

Defendants Hawk and Griffith, then, had at least the following contacts with the State of West Virginia: (1) they acted as directors of a West Virginia corporation which did business in West Virginia, (2) as directors of Western Maryland, they participated in the solicitation of the proxy of Mid Allegheny in favor of the merger, (3) as the directors of Mid Allegheny, they participated in voting the corporation's stock in favor of the challenged transaction, and (4) they approved the transaction through a telephone call to West Virginia with Mid Allegheny's director and president, a citizen of West Virginia. In addition, Hawk was the individual who actually voted Mid Allegheny's proxy in favor of the transaction. It is not alleged that either of the non-resident directors was ever physically present in West Virginia for any purpose relating to the transaction. The question presented is whether, in the context of this litigation, the foregoing constituted the minimum purposeful contacts necessary to allow West Virginia to assert personal jurisdiction over Hawk and Griffith under West Virginia's long-arm statute. ³

In the district court, the defendants attempted, as here, to invoke the "fiduciary shield" doctrine, under which "the acts of a corporate officer or employee taken in his corporate capacity within the jurisdiction generally do not form the predicate for jurisdiction over him in his individual capacity." Bulova Watch Co. v. K. Hattori & Co., 508 F.Supp. 1322, 1347 (E.D.N.Y.1981). The district court, however, ruled that the doctrine was not available to Hawk and Griffith on the authority of Columbia Briargate Co. v. First National Bank, 713 F.2d 1052 (4th Cir.1983). cert. denied sub nom, Pearson v. Columbia Briargate Co., 465 U.S. 1007, 104 S.Ct. 1001, 79 L.Ed.2d 233 (1984). There, this court held that the fiduciary shield doctrine is not available where the forum state's long-arm statute is "coextensive with the full reach of due process." 713 F.2d at 1064. Relying on Harman v. Pauley, 522 F.Supp. 1130 (S.D.W.Va.1981), the district court found that West Virginia's long-arm statute, W.Va.Code Sec. 56-3-33, is coextensive with due process (which is not disputed by defendants), and refused to apply the doctrine. We agree with its analysis and affirm the district court's ruling on the fiduciary shield doctrine.

We next consider whether assertion of jurisdiction by West Virginia over Hawk and Griffith under the long-arm statute was proper and whether it satisfies the dictates of due process, i.e., whether the defendants established minimum purposeful contacts with the State of West Virginia.

Since International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), the Supreme Court has held that due process requires a State seeking to assert in personam jurisdiction over a non-resident to show that the non-resident defendant had established some meaningful contacts with the forum state. In demanding that persons have fair warning that their activities may subject them to suit in a particular State, the Fourteenth Amendment "gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurances as to where that conduct will and will not render them liable to suit." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980). These contacts are established where there has been "some act by which the defendant purposefully avails ... [himself] of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958).

Furthermore, it is not necessary that the defendant ever actually enter the forum State's territory; so long as the defendant has purposefully directed his activities toward the forum State, and the litigation arises from those activities, due process is satisfied. See Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984). See also McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957).

The Court has noted three reasons why a State should be able to assert jurisdiction over non-residents who purposefully direct their activities toward that State. First, a State has an obvious interest in providing a forum for its resident to redress injuries inflicted by non-residents. Second, it would be unfair not to allow jurisdiction where the defendant has derived benefits from the activities directed toward the forum State. Finally, modern methods of transportation and communication make it much less onerous now for a person to defend himself in a remote forum. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473-74, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985).

Both sides have cited Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), as supporting their position. Although some of the language in Shaffer would tend to deny jurisdiction in this case, we feel that Shaffer ultimately supports the plaintiff's theory. Shaffer involved a Delaware statute that allowed the in-state property of a non-resident defendant to be sequestered in order to coerce the defendant's personal appearance. The property could be sold to satisfy the plaintiff's demands if the defendant did not enter a general appearance, thus submitting himself to the jurisdiction of the Delaware courts. In that case, the stock owned by the directors of the defendant corporation in a stockholder's derivative suit was seized, pursuant to another Delaware statute which made Delaware the situs of all stock in Delaware corporations, regardless of where the shares were physically located. None of the activities leading to the lawsuit had occurred in Delaware.

The Supreme Court held that Delaware could not constitutionally assert jurisdiction over the defendants or their property under this scheme. The narrow holding of that case was a simple one: the minimum contacts rule of International Shoe would henceforth be applied to actions in rem and quasi in rem, as well as to actions in personam. ⁴ The dispute between the plaintiff and the defendants here is in how Shaffer applied the minimum contacts test to the facts of that case.

The Court held that mere ownership of stock in a corporation could not supply the necessary contacts to allow the chartering State to assert jurisdiction. In so doing, the Court observed that actions...