Springs Industries, Inc. v. Gasson

• Decision Date: 16 April 1996
• Docket Number: Civ. A. No. 6:95-3567-20.
• Citation: 923 F. Supp. 823
• Parties: SPRINGS INDUSTRIES, INC., Plaintiff, v. Anthony GASSON and Joseph Santarlasci, Defendants.
• Court: U.S. District Court — District of South Carolina

923 F. Supp. 823

SPRINGS INDUSTRIES, INC., Plaintiff, v. Anthony GASSON and Joseph Santarlasci, Defendants.

Civ. A. No. 6:95-3567-20.

United States District Court, D. South Carolina, Greenville Division.

April 16, 1996.

Michael J. Giese, Greenville, SC, for plaintiff.

Walker Duvall Spruill, Columbia, SC, for defendant Gasson.

James D. Brice and Ronald K. Wray, II, Greenville, SC, for defendant Santarlasci.

ORDER

HERLONG, District Judge.

This matter is before the court on the motion of the defendant, Joseph Santarlasci ("Santarlasci"), to dismiss for lack of personal jurisdiction. The plaintiff, Springs Industries, Inc. ("Springs"), filed a memorandum in opposition to the motion to dismiss. Santarlasci has filed a reply memorandum.

In its memorandum in opposition, Springs alleges that Santarlasci and the other defendant, Anthony Gasson ("Gasson"), are the owners and managing agents of various corporations which have operated a garment manufacturing business in South Carolina. Springs was a supplier of piece goods to two of these corporations, New Swirl, Inc. ("New Swirl") and NIC Textiles Corp. ("NIC Textiles"). Initially, Springs supplied piece goods to New Swirl. New Swirl accumulated indebtedness to Springs in the amount of three hundred thousand dollars ($300,000). Santarlasci and Gasson created another corporation named NIC Textiles, of which they were the only two shareholders, directors, and officers. Springs contends that Gasson, as a representative of NIC Textiles, induced Springs to supply piece goods to NIC Textiles on the promise that it would pay the pre-existing debt of New Swirl. After NIC Textiles incurred a debt of eighty-seven thousand dollars ($87,000) to Springs and refused to pay off New Swirl's account, Springs filed suit in the Court of Common Pleas for Greenville County, South Carolina.

At the conclusion of a bench trial, the Honorable Edward B. Cottingham, Jr. found that NIC Textiles had agreed to assume New Swirl's debt and entered a judgment against NIC Textiles for the full amount.

In this action, Springs seeks to pierce the corporate veil and hold both Gasson and Santarlasci individually liable for the judgments and underlying debts of NIC Textiles. Springs alleges fraud and civil conspiracy.

Santarlasci takes the position that he is not subject to the personal jurisdiction of this court. As support for this assertion, Santarlasci first claims that he is protected by the "fiduciary shield" doctrine. Second, Santarlasci asserts that he has not had the minimum contacts with South Carolina necessary to support either specific jurisdiction or general jurisdiction pursuant to South Carolina's long-arm statute. Finally, Santarlasci states the exercise of personal jurisdiction in this situation would not comport with the requirements of fair play and substantial justice.

A. BURDEN OF PROOF

When a defendant contests personal jurisdiction, the plaintiff has the burden of showing that jurisdiction exists. Umbro U.S.A. v. Goner, 825 F.Supp. 738, 739 (D.S.C.1993). Before discovery has been completed, however, the plaintiff's allegations of jurisdictional facts are generally construed in its favor. See Magic Toyota v. Southeast Toyota Distrib., 784 F.Supp. 306, 310 (D.S.C.1992); Holland v. Hay, 840 F.Supp. 1091, 1095 (E.D.Va. 1994). Consequently, to meet its burden, the plaintiff needs to make only a prima facie showing of jurisdiction. Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). For the reasons that follow, the court finds that Springs has met its burden and that jurisdiction over Santarlasci is proper.

B. FIDUCIARY SHIELD DOCTRINE

The fiduciary shield doctrine states that "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., Ltd., 508 F.Supp. 1322, 1347 (E.D.N.Y.1981). Santarlasci claims that any acts that might subject him to personal jurisdiction in South Carolina were done in his corporate capacity. Therefore, according to Santarlasci, he is not subject to suit individually in South Carolina.

Contrary to Santarlasci's position, the United States Court of Appeals for the Fourth Circuit has not rejected the fiduciary shield doctrine. Oddly enough, the cases that express this holding are the same ones that Santarlasci cites in support of his position. In Columbia Briargate Co. v. First Nat'l Bank, 713 F.2d 1052 (4th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1001, 79 L.Ed.2d 233 (1984), the Fourth Circuit addressed the fiduciary shield doctrine for the first time. Noting that the doctrine sprang from an interpretation of the New York long-arm statute, the court rejected the doctrine as having no basis in the law of due process. See id. at 1059-60. After an in-depth analysis of the cases most often cited as support for the fiduciary shield doctrine, the court found that "not a one of them can be said to have been decided under the expansive language of the doctrine and the decision in each was rested upon the fact that the agent had not actually and individually participated in a tort in the forum state." Id. at 1061. Furthermore, the court found that the same result would have been reached in each instance under the traditional minimum contacts analysis required by due process. Id. Consequently, the court stated:

We are persuaded that when a non-resident corporate agent is sued for a tort committed by him in his corporate capacity in the forum state in which service is made upon him without the forum under the applicable state long-arm statute as authorized by Rule 4(e), he is properly subject to the jurisdiction of the forum court, provided the long-arm statute of the forum state is co-extensive with the full reach of due process. On the other hand, if the claim against the corporate agent rests on nothing more than that he is an officer or employee of the non-resident corporation and if any connection he had with the commission of the tort occurred without the forum state, we agree that, under sound due process principles, the nexus between the corporate agent and the forum state is too tenuous to support jurisdiction over the agent personally by reason of service under the long-arm statute of the forum state.¹

Id. at 1064. "Distinguishing those cases which have applied the fiduciary shield doctrine, the court concluded that it may have personal jurisdiction over an individual nonresident employee based on acts he performed on behalf of his employer under certain circumstances." Magic Toyota, 784 F.Supp. at 314.

In Pittsburgh Terminal Corp. v. Mid Allegheny Corp., 831 F.2d 522 (4th Cir.1987), the court reiterated that in Columbia Briargate, "this court held that the fiduciary shield doctrine is not available where the state's long-arm statute is `co-extensive with the full reach of due process.'" Id. at 525. Considering the fact that South Carolina's long-arm statute has long been considered to extend to the limits of due process, see, e.g., Triplett v. R.M. Wade & Co., 261 S.C. 419, 200 S.E.2d 375 (1973), Santarlasci's assertion that he is protected by the fiduciary shield doctrine is without merit.

C. SPECIFIC JURISDICTION

Jurisdiction over a defendant that arises out of or is related to his activities in the forum state is called "specific jurisdiction." Sheppard v. Jacksonville Marine Supply, Inc., 877 F.Supp. 260, 264 (D.S.C.1995). Springs alleges that Santarlasci and Gasson controlled NIC Textiles. They each owned one half of the corporation and served as its only two directors. Therefore, Springs asserts, both defendants were involved in the injury that is the subject of this suit.

South Carolina confers specific jurisdiction over a defendant pursuant to its long-arm statute. Id. Because South Carolina's long-arm statute extends to the limits of due process, "the test of amenability under the state law and under the constitutional test are identical." Magic Toyota, 784 F.Supp. at 312. The exercise of specific jurisdiction requires that the defendants have established minimum purposeful contacts with South Carolina. This requirement is satisfied if the state's long-arm statute authorizes jurisdiction. See Pittsburgh Terminal, 831 F.2d at 527.

South Carolina's long-arm statute provides in pertinent part: "a court may exercise personal jurisdiction over a person who acts directly or by an agent as to a cause of action arising from the person's (a) transacting any business in this state or ... (c) commission of a tortious act in whole or in part in this state." S.C.Code Ann. § 36-2-803(1)(a), (c) (Law.Co-op.1976).

Springs has alleged and Santarlasci admits that he served as a director of New Swirl and NIC Textiles. (Def.'s Mem. Supp. Mot. Dismiss at 3.) He asserts, however, that any decision he allegedly made took place outside of South Carolina. Therefore, Santarlasci reasons that he has never personally transacted business in South Carolina with regard to Springs's claim. Assuming that Santarlasci did not make any business decisions for New Swirl or NIC Textiles while personally in South Carolina, the court finds that the long-arm statute still authorizes the exercise of personal jurisdiction over him.

In Pittsburgh Terminal, 831 F.2d at 527, the Fourth Circuit addressed a similar issue under West Virginia's long-arm statute. West Virginia's long-arm statute is substantially the same as that of South Carolina. Compare W.Va.Code § 56-3-33(a)(1) (1995) (conferring jurisdiction over non-residents "transacting any business in the state") with S.C.Code Ann. § 36-2-803(1)(a) (Law.Co-op.1976) (conferring jurisdiction over nonresidents "transacting any business in the state"). The court stated that West Virginia law commits the affairs of the corporation to its board of directors. Id. (citing W.Va.Code § 31-1-95 (1995)). Once again, South Carolina has a code section that is...