Arnold Jackson, et al v. FIE Corp., et al

Filing

Arnold Jackson, et al v. FIE Corp., et al

Doc. 0

Case: 09-30870

Document: 00511211752

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Date Filed: 08/23/2010

IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
N o . 09-30870 August 23, 2010 Lyle W. Cayce Clerk L IN D A JACKSON; BRIAN JACKSON, P la in t if f s - A p p e lla n t s v. T A N F O G L I O GIUSEPPE S.R.L.; GIUSEPPE TANFOGLIO S.P.A.; FRATELLI T A N F O G L I O DI TANFOGLIO BORTOLO & C.S.n.c., formerly known as Pacific C a p it a l Partners of Oregon Inc., D e fe n d a n t s -A p p e lle e s

A p p e a ls from the United States District Court fo r the Eastern District of Louisiana

B e fo r e KING, HIGGINBOTHAM, and GARZA, Circuit Judges. E M I L I O M. GARZA: T h is is an appeal from the district court's order granting Fratelli T a n fo g lio , S.n.c.'s ("Fratelli") Rule 60(b)(4) motion to vacate a default judgment a g a in s t it. The district court held that it lacked personal jurisdiction--both g e n e r a l and specific--over Fratelli. The plaintiffs appeal. For the reasons set fo r t h below, we AFFIRM. I T h i s is the third time this court has been asked to review whether the d is t r ic t court has personal jurisdiction in this case. In May 1992, Arnold

J a c k s o n ("Jackson") was injured by the unexpected discharge of a Titan .25

Dockets.Justia.com

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c a lib e r semi-automatic pistol (the "pistol"). Jackson was rendered a quadriplegic a n d eventually died from his injuries. Plaintiffs-Appellants Linda Jackson, J a c k s o n 's wife, and their son Brian (collectively, "Plaintiffs") filed suit in May 1 9 9 3 against a number of defendants involved in the manufacture and sale of t h e pistol.1 Among the defendants were three Italian companies: Fratelli

T a n fo g lio , S.n.c. ("Fratelli"); Giuseppe Tanfoglio, S.p.a. ("Giuseppe S.p.a."); and T a n fo g lio Giuseppe, S.r.l. ("Giuseppe S.r.l.") (collectively, the "Tanfoglio e n tit ie s " ).2 None of these firms made an appearance in the case and the

P la in t iff s obtained a default judgment of approximately $11 million against t h e m in December 1998. In entering the judgment, the district court ruled that t h e Tanfoglio entities manufactured the pistol, which had a firing pin that was t o o long, making the pistol discharge too easily. The district court entered a fin a l judgment against the Tanfoglio entities and closed the case. N e a r l y two years later, Fratelli filed a Federal Rule of Civil Procedure 6 0 (b )(4 ) motion to vacate the default judgment on the basis that the judgment w a s void because the district court lacked personal jurisdiction over it.3 In s u p p o r t of its claim, Fratelli asserted that it did not make the pistol that injured J a c k s o n , and that there was nothing connecting Fratelli with Louisiana. The d is t r ic t court denied the motion, holding that the jurisdictional facts--that F r a t e lli had made the pistol))had been conclusively established by the default ju d g m e n t . On appeal, this court reversed and remanded the case for further a d v e r s a r ia l proceedings on the issue of personal jurisdiction. See Jackson v. FIE C o r p ., 302 F.3d 515, 531 (5th Cir. 2002) (Tanfoglio I).

The frame of the pistol was manufactured by Southern Die Cast Company and the pistol itself was assembled by Firearms Import and Export Corporation ("FIE") in Florida, likely between 1970 and 1973.
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Over the years, all of the other defendants have been dismissed from the case.

Only Fratelli appeared in the case and moved to vacate the default judgment. The default judgment is still in effect as to Giuseppe S.r.l. and Giuseppe S.p.a.

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O n remand, the parties engaged in considerable discovery. Plaintiffs a r g u e d that the court had specific personal jurisdiction because the Tanfoglio e n tit ie s manufactured the pistol or the firing pin, and that there was general ju r is d ic t io n arising from the Tanfoglio entities' continuous and systematic c o n t a c t s with the forum state. In its April 2007 order, the district court found t h a t there was insufficient evidence to establish that: (1) Fratelli shipped any fin is h e d products or component parts to Louisiana or made the defective firing p in ; (2) the actions of other Tanfoglio entities should be imputed to Fratelli; and (3 ) Fratelli was subject to general jurisdiction in Louisiana. Jackson v. F.I.E. C o r p ., No. 95-2389, 2007 WL 1259216, at *3­7 (E.D. La. Apr. 30, 2007). Plaintiffs appealed and we vacated and remanded because the district court in c o r r e c t ly found that Plaintiffs had not presented sufficient evidence to e s t a b lis h jurisdiction when it should have determined "whether there was s u ffic ie n t evidence to prove that Fratelli Tanfoglio was not subject to the court's ju r is d ic t io n ." Jackson v. Fratelli Tanfoglio di Tanfoglio Bortolo & C.S.n.c., 310 F . App'x 629, 631 (2009) (per curiam) (Tanfoglio II). O n remand, the district court found that Fratelli met its burden of proving t h e lack of both specific and general personal jurisdiction, and again granted the m o t io n to vacate the default judgment. Once again, the Plaintiffs appeal. A brief discussion of the Tanfoglio entities is necessary for purposes of c o n s id e r in g personal jurisdiction. Giuseppe Tanfoglio owned and operated a c o m p a n y in Italy which manufactured the Titan .25 caliber pistol and other fir e a r m s . In 1969, Giuseppe's brother, Bortolo, incorporated Fratelli; Giuseppe's d a u g h t e r , Maria Celsa, was one of Fratelli's directors. In 1978, Giuseppe and his s o n , Massimo, incorporated Giuseppe S.r.l. which eventually took over the o p e r a t io n s of Giuseppe's original company. From approximately 1969 to 1990, G iu s e p p e S.r.l. and Giuseppe S.r.a. sold components to FIE in Florida for use in t h e assembly of the Titan .25 caliber pistol. Information obtained in discovery in d ic a te s that the majority of the Tanfoglio entities' products were distributed 3

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t o FIE and another Florida-based company. In 1991, after FIE went out of b u s in e s s resulting in large losses for Giuseppe S.r.l., Giuseppe S.r.l. was liq u id a t e d under Italian law. Maria Celsa was appointed as Giuseppe S.r.l.'s liq u i d a t o r and relinquished her position as a director of Fratelli. During the liq u id a t io n , Fratelli, who was Giuseppe S.r.l.'s largest creditor because of debts i n c u r r e d in the operation of the businesses, remitted debts owed by Giuseppe S .r .l. to avoid bankruptcy in favor of liquidation to pay off all creditors. Fratelli a ls o purchased some of Giuseppe S.r.l.'s assets and liabilities. Giuseppe S.r.l.'s fin a l liquidation and dissolution of the entity was completed in 1996, two years b e fo r e the Jacksons' default judgment against the Tanfoglio entities. II T h is court reviews a district court's determination of personal jurisdiction d e novo. McFadin v. Gerber, 587 F.3d 753, 758 (5th Cir. 2009); see also Tanfoglio I I , 310 F. App'x at 630; Tanfoglio I, 302 F.3d at 521 (stating that the de novo s t a n d a r d applies to challenges to personal jurisdiction brought under Rule 6 0 (b )(4 )). It is the law of the case that Fratelli bears the burden of proof to d e m o n s t r a t e the court lacks jurisdiction. Tanfoglio II, 310 F. App'x at 630­31; s e e also Tanfoglio I, 302 F.3d at 520­21 & n.6. T h e limits of the Louisiana long-arm statute are coextensive with c o n s t it u t io n a l due process limits. Walk Haydel & Assocs. v. Coastal Power Prod. C o ., 517 F.3d 235, 242­43 (5th Cir. 2008) (citing A&L Energy, Inc v. Pegasus G r p ., 791 So.2d 1266, 1270 (La. 2001)). Therefore, the inquiry is whether

ju r is d ic t io n comports with federal constitutional guarantees. See id. at 243. A fe d e r a l district court in Louisiana sitting in diversity may exercise personal ju r is d ic t io n over a non-resident defendant if (1) the defendant has purposefully a v a ile d himself of the protections and benefits of Louisiana by establishing " m in im u m contacts" in the state, and (2) the exercise of the jurisdiction complies w it h traditional notions of "fair play and substantial justice." Id.

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" J u r is d ic tio n may be general or specific," depending on the nature of the d e fe n d a n t 's forum-related contacts. Luv N'care v. Insta-Mix, Inc., 438 F.3d 465, 4 6 9 (5th Cir. 2006). "Where a defendant `has continuous and systematic general b u s in e s s contacts' with the forum state, the court may exercise general ju r is d ic t io n over any action brought against the defendant. Where contacts are le s s pervasive, the court may still exercise `specific' jurisdiction `in a suit arising o u t of or related to the defendant's contacts with the forum.'" Id. (citing

H e lic o p te r o s Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 (1984)). A W e dispose of any argument that general jurisdiction over Fratelli exists. General jurisdiction may be found when the defendant's contacts with the forum s t a t e are substantial, continuous, and systematic. Helicopteros Nacionales, 466 U .S . at 414­19. The "continuous and systematic contacts test is a difficult one t o meet, requiring extensive contacts between a defendant and a forum." Johnston v. Multidata Sys. Int'l Corp., 523 F.3d 602, 609 (5th Cir. 2008). To c o n fe r general jurisdiction, a defendant must have a business presence in the fo r u m state. Access Telecom, Inc. v. MCI Telecomm. Corp., 197 F.3d 694, 717 (5 t h Cir. 1999). Injecting a product, even in substantial volume, into a forum's " s t r e a m of commerce," without more, does not support general jurisdiction. Bearry v. Beech Aircraft Corp., 818 F.2d 370, 375 (5th Cir. 1987); accord Alpine V ie w Co. v. Atlas Copco AB, 205 F.3d 208, 216 (5th Cir. 2000) (noting that this c ir c u it has rejected reliance on a stream-of-commerce theory to support general ju r is d ic t io n ). Advertising and marketing through national media is insufficient, a s are isolated visits to a forum. See Johnston, 523 F.3d at 612; Alpine View Co., 2 0 5 F.3d at 218; Bearry, 818 F.2d at 376. F r a t e lli must have substantial contacts with Louisiana for the court to h a v e general jurisdiction over it. Fratelli's representatives testified that Fratelli h a s never had an office, bank accounts, employees, or even a postal address in L o u is ia n a , nor owned or leased any property there. Nor has Fratelli ever been 5

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r e g is t e r e d to do business in Louisiana or paid taxes in Louisiana. Fratelli did n o t directly sell any products in Louisiana. Fratelli's only contacts are: (1) s u p p ly in g parts or components for the assembly of handguns in Florida, which w e re then sold throughout the United States by other companies;4 (2) attendance a t two trade shows in New Orleans; and (3) advertising and marketing in n a t io n w id e media that reached Louisiana but was not directed to Louisiana. These contacts are neither systematic, continuous, nor substantial enough to s u p p o r t general jurisdiction. See Johnston, 523 F.3d at 610­12. B P la in t iffs contend that absent general jurisdiction, the district court has s p e c ific jurisdiction over Fratelli based on (1) Fratelli's minimum contacts s t e m m in g from its delivery of the Titan .25 caliber pistol into the stream of c o m m e r c e , and (2) under a theory of imputed contacts. 1 T h is court applies a three-step analysis to determine specific jurisdiction: (1 ) whether the defendant has minimum contacts with the forum state; (2) w h e t h e r the plaintiff's cause of action arises out of or results from the d e fe n d a n t 's forum-related contacts; and (3) whether the exercise of personal ju r is d ic t io n is fair and reasonable. Seiferth v. Helicopteros Atuneros, Inc., 472 F .3 d 266, 271 (5th Cir. 2006). We have applied a stream-of-commerce principle t o permit the assertion of specific jurisdiction over nonresident defendants that s e n d a defective product into a forum. Nuovo Pignone, SpA v. STORMAN ASIA M / V , 310 F.3d 374, 380 (5th Cir. 2002). W h e r e a nonresident's contact with the forum state "stems from a p r o d u c t, sold or manufactured by the foreign defendant, which has c a u s e d harm in the forum state, the court has [specific] jurisdiction if it finds that the defendant delivered the product into the stream

Fratelli did not supply parts or components or manufacture the 0.25 caliber pistol until after the injury at issue in this case.

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o f commerce with the expectation that it would be purchased or u s e d by consumers in the forum state." I d . (quoting Bearry, 818 F.2d at 374) (alteration in original). Under this

" r e la t iv e ly expansive" theory, only "mere foreseeability" that a defendant might b e haled into court because it purposely availed itself of the benefits of the forum s t a t e is required. Id. at n.8. A defendant need not have "purposely direct[ed]" it s activities to the forum. Ruston Gas Turbines v. Donaldson, Co., 9 F.3d 415, 4 1 9 (5th Cir. 1993). P la in t if f s contend that Fratelli manufactured, sold or distributed c o m p le t e d products or component parts in Louisiana and specifically targeted L o u is ia n a such that the district court has specific jurisdiction. Although

P la in t iffs contend that Fratelli, by itself, has sufficient contacts for specific ju r is d ic t io n , their argument--repeatedly referring to "the Tanfoglios" and the " T a n fo g lio enterprise"--in fact, conflates Giuseppe S.r.l, Giuseppe S.p.a., and F r a t e lli and treats the contacts of one entity as applicable to all.5 There is no c h a lle n g e to the district court's jurisdiction over Giuseppe S.r.l. and Giuseppe S .p .a . Only Fratelli moved to vacate the default judgment on the grounds of lack o f personal jurisdiction. Thus, the question before the court is confined to w h e t h e r there is personal jurisdiction over Fratelli. H a v in g reviewed the evidence regarding Fratelli's contacts with Louisiana, w e agree with the district court that Fratelli has met its burden. The evidence s h o w s that Fratelli did not manufacture any Titan .25 caliber pistols until 1993, a fte r Jackson was injured, and long after the weapon that caused the injury was

For instance, Plaintiffs contend that Fratelli collaborated with Giuseppe S.p.a. and Giuseppe S.r.l. by leasing and selling equipment to one another and advertising, marketing, and shipping firearms together. Plaintiffs further contend that Tanfoglio employees and engineers directed the production of the pistol and were involved in the testing and inspection of the pistol, including providing proper assembly instructions to FIE employees.

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p r o d u c e d and sold sometime in the 1970s.6 The pistol involved in this case was a s s e m b le d and/or manufactured in Florida by FIE and was sold under the FIE lo g o . Further, although Fratelli purchased the equipment to bore .25 caliber b a r r e ls in 1972 or 1973, there is no evidence that Fratelli was actually boring b a r r e ls at that time. Plaintiffs rely only on surmise and conjecture to conclude t h a t because Fratelli possessed the bores it must actually have been making the b a r r e ls for .25 caliber pistols. There is also no evidence that Fratelli

m a n u fa c t u r e d the .25 caliber firing pin, the pistol's defective component.7 In s h o r t , there is no evidence that Fratelli, as distinct from other Tanfoglio entities, s o ld or manufactured the pistol, or otherwise "delivered the product into the s t r e a m of commerce with the expectation that it would be purchased or used by c o n s u m e r s in the forum state." Nuovo Pignone, 310 F.3d at 380. Accordingly, t h e r e can be no specific personal jurisdiction. 2 P la in t iffs also contend that specific jurisdiction exists through a theory of im p u t e d contacts or alter egos. In other words, they argue that Fratelli is an a lt e r ego of the other Tanfoglio entities and thus, the contacts of those entities c a n be imputed to Fratelli to satisfy personal jurisdiction.8

The record includes information about firearms licenses obtained in Brescia, Italy by the other Tanfoglio entities that were necessary for their business activities. There is no license for Fratelli for a .25 caliber pistol. Massimo Tanfoglio initially testified that Tanfoglio never manufactured the .25 caliber firing pin. He later admitted that the firing pin "could have" been made by Giuseppe S.r.l. but "there would be no way to prove" whether Giuseppe S.r.l. or some other entity, including thirdparty suppliers or FIE, actually manufactured the pin. At best, this evidence might raise a question whether Giuseppe S.r.l. manufactured the faulty firing pin. But it certainly does not suggest that Fratelli did so. And indeed, the Tanfoglios testimony was consistent in denying that Fratelli made the firing pin. The district court assumed arguendo that it had specific jurisdiction over the nowliquidated Giuseppe S.r.l. because it manufactured parts for the Titan .25 caliber pistol that injured Jackson, and delivered the product into the stream of commerce with the expectation that it would be purchased or used by consumers in Louisiana. We adopt the same assumption in considering whether the contacts of one entity can be imputed to another.
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" [A ] court which has jurisdiction over a corporation has jurisdiction over it s alter egos." Minn. Mining & Mfg. Co. v. Eco Chem, Inc., 757 F.2d 1256, 1265 (5 t h Cir. 1985); see also Hargrave v. Fibreboard Corp., 710 F.3d 1154, 1159 (5th C ir . 1983). "[F]ederal courts have consistently acknowledged that it is

c o m p a tib le with due process . . . to exercise personal jurisdiction over an in d i v id u a l or a corporation that would not ordinarily be subject to personal ju r is d i c t io n in that court when the individual or corporation is an alter ego or s u c c e s s o r of a corporation that would be subject to personal jurisdiction in that c o u r t." Patin v. Thoroughbred Power Boats, Inc., 294 F.3d 640, 653 (5th Cir. 2 0 0 2 ). "The theory . . . is that, because the two corporations (or the corporation a n d its individual alter ego) are the same entity, the jurisdictional contacts of o n e are the jurisdictional contacts of the other for the purposes of the . . . due p r o c e s s analysis." Id. T h e district court analyzed the question whether Fratelli is an alter ego o f Giuseppe S.p.a. or Giuseppe S.r.l. under Italian law. Plaintiffs contend that t h is was error because the choice of law for alter ego analysis for personal ju r is d ic t io n purposes is different than for liability. Thus, while it may be

a p p r o p r i a t e to use Italian law to determine alter ego liability, Plaintiffs argue t h a t Louisiana law must be applied to the personal jurisdiction analysis. A lt h o u g h this complicated choice of law question is an open issue, we need n o t resolve it here. Even applying the more flexible standard for which Plaintiffs a r g u e , the other Tanfoglio entities' contacts with Louisiana cannot be imputed t o Fratelli. Under Louisiana law, the factors to be considered to determine w h e t h e r one entity is an alter ego of another or whether two entities are a " s in g le business enterprise" are similar. Green v. Champion Ins. Co., 577 So. 2d 2 4 9 , 257­58 (La. Ct. App. 1991). They include, but are not limited to, common o w n e r s h ip , directors and officers, employees, and offices; unified control; in a d eq u ate capitalization; noncompliance with corporate formalities; centralized a c c o u n t in g ; unclear allocation of profits and losses between corporations; one 9

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c o r p o r a t io n paying the salaries, expenses, or losses of another corporation; and u n d o c u m e n te d transfers of funds between entities. See Hollowell v. Orleans R e g 'l Hosp. LLC, 217 F.3d 379, 385­89 (5th Cir. 2000); Green, 577 So. 2d at 258. No one factor is dispositive. Green, 577 So. 2d at 258. S o m e of the factors weigh in favor of imputing jurisdiction. For instance, t h e Tanfoglio entities appear to have been operated in a way that their brands a n d products appear identical and their business relationships are deeply in t e r t w in e d . The Tanfoglio entities shared office space, phone numbers, and the T a n fo g l i o siblings were officers and directors of each of the Tanfoglio entities. Further, despite the significant business relationship between the Tanfoglio e n tit ie s and FIE, FIE employees testified that they could not distinguish b e tw e e n each of the Tanfoglio companies and viewed them as one company. As w e ll, the Tanfoglio entities were indebted to one another through a variety of b u s in e s s transactions such that Fratelli was Giuseppe's largest creditor when G iu s e p p e was liquidated. O n the other hand, there is no evidence of undocumented transfers of fu n d s between the various entities. Indeed, Fratelli produced documentation s h o w in g that Giuseppe S.r.l.'s debts to Fratelli were on the books. There was a ls o no evidence of unclear allocation of profits and losses between corporations. Nor was there evidence that one of the Tanfoglio entities paid the salaries of the o t h e r entities' employees. Further, there was clear and undisputed evidence t h a t the Tanfoglio companies did not abuse the corporate form, and indeed, fo llo w e d all of the Italian corporate legalities necessary to maintain distinct e n tit ie s .9
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The companies maintained separate books, had separate tax

To be clear, we consider whether Fratelli complied with corporate formalities because that is one factor to be considered under Louisiana law. See Hollowell, 217 F.3d at 385­89; Green, 577 So. 2d at 258. However, in considering whether Fratelli abused the corporate form, we must look to the law governing Fratelli's corporate form--that is, Italian law. It would make no sense to consider whether Fratelli complied with Louisiana corporate formalities because Fratelli was not incorporated in Louisiana and was not subject to the rules and regulations governing corporate structures in that State.

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id en tificatio n numbers, held separate shareholder meetings, and followed Italian s t a t u t o r y formalities in both the formation of the entities and in the liquidation s a le of the Giuseppe entity. The Tanfoglios' former statutory auditor and

a c c o u n t a n t attended shareholder and director meetings as required by Italian la w and prepared and filed reports reflecting those proceedings as required. The s t a t u t o r y auditor repeatedly testified that the Giuseppe S.r.l. and Fratelli's m e e t in g s were not held jointly. Further, the accountant testified that while the F r a t e lli and Giuseppe entities shared office space, the office space of each entity w a s separate within the buildings. Thus, there is absolutely nothing to suggest t h a t the corporate formalities were not observed at all times. T h e r e is also no support for the argument that the liquidation of Giuseppe S .r .l. resulted in a merger with Fratelli or created successor liability. Under I t a lia n law, the sale of assets from one entity to another does not automatically m a k e the purchaser a universal successor of the vendor. Rather, the sale is of s p e c ific , identifiable set of goods. The record does not show that any of Giuseppe S .r .l.'s liability related to this lawsuit was transferred to or assumed by Fratelli. Although Plaintiffs allege that the liquidation and sale of Giuseppe was a " s h a m ," both Fratelli's expert and its former accountant/auditor testified that t h e liquidation and sale were proper under Italian law. The statutory auditor t e s t ifie d that Giuseppe S.r.l. initially tried to remain a going concern by seeking p e r m is s io n from the Italian courts to incorporate under a different corporate fo r m . However, the Italian court denied that request and ordered a "forced" liq u id a t io n . Notably, when Maria Celsa was appointed as Giuseppe S.r.l.'s li q u id a t o r , she relinquished her directorship with Fratelli so that she was not in v o lv e d in both entities' activities during the liquidation. The fact that Fratelli a c q u i r e d certain assets and liabilities from Giuseppe S.r.l. and forgave a s u b s t a n t ia l portion of its debts so that Giuseppe S.r.l. could pay other creditors d o e s not point to any impropriety. To the contrary, Fratelli's Italian law expert t e s t ifie d that such debt forgiveness is "definitely legal" and an "accepted and 11

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r e c o g n iz e d way of payment." Further, according to Fratelli's Italian law expert, a sale of assets or assumption of debts, by itself, could never be a merger because a merger is a distinct, formal legal act, for which specific procedures must be fo llo w e d under Italian law. The Italian merger procedures did not occur in the liq u id a t io n of Giuseppe S.r.l. H e r e , there are some factors in favor of imputing contacts and some factors a g a in s t . Even where some factors suggest that one entity is the alter ego of a n o t h e r , the maintenance of corporate formalities tips in favor of finding that the e n tit ie s are not alter egos. Dalton v. R & W Marine, Inc., 897 F.2d 1359, 1363 (5 t h Cir. 1990) (declining to find an alter ego even though one entity owned 100% o f its subsidiaries, was responsible for corporate policy, funneled revenues into c e n t r a liz e d accounts, and filed consolidated tax returns because those factors w e r e "outweighed, albeit modestly" by observation of corporate formalities). The e v id e n c e shows that Fratelli strictly maintained its corporate form, distinct from G iu s e p p e S.r.l., and thus, the entities cannot be considered alter egos for ju r is d ic t io n a l purposes. III F o r the foregoing reasons, we AFFIRM the judgment of the district court.

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