Lothrop et al v. North American Air Charter, Inc. et al

Filing 56

Judge Douglas P. Woodlock: MEMORANDUM AND ORDER entered in case 1:13-cv-10235-DPW; granting (49) Motion to Dismiss for Lack of Jurisdiction in case 1:13-cv-13007-DPW Associated Cases: 1:13-cv-13007-DPW, 1:13-cv-10235-DPW(Woodlock, Douglas)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
ROBERT S. LOTHROP,
Individually and as
Administrator of the Estate
of ROBERT E. LOTHROP
(Deceased),

)
)
)
)
)
)
Plaintiffs,
)
)
v.
)
)
NORTH AMERICAN AIR CHARTER,
)
INC., AIRBORNE MAINTENANCE,
)
INC., AIR HAMPTONS, INC.,
)
and CONTINENTAL MOTORS, INC., )
)
Defendants.
)

CIVIL ACTION NO.
13-13007-DPW

MEMORANDUM AND ORDER
March 26, 2015
I. BACKGROUND
This action arises from a plane crash on December 5, 2010
in Massachusetts.

The flight originated in New York and was

returning to New York after a stop in New Hampshire when the
engine lost power.

The airplane landing gear hit electrical

transmission wires, causing the airplane to flip during its
forced landing.

Two of the passengers, Robert E. Lothrop and

William Schley, died as a result of the accident.

Another

passenger and the pilot survived.
A.

Procedural Background
Robert S. Lothrop, Administrator of the Lothrop estate, and

Kevin Earls, Administrator of the Schley estate, brought actions
1

against North American Air Charter, Inc. (“North American”),
Airborne Maintenance, Inc. (“Airborne”), and Air Hamptons, Inc.
(“Air Hamptons”) in both New York and Massachusetts state court.
They claimed wrongful death of the decedents and loss of
consortium due to negligence and breach of warranty and also
brought a claim for product liability against Continental
Motors, Inc. (“Continental Motors”).
North American removed the Massachusetts action to federal
court on the basis of federal diversity jurisdiction.

However,

plaintiff Earls and several defendants were citizens of New
York.

North American argued that Earls’ claims were

fraudulently joined and therefore that Earls’ citizenship should
be disregarded for jurisdictional purposes.

North American made

two arguments regarding fraudulent joinder: that the lawyer who
signed the complaint on behalf of Earls was not admitted to
practice in Massachusetts and that Earls had not paid the proper
filing fees.

I held that North American failed to show that

Earls was fraudulently joined and I remanded the case to state
court for resolution of North American’s state law objections to
the inclusion of Earls in this action.
While the case was before me prior to remand, North
American took steps to press its claim of lack of personal
jurisdiction.

North American filed an answer asserting the

affirmative defense of lack of personal jurisdiction.
2

North

American’s memorandum in opposition to Lothrop’s motion to
remand also asserted that Massachusetts courts lack personal
jurisdiction over North American.

In addition, the parties

filed a report of a planning meeting in which North American
proposed a discovery plan that included limited jurisdictional
discovery before any merits discovery and motions to dismiss for
lack of personal jurisdiction.
Once back in state court after remand, North American filed
a motion titled “Motion to Strike,” claiming that the Earls case
was never properly commenced.

During a hearing on the motion to

strike in Suffolk County Superior Court, counsel for Earls
explained to Judge Locke that the plaintiffs had filed in New
York concurrently with the action in Massachusetts because of
North American’s contention that Massachusetts courts lack
personal jurisdiction over North American.

The motion to strike

was denied by Judge Locke.
Ultimately, North American and Earls settled and Earls
entered a stipulation of dismissal of his claims in state court.
North American then removed this action again to federal court.
North American now presses for dismissal on the ground that
there is no personal jurisdiction over it in Massachusetts.
Lothrop continues to maintain that Massachusetts courts do,
in fact, have personal jurisdiction over North American.

3

Meanwhile, Lothrop also moved to dismiss his claims against
Continental Motors, Airborne Maintenance, and Air Hamptons, on
the basis that Lothrop and these three settling defendants have
settled in good faith and without fraud, collusion, or
dishonesty.

Lothrop presented problems including questionable

liability, potential jurisdictional defenses, and perceived
relative culpability, as reasons for the settlements with the
three defendants,.

After reviewing the submissions and without

objection from any party, I determined, following a hearing in
this matter, that the settlements with the settling defendants
were in good faith in accordance with MASS. GEN. LAWS
4.

CH.

231B, §

I thereupon allowed defendants to be dismissed from this

action.

With the case in that posture, I turn now to resolve

the motion to dismiss for lack of personal jurisdiction pressed
by the remaining defendant, North American.
II. ANALYSIS
A.

Waiver
As a threshold matter, Lothrop argues that North American

has waived its personal jurisdiction defense through its actions
in this litigation.
1. Waiver by Omission
Lothrop first claims that North American has waived its
personal jurisdiction defense by failing to include the defense
in its motion before the state court.
4

The proceedings before

the state court were conducted, of course, under state
procedural rules.

Rule 12(g) of the Massachusetts Rules of

Civil Procedure requires a party that makes a motion to dismiss
to include in the motion any defense that may be raised by
motion and prohibits a party from making a new motion based on
an omitted defense or objection. 1
Lothrop concedes that two of the grounds asserted in the
motion to strike — failure to have the complaint signed by a
Massachusetts attorney and impermissible joinder — are arguably
not motions to dismiss under Rule 12, but are rather addressed
by other rules.

Rule 11 permits the striking of a pleading not

signed by a Massachusetts lawyer and Rule 21 permits dropping an
improperly joined party.

He argues, however, that despite the

motion to strike nomenclature, seeking to have the action
dismissed for failure to pay the filing fee is a motion under
Rule 12(b)(6) for failure to state a claim upon which relief can
be granted because there is no other rule of civil procedure
that would permit dismissal for failure to pay a fee.

In this

connection, Lothrop cites Heendeniy v. Swiftwill, Inc., 2011 WL
7718431 at *2 (Mass. Super. 2011) for the proposition that a
party’s failure to pay the required fee results in dismissal.
1

This rule is similar to Rule 12(g)(2) of the Federal Rule of
Civil Procedure, providing that “a party that makes a motion
under this rule must not make another motion under this rule
raising a defense or objection that was available to the party
but omitted from the earlier motion.”
5

He argues that North American failed to include the defense of
lack of personal jurisdiction in the earlier motion, that
therefore North American has waived this defense, and that this
motion to dismiss for lack of personal jurisdiction is barred
under Rule 12(g).
North American counters that the motion to strike was
directed to the argument that Earls had not properly commenced
an action in the first instance and that any action by Earls was
a nullity, not that the complaint failed to state a claim upon
which relief could be granted.

Rule 3 of the Massachusetts

Rules of Civil Procedures requires a party to mail or file a
complaint with the entry fee prescribed by law in order to
commence a civil action.

North American argues that the fact

that the complaint could have been dismissed under Heendeniy for
failure to pay a fee does not mean that dismissal is generally
an appropriate response to failure to commence an action
properly under Rule 3.

In Heendeniy, North American observes,

the plaintiff filed the action pro se accompanied by an
Affidavit of Indigency seeking waiver of the filing fee.

His

filing of the affidavit meant that the action was properly
commenced.

Mass. Gen. Laws c. 261, § 27C(1)(where an affidavit

of indigency is filed with the complaint, “the clerk shall
receive the complaint . . . and proceed as if all regular filing
fees had been paid.”)

After a hearing, however, the Superior
6

Court later determined that the plaintiff could pay a partial
filing fee and sua sponte ordered that the case, which was
properly commenced in the first instance, be dismissed if he did
not pay the reduced fee within ten days of the order.

In

contrast, North American here contends that the filing by an
unlicensed lawyer without the proper fees on behalf of Earls
meant that the action was never properly commenced at all under
Rule 3.
North American has not identified, nor have I found, any
case law distinguishing a motion to strike or dismiss an action
as a nullity from a motion to dismiss under Rule 12(b). 2
Nonetheless, a close look at the motion to strike and Judge
Locke’s September 30, 2013 decision denying the motion (Doc. 1638) makes clear that the argument made by North American about
2

In Superior Court, North American cited Ownes v. Amtrak, 1998
WL 448908 (Mass. Sup. Ct. July 31, 1998) in its motion to
strike. In Ownes, the Superior Court granted summary judgment
as to one count of the complaint on statute of limitations
grounds because the plaintiff had not timely paid the full
filing fee. Id. While that decision supports the idea that
failure to submit the proper filing fee is a failure to commence
the action under Rule 3, it does not address the status of a
motion to strike that raises this issue at an earlier stage. In
Hanlon v. Floridia, 1994 Mass. App. Div. 98 (Mass. Dist. Ct.
1994), the court addressed what may be the analogous case of a
plaintiff who failed to file her Statement of Damages with her
complaint. The court noted that this meant that her case had
been improperly commenced, and instructed the defendant to “move
for the dismissal of this action” if the plaintiff did not
properly move for late filing of the Statement of Damages.
While the court used the general term dismissal, it did not
explain the procedural mechanism under the Rules of Civil
Procedure that should be used for that situation.
7

the filing fees in its motion to strike was inextricably bound
up in the argument about improper joinder.
The motion to strike was brought pursuant to Rules 11 and
21 of the Massachusetts Rules of Civil Procedure.

The motion is

composed of one section about the fact that the attorney who
signed the complaint was not authorized to practice in
Massachusetts and a second section about the failure to pay the
required filing fees.

This second section included a

preliminary argument that the plaintiffs actually allege
separate, not joint recovery, under the joinder rules of Rule 20
for the loss of consortium claims and then a secondary argument
that therefore Earls was required to pay an additional filing
fee as specified in Rule 20.

Judge Locke’s decision denying the

motion to strike for failure to pay the filing fee stated that
he determined that the filing fee paid at the time the complaint
was filed was properly calculated under Rule 20(a) of the
Massachusetts Rules of Civil Procedure, governing the permissive
joinder of parties.

Both the motion to strike and the decision

treated the issue of the filing fee as completely determined by
the propriety of joinder and the possibility of joint recovery.
Regardless of whether there is any difference generally between
a motion to dismiss a pleading and a motion to strike or dismiss
an improperly commenced action as a nullity, the focus in North
American’s motion to strike was on a question of proper joinder,
8

which could have led to dropping Earls as a party under Rule 21.
The motion to strike was not strictly speaking a Rule 12 motion
to dismiss, and therefore North American’s defense of lack of
personal jurisdiction has not been waived by omission from its
earlier filing.
2. Waiver by Participation
Lothrop next claims that North American waived its defense
of lack of personal jurisdiction through participation in this
litigation.

North American raised lack of personal jurisdiction

as an affirmative defense in its answer to the complaint.
Nonetheless, under Massachusetts law, “where a party raises the
defense of lack of personal jurisdiction in responsive pleading,
the party’s subsequent conduct may in some circumstances result
in a forfeiture of that defense.” American Intern. Ins. Co. v.
Robert Seuffer GMBH & Co., 9 N.E.3d 289, 291 (Mass 2014).

The

determination whether this defense is forfeited is factspecific.

Id.

Lothrop details the many ways in which North American has
participated in this proceeding so far: filing a notice of
removal, opposing remand, answering the complaint, stipulating
to the dismissal of defendants, opposing Lothrop’s motion to
admit an attorney pro hac vice, filing the motion to strike,
stipulating to a change of venue, and assenting to a motion to
admit attorneys for defendant Air Hamptons pro hac vice.
9

Lothrop argues that North American’s extensive participation in
this litigation means that it has waived its personal
jurisdiction defense.
Lothrop relies on Sarin v. Ochsner, 721 N.E.2d 932, 933
(Mass. App. Ct. 2000) as an example of the minimal participation
that can constitute waiver, noting that the defendants’ personal
jurisdiction argument was deemed waived in Sarin where they
appeared at two hearings on damages and filed motions to
disqualify counsel, stay discovery, and remove a default.

In

Sarin, however, the defendants sought to assert lack of personal
jurisdiction almost three years after the entry of a default
judgment against them for failure to comply with discovery
orders.

Id.

The character of the defendants’ prior

participation combined with the very advanced posture of the
proceedings significantly differentiates Sarin from this matter.
Another case relied upon by Lothrop as showing the minimal
conduct needed to find waiver of any personal jurisdiction
defense is Plunkett v. Valhalla Investment Services, Inc., 409
F.Supp.2d 39 (D. Mass. 2006).

In Plunkett, the defendant

“marginally” asserted the defense of lack of personal
jurisdiction in its answer, then participated in a scheduling
conference, engaged in a colloquy with the court about the
nature of the case, conducted discovery, entered into a
stipulation, consented to alternative dispute resolution, and
10

moved for admission of their counsel pro hac vice over a period
of eleven months before filing a motion asserting this defense.
Id. at 42.

At least some of the conduct of the defendant in

Plunkett, such as participating in alternative dispute
resolution through the court and engaging in merits discovery,
are the types of merit-focused activities that can result in the
waiver of a jurisdictional defense.

See American Intern., 9

N.E.3d at 297 (“Parties who opt to raise such a defense [of lack
of personal jurisdiction] in a responsive pleading may ensure
its preservation by moving to dismiss pursuant to rule 12(b)(2)
within a reasonable time, prior to substantially participating
in discovery and litigating the merits of the case.”)(internal
quotation marks omitted).
Despite the fact that the litigation now before me has
already seen the expenditure of significant judicial resources,
the action is still in a preliminary posture.

The focus until

this point has been on determining an appropriate forum and the
status of the claims brought by Earls in state court.
has been taken on the merits.

No action

North American has consistently

taken steps to advance its affirmative defense of lack of
jurisdiction.

The fact that North American did not conduct

jurisdictional discovery and file this motion while the backand-forth about removal and remand was underway does not suggest
waiver.

North American made its motion promptly once the action
11

landed squarely in this forum and before any merits discovery or
determination had begun.

I conclude that Northern American has

not waived its personal jurisdiction defense through its
participation thus far in this litigation.
B.

Personal Jurisdiction
When a motion to dismiss due to lack of personal

jurisdiction is filed, “it is plaintiff’s burden to demonstrate
the existence of every fact required to satisfy both the forum’s
long-arm statute and the Due Process Clause of the
Constitution.”

United Elec. Radio and Mach. Workers of America

v. 163 Pleasant Street Corp., 987 F.2d 39, 43-44 (1st Cir.
1993)(internal quotations and corrections omitted).

My review

will be conducted under the “prima facie” standard, in which the
plaintiff must make affirmative proof of the facts in the record
that provide jurisdiction.

Id. at 44.

I accept all properly

supported proffers of evidence by plaintiff as true and
determine, as a matter of law, whether the plaintiff has
demonstrated that personal jurisdiction exists over North
American.

Id.

The Massachusetts Long Arm Statute, Mass. Gen. Laws c. 223A
§ 3, provides in relevant part:
A court may exercise personal jurisdiction over a
person, who acts directly or by an agent, as to a
cause of action in law or equity arising from the
person's
(a) transacting any business in this commonwealth;
12

(b) contracting to supply services or things in this
commonwealth;
(c) causing tortious injury by an act or omission in
this commonwealth;
(d) causing tortious injury in this commonwealth by an
act or omission outside this commonwealth if he
regularly does or solicits business, or engages in any
other persistent course of conduct, or derives
substantial revenue from goods used or consumed or
services rendered, in this commonwealth. . .
If a defendant’s conduct falls within one of the
subsections of the Massachusetts long-arm statute, then I may
exercise jurisdiction over the defendant unless doing so would
be inconsistent with the Due Process Clause of the United States
Constitution.

Due Process requires that a nonresident defendant

have significant enough “minimum contacts” with Massachusetts
that it would not offend “traditional notions of fair play and
justice” to maintain a suit against the defendant in
Massachusetts.

Good Hope Industries, Inc. v. Ryder Scott Co.,

389 N.E.2d 76, 80 (Mass. 1979)(quoting International Shoe Co. v.
Washington, 326 U.S. 310 (1945)).
North American did not own the plane that was involved in
the crash and has had no customers located in Massachuestts
between 2009 and 2013.

(Ross Aff., Doc. No. 50-1).

Less than

0.01% of North American’s total gross revenue came from services
that included any flights to, through, or from Massachusetts.
(Id.)

North American argues extensively that it is not subject

to personal jurisdiction in Massachusetts on its own account.

13

Lothrop seems to concede this point, since he does not make any
meaningful argument to the contrary.

Lothrop instead argues

that there is personal jurisdiction over North American because
it is the alter-ego of another company, Air Hamptons.
North American maintains that it is not an alter-ego of Air
Hamptons but does not challenge Lothrop’s claim that Air
Hamptons is subject to personal jurisdiction in Massachusetts
because Air Hamptons operated the aircraft that crashed in
Massachusetts and Air Hamptons’ aircraft flew into or out of
Massachusetts over fifty times from 2007-2010.
C.

Alter-Ego Personal Jurisdiction
1. Choice of Law
At the outset, I address the choice-of-law issue the

parties have neglected.
in their memoranda.

Both parties rely on Massachusetts law

Lothrop claims that there is no significant

distinction between Massachusetts and New York law, and North
American claims that New York law is even less permissive than
Massachusetts law.

North American argues in a footnote of its

reply brief that New York substantive law should be applied to
the alter-ego analysis.

Nonetheless, North American claims,

without explaining why this should change the choice-of-law
analysis, that it is conducting its analysis under Massachusetts
law because this is a Massachusetts jurisdictional determination

14

and because it believes that because it prevails under
Massachusetts law it a fortiori prevails under New York law.
Massachusetts law is not entirely settled regarding whether
determinations about piercing a corporation’s veil should
automatically be made under the law of the state of
incorporation, see e.g. Lily Transp. Corp. v. Royal Inst.
Servs., Inc., 832 N.E.2d 666, 674 n.15 (Mass. App. Ct.
2005)(applying law of the place of incorporation); In re
Cambridge Biotech Corp., 186 F.3d 1356, 1376 n.11 (Fed. Cir.
1999)(applying Massachusetts law, same), or whether the place of
incorporation is one of a number of factors considered, see
e.g., Evans v. Multicon Const. Corp., 574 N.E.2d 395, 400 n.7
(Mass. App. Ct. 1991)(considering multiple factors under the
Restatement (Second) of Conflict of Laws § 188); John T.
Callahan & Sons, Inc. v. Dykeman Elec. Co., Inc. 266 F.Supp.2d
208, 230 (D. Mass. 2003)(same).

Both positions were noted by

the Supreme Judicial Court in Scott v. NG U.S. 1, Inc., 881
N.E.2d 1125, 1131, n.13 (Mass. 2008), which did not resolve the
disagreement because the parties in that case did not dispute
the proper law to apply.

Regardless, even if the place of

incorporation of North American were but one of a number of
factors to consider, I find that New York has the more
significant relationship to the claims against North American in
this case.

See Restatement (Second) of Conflict of Laws § 188.
15

Both North American and Air Hamptons were incorporated in New
York and any maintenance that forms the basis of the allegations
against North American occurred in New York.
In the end, I find the core of the choice-of-law analysis
to be the same when analyzing corporate veil-piercing under New
York or Massachusetts law, although North American is correct
that the case for maintaining corporate distinctiveness is even
stronger under New York law.

In this Memorandum, I will

continue consistently with the parties’ reliance upon a
Massachusetts analysis while noting relevant New York case law
in the footnotes.
2. Substantive Considerations
Lothrop argues that North American is an alter-ego of Air
Hamptons such that personal jurisdiction over Air Hamptons is
sufficient to establish personal jurisdiction over North
American as well.

In My Bread Baking Co. v. Cumberland Farms,

Inc., 233 N.E.2d 748 (Mass. 1968), the Supreme Judicial Court
discussed when it is appropriate under Massachusetts law to
“disregard[] the corporate fiction.”

Id. at 752.

The Supreme

Judicial Court acknowledged the “principle that corporations are
generally to be regarded as separate from each other and from
their respective stockholders,” but observed that this “general
principle is not of unlimited application.”

16

Id.

The Supreme Judicial Court discussed two circumstances in
which a relationship between two corporations may result in
joint liability. The first is “when there is active and direct
participation by the representatives of one corporation,
apparently exercising some form of pervasive control, in the
activities of another and there is some fraudulent or injurious
consequence of the inter-corporate relationship.” Id. at 752.
The second is “when there is a confused intermingling of
activity of two or more corporations engaged in a common
enterprise with substantial disregard of the separate nature of
the corporate entities, or serious ambiguity about the manner
and capacity in which the various corporations and their
respective representatives are acting.” Id.

The court went on

to provide some examples, such as failure to make clear which
corporation is taking action in a particular situation or
failure to observe formal barriers between the corporations,
that could lead to the “confused intermingling” that “may
warrant some disregard of the separate entities in rare
particular situations in order to prevent gross inequity.”

3

Id. 3

Under New York law, a corporation is considered to be a mere
alter ego when it “has been so dominated by . . . another
corporation . . . and its separate identity so disregarded, that
it primarily transacted the dominator’s business rather than its
own.’” Gartner v. Snyder, 607 F.2d 582, 586 (2d Cir. 1979).
Courts will only pierce the corporate veil under New York law
where there has been either a “showing of fraud or . . .
complete control by the dominating party that leads to a wrong
17

The Massachusetts standard for disregarding the separate
entities of different corporations is a demanding one.
Bread Baking, 233 N.E.2d at 752. 4

See My

Massachusetts cases since My

Bread Baking have repeatedly confirmed the principle that
corporations are generally treated as “separate and distinct
entities” notwithstanding relationships between them, Scott, 881
N.E.2d at 1131, and that the corporate veil may be pierced only
with reluctance and in extreme circumstances when compelled by
reasons of equity.

See, e.g., Attorney General v. M.C.K., Inc.,

736 N.E.2d 373, 380 (Mass. 2000)(“The doctrine of corporate
disregard is an equitable tool that authorizes courts, in rare
situations, to ignore corporate formalities, when such disregard
is necessary to provide a meaningful remedy for injuries and to
avoid injustice.”); Spaneas v. Travelers Indem. Co., 668 N.E.2d

against third parties.’” Wm. Passalaqcua Builders, Inc. v.
Resnick Developers, Inc., 933 F.2d 131, 138 (2d Cir. 1991). A
significant difference between Massachusetts and New York law is
that under New York law there must be a direct connection
between any abuse of the corporate form and the injury to the
plaintiff. “While complete domination of the corporation is the
key to piercing the corporate veil . . . such domination,
standing alone, is not enough; some showing of a wrongful or
unjust act toward plaintiff is required. The party seeking to
pierce the corporate veil must establish that the owners,
through their domination, abused the privilege of doing business
in the corporate form to perpetrate a wrong or injustice against
that party such that a court in equity will intervene.” Morris
v. New York State Dep't of Taxation & Fin., 623 N.E.2d 1157,
1161 (N.Y. 1993).
4
Under New York law, “piercing the corporate veil is a remedy
undertaken with extreme reluctance.” Lakah v. UBS, 996
F.Supp.2d 250 (S.D.N.Y. 2014).
18

325, 326 (Mass. 1996)(“Only in rare instances, in order to
prevent gross inequity, will a Massachusetts court look beyond
the corporate form”).
Here, Lothrop does not contend that the first circumstance
identified in My Bread Baking, 233 N.E.2d at 752, for corporate
veil piercing — requiring fraudulent or injurious consequences
that stem from the relationship between the corporations — is
met.

Rather, he argues that the “confused intermingling”

between the two corporations and “substantial disregard” of
corporate form, the second circumstance identified in My Bread
Baking, id., is met here.

Courts considering whether to set

aside corporate formalities consider twelve factors:
(1) common ownership; (2) pervasive control; (3)
confused intermingling of business assets; (4) thin
capitalization; (5) nonobservance of corporate
formalities; (6) absence of corporate records; (7) no
payment of dividends; (8) insolvency at the time of
the litigated transaction; (9) siphoning away of
corporation's funds by dominant shareholder; (10)
nonfunctioning of officers and directors; (11) use of
the corporation for transactions of the dominant
shareholders; and (12) use of the corporation in
promoting fraud.
Attorney Gen. v. M.C.K., Inc., 736 N.E.2d at 380 n.19. 5
5

Under New York law, the list of facts relevant to whether
there is “complete control” by one corporation against another
is:
(1) the absence of the formalities and paraphernalia
that are part and parcel of the corporate existence,
... (2) inadequate capitalization, (3) whether funds
are put in and taken out of the corporation for
personal rather than corporate purposes, (4) overlap
in ownership, officers, directors, and personnel, (5)
19

These factors are not simply added up, but rather are considered
in an integrated manner based on all of the facts presented.
The primary evidence relied on by Lothrop is the 30(b)(6)
deposition of the corporate representative of North American,
Jonathan Ross.

In this deposition, Ross explained that North

American operates chartered flights and that North American
exclusively operates airplanes that are on its own air carrier
certificate.

North American and Air Hamptons have separate

operations specifications that apply to its crews, training,
drug testing, and operational control.

He testified, “the FAA

comes out and determines that those things are kept very
separate,” referring to the separate operations of the two
companies. 6

common office space, address, and telephone numbers of
corporate entities, (6) the amount of business
discretion displayed by the allegedly dominated
corporation, (7) whether the related corporations deal
with the dominated corporation at arms length, (8)
whether the corporations are treated as independent
profit centers, (9) the payment or guarantee of debts
of the dominated corporation by other corporations in
the group, and (10) whether the corporation in
question had property that was used by other of the
corporations as if it were its own.
Wm. Passalacqua Builders, 933 F.2d at 139 (citations omitted).
6
North American explains further in its reply memorandum that
the two companies have different types of air carrier
certificates, with North American permitted to manage and
operate large, long range, intercontinental business jet
transport category aircraft, and Air Hamptons permitted to
manage and operate smaller, shorter range, piston-engine and
20

F. Jay Schley is the owner and sole shareholder of North
American, and serves as President and CEO of North American.
is also the President and CEO of Air Hamptons.

He

There is no

Board of Directors for either company, and F. Jay Schley is the
sole corporate director of both.

While Lothrop claimed in his

memorandum that the positions at both companies are “one and the
same to him,” meaning to F. Jay Schley, in fact the deposition
testimony was that F. Jay Schley considered the CEO and
President positions within one company to be one and the same,
and Ross was not sure whether he held both titles or just one.
Ross serves as the Director of Operations for both North
American and for Air Hamptons. 7
North American, Air Hamptons, and Airborne Maintenance
share some resources: North American and Air Hamptons share a
common address and telephone number, an inter-office telephone
extension network, as well as an “@naac.com” email domain.
Other resources are shared between North American and Air

turboprop aircraft similar to the aircraft involved in this
accident.
7
North American takes issue with the characterization by
Lothrop that the two corporations “share the same Director of
Operations,” contending instead that Ross holds two separate
roles in relation to the two companies. The deposition record
supports that these were two separate roles, not one role across
the two companies. North American distinguishes between Ross’s
roles at the two companies explaining that he only has authority
to hire for Air Hamptons in his capacity as Director of
Operations for Air Hamptons, not in his capacity as Director of
Operations for North American.
21

Hamptons.

Receptionists and salespeople employed by North

American and whose W-2 tax forms are issued by North American
also perform work for Air Hamptons.

An in-house accountant

performs accounting duties for North American, Air Hamptons, and
Airborne Maintenance and is paid by North American.

Some pilots

fly for both companies but are paid by North American.

Ross

testified, however, that whenever a pilot flies for Air
Hamptons, that pilot must be qualified and acting as an Air
Hamptons pilot.
The two companies are presented on North American’s website
as “sister compan[ies],” and Ross as the corporate witness for
North American described the arrangement between North American
and Air Hamptons for borrowing workers to help with maintenance
as a “symbiotic relationship that is ongoing.” 8

Ross clarified,

however, that FAA regulations do not permit “mingling of
operating authority” between different companies.

8

Lothrop also points to evidence in the record about North
American’s close dealing with a third company, defendant
Airborne Maintenance, noting that North American has loaned
money to Airborne maintenance, sometimes shares workers with
them, and operates under verbal agreements between F. Jay
Schley, the owner of North American, and his son Jay Schley,
Jr., owner of Airborne Maintenance. The relationship between
North American and Airborne Maintenance does not support
Lothrop’s allegations about the relationship between North
American and Air Hamptons — other than perhaps through some
attenuated propensity argument that Lothrop does not explicitly
make and that would not affect my analysis of the relationship
between North American and Air Hamptons in any event.
22

While Lothrop has shown a strong relationship between the
two companies, the evidence Lothrop points to in the record does
not support a finding that there is such confused intermingling
or disregard of the separate corporate forms as could justify
treating these two separate corporations as a single entity.
While Lothrop points to shared employees and services, there is
no evidence that one corporation controlled or used the other
corporation other than for the mutual benefit of both.

There is

no evidence that the two companies’ sharing of the same physical
space, phone number, or email address created any confusion in
record keeping or was confusing to other companies or
individuals that interacted with these two corporations.

There

is no evidence about the capitalization of either corporation,
improper segregation of separate business records or finances,
or any improper use of the corporations’ funds.

There is no

evidence, or even allegation, that the corporations were used in
promoting fraud.
The evidence that Lothrop points to shows common ownership
and management as well as cooperation and some sharing of
resources.

“[C]ommon ownership of the stock of two or more

corporations together with common management, standing alone,
will not give rise to liability on the part of one corporation
for the acts of another corporation,” My Bread Baking, 233
N.E.2d at 752.

Here, Lothrop has presented facts that also show
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a high degree of cooperation between the two corporations,
including occasionally sharing costs and personnel or providing
services to each other.

This cooperation demonstrates a close

working relationship but not disregard of the separate entities.
Lothrop has not demonstrated that there are other factors
present here that would “permit the conclusion that an agency or
Id. 9

similar relationship exists between the entities.”

Even if I were to find that Lothrop had presented evidence
of a confused intermingling of the corporations and substantial
disregard of corporate form, Lothrop has failed to allege
equitable concerns sufficient to spur me to consider
disregarding the corporate form here. 10

The “gross inequity”

that can lead to the piercing of the corporate veil typically
requires some finding that the corporation engaged in misconduct
through the corporate form.

“There is present in the cases

which have looked through the corporate form an element of
9

The New York factors also include common office space and
telephone numbers, which the two corporations do share here, and
there is also some evidence that the dealings between the
corporations may have been less than entirely at arms length,
such as by being less formalized and more flexible. Similar to
Massachuestts, however, the majority of the New York factors —
particularly the ones having to do with finances — are not met
in this case.
10
Under New York law, even if I were to find that North
American so dominated Air Hamptons that it could be said to have
exerted “complete control” over Air Hampton, Lothrop has not
identified any injury suffered by him or another third party as
a result of this domination or other abuse of the corporate form
as required for a New York court to pierce the veil of the two
corporations. See Morris, 623 N.E.2d at 1161.
24

dubious manipulation and contrivance [and] finagling....” Scott,
881 N.E.2d at 1132 (quoting Evans, 574 N.E.2d 395).

See also

United States v. Bestfoods, 524 U.S. 51, 62 (1998)(discussing
the fundamental principle of corporate law that “the corporate
veil may be pierced . . . when, inter alia, the corporate form
would otherwise be misused to accomplish certain wrongful
purposes . . .”).
Lothrop asserts that he will suffer gross inequity if North
American is permitted to shield itself from liability in a
Massachusetts forum on a claim of lack of personal jurisdiction.
While he claims that I should not allow North American to “evade
liability for its negligence,” in reality the question is not
whether North American can evade liability but only whether it
can properly be brought into court in Massachusetts for an
evaluation of liability.

Lothrop commenced an identical action

in New York against the same defendants, which has been
consolidated with the personal injury action of the passenger
and also includes the pilot as a party.

The conduct at issue

concerning the maintenance of the aircraft took place in New
York and the parties are all located in New York.
can go forward in New York.

This action

To be sure, Lothrop is apprehensive

that New York damages may not be as generous as those available
in Massachusetts.

But that potential has no role in a

determination of corporate veil piercing.
25

Maintaining the

separate corporate entities of these two companies does not
create a “gross inequity” merely by requiring Lothrop to pursue
claims against North American in a jurisdiction whose courts
have personal jurisdiction over the company itself.
III. CONCLUSION
For the reasons set forth more fully above, I GRANT
Defendant North American’s Motion to Dismiss for Lack of
Personal Jurisdiction (Doc. No. 50).

/s/ Douglas P. Woodlock
DOUGLAS P. WOODLOCK
UNITED STATES DISTRICT

26