Davenport v. Hansaworld, USA et al
Filing
108
ORDER granting Defendant HansaWorld USA, Inc.'s 69 Motion to Dismiss Plaintiff's Title VII claims; granting Defendant HansaWorld Holding Limited's 94 Motion to Dismiss for Lack of Jurisdiction. Further, within 21 days of the date of the entry of this Order, Plaintiff and HansaWorld USA, Inc. shall each submit a memorandum brief limited to 25 pages in length addressing the following issues: (1) whether the Court has subject matter jurisdiction over Plaintiff's state law claims under 28 U.S.C. Section 1332 or Section 1367; and (2) if 28 U.S.C. Section 1367 is the applicable statute, whether the Court should exercise its discretion to dismiss the state law claims without prejudice. Signed by District Judge Keith Starrett on May 20, 2014 (dsl)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
EASTERN DIVISION
KIMBERLEE DAVENPORT
PLAINTIFF
V.
CIVIL ACTION NO. 2:12-CV-233-KS-MTP
HANSAWORLD USA, INC. and
HANSAWORLD HOLDING LIMITED
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This matter is before the Court on the Defendant HansaWorld USA, Inc.’s
(“HansaWorld USA”) Partial Motion to Dismiss or, in the Alternative, for Summary
Judgment (“Motion to Dismiss”) [69], and the Defendant HansaWorld Holding Limited’s
(“HansaWorld Holding”) Motion to Dismiss [94]. Having considered the submissions of
the parties, the record, and the applicable law, the Court finds that both motions should
be granted.
RELEVANT BACKGROUND
Plaintiff Kimberlee Davenport asserts several federal and state law claims against
her former employer, HansaWorld USA, in this action. Davenport was employed by
HansaWorld USA as a sales manager through a written Contract of Employment [13-4]
from January of 2011 to October of 2012. It appears that HansaWorld USA is a software
company. HansaWorld USA was incorporated in California in July of 2009, and
maintains its principal offices in Florida. HansaWorld USA was registered to do business
in Mississippi from February of 2010 to December of 2011. HansaWorld Holding is the
parent company and sole shareholder of HansaWorld USA. HansaWorld Holding was
organized under the laws of Ireland and maintains its headquarters in that country.
On December 13, 2012, Davenport filed suit against HansaWorld USA and Karl
Bohlin (an adult resident citizen of Sweden) in this Court. (See Compl. [1].) Subject
matter jurisdiction is asserted under Title 28 U.S.C. §§ 1331 (federal question) and 1343
(civil rights). Davenport alleges that she experienced sexual harassment by several
individuals, and that Bohlin, her direct and immediate supervisor, was the primary
perpetrator of the harassment. Davenport further contends that as one of the few U.S.
employees of HansaWorld USA, she “was often singled out and ridiculed for her national
origin as being an ‘American.’” (Compl. [1] at ¶ 15.) Davenport claims that she was
wrongfully terminated after complaining about the purported sexual harassment and
about HansaWorld USA’s alleged disregard of U.S. tax and immigration laws pertaining
to employee pay. Based on these and other allegations, the Complaint asserts liability
under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title VII”), for
discrimination based on sex and national origin, retaliation, and hostile work environment.
The following state law claims are also included in the Complaint: defamation; malicious
interference with employment; intentional and negligent infliction of emotional distress;
discharge in violation of public policy; breach of contract; breach of good faith and fair
dealing; and negligent supervision and training.
On April 16, 2013, Davenport filed her Amended Complaint [28], joining
HansaWorld UK Ltd. and HansaWorld Ireland as Defendants. Through this pleading,
Davenport claimed that HansaWorld USA is the alter ego and subsidiary of HansaWorld
UK Ltd. and HansaWorld Ireland. Davenport further asserted that all HansaWorld
companies share the same Board of Directors. No new causes of action were alleged in
the Amended Complaint [28].
On April 23, 2013, HansaWorld USA moved to dismiss the Amended Complaint
for lack of personal jurisdiction and improper venue. (See Doc. No. [30].) HansaWorld
USA alternatively sought to transfer venue to the U.S. District Court for the Southern
District of Florida. On September 25, 2013, the Court entered its Memorandum Opinion
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and Order [45], concluding that dismissal was unwarranted on the grounds urged by
HansaWorld USA, and that good cause did not exist for the transfer of this action to the
Southern District of Florida.
On October 24, 2013, Davenport’s claims against Bohlin, HansaWorld UK Ltd.,
and HansaWorld Ireland were dismissed with prejudice via an Agreed Order of Dismissal
with Prejudice [51].
On January 10, 2014, Davenport filed her Second Amended Complaint [62]. This
pleading only names HansaWorld USA and HansaWorld Holding as Defendants.
Davenport claims that HansaWorld USA is the alter ego and subsidiary of HansaWorld
Holding; that the Defendants share the same Board of Directors and bank accounts; and,
that employees “of all HansaWorld companies are fluid and work for and between the
HansaWorld sister companies.” (2d Am. Compl. [62] at pp. 2-3.) The Second Amended
Complaint contains the same causes of action as the original Complaint, minus
Davenport’s claim for malicious interference with employment against Bohlin.
On January 16, 2014, HansaWorld USA filed its Motion to Dismiss [69]. This
motion is aimed only at Davenport’s Title VII cause of action. On March 5, 2014,
HansaWorld Holding filed its Motion to Dismiss [94]. HansaWorld Holding seeks the
dismissal of the Second Amended Complaint [62] on two grounds: (1) lack of personal
jurisdiction and (2) insufficient service of process. HansaWorld Holding also joins in
HansaWorld USA’s request for the dismissal of Davenport’s Title VII claims. The subject
motions have been fully briefed and the Court is ready to rule.
DISCUSSION
I.
HansaWorld USA’s Motion to Dismiss [69]
HansaWorld USA argues that Davenport’s Title VII claims fail because it does not
have the requisite number of employees to qualify as a statutory “employer.” Under Title
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VII, an “employer” is defined as “a person engaged in an industry affecting commerce
who has fifteen or more employees for each working day in each of twenty or more
calendar weeks in the current or preceding calender year . . . .” 42 U.S.C. § 2000e(b).
The term “employee” is defined as “an individual employed by an employer,” but does not
encompass certain government officials. 42 U.S.C. § 2000e(f). “With respect to
employment in a foreign country, such term [employee] includes an individual who is a
citizen of the United States.” Id.
HansaWorld USA contends that dismissal is required under Federal Rule of Civil
Procedure 12(b)(6) since the Complaint is devoid of any allegations indicating that it is an
employer under Title VII. HansaWorld USA alternatively contends that summary
judgment is appropriate on this issue under Federal Rule of Civil Procedure 56.
A.
Federal Rule of Civil Procedure 12(b)(6)
1.
Standard of Review
To withstand a motion to dismiss under Rule 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d
929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id.; see also In re Great Lakes Dredge & Dock Co., 624 F.3d 201,
210 (5th Cir. 2010) (“To be plausible, the complaint’s ‘[f]actual allegations must be
enough to raise a right to relief above the speculative level.’”) (quoting Twombly, 550
U.S. at 555). A complaint containing mere “labels and conclusions, or a formulaic
recitation of the elements” is insufficient. Bowlby v. City of Aberdeen, Miss., 681 F.3d
215, 219 (5th Cir. 2012) (citation and internal quotation marks omitted). Although courts
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are to accept all well-pleaded facts as true and view those facts in the light most
favorable to the nonmoving party, courts are not required “to accept as true a legal
conclusion couched as factual allegation.” Randall D. Wolcott, M.D., P.A. v. Sebelius,
635 F.3d 757, 763 (5th Cir. 2011) (citations omitted). Ultimately, the court’s task “is to
determine whether the plaintiff has stated a legally cognizable claim that is plausible, not
to evaluate the plaintiff’s likelihood of success.” In re McCoy, 666 F.3d 924, 926 (5th Cir.
2012) (citing Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th
Cir. 2010)).
2.
Analysis
The United States Supreme Court has held that § 2000e(b)’s employee
numerosity requirement “is an element of a plaintiff’s claim for relief, not a jurisdictional
issue.” Arbaugh v. Y & H Corp., 546 U.S. 500, 516, 126 S. Ct. 1235, 163 L. Ed. 2d 1097
(2006).
Thus, a defendant charged with employment discrimination cannot wait until
after the close of evidence to seek and obtain dismissal based on the ground that it
employs fewer than fifteen people. See id. at 504. There are divergent district court
opinions regarding whether a complaint asserting a claim for relief under Title VII must
specifically allege the number of employees employed by the defendant in order to
survive Rule 12(b)(6) scrutiny. Compare Prystawik v. BEGO USA, No. 13-134 S, 2013
WL 2383680, at *2-3 (D.R.I. May 30, 2013) (granting the defendant’s motion to dismiss
where the complaint did not allege the number of employees), and Morrow v. Keystone
Builders, Inc., No. 2:08-4119-CWH, 2010 WL 3672354, at *8 (D.S.C. Sept. 15, 2010)
(“Plaintiff’s Amended Complaint fails to state a claim for which relief can be granted
under Title VII because the Plaintiff fails to allege facts establishing an essential element
of her claim—that her employer employed fifteen or more employees.”), with LeBlanc v.
Del. County Bd. of Prison Inspectors, No. 10-3704, 2011 WL 2745800, at *5 (E.D. Pa.
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July 14, 2011) (denying a motion to dismiss with respect to a complaint that presented no
specific factual allegations as to the number of individuals employed by the defendant,
but pleaded facts allowing the Court to reasonably infer that the numerosity requirement
was met), Powers v. Avondale Baptist Church, No. 3:06cv363-J-33MCR, 2007 WL
2310782, at *2-3 (M.D. Fla. Aug. 9, 2007) (noting that the employee numerosity
requirement is more appropriately considered in the context of summary judgment in
denying a Rule 12(b)(6) request for dismissal) (citation omitted), and Berry v. Lee, 428 F.
Supp. 2d 546, 559 (N.D. Tex. 2006) (denying the defendants’ requests for dismissal
under Rule 12(b)(6) without prejudice to their ability to move for summary judgment
where the complaint did not specifically allege that any defendant employed fifteen or
more individuals).
Davenport’s Second Amended Complaint [62] does not specify the number of
employees employed by HansaWorld USA. However, this pleading and Davenport’s
Equal Employment Opportunity Commission Charge of Discrimination (“EEOC Charge”)
[63] clearly assert that HansaWorld USA employed multiple employees. (See 2d Am.
Compl. [62] at ¶¶ 10, 15, 20, 47; EEOC Charge [63] at p. 1.)1 Davenport’s opposition to
the Motion to Dismiss further posits that “at least forty-five (45) employees had an
employment relationship with HansaWorld USA.” (Davenport’s Mem. in Supp. of Opp. to
Mot. to Dismiss [73] at ¶ 41.)
A court should not ordinarily dismiss a claim based on a pleading defect without
granting leave to amend. See Hart v. Bayer Corp., 199 F.3d 239, 248 n.6 (5th Cir. 2000)
(citations omitted). It thus appears that the grant of HansaWorld USA’s Rule 12(b)(6)
1
The Court may consider Davenport’s EEOC Charge [63] without running afoul of
Rule 12(b)(6) since it is referenced in the Complaint and is a matter of public record.
See Thomas v. Lowe’s Home Ctrs., Inc., No 13-0779, 2014 WL 545862, at *2 n.5 (W.D.
La. Feb. 10, 2014) (citations omitted).
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request for dismissal would amount to an exercise in futility and only delay proceedings
while Davenport amends the pleadings to assert that HansaWorld USA employed at
least forty-five individuals. The Court finds that the dismissal of Davenport’s Title VII
cause of action under Rule 12(b)(6) would be improvident under these circumstances,
and that the employee numerosity requirement should be addressed under Rule 56. Cf.
Powers, 2007 WL 2310782, at *2-3; Berry, 428 F. Supp. 2d at 559.2
B.
Federal Rule of Civil Procedure 56
1.
Standard of Review
Rule 56 provides that “[t]he court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Where the burden of production
at trial ultimately rests on the nonmovant, the movant must merely demonstrate an
absence of evidentiary support in the record for the nonmovant’s case.” Cuadra v.
Houston Indep. Sch. Dist., 626 F.3d 808, 812 (5th Cir. 2010) (citation and internal
quotation marks omitted). The nonmovant must then “come forward with specific facts
showing that there is a genuine issue for trial.” Id. “‘An issue is material if its resolution
could affect the outcome of the action.’” Sierra Club, Inc. v. Sandy Creek Energy
Assocs., L.P., 627 F.3d 134, 138 (5th Cir. 2010) (quoting Daniels v. City of Arlington,
Tex., 246 F.3d 500, 502 (5th Cir. 2001)). “An issue is ‘genuine’ if the evidence is
sufficient for a reasonable jury to return a verdict for the nonmoving party.” Cuadra, 626
2
Federal Rule of Civil Procedure 12(d) requires that all parties be given a
reasonable opportunity to present pertinent materials when a request for dismissal
under Rule 12(b)(6) or 12(c) is treated as a motion for summary judgment. This notice
requirement has been satisfied here given HansaWorld USA’s request for summary
judgment in the alternative, and given the parties’ submission of matters outside the
pleadings on the subject motion.
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F.3d at 812 (citation omitted).
The Court is not permitted to make credibility determinations or weigh the
evidence. Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir. 2009) (citing Turner v. Baylor
Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007)). When deciding whether a
genuine fact issue exists, “the court must view the facts and the inferences to be drawn
therefrom in the light most favorable to the nonmoving party.” Sierra Club, Inc., 627 F.3d
at 138. However, “[c]onclusional allegations and denials, speculation, improbable
inferences, unsubstantiated assertions, and legalistic argumentation do not adequately
substitute for specific facts showing a genuine issue for trial.” Oliver v. Scott, 276 F.3d
736, 744 (5th Cir. 2002) (citation omitted). Summary judgment is mandatory “‘against a
party who fails to make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear the burden of proof at
trial.’” Brown v. Offshore Specialty Fabricators, Inc., 663 F.3d 759, 766 (5th Cir. 2011)
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265
(1986)).
2.
Analysis
HansaWorld USA makes the following pertinent assertions of fact in support of
summary judgment: (i) HansaWorld USA “has never employed more than fifteen (15)
total employees for each working day in each of twenty or more calendar weeks during
any calendar year”; (ii) “all HansaWorld companies combined have never employed
fifteen (15) or more United States citizens for each working day in each of twenty or more
calendar weeks in any given calendar year”; and (iii) HansaWorld USA employed a total
of thirteen (13) people during the calender years of 2010 through 2012, only six (6) of
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whom are U.S. citizens. (Jay Decl. [69-1] at ¶¶ 3-5.)3 HansaWorld USA also makes the
legal argument that foreign citizens employed abroad do not count toward § 2000e(b)’s
employee numerosity requirement.
Davenport’s central factual assertion in opposition to summary judgment is that
while she was employed by HansaWorld USA, she “regularly worked with and interacted
with . . . [forty-five (45) individuals] who had employment relationships with HansaWorld
USA”. (Davenport Aff. [72-1] at ¶ 3.) Davenport contends HansaWorld USA and
HansaWorld Holding are an integrated enterprise4 that, along with several different
HansaWorld branches or companies operating around the globe, employs hundreds of
individuals. At times, Davenport refers to the integrated enterprise as “HansaWorld
Group”. Davenport further disputes HansaWorld USA’s argument that non-U.S. citizens
are excluded from the employee count under § 2000e(b). As a fall-back argument,
Davenport contends the integrated enterprise of HansaWorld Group includes twenty (20)
U.S. business partners and that it is reasonable to infer that each business partner
employs at least one (1) U.S. citizen.
In rebuttal, HansaWorld USA extensively disputes Davenport’s contention that it
should be considered an employer of its U.S. business partners’ employees.
HansaWorld USA also submits the Declaration of Vadims Zuravlovs, “the Chief Legal
Advisor for HansaWorld Legal Department,” stating that HansaWorld Holding did not
have any employees during the calendar years of 2010 through 2012. (Zuravlovs Decl.
3
Stephen Jay is HansaWorld USA’s Country Manager. (Jay Decl. [69-1] at ¶ 2.)
4
A court may find two or more entities to constitute an integrated enterprise (i.e., a
single employer) for purposes of Title VII upon the consideration of four factors: “(1)
interrelation of operations; (2) centralized control of labor relations; (3) common
management; and (4) common ownership or financial control.” Turner, 476 F.3d at 344
(citing Vance v. Union Planters Corp., 279 F.3d 295, 297 (5th Cir. 2002)).
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[81-1] at ¶¶ 2-3.) HansaWorld USA thus asserts that even if it and HansaWorld Holding
are considered to be an integrated enterprise, the employee numerosity requirement
under Title VII is not met. HansaWorld USA nonetheless admits that “there are other
HansaWorld entities organized abroad”, and concedes, solely for purposes of the Motion
to Dismiss [69], “that the Court may assume that all HansaWorld entities are a single
enterprise.” (HansaWorld USA’s Rebuttal in Supp. of Mot. to Dismiss [91] at p. 22.)
HansaWorld USA also assumes (solely for purposes of the subject motion) that it
employs “fifteen (15) or more individuals counting foreign employees employed abroad.”
(HansaWorld USA’s Rebuttal in Supp. of Mot. to Dismiss [91] at p. 8.) HansaWorld USA
is willing to make these concessions or assumptions based on two positions: (1) foreign
citizens employed abroad do not count in determining whether an entity is an employer
under Title VII; and (2) “no HansaWorld company has ever employed fifteen or more U.S.
citizens or foreign nationals employed in the U.S. for the requisite period of time under
Title VII.” (HansaWorld USA’s Rebuttal in Supp. of Mot. to Dismiss [91] at p. 23.)
Therefore, HansaWorld USA argues that the ultimate issue before the Court is whether
foreign citizens employed abroad are included under Title VII’s definition of employer.
Upon consideration of the parties’ arguments (including the arguments asserted in
the briefs, but not specifically addressed above), the Court finds that the resolution of
HansaWorld USA’s request for summary judgment turns on two issues: (1) whether a
foreign citizen employed outside the United States is to be included in the employee
count under § 2000e(b); and (2) whether there is sufficient evidence for a reasonable jury
to conclude that HansaWorld USA is an employer of its U.S. business partners’
employees. Each issue will be addressed in turn.
a.
Whether a Foreign Citizen Employed Outside the United
States Is to Be Included in the Employee Count Under 42
U.S.C. § 2000e(b)
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There is a split in authority on this issue. Compare Kang v. U. Lim Am., Inc., 296
F.3d 810, 816 (9th Cir. 2002) (“The fact that some of the employees of the integrated
enterprise are not themselves covered by federal anti-discrimination law [because they
are non-U.S. citizens employed abroad] does not preclude counting them as employees
for the purposes of determining Title VII coverage.”) (citing Morelli v. Cedel, 141 F.3d 39,
44-45 (2d Cir. 1998)), Arroyo-Perez v. Demir Group Int’l, 762 F. Supp. 2d 374, 388
(D.P.R. 2011) (counting the Canadian employees of one entity along with the Floridabased employees of a related entity to determine the employee headcount), and
Wildridge v. IER, Inc., 65 F. Supp. 2d 429, 431 (N.D. Tex. 1999) (providing that
employees of foreign entities may be factored into the employee calculation), with Mousa
v. Lauda Air Luftfahrt, A.G., 258 F. Supp. 2d 1329, 1335-36 (S.D. Fla. 2003) (“[T]he
majority of courts that have addressed the issue have found that foreign citizens
employed abroad who work exclusively outside of the United States do not count towards
the fifteen-employee jurisdictional minimum.”) (citing Iwata v. Stryker Corp., 59 F. Supp.
2d 600, 604 (N.D. Tex. 1999); Greenbaum v. Svenska Handelsbanken, 979 F. Supp.
973, 983 (S.D.N.Y. 1997); Minutillo v. Aqua Signal Corp., No. 96 C 3529, 1997 WL
156495, at *2 (N.D. Ill. Mar. 31, 1997); Russell v. Midwest–Werner & Pfleiderer, Inc., 955
F. Supp. 114, 115 (D. Kan. 1997); Kim v. Dial Serv. Int'l, Inc., No. 96 Civ. 3327(DLC),
1997 WL 5902, at *3 (S.D.N.Y. Jan. 8, 1997); Robins v. Max Mara, U.S.A., Inc., 914 F.
Supp. 1006, 1009 (S.D.N.Y. 1996); Rao v. Kenya Airways, Ltd., No. 94 Civ. 6103(CSH),
1995 WL 366305, at *2 (S.D.N.Y. June 20, 1995)). The parties have not cited, and the
Court has not identified any Fifth Circuit opinion resolving this question.
The Second Circuit’s decision in Morelli, although an Age Discrimination in
Employment Act (“ADEA”) case, is the lead authority for the view that foreign employees
count under Title VII’s employee numerosity requirement. In Morelli, the plaintiff alleged
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violations of the ADEA after she was terminated from her position as an assistant to the
manager of the defendant bank’s New York office. 141 F.3d at 41. The defendant was a
Luxembourg bank and its sole U.S. branch was located in New York. Id. The district
court dismissed the plaintiff’s complaint, finding that the ADEA did not apply to the
defendant. Id. Under the ADEA, “[a] business must have at least twenty ‘employees’ to
be an ‘employer.’” Id. at 44 (quoting 29 U.S.C. § 630(b)). The district court limited its
employee count to the defendant’s New York office, reasoning “that the overseas
employees of foreign employers should not be counted because they are not protected
by the ADEA.” Id. The Second Circuit disagreed with the district court’s reasoning:
But there is no requirement that an employee be protected by the ADEA to be
counted; an enumeration, for the purpose of ADEA coverage of an employer,
includes employees under age 40, who are also unprotected, see 29 U.S.C.
§ 631(a). The nose count of employees relates to the scale of the employer
rather than to the extent of protection.
Id. at 44-45. The Second Circuit also referenced several reasons underlying Title VII’s
employee numerosity requirement (such as, protecting the intimate and personal nature
of relationships in small businesses, and the burdens of compliance) since the ADEA
was largely modeled on Title VII. Id. at 45. The Second Circuit found that none of those
reasons supported the applicability of the ADEA turning solely on the size of a foreign
employer’s U.S. operations. Id. Holding that “employees cannot be ignored merely
because they work overseas”, the Second Circuit vacated the district court’s dismissal of
the plaintiff’s ADEA cause of action. Id.
In Kang, two of the three judges on the Ninth Circuit’s panel found Morelli
persuasive in holding “that Title VII’s definition of ‘employee’ does not prohibit counting
the foreign employees of U.S.-controlled corporations for determining coverage.” Kang,
296 F.3d at 816. The Defendant U. Lim of America (which was based in the United
States and employed less than seven employees) was found to be covered by Title VII
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since it and U. Lim de Mexico (which was located in Mexico and employed between 50150 Mexican citizens) were an integrated enterprise. Id. at 814-15. The majority
considered § 2000e(f)’s reference to U.S. citizens working abroad to be inclusive rather
than limiting: “The term ‘employee’ is defined to include U.S. citizens employed by U.S.
companies in foreign countries rather than to prohibit counting non-U.S. citizens.” Id. at
816. Circuit Judge Ferdinand Fernandez viewed the statute differently in dissent:
[T]he definition of employee does not automatically include all persons
working abroad because, if it did, there would be no reason to expressly
include United States citizens. Rather, non-United States citizens, who are
working abroad, are not employees within the meaning of Title VII and cannot
be counted when we decide if an entity is an employer pursuant to 42 U.S.C.
§ 2000e(b).
Id. at 821 (Fernandez, J., dissenting). Judge Fernandez considered this reasoning
compatible with the Supreme Court’s interpretation of 42 U.S.C. § 2000e-1(a), which
exempts certain employees from Title VII coverage. Id. Because § 2000e-1(a) renders
Title VII inapplicable “‘with respect to the employment of aliens outside any State,’ it must
apply ‘with respect to the employment of aliens inside any State.’” Id. (quoting Espinoza
Farah Mfg. Co., 414 U.S. 86, 95, 94 S. Ct. 334, 38 L. Ed. 2d 287 (1973)). Further, Judge
Fernandez disagreed with the Second Circuit’s examination of the legislative purposes
behind Title VII’s employee numerosity requirement in Morelli. “[T]he statute speaks with
enough clarity to permit (nay require) one to stop with its own words, rather than
undertaking to stravage in a wilderness of possible legislative purposes.” Id. (citation
omitted).
Aside from Judge Fernandez’s dissent, Mousa v. Lauda Air Luftfahrt, A.G.,
appears to be the only judicial opinion expressly disagreeing with the Second Circuit’s
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holding in Morelli.5 Samir Mousa filed suit against Lauda Air Luftfahrt, A.G. (“Lauda Air”),
his former employer, alleging religious discrimination under Title VII and other claims
following the termination of his employment. Mousa, 258 F. Supp. 2d 1332-33. Lauda
Air employed more than fifteen employees, but the vast majority of those individuals were
foreign citizens who worked exclusively outside the United States. Id. at 1334. Lauda Air
moved for summary judgment on the basis that it was not an “employer” under Title VII
because it lacked the requisite number of domestic employees. Id. at 1333. Mousa
primarily relied on Morelli in arguing that Lauda Air’s foreign employees counted toward
the fifteen-employee threshold. Id. at 1336. Mousa’s reliance on Morelli was not well
taken by the district court.
Importantly, Morelli was an ADEA case and was admittedly contrary to every
preceding district court decision. Id. at 45 n. 1 (“We do not follow the district
courts that have concluded-without apparent exception-that only the domestic
employees of a foreign employer are counted.”). Additionally, the ADEA
counts all workers in its definition of “employee” but extends its protection only
to those workers who are over 40 years of age, while Title VII's coverage and
definition of “employee” appear co-extensive. Otherwise, businesses could
avoid being subject to the ADEA simply by failing to hire enough older
workers. No such danger exists under Title VII. Moreover, unlike Title VII, the
ADEA does not contain a provision excluding from its application “the
employment of aliens outside of any State.” 42 U.S.C. § 2000e–1(a). The
Morelli court did not address this statutory language.
The Court does not find Morelli persuasive and finds, based upon Title
VII's statutory language and the near unanimity of lower courts, that Title VII's
coverage and definition of “employee” are co-extensive. 42 U.S.C. § 2000e(f)
supports this reading of the statute. If the definition of “employee” included all
individuals working abroad, there would be no reason for Congress to
expressly include United States citizens. Accordingly, the Court finds that
foreign citizens based abroad who worked exclusively outside of the United
States are not included in the fifteen-employee jurisdictional count.
Id. at 1337.
5
But see Matthew H. Hawes & W. Scott Hardy, Morelli v. Cedel: Ignoring
Jurisdictional Limits and Outflanking Congress Towards the Internationalization of the
ADEA, 65 U. Pitt. L. Rev. 507 (2004).
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In its consideration of the evidence on summary judgment, the district court
refined the period of time an employee had to work in the United States before he or she
could be factored into the statutory employee count. The court looked to § 2000e(b) in
identifying the time period as “for each working day in each of twenty or more calendar
weeks”. Id. at 1339. Thus, Mousa’s contention that an employee need only step foot in
the United States to be counted was rejected. Id. Ultimately, the district court granted
summary judgment in favor of Lauda Air because Mousa could only point to eight
employees that worked in the United States for a sufficient period of time. Id.
The Court finds that Mousa, involving Title VII and a foreign employer, squares
more firmly with the allegations and claims at issue in this case than does Morelli or
Kang. Morelli involved the ADEA. The fact that employees under the age of forty receive
no protection under the ADEA, but are still counted for purposes of determining employer
coverage does not bear on the Title VII claims at issue here. In Kang, a U.S.-based
company owned and operated a foreign company. In this suit, it is undisputed that
HansaWorld Holding, a foreign entity, is the parent company and sole shareholder of
HansaWorld USA. Further, Davenport alleges that HansaWorld Holding maintained
control over employment decisions for both companies. This distinction is not without
consequence since the anti-discrimination provisions of Title VII are inapplicable “with
respect to the foreign operations of an employer that is a foreign person not controlled by
an American employer.” 42 U.S.C. § 2000e-1(c)(2).
The Court also finds Mousa’s holding, “that Title VII’s coverage and definition of
‘employee’ are co-extensive”, to be persuasive. 258 F. Supp. 2d at 1337. As noted
above, the definition of “employee” under Title VII specifically includes a U.S. citizen
working in a foreign country. 42 U.S.C. § 2000e(f). In addition, § 2000e-1 renders Title
VII inapplicable “to the employment of aliens outside any State . . . .” 42 U.S.C. § 2000e-15-
1(a). It is generally accepted that these provisions negate the application of Title VII to
non-U.S. citizens working abroad.6 The Court discerns no cogent basis for giving effect
to these provisions in determining whether an employee is protected by Title VII, while
ignoring their existence in determining whether an employer has the requisite number of
employees to trigger Title VII coverage. In contexts outside the realm of foreign
employment, courts have found that an individual’s ability to obtain relief under Title VII
affects whether an employer has the requisite number of employees to implicate Title
VII’s protections.7 The result should be no different with respect to the issue before this
Court, especially given the well-established principle that “[w]hen a statute gives no clear
indication of an extraterritorial application, it has none.” Morrison v. Nat’l Austl. Bank
Ltd., 561 U.S. 247, 130 S. Ct. 2689, 2878, 177 L. Ed. 2d 535 (2010). As a result, the
6
See, e.g., Shekoyan v. Sibley Int’l, 409 F.3d 414, 422 (D.C. Cir. 2005) (“Title VII
does not extend extraterritorially to any person who is not an American citizen.”); Mota
v. Univ. of Tex. Houston Health Sci. Ctr., 261 F.3d 512, 524 n.34 (5th Cir. 2001) (“Title
VII does not govern aliens employed outside the United States.”); Iwata, 59 F. Supp. 2d
at 604 (“Non-citizens working outside the United States are not protected because they
are not considered employees.”).
7
See Mariotti v. Mariotti Bldg. Prods., Inc., 714 F.3d 761, 766 (3d Cir. 2013) (“[T]he
definitions of ‘employer’ and ‘employee’ set forth in both the ADA and Title VII are
relevant in resolving (1) whether an entity qualifies as an ‘employer’ under Title VII, and
(2) whether an individual is an ‘employee’ who ‘may invoke [Title VII’s] protections
against discrimination[.]’”) (quoting Clackamas Gastroenterology Assocs., P. C. v.
Wells, 538 U.S. 440, 446 n.6, 123 S. Ct. 1673, 155 L. Ed. 2d 615 (2003)), cert. denied,
134 S. Ct. 437 (2013); Smith v. Castaways Family Diner, 453 F.3d 971, 986 (7th Cir.
2006) (“Characterizing someone as an employer rather than an employee directly
affects the reach of Title VII in two different ways[:]” (1) the individual may be precluded
from filing suit since it is thought that only employees are entitled to invoke the statute;
and (2) “treating an individual as an employer excludes him or her from the workers who
will be counted towards the fifteen-employee threshold . . . .”) (citations omitted); cf.
Auld v. Law Offices of Cooper, Beckman & Tuerk, 981 F.2d 1250, 1992 WL 372949, at
*1-2 (4th Cir. Dec. 18, 1992) (finding that partners of the defendant law firm could not be
factored into the employee head count since partners are not considered to be
employees for purposes of Title VII).
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Court holds that foreign citizens employed outside the United States are excluded from
the employee head count under 42 U.S.C. § 2000e(b). Only those foreign citizens
working inside the United States “for each working day in each of twenty or more
calendar weeks in the current or preceding year” should be factored into the fifteenemployee threshold. 42 U.S.C. § 2000e(b).
HansaWorld USA asserts that no HansaWorld company has ever employed
fifteen or more employees (U.S. citizen or alien) in the United States for the length of time
specified under § 2000e(b). Davenport has failed to evidence facts negating this
assertion. The averment that forty-five “employees worked at different HansaWorld
Group branches around the world”8 falls short of establishing that any employee worked
in the United States “for each working day in each of twenty or more calendar weeks . . .
.” 42 U.S.C. § 2000e(b). Davenport’s contention that some of these “employees would
be physically in the United States from time to time”9 is also insufficient. See Mousa, 258
F. Supp. 2d at 1339 (rejecting the plaintiff’s argument that an employee need only cross
the U.S. border to be counted). The Court further finds Davenport’s reliance on the
Supplemental Affidavit of Stephen Jay [73-7], previously submitted by HansaWorld USA
on the issue of personal jurisdiction, to be unavailing. The fact that “HW BA S.R.L., an
Argentinian sister company of HansaWorld USA, Inc., . . . house[d] two employees in
Mississippi” for one year does not establish that any HansaWorld company employed
fifteen or more individuals in the United States for the required length of time. (Jay
Suppl. Aff. [73-7] at ¶ 9) (emphasis added). Therefore, Davenport’s Title VII claims will
8
(Davenport Aff. [72-1] at ¶ 4.)
9
(Davenport’s Mem. in Supp. of Opp. to Mot. to Dismiss [73] at ¶ 56.)
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be dismissed due to her failure to meet § 2000e(b)’s employee numerosity requirement
unless the issue stated below is resolved in her favor.
b.
Whether There Is Sufficient Evidence for a Reasonable
Jury to Conclude that HansaWorld USA Is an Employer
of Its U.S. Business Partners’ Employees
The Fifth Circuit has utilized two similar, but distinct tests to determine statutory
“employer” status when it is alleged that two or more entities share employees: (1) the
single employer test adopted by the Fifth Circuit in Trevino v. Celanese Corp., 701 F.2d
397 (5th Cir. 1983); and (2) the “hybrid economic realities/common law control test”.
Schweitzer v. Advanced Telemarketing Corp., 104 F.3d 761, 763-64 (5th Cir. 1997)
(citations omitted). Davenport relies on both tests in arguing that the employees of
HansaWorld USA’s U.S. business partners count toward meeting Title VII’s employee
numerosity requirement. The Court determines that Davenport has failed to evidence a
genuine issue for trial under either standard.
(1)
The Trevino Single Employer Test
“[S]uperficially distinct entities may be exposed to liability upon a finding that they
represent a single, integrated enterprise: a single employer.” Trevino, 701 F.2d at 404.
Factors utilized to determine the existence of a single employer “are (1) interrelation of
operations, (2) centralized control of labor relations, (3) common management, and (4)
common ownership or financial control.” Id. (citations omitted). The Fifth Circuit
considers the second factor to be the most important, rephrasing and boiling it down to
the question “of ‘what entity made the final decisions regarding employment matters
related to the person claiming discrimination.’” Turner, 476 F.3d at 344 (quoting Chaiffetz
v. Robertson Research Holding, Ltd., 798 F.2d 731, 735 (5th Cir. 1986)).
As to the factor of highest importance, there is no allegation, much less proof, that
any U.S. business partner of any HansaWorld company made an employment decision,
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final or otherwise, pertaining to Davenport. Further, Stephen Jay avers that “HansaWorld
has no authority to hire or fire any of its business partners’ employees or make any other
employment decisions related to these employees, and these entities have no authority
to hire or fire any of HansaWorld’s employees, including Plaintiff Davenport.” (Jay Suppl.
Decl. [91-1] at ¶ 7.) Davenport references the Declaration of Ara Darajkian [83-2], who
appears to be a former business partner of HansaWorld USA, in support of her argument
that HansaWorld USA and its business partners constitute an integrated enterprise.
However, even Ara Darajkian states that “Karl Bohlin, director of HansaWorld, did not
have the ability to hire and fire employees of a partner . . . .” (Darajkian Decl. [83-2] at ¶
9.) The continuation of Darajkian’s statement—Bohlin “would attempt to throw his weight
around and influence the personnel of business partners”—affects nothing. (Darajkian
Decl. [83-2] at ¶ 9.) The test is “what entity made the final decisions regarding
employment matters”, not what entity attempted to influence personnel decisions. Turner,
476 F.3d at 344. Therefore, the second Trevino factor weighs against Davenport.
Upon review of the summary judgment record, it appears that the relationship
between a HansaWorld company and a business partner is a typical business
arrangement under which the business partner sells HansaWorld software. Business
partners are not prohibited from selling software for other companies. Business partners
receive training from HansaWorld, and regularly update HansaWorld concerning sales.
Also, HansaWorld controls how business partners sell its software products, to whom the
products are sold, and how the products are advertised. Clearly, the operations of
HansaWorld and its business partners are related or intertwined for the specific purpose
of the sale of software under this arrangement. However, the Court finds no atypical
“interrelation of operations” rendering HansaWorld and its business partners a single
employer for purposes of Title VII. Cooley v. Reckitt Benckiser, No. 3:11cv404, 2012 WL
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8667577, at *3, 4 (S.D. Miss. July 25, 2012) (finding that the existence of a staffing
agreement between the defendants did not make them joint employers under Title VII),
aff’d, 517 Fed. Appx. 298 (5th Cir. 2013).10
The remaining “common management . . . [and] common ownership or financial
control” factors do not carry enough weight to tip the scales in favor of aggregation. See
Lusk v. FoxMeyer Health Corp., 129 F.3d 773, 777, 778 (5th Cir. 1997) (“Although the
appellants produced evidence establishing common management and ownership
between NII and its FoxMeyer subsidiaries, these factors alone are insufficient to
establish single employer status.”). The weight of these factors aside, Stephen Jay’s
Supplemental Declaration provides that “HansaWorld does not have any common or
mutual management at all with any of its business partners . . . . There is also no
common ownership or financial control, and HansaWorld maintains its own financial
records and statements separate and apart from any of its” business partners. (Jay
Suppl. Decl. [91-1] at ¶ 8.) The Court finds nothing in the record refuting these
statements.
Davenport argues that the following information posted on HansaWorld’s website
shows that HansaWorld considers the employees of its business partners to be part of
“HansaWorld Group”: “The group employs around 300 staff in a strong network of
daughter companies and distribution partners worldwide.” (Doc. No. [83-3 at ECF p. 6].)
What Davenport or third parties may be led to believe from viewing the preceding
10
In contrast, the Fifth Circuit has found evidence of the interrelation of operations
where two entities operated from the same building; one entity used the other for
supplies and secretarial support; one entity did not account for the time its employees
spent performing work for the other; and, one entity’s personnel director responded to
an EEOC charge from an individual employed by the other entity. See Johnson v.
Crown Enters., Inc., 398 F.3d 339, 343 (5th Cir. 2005).
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information does not weigh upon the Trevino analysis. See Tipton v. Northrup Grumman
Corp., 242 Fed. Appx. 187, 190 (5th Cir. 2007) (Plaintiffs’ evidence—including press
releases and printouts from NGC’s corporate website that purportedly led the plaintiffs to
believe their employment extended from NGSS to NGC—failed to establish the existence
of “genuine issues of fact regarding whether NGSS and NGC had interrelated operations,
centralized control of labor or employment decisions, common management, or common
ownership or financial control.”); McLaurin v. Fusco, 629 F. Supp. 2d 657, 662-63 (S.D.
Miss. 2009) (finding the plaintiff’s belief that she was employed by DMJ and Jenny Craig,
based on her review of Jenny Craig documents during the hiring process, to be
insufficient to avoid summary judgment in favor of Jenny Craig). Ultimately, Davenport
has failed to come forward with sufficient facts in support of her argument that
HansaWorld USA and its U.S. business partners constitute a single employer.
(2)
The Hybrid Economic Realities/Common Law
Control Test
The Fifth Circuit has explained this test as follows:
In determining whether an employment relationship exists within the meaning
of Title VII and the ADEA, we apply a “hybrid economic realities/common law
control test.” ... The right to control an employee's conduct is the most
important component of this test.... When examining the control component,
we have focused on whether the alleged employer has the right to hire and fire
the employee, the right to supervise the employee, and the right to set the
employee's work schedule.... The economic realities component of our test
has focused on whether the alleged employer paid the employee's salary,
withheld taxes, provided benefits, and set the terms and conditions of
employment.
Barrow v. New Orleans Steamship Assoc., 10 F.3d 292, 296 (5th Cir. 1994) (citing Deal
v. State Farm County Mut. Ins. Co. of Tex., 5 F.3d 117, 118-19 (5th Cir. 1993)).11
11
At times, the Fifth Circuit has referenced eleven (11) separate factors pertaining to
the economic realities of employment: “(1) the kind of occupation, with reference to
whether the work usually is done under the direction of a supervisor or is done by a
specialist without supervision; (2) the skill required in the particular occupation; (3)
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The hybrid economic realities/common law control test (“hybrid test”) is usually
employed to determine if a plaintiff has an employment relationship with one or more
defendants. Here, however, Davenport seeks to show that the employees of third parties
to the litigation are employees of HansaWorld USA for purposes of meeting Title VII’s
employee numerosity requirement. As pointed out by HansaWorld USA, Davenport’s
utilization of the hybrid test for this purpose rests on much speculation and conjecture:
Employing this test to all of the employees of all twenty companies is
impossible in this instance because Plaintiff has not even identified these
alleged other employees to allow the Court to engage in such a test. Indeed,
Plaintiff’s allegations again surround only the terms of the business contracts
between HansaWorld and its business partners (i.e., the companies listed in
Exhibit D). . . . Similarly, there is no allegation anywhere in any of Plaintiff’s
responses that addresses the rest of Title VII’s definition of an employer.
Under Title VII, the definition of employer is one who “has fifteen or more
employees for each working day in each of twenty or more calendar weeks in
the current or preceding calendar year.” 42 U.S.C. § 2000e(b) (emphasis
supplied). The only thing Plaintiff does in her responses is ask this Court to
assume that the employees of these entities exist and that they meet the
above standard, and then utilize pure academic guesswork to engage in an
analysis of whether the individuals are employees of HansaWorld.
(HansaWorld USA’s Rebuttal in Supp. of Mot. to Dismiss [91] at p. 21.) HansaWorld
USA’s point is well taken. “Mere improbable inferences and unsupported speculation are
not proper summary judgment evidence.” Zarnow v. City of Wichita Falls, Tex., 614 F.3d
161, 169 (5th Cir. 2010) (citation and internal quotation marks omitted).
whether the ‘employer’ or the individual in question furnishes the equipment used and
the place of work; (4) the length of time during which the individual has worked; (5) the
method of payment, whether by time or by the job; (6) the manner in which the work
relationship is terminated, i.e., by one or both parties, with or without notice and
explanation; (7) whether annual leave is afforded; (8) whether the work is an integral
part of the business of the ‘employer’; (9) whether the worker accumulates retirement
benefits; (10) whether the ‘employer’ pays social security taxes; and (11) the intention of
the parties.” Bloom v. Bexar County, Tex., 130 F.3d 722, 726 n.3 (5th Cir. 1997) (citing
Spirides v. Reinhardt, 613 F.2d 826, 832 (D.C. Cir. 1979)).
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Davenport references her Supplemental Affidavit [83-5] and the Declaration of Ara
Darajkian [83-2] in her discussion of the hybrid test. Davenport states that “I was a
partner before I was a salaried employee.” (Davenport Suppl. Aff. [83-5] at ¶ 6.) As
noted above, it appears that Ara Darajkian is a former business partner of HansaWorld.
Even assuming arguendo that Davenport and Darajkian’s former partnerships with
HansaWorld are representative of HansaWorld’s agreements with the twenty (20)
business partners identified in the record, the hybrid test fails to preclude the entry of
summary judgment against Davenport.
The Court’s preceding analysis as to the Trevino single employer test negates any
finding that HansaWorld has the right to hire or fire the employees of its business
partners. Furthermore, Davenport’s opposition to dismissal provides that the “partner is
allowed to set their own work schedule . . . .” (Doc. No. [83] at p. 8.) Viewing the facts in
the light most favorable to Davenport, it may be reasonably inferred that HansaWorld
supervises its business partners with respect to the sale of HansaWorld software.
However, it is unreasonable to assume that HansaWorld supervises any and all aspects
of the work of its business partners’ employees, particularly when the employees may be
selling software for a company other than HansaWorld.12 The “right to supervise” factor
does not override “the right to hire and fire” and “right to set the employee’s work
schedule” considerations. Barrow, 10 F.3d at 296. Several economic realties further
militate against the existence of an employment relationship between HansaWorld and its
business partners. Business partners are paid on commission. (See Darajkian Decl.
[83-2] at ¶ 8; Davenport Suppl. Aff. [83-5] at ¶ 8.) HansaWorld does not withhold taxes in
12
Each business partner that Davenport contends is likely to employ one (1) U.S.
citizen appears to be a company or entity, as opposed to an individual. (See Doc. No.
[83-4].)
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paying business partners. (Davenport Suppl. Aff. [83-5] at ¶ 8.) “HansaWorld does not
provide insurance to partners, . . . [or] require the partner to have their own insurance . . .
.” (Doc. No. [83] at p. 8.) The partnership agreements identify the partners as
independent contractors. (Doc. No. [83] at p. 5.) No showing has been made that
HansaWorld affords its business partners’ employees annual leave, or that the
employees accumulate retirement benefits from HansaWorld. On the whole, Davenport
“shows little more than a scintilla of evidence upon which a jury could find in h[er] favor”
under the hybrid test. Thompson v. Zurich Am. Ins. Co., 664 F.3d 62, 68 (5th Cir. 2011)
(citation and internal quotation marks omitted).
It is the exception rather than the rule that a contractual relationship between two
entities for a particular purpose (such as the sale of products) will render one the
employer of the other’s employees. Based on the foregoing considerations, the Court
concludes that no reasonable jury would find the exception applicable here and deem
HansaWorld USA the employer of its U.S. business partners’ employees.
c.
Summation
Title 42 U.S.C. § 2000e(b)’s employee numerosity requirement is an element of
Davenport’s Title VII cause of action. See Arbaugh, 546 U.S. at 516. Davenport cannot
establish that HansaWorld USA employed “fifteen or more employees for each working
day in each of twenty or more calendar weeks in the current or preceding calender year”
under § 2000e(b). Therefore, HansaWorld USA is entitled to judgment as a matter of law
on Davenport’s Title VII claims.
II.
HansaWorld Holding’s Motion to Dismiss [94]
A.
Personal Jurisdiction
A non-resident defendant is amenable to being sued in Mississippi if: (1)
Mississippi’s long-arm statute confers jurisdiction over the defendant; and (2) the
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exercise of personal jurisdiction comports with the requirements of federal due process.
See Stripling v. Jordan Prod. Co., 234 F.3d 863, 869 (5th Cir. 2000) (citation omitted).
The plaintiff must establish personal jurisdiction, but need only present a prima facie case
to meet his burden. See Luv n’ care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir.
2006) (citing Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982)). “This court must
resolve all undisputed facts submitted by the plaintiff, as well as all facts contested in the
affidavits, in favor of jurisdiction.” Id.
HansaWorld Holding asserts that it is not subject to Mississippi’s long-arm statute
and that it lacks sufficient contacts with Mississippi to render jurisdiction over it
constitutional. HansaWorld Holding submits the Declaration of Jennifer O’Carroll [94-1],
the Manager for HansaWorld Ireland Ltd., in support of its request for dismissal.
O’Carroll’s Declaration states, inter alia, that HansaWorld Holding has never taken any
action in Mississippi; that HansaWorld Holding is not registered to do business in
Mississippi; that HansaWorld Holding has never entered into a contract with Davenport or
any other individual or entity in Mississippi; that HansaWorld Holding has never owned or
leased any property in Mississippi; and that HansaWorld Holding has never advertised in
Mississippi. (O’Carroll Decl. [94-1] at ¶¶ 4-9.)
Davenport’s opposition to dismissal does not contest the preceding factual
assertions presented by the O’Carroll Declaration. Further, Davenport does not present
any contrary facts showing that HansaWorld Holding itself engaged in any conduct
meeting the requirements for the exercise of personal jurisdiction under Mississippi’s
long-arm statute or the Due Process Clause. Instead, Davenport argues that
HansaWorld USA is the alter ego of HansaWorld Holding, and that the Court’s prior
personal jurisdiction ruling as to HansaWorld USA also applies to HansaWorld Holding.
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“Generally, a foreign parent corporation is not subject to the jurisdiction of a forum
state merely because its subsidiary is present or doing business there; the mere
existence of a parent-subsidiary relationship is not sufficient to warrant the assertion of
jurisdiction over the foreign parent.” Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1159
(5th Cir. 1983) (citing 2 J. Moore & J. Lucas, Moore’s Federal Practice ¶ 4.25[6], at 4-272
(2d ed. 1982)). Courts presume corporate separateness, although this presumption may
be rebutted by clear evidence of a parent corporation asserting sufficient control over its
subsidiary to render the subsidiary its agent or alter ego. Dickson Marine Inc. v.
Panalpina, Inc., 179 F.3d 331, 338 (5th Cir. 1999) (citations omitted). “The rationale for
such an exercise of jurisdiction is that the parent corporation exerts such domination and
control over its subsidiary that they do not in reality constitute separate and distinct
corporate entities but are one and the same corporation for purposes of jurisdiction.”
Hargrave, 710 F.2d at 1159 (citations and internal quotation marks omitted). In
Hargrave, the Fifth Circuit set forth the factors to be utilized in determining whether
personal jurisdiction can be exercised over a parent corporation based on the actions of
its subsidiary. The Hargrave factors are as follows:
(1) amount of stock owned by the parent of the subsidiary; (2) did the two
corporations have separate headquarters; (3) did they have common officers
and directors; (4) did they observe corporate formalities; (5) did they maintain
separate accounting systems; (6) did the parent exercise complete authority
over general policy; (7) did the subsidiary exercise complete authority over
daily operations.
Dickson Marine Inc., 179 F.3d at 339 (citing Hargrave, 710 F.2d at 1160). The plaintiff’s
prima facie burden of establishing alter ego jurisdiction is less stringent than what is
required to establish alter ego liability. See, e.g., Hargrave, 710 F.2d at 1161; Stuart v.
Spademan, 772 F.2d 1185, 1198 n.12 (5th Cir. 1985).
The first three Hargrave factors are not in dispute. HansaWorld Holding owns
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100% of HansaWorld USA’s stock. HansaWorld Holding is headquartered in Ireland,
while HansaWorld USA maintains its principal place of business in Florida. The two
companies share some officers and directors. If the Court’s analysis were to stop here,
jurisdiction over HansaWorld Holding would be found lacking. See Alpine View Co. v.
Atlas Copco AB, 205 F.3d 208, 219 (5th Cir. 2000) (“We have said . . . that ‘100% stock
ownership and commonality of officers and directors are not alone sufficient to establish
an alter ego relationship between two corporations.’”) (quoting Hargrave, 710 F.2d at
1160); Gardemal v. Westin Hotel Co., 186 F.3d 588, 594 (5th Cir. 1999) (“‘[O]ne-hundred
percent ownership and identity of directors and officers are, even together, an insufficient
basis for applying the alter ego theory to pierce the corporate veil.’”) (quoting United
States v. Jon-T Chems., Inc., 768 F.2d 686, 691 (5th Cir. 1985)); Replogle v. Shoreline
Transp. of Ala., LLC, No. 3:11cv83, 2012 WL 4755039, at *3 (S.D. Miss. Oct. 4, 2012)
(finding insufficient proof of an alter ego relationship even though parent and subsidiary
entities shared headquarters and the same registered agent for service of process, and
the single employee of the parent corporation was the manager of the subsidiary);
Samples v. Vanguard Healthcare, LLC, No. 3:07cv157, 2008 WL 4371371, at *3-4 (N.D.
Miss. Sept. 18, 2008) (declining to exercise personal jurisdiction over a parent company
that shared officers and headquarters with its wholly owned subsidiary).
Moving on to the disputed Hargrave factors, Davenport states (in affidavit form)
that “HansaWorld USA did not exercise any corporate formalities.” (Davenport Aff. [98-5]
at ¶ 8.) Davenport posits that HansaWorld USA never held any corporate or board
meetings, and thus, the company never approved articles of incorporation or kept any
minutes. (See Davenport Aff. [98-5] at ¶¶ 9-11.) Davenport claims first hand knowledge
of HansaWorld USA’s corporate structure based on her prior membership on the
company’s board of directors and former status as the corporate secretary. (See
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Davenport Aff. [98-5] at ¶¶ 6-7, 12.) Davenport also states that she helped incorporate
HansaWorld USA while she was a contract employee of HansaWorld Ireland. (See
Davenport Aff. [98-5] at ¶ 5.) Conversely, Jennifer O’Carroll declares that “HansaWorld
Holding and HansaWorld USA maintain corporate separateness and observe corporate
formalities.” (O’Carroll Decl. [94-1] at ¶ 14.) O’Carroll also states that Davenport never
served on the board of any HansaWorld entity and that Davenport was not privy to
HansaWorld USA’s board meetings or decisions. (See O’Carroll Suppl. Decl. [100-1] at ¶
2.) HansaWorld USA thus argues that Davenport cannot offer competent testimony
regarding the corporate formalities of HansaWorld USA’s board.13
The factual conflict between Davenport and HansaWorld Holding concerning
Davenport’s status as a former board member of HansaWorld USA must be resolved in
Davenport’s favor at this stage of the proceedings. See Freudensprung v. Offshore
Technical Servs., 379 F.3d 327, 343 (5th Cir. 2004) (providing that conflicts in
jurisdictional facts are to be resolved in the plaintiff’s favor) (citation omitted). Thus, the
Court finds Davenport competent to provide testimony regarding HansaWorld USA’s
corporate inner workings. The Court further accepts Davenport’s statements regarding
HansaWorld USA’s failure to hold board meetings, keep minutes, and approve controlling
documents. Nonetheless, the record in this case contains filings militating against the
conclusion that HansaWorld USA is a sham corporation. A Certificate of Status issued
13
HansaWorld Holding further argues that Davenport’s allegations regarding
HansaWorld USA should be disregarded since they concern matters that allegedly
existed months before the complaint was filed, and personal jurisdiction is to be
determined at the time of the filing of the complaint. This argument is not well taken.
The Fifth Circuit opinion cited by HansaWorld Holding merely holds that events
occurring “after the filing of the complaint” are irrelevant for determining jurisdiction.
Asarco, Inc. v. Glenara, Ltd., 912 F.2d 784, 787 n.1 (5th Cir. 1990). No authority has
been presented to the Court ruling that circumstances existing weeks, months, or years
prior to the initiation of an action are to be disregarded for jurisdictional purposes.
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by the State of California in December of 2009 indicates that HansaWorld USA “is
authorized to exercise all of its powers, rights and privileges in the State of California.”
(Doc. No. [18-4 at ECF p. 5].) In addition, HansaWorld USA registered to do business in
Mississippi and appointed Davenport as its registered agent for service of process in
February of 2010. (See Doc. No. [18-4].) Davenport also fails to submit evidence
indicating that HansaWorld Holding did not follow corporate formalities. Davenport
admits that HansaWorld Holding held board meetings in Europe. (Davenport Aff. [98-5]
at ¶ 12.) The record further reflects that HansaWorld Holding filed separate annual
reports. (See Doc. No. [73-1].) As a result, the consideration of whether “they
[HansaWorld USA and HansaWorld Holding] observe corporate formalities” only slightly
weighs in favor of the exercise of personal jurisdiction over HansaWorld Holding.
Dickson Marine Inc., 179 F.3d at 339.
The Court resolves the next Hargrave factor in the opposite direction. Jennifer
O’Carroll states that “HansaWorld Holding and HansaWorld USA maintain separate
accounting systems, bank records, and separate financial statements. HansaWorld
Holding and HansaWorld USA further do not file consolidated tax returns.” (O’Carroll
Decl. [94-1] at ¶ 16.) These averments are supported by the existence of several
business records pertaining to HansaWorld USA, as opposed to HansaWorld Holding or
HansaWorld USA and HansaWorld Holding (See Invoices [14-5]; Checks [13-5], [14-6];
Employment Records [35-2]; HansaWorld USA Banking Records [98-2].) Davenport’s
argument that “[b]oth HansaWorld USA and HansaWorld Holding have, or had, the same
business departments” is unsupported by the record. (Davenport’s Mem. in Supp. of
Resp. in Opp. to Mot. to Dismiss [98] at ¶ 16.) There is documentation of financing and
financial cooperation between HansaWorld USA and other HansaWorld subsidiaries,
such as HansaWorld UK Ltd. and HansaWorld Ireland. (See O’Carroll Dep. [98-1] at pp.
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28-30; HansaWorld USA Banking Records [98-2]; Davenport Banking Records [98-3].)
Yet, the relevant entity for purposes of this motion is HansaWorld Holding. Cf. Lee v.
Ability Ins. Co., No. 2:12cv17, 2013 WL 2491067, at *2 (S.D. Miss. June 10, 2013)
(rejecting the plaintiff’s argument “that Ability is an alter-ego of ARH,” where the bulk of
her evidence pertained “to corporate entities other than ARH”). There is no competent
evidence before the Court showing that each and every HansaWorld subsidiary company
is the alter ego of HansaWorld Holding, or vice versa. Cf. Alpine View Co., 205 F.3d at
218 (providing that the plaintiffs’ prima facie burden was made more difficult due to the
existence of multiple levels of subsidiaries; plaintiffs were required to show corporate
domination at each level). Furthermore, “[t]he existence of intercorporate loans does not
establish the requisite dominance”. Id. at 219 (citation omitted); see also Adm’rs of the
Tulane Educ. Fund v. Ipsen. S.A., 450 Fed. Appx. 326, 332 (5th Cir. 2011) (providing that
plaintiffs must show a parent corporation’s control over a subsidiary’s budget to be so
extensive they essentially became the same entity) (citation omitted); Gardemal, 186
F.3d at 593 (finding that financing arrangements, stock ownership, and shared officers
evidenced a typical parent-subsidiary relationship).
Neither Davenport’s Affidavit [98-5] nor O’Carroll’s Declaration [94-1] is particularly
useful in determining the final “complete authority” factors. Hargrave, 710 F.2d at 1160.
O’Carroll states:
17.
HansaWorld Holding, as a mere holding company, does not exercise
authority over the general policy of HansaWorld USA, and HansaWorld
USA’s policy obligations are completely separate from HansaWorld
Holding.
18.
HansaWorld USA exercises complete authority over its daily operations,
and it runs its own business operations from and in Florida.
(O’Carroll Decl. [94-1] at p. 2.) Davenport avers:
13.
HansaWorld USA took all directives from HansaWorld Holding.
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HansaWorld USA was not autonomous.
14.
To the best of my knowledge, no other HansaWorld subsidiary company
operates as its own company. All other companies operate the same as
HansaWorld USA and take directives directly from the HansaWorld Holding
board.
(Davenport Aff. [98-5] at p. 2.) The Court finds these statements too conclusory to offer
enlightenment on the issue of personal jurisdiction. Cf. Clark v. America’s Favorite
Chicken Co., 110 F.3d 295, 297 (5th Cir. 1997) (“Unsupported allegations or affidavit or
deposition testimony setting forth ultimate or conclusory facts and conclusions of law are
insufficient to defeat a motion for summary judgment.”) (citation omitted); Galindo v.
Precision Am. Corp., 754 F.2d 1212, 1221 (5th Cir. 1985) (“[T]he affidavit’s statement
that Georgia-Pacific is not engaged in the business of selling sawmill trimmers is merely
a conclusion which could not shift the summary judgment burden . . . .”).
Setting aside the above-quoted averments (and other bare allegations contained
in the parties’ briefs), there is some evidence that members of HansaWorld Holding’s
board were involved in general policy considerations, such as employment matters, at
HansaWorld USA. See Hargrave, 710 F.2d at 1160. It appears that a board member of
HansaWorld Holding, Elar Tammeraja, notified Davenport of her termination from
HansaWorld USA. (See Doc. No. [98-4].) Davenport’s statement that HansaWorld
Holding selected HansaWorld USA’s Country Manager,14 comports with certain
immigration filings providing that the “Country Manger oversees the US operations and
reports directly to the CEO of the group.” (See Doc. No. [101-1 at ECF p. 8].) Jennifer
O’Carroll has testified at deposition that Karl Bohlin, a member of HansaWorld Holding’s
board,15 is “the CEO of the company.” (O’Carroll Dep. [98-1] at p. 13.) It is far from
14
(See Davenport Aff. [98-5] at ¶ 17.)
15
(See Doc. No. [73-1] at p. 3.)
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clear, however, that the entity HansaWorld Holding, as opposed to individuals on the
boards of two or more HansaWorld companies, exercised authority over HansaWorld
USA’s general policies. In any event, it is not uncommon for a wholly-owned subsidiary
to cede control over general policies and procedures to its parent owner. Cf. United
States v. Bestfoods, 524 U.S. 51, 72, 118 S. Ct. 1876, 141 L. Ed. 2d 43 (1998)
(“[A]ctivities . . . which are consistent with the parent’s investor status, such as monitoring
of the subsidiary’s performance, supervision of the subsidiary’s finance and capital
budget decisions, and articulation of general policies and procedures, should not give
rise to direct liability.”) (citation omitted). Several Fifth Circuit opinions reflect a judicial
unwillingness to equate control over policy matters with the blurring of corporate lines in
determining personal jurisdiction.16
There is also evidence of HansaWorld USA exercising authority over its daily
operations. As referenced above, certain business records reflect that HansaWorld USA
submits separate invoices, maintains its own bank account, writes checks on the
account, receives payments for its own sales, and maintains separate employment
records for its employees. (See Invoices [14-5]; Checks [13-5], [14-6]; Employment
Records [35-2]; HansaWorld USA Banking Records [98-2].) It is further undisputed that
16
Ipsen, S.A., 450 Fed. Appx at 331 (affirming the district court’s dismissal of a
parent corporation where the corporation exercised significant control over its
subsidiary’s policies, “but no more than appropriate for a wholly-owned subsidiary”);
Turan v. Universal Plan Invs. Ltd., 248 F.3d 1139, 2001 WL 85902, at *3 (5th Cir. Jan.
24, 2001) (finding that the plaintiffs failed to show clear evidence of an alter ego
relationship even though the parent corporation exercised authority over the
subsidiary’s general policies and daily operations); Dalton v. R & W Marine, Inc., 897
F.2d 1359, 1363 (5th Cir. 1990) (holding that Midland Enterprises could not be
considered the alter ego of its subsidiaries despite its responsibility for their general
policies); Hargrave, 710 F.2d at 1160-61 (The policymaking authority exercised by the
parent company—approving sizeable capital investments, hiring and firing the
subsidiary’s officers, and selecting product lines—“was no more than that appropriate
for a sole shareholder of a corporation . . . .”).
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Davenport contracted with “HansaWorld USA, Inc.” for employment. (Contract of
Employment [13-4].) Based on the totality of the preceding circumstances, the Court
determines that there is an absence of clear evidence indicating that HansaWorld
Holding “dominates . . . [HansaWorld USA] to the extent that . . . [HansaWorld USA] has,
for practical purposes, surrendered its corporate identity.” Gardemal, 186 F.3d at 594.
Even through the viewpoint of Davenport’s prima facie burden, the “corporate separation
[at issue here], though perhaps merely formal, [i]s real. It [i]s not pure fiction.” Hargrave,
710 F.2d at 1160 (quoting Cannon Mfg. Co. v. Cudahy Packing Co., 276 U.S. 333, 337,
45 S. Ct. 250, 69 L. Ed. 634 (1925)).
Davenport has failed to show that HansaWorld Holding itself engaged in any
conduct rendering it amenable to being sued in Mississippi. Further, the Court finds that
HansaWorld USA’s contacts with Mississippi may not be imputed to HansaWorld Holding
based on a purported alter ego relationship between the two entities. Therefore,
HansaWorld Holding will be dismissed from this cause for lack of personal jurisdiction.
The Court need not address HansaWorld Holding’s remaining bases for dismissal given
this ruling.
III.
Subject Matter Jurisdiction over Davenport’s Remaining State Law Claims
HansaWorld USA has posited that “if the district court dismisses the federal cause
of action, it will then have discretion to dismiss, without prejudice, the state law actions.”
(Doc. No. [90] at ¶ 3.) The accuracy of this statement depends on whether the Court has
original diversity jurisdiction or supplemental jurisdiction over Davenport’s state law
claims. Supplemental jurisdiction under 28 U.S.C. § 1367 is discretionary and a court
may decline to exercise it when only pendent state causes of action remain in a
proceeding. See St. Germain v. Howard, 556 F.3d 261, 263-64 (5th Cir. 2009) (citing 28
U.S.C. § 1367(c)). Conversely, when the district court has original diversity “jurisdiction
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over state law claims, the exercise of that jurisdiction is mandatory.” Cuevas v. BAC
Home Loans Servicing, LP, 648 F.3d 242, 250 (5th Cir. 2011). There is presently
insufficient information before the Court regarding the jurisdictional basis for Davenport’s
state law claims at the time this suit was filed.17 Even assuming that § 1367 is the
controlling statute, the parties have not briefed whether the Court should exercise its
discretion in favor of dismissal or retention. Therefore, the Court will require briefing from
the parties on these issues before determining the future course of Davenport’s state law
claims.
CONCLUSION
For the foregoing reasons:
IT IS ORDERED AND ADJUDGED that HansaWorld USA, Inc.’s Motion to
Dismiss [69] is granted and Plaintiff’s Title VII claims are dismissed with prejudice.
IT IS FURTHER ORDERED AND ADJUDGED that HansaWorld Holding Limited’s
Motion to Dismiss [94] is granted and this Defendant is dismissed from this action without
prejudice for lack of personal jurisdiction.
IT IS FURTHER ORDERED AND ADJUDGED that within twenty-one (21) days of
the entry of this Order, Plaintiff and HansaWorld USA, Inc. shall each submit a
memorandum brief limited to twenty-five (25) pages in length addressing the following
issues: (1) whether the Court has subject matter jurisdiction over Plaintiff’s state law
claims under 28 U.S.C. § 1332 or § 1367; and (2) if 28 U.S.C. § 1367 is the applicable
statute, whether the Court should exercise its discretion to dismiss the state law claims
without prejudice.
17
It is well established that subject matter jurisdiction “‘depends upon the state of
things at the time of the action brought.’” Grupo Dataflux v. Atlas Global Group, L.P.,
541 U.S. 567, 570, 124 S. Ct. 1920, 158 L. Ed. 2d 866 (2004) (quoting Mollan v.
Torrance, 9 Wheat. 537, 539, 6 L. Ed. 154 (1824)).
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SO ORDERED AND ADJUDGED this the 20th day of May, 2014.
s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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