Adkins et al v. CSX Transportation, Inc. et al

Filing 166

MEMORANDUM OPINION AND ORDER granting CSX Corporation's 158 RENEWED MOTION to Dismiss for Lack of Personal Jurisdiction; dismissing CSX Corporation as a party to this suit. Signed by Judge Robert C. Chambers on 6/11/2020. (cc: counsel of record; any unrepresented parties) (hkl)

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
JUSTIN ADKINS, et al.,
Plaintiffs,
v.

CIVIL ACTION NO. 3:18-0321

CSX TRANSPORTATION, INC., et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending is defendant CSX Corporation’s (“CSX”) Renewed Motion to Dismiss for Lack
of Personal Jurisdiction, ECF No. 158. CSX argues its status as the parent company of defendant
CSX Transportation, Inc. (“CSXT”) is insufficient for the Court to exercise jurisdiction over it.
The Court agrees and finds no basis for asserting personal jurisdiction over CSX. The Renewed
Motion is therefore GRANTED.
I. BACKGROUND
The plaintiffs assert a series of claims arising out of their termination with rail carrier CSXT
in Huntington, West Virginia. See ECF No. 93. The plaintiffs also name CSXT’s parent company,
CSX, as a defendant. In August 2018, CSX filed a motion to dismiss for lack of personal
jurisdiction on the basis that CSX is separate from CSXT and does not have sufficient contacts
with West Virginia. ECF No. 20. The Court denied the motion because the plaintiffs made a prima
facie case for personal jurisdiction. ECF No. 48, at 5. The Court then entered a scheduling order
that permitted CSX to raise its jurisdictional defense again after the completion of jurisdictional

discovery. ECF No. 53, at 1–2. Having completed jurisdictional discovery, CSX now moves again
for dismissal for lack of personal jurisdiction. ECF No. 158.
II. LEGAL STANDARD
A federal court sitting in diversity “has personal jurisdiction over a non-resident defendant
if (1) an applicable state long-arm statute confers jurisdiction and (2) the assertion of that
jurisdiction is consistent with constitutional due process.” Perdue Foods LLC v. BRF S.A., 814
F.3d 185, 188 (4th Cir. 2016) (citation omitted). “Because the West Virginia long-arm statute is
coextensive with the full reach of due process,” these questions merge into one inquiry. In re
Celotex Corp., 124 F.3d 619, 627–28 (4th Cir. 1997). “A court’s exercise of jurisdiction over a
nonresident defendant comports with due process if the defendant has ‘minimum contacts’ with
the forum, such that to require the defendant to defend its interests in that state ‘does not offend
traditional notions of fair play and substantial justice.’” Carefirst of Md., Inc. v. Carefirst
Pregnancy Ctrs., Inc., 334 F.3d 390, 397 (4th Cir. 2003) (quoting Int’l Shoe Co. v. Wash., 326
U.S. 310, 316 (1945)).
In this case, the plaintiffs seek to pierce the corporate veil between CSX and CSXT to
impute the subsidiary’s West Virginia contacts to its parent. The Court must therefore look to the
substantive requirements for piercing the corporate veil under West Virginia law. See Byard v.
Verizon W. Va., Inc., No. 1:11CV132, 2012 WL 1085775, at *10 (N.D.W. Va. Mar. 30, 2012)
(analyzing West Virginia’s alter ego doctrine in the context of determining personal jurisdiction
over a parent corporation). The law presumes that two separately incorporated businesses are
separate entities. Syl. pt. 3, S. Elec. Supply Co. v. Raleigh Cty. Nat. Bank, 320 S.E.2d 515 (W. Va.
1984). However, a plaintiff may overcome this presumption and pierce the corporate veil “when
the corporate form is interposed to perpetrate an intentional wrong, fraud or illegality.” Id. at 521–

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22. The Court may then disregard the corporate structure in order to “make a corporation liable for
behavior of another corporation within its total control.” Id. at 522 (emphasis added). In addition
to evidence concerning the organizational relationship between the parent and subsidiary, courts
must consider evidence “that a corporation attempted to use its corporate structure to perpetrate a
fraud or do grave injustice on an innocent third party.” Id. at 523. West Virginia courts apply this
“complicated” doctrine “gingerly” on a “case-by-case” basis “with particular attention to factual
details.” Id. at 522–23.
The Supreme Court of Appeals of West Virginia has outlined eleven factors for courts to
consider “in determining whether to assert personal jurisdiction over the parent company of a
subsidiary doing business in West Virginia.” Bowers v. Wurzburg, 501 S.E.2d 479, 490 (W. Va.
1998). These factors include:
1. Whether the parent corporation owns all or most of the capital stock of the
subsidiary;
2. Whether the parent and subsidiary corporations have common directors and
officers;
3. Whether the parent corporation finances the subsidiary;
4. Whether the parent corporation subscribes to all the capital stock of the
subsidiary or otherwise causes its incorporation;
5. Whether the subsidiary has grossly inadequate capital;
6. Whether the parent corporation pays the salaries and other expenses or losses
of the subsidiary;
7. Whether the subsidiary has substantially no business except with the parent
corporation or no assets except those conveyed to it by the parent corporation;
8. Whether in the papers of the parent corporation or in the statement of its
officers, the subsidiary is described as a department or division of the parent
corporation, or its business or financial responsibility is referred to as the parent
corporation’s own;
9. Whether the parent corporation uses the property of the subsidiary as its own;
10. Whether the directors or executives of the subsidiary do not act independently
in the interest of the subsidiary but take their orders from the parent corporation
in the latter’s interest; and
11. Whether the formal legal requirements of the subsidiary are not observed.

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Id. (citation omitted). Now that jurisdictional discovery has occurred and the parties had the
opportunity to present relevant evidence and argument, the plaintiffs bear the burden of
establishing personal jurisdiction by a preponderance of the evidence. See Sneha Media & Entm’t,
LLC v. Associated Broad. Co. P Ltd., 911 F.3d 192, 197 (4th Cir. 2018); James v. Subaru of Am.,
Inc., No. 1:19CV00021, 2020 WL 220093, at *3 (W.D. Va. Jan. 15, 2020).
III. DISCUSSION
The plaintiffs argue several facts show CSX exercised total control over CSXT. ECF No.
164, at 7–11. They point out that CSXT is a wholly-owned subsidiary of CSX and the two entities
share some common officers who are compensated by CSX. Id. at 8. The plaintiffs also argue CSX
guarantees the debt of its subsidiary and CSXT provides extensive services to CSX under a
Specialized Services Agreement. Id. at 5, 8–9. In addition, CSX uses some of CSXT’s property,
assets, and workforce. Id. at 9. This includes use of CSXT’s private aircraft and the leasing of
office space from CSXT for a submarket rate. Id. at 9–10. The plaintiffs further argue that a
Strategic Management Services Agreement obligates CSXT to comply with business strategies
developed by CSX. Id. Finally, the plaintiffs argue CSX and CSXT represent themselves as a
consolidated entity, including on their websites for the public and investors. Id. at 10–11.
These facts fall far short of showing anything more than a typical parent-subsidiary
relationship. As considered by the second Bowers factor, CSX and CSXT shared some common
officers and directors during the relevant period. The two entities’ 2018 Secretary of State filings
show six individuals served as officers for both CSX and CSXT (assuming these officers did not
change in between the two filings). ECF Nos. 25-1, 25-2; see also ECF No. 164-4. Even so, “it is
entirely appropriate for directors of a parent corporation to serve as directors of its subsidiary, and
that fact alone may not serve to expose the parent corporation to liability for its subsidiary’s acts.”

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W. Va. Highlands Conservancy, Inc. v. Pub. Serv. Comm’n of W. Va., 527 S.E.2d 495, 502 (1998)
(quoting U.S. v. Bestfoods, 524 U.S. 51, 69 (1998)). In other words, having common officers and
directors is often necessary for piercing the corporate veil, but it is far from sufficient to invoke
the doctrine. See C M Corp. v. Oberer Dev. Co., 631 F.2d 536, 539 (7th Cir. 1980) (“Stock control
and common officers and directors . . . are not sufficient by themselves . . . for such factors are
common business practice and exist in most parent and subsidiary relationships.”); Haas v. Antero
Res. Corp., No. 1:17CV108, 2018 WL 6596869, at *9 (N.D.W. Va. Dec. 14, 2018) (holding that
wholly owning a subsidiary, some shared officers and directors, and the allegation of “significant
overlap in corporate control” fall “woefully short” of plausibly supporting alter ego liability).
The plaintiffs also failed to show CSXT’s directors and executives “[took] their orders
from the parent corporation” instead of “act[ing] independently in the interest of the subsidiary”
as considered under the tenth Bowers factor. 501 S.E.2d at 490. The simple fact that some directors
and officers split their time between the two companies does not support alter ego liability, for it
is a “well established principle of corporate law that directors and officers holding positions with
a parent and its subsidiary can and do ‘change hats’ to represent the two corporations separately,
despite their common ownership.” Bestfoods, 524 U.S. at 69 (citations omitted). Thus, courts
“generally presume that the directors are wearing their ‘subsidiary hats’ and not their ‘parent hats’
when acting for the subsidiary.” Id. (internal quotation marks and citations omitted). The plaintiffs
produced no evidence to rebut this presumption.
Per the ninth Bowers factor, the plaintiffs argue CSX uses some of CSXT’s property. ECF
No. 164, at 9. However, the only examples the plaintiffs provide are that CSX leases office space
from CSXT and that CSXT permits CSX to use its aircraft under the companies’ Specialized
Services Agreement. Id. This use of CSXT’s property is negligible, especially considering that

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CSXT holds billions of dollars in assets, including real estate, bridges, locomotives, and freight
cars. ECF No. 163-1 ¶ 13. Shared office space does not show a subsidiary is an alter ego of the
parent. See, e.g., Tucker v. Thomas, 853 F. Supp. 2d 576, 591 (N.D.W. Va. 2012) (holding that an
overlap in ownership and management and a shared office space and telephone number did not
plausibly support alter ego liability); EEOC v. Bass Pro Outdoor World, LLC, No. 4:11-CV-3425,
2012 WL 13040407, at *3 (S.D. Tex. Oct. 23, 2012) (holding that common ownership, a shared
corporate headquarters, and shared officers and directors did not establish an alter ego
relationship). And, CSX does not freely use CSXT’s aircraft as if CSX owned the aircraft. Rather,
access is provided for in the companies’ Strategic Management Services Agreement to “enable
[CSX] to discharge its obligation in providing Strategic Management Services to [CSXT] without
incurring greater cost.” ECF No. 164-2, at 3. CSX’s use of the aircraft is therefore part of an
exchange of services typical of a parent and subsidiary, not indicative of a parent unconditionally
controlling its subsidiary’s assets.
As the plaintiffs argue, CSXT provides many services to CSX. See ECF No. 164, at 4–5.
The companies’ Specialized Services Agreement describes the provision of accounting,
environmental, financial, human resources, legal, and other services. ECF No. 164-3. However,
the provision of some services by a subsidiary to a parent is not unique and does not necessarily
support piercing the corporate veil. Rather, according the seventh Bowers factor, the question is
whether the subsidiary “has substantially no business except with the parent corporation or no
assets except those conveyed to it by the parent corporation.” 501 S.E.2d at 490. Here, CSXT has
significant business beyond CSX. ECF No. 158-1 ¶ 11. In 2018, CSXT had approximately $12.2
billion in revenue, while CSX paid only $5.57 million under the Specialized Services Agreement.
Id.; ECF No. 163-1 ¶ 6. CSXT also holds considerable assets independent of CSX, including real

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estate, bridges, locomotives, and freight cars. ECF No. 158-1 ¶ 13. Thus, the receipt of some
business from the companies’ Specialized Services Agreement does not support holding CSX
liable here.
The plaintiffs’ main argument is that a Strategic Management Services Agreement permits
CSX to set CSXT’s strategy and prohibits CSXT from deviating from that strategy. ECF No. 164,
at 9–10. However, this Agreement does not evidence the kind of “total control” that would justify
holding CSX liable. As the United States Supreme Court and the Supreme Court of Appeals of
West Virginia have explained, “activities 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 do not indicate that
the parent corporation is in fact controlling the subsidiary.” W. Va. Highlands Conservancy, Inc.,
527 S.E.2d at 502 (quoting Bestfoods, 524 U.S. at 72) (internal quotation marks omitted). Thus,
parent companies can set the corporate strategy of their subsidiaries without giving rise to alter
ego liability when the subsidiary maintains control of day-to-day operations. E.g., Anwar v. Dow
Chem. Co., 876 F.3d 841, 850 (6th Cir. 2017) (holding that parent’s “macromanagement” of
subsidiary is insufficient for alter ego liability); Ranza v. Nike, Inc., 793 F.3d 1059, 1074–75 (9th
Cir. 2015) (rejecting alter ego liability where subsidiary handled its day-to-day operations even
though the parent company controlled the subsidiary’s budget, approved large purchases, and set
general human resource policies); Byard, 2012 WL 1085775, at *10–11 (holding that a parent
company’s “Code of Conduct” outlining general corporate policy for its subsidiary could not
justify piercing the corporate veil); see also Company, BLACK’S LAW DICTIONARY (11th ed. 2019)
(defining “holding company” as one that generally “confin[es] its role to owning stock and
supervising management” without “participat[ing] in making day-to-day business decisions”).

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The companies’ Strategic Management Services Agreement evidences only the kind of
“macromanagement” typical of a parent-subsidiary relationship. The agreement is only fourteen
pages long and describes CSX’s provision of management services to CSXT in the broadest of
terms. See ECF No. 164-2. For example, CSX agrees to “create long-term value and growth by
identifying [CSXT’s] longterm needs; establishing one or more plans to address those needs; and
work with [CSXT’s] management to execute those plans.” Id. at 6. In another portion, CSX agrees
to the “coordination of human resource policies; overseeing compliance with labor laws;
evaluating managerial restructuring; creation of longterm incentive plans; and strategizing
collective bargaining.” Id. Nothing in the agreement indicates CSX goes beyond the development
of strategy to control the day-to-day operations of CSXT. To the contrary, this intercompany
contract shows CSXT and CSX closely adhered to the formalities of corporate separateness when
establishing this provision of management services. See Special Indus., Inc. v. Zamil Grp. Holding
Co., 578 F. App’x 325, 333 (5th Cir. 2014) (“[F]ormal contractual relationships in the form of
service, patent, trademark, licensing, and interest-bearing loan agreements, like the ones [the
parent] has here with its subsidiaries, could be more indicative of separateness than unity.”); In re
Joseph Walker & Co., Inc., 522 B.R. 165, 192 (Bankr. D.S.C. 2014) (“[F]ar from suggesting any
domination or control of a corporate subsidiary, intercompany transactions may establish the
independence of corporate entities.”). Without additional evidence showing CSX exercised control
over CSXT’s operations, the Strategic Management Services Agreement fails to support holding
CSX liable.
Finally, the plaintiffs’ argument that CSX and CSXT represent themselves as a
consolidated entity also does not support alter ego liability. See ECF No. 164, at 10–11.
Specifically, the plaintiffs argue CSX’s main website and investors website do not distinguish

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between the two companies. Id. This is false. Both websites link to a “corporate structure” page
that explains: “CSX Corporation is the parent company of several direct and indirect whollyowned subsidiaries, including: [CSXT]. Each subsidiary is a separate and distinct company.”
Corporate Structure, CSX, https://www.csx.com/index.cfm/about-the-site/corporate-structure/
(last visited June 9, 2020). The plaintiffs provided no evidence that earlier versions of the websites
did not make this distinction. CSX’s investors website also includes copies of CSX’s annual Form
10-Ks and CSXT’s Class 1 Railroad Annual Reports, each of which distinguish between the
companies. See Annual Reports, CSX, https://investors.csx.com/financials/annual-reports/
default.aspx (last visited June 9, 2020). The plaintiffs contend that CSX’s first quarter financial
report for 2020 fails to distinguish between CSX and its subsidiaries. See ECF No. 164-5.
However, the report is meant to provide a concise summary and clearly instructs readers on the
first page to read the report “in conjunction with the Company’s most recent Annual Report on
Form 10-K” among other public filings. Id. at 3. The report also refers readers to CSX’s website
for “[m]ore information about CSX Corporation and its subsidiaries.” Id. at 4 (emphasis added).
Given these statements, it cannot be said that CSX describes CSXT as a division of itself or that
CSX refers to CSXT’s business responsibility as its own as considered by the eighth Bowers factor.
See 501 S.E.2d at 490.
In sum, the plaintiffs have failed to offer any significant evidence that CSX exercised total
control over CSXT and did so to “perpetrate an intentional wrong, fraud or illegality.” S. Elec.
Supply Co., 320 S.E.2d at 521–22. The companies’ corporate and financial structure, shared
officers and directors, exchange of services, setting of strategy, and public presentation show
nothing more than a typical parent-subsidiary relationship. West Virginia law mandates that the
corporate form should “never be disregarded lightly,” and this case does not present exceptional

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circumstances. Dallas Nat’l Ins. Co. v. Owner’s Sol., Inc., No. 2:13-CV-10780, 2014 WL
12744644, at *2 (S.D.W. Va. Mar. 10, 2014). The plaintiffs’ attempt to pierce the corporate veil
and impute CSXT’s West Virginia contacts to CSX is unfounded.
IV. CONCLUSION
The Court therefore GRANTS CSX’s Renewed Motion to Dismiss for Lack of Personal
Jurisdiction, ECF No. 158, and DISMISSES CSX as a party to this suit. The Court DIRECTS the
Clerk to send a copy of this Memorandum Opinion and Order to counsel of record and any
unrepresented parties.
ENTER:

June 11, 2020

ROBERT C. CHAMBERS
UNITED STATES DISTRICT JUDGE

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