United States District Court, N.D. Iowa, Western Division
SHINE BROS. CORP., Plaintiff,
AMERICAN INTERNATIONAL GROUP, INC., CHARTIS INC., and CHARTIS SPECIALTY INSURANCE COMPANY, Defendants.
MEMORANDUM OPINION AND ORDER REGARDING DEFENDANTS' MOTION TO DISMISS AND PLAINTIFF'S REQUEST FOR JURISDICTIONAL DISCOVERY
MARK W. BENNETT, District Judge.
Plaintiff, an industrial corporation in Iowa, filed suit in Iowa state court, alleging that out-of-state defendants, two corporate entities and one indirect subsidiary of those entities, breached their contractual obligations and fiduciary duties, and acted in bad faith with respect to a pollution liability insurance policy. More specifically, the plaintiff alleges that the defendants' insurance policy provided coverage for the plaintiff's defense costs, fines, and clean-up costs in relation to a notice, dated March 31, 2014, from The United States Environmental Protection Agency (USEPA) as to alleged contaminants that flowed from the plaintiff's facility in Spencer, Iowa, into a nearby pond of a public park. The defendants did not provide insurance coverage to the plaintiff and refused to defend the plaintiff as to the alleged environmental events that occurred at the plaintiff's facility. After removal to federal court, the defendants moved for dismissal of the plaintiff's claims for lack of personal jurisdiction and failure to state a claim. The merits of the plaintiff's claims are not before me at this time. Rather, I must resolve, inter alia, whether the plaintiff has made a prima facie showing that the two named corporate defendants had sufficient minimum contacts with Iowa to satisfy the exercise of specific or general personal jurisdiction thereby overcoming the defendants' 12(b)(2) motion. In addition, I confront whether the plaintiff defeats the defendants' 12(b)(6) motion to dismiss, and whether to permit the plaintiff to conduct limited discovery confined to the issue of personal jurisdiction.
I. FACTUAL AND PROCEDURAL BACKGROUNDS
The following facts are drawn from AIG Claims, Inc.'s letter to the plaintiff denying insurance coverage, the parties' memorandums, the defendants' declarations, and the plaintiff's state law petition. Plaintiff Shine Bros. Corp. (Shine) operates an industrial facility in the city of Spencer, Iowa. At that facility, Shine purchases, recycles, and sells scrap metal, mostly from wire chopping and auto shredding, and also sells other products. The corporation engages in these activities near a public park, called Pete's Pond Park. The park includes a man-made body of water that flows into the Little Sioux River. Defendants, American International Group, Inc. (AIG, Inc.), Chartis Inc. n/k/a AIG Property Casualty Inc. (AIG Property Casualty), and Chartis Specialty Insurance Company n/k/a Specialty Insurance Company (AIG Specialty),  provided insurance coverage to Shine for certain environmental events at Shine's facility from July 27, 2006 through July 27, 2015.
In March of 2014, USEPA filed a Complaint against Shine for violating the Federal Water Pollution Control Act, commonly referred to as the Clean Water Act, 33 U.S.C. §§ 1311 and 1342. This is because, according to the USEPA, there were contaminants from Shine's facility found in Pete's Pond Park as a result of storm water, melting snow, surface drainage, and run off water discharged from Shine's facility. After notifying its insurer, Shine received a letter in Iowa, dated June 18, 2014, indicating that coverage for the EPA Complaint was denied. AIG Claims, Inc. sent Shine the letter that denied insurance coverage, and the letter displayed AIG's logo. See Plaintiff's Memorandum of Authorities in Support of its Resistance (docket no. 12-1), 2, 10.
On November 13, 2014, Shine filed a petition in the Iowa District Court for Clay County against the defendants, AIG, Inc., AIG Property Casualty, and AIG Specialty. See Plaintiff's Memorandum of Authorities in Support of its Resistance at 1; see also Plaintiff's Petition At Law at 1. In its state law petition, Shine seeks relief from the defendants for their alleged breach of contract and fiduciary duty and bad faith as to insurance coverage under a policy issued by AIG Specialty to Shine. Plaintiff's Petition At Law at 3-5.
On December 15, 2014, the defendants filed a Notice of Removal of Shine's action from the Iowa District Court for Clay County to the United States District Court for the Northern District of Iowa, Western Division (docket no. 2). After the case was removed to federal court, on January 16, 2015, the defendants filed a motion to dismiss Shine's state law petition pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure. Defendants' Motion To Dismiss at 1. Although the defendants concede that AIG Specialty, the issuing insurance company, is "a proper defendant, " the defendants take issue with Shine's inclusion of the other AIG corporate entities in Shine's state law petition, including AIG, Inc. and AIG Property Casualty. Defendants' Memorandum In Support Of Their Motion To Dismiss at 2-3.
II. FACTS RELATING SOLELY TO PERSONAL JURISDICTION OVER AIG, INC. AND AIG PROPERTY CASUALTY
The defendants supplied declarations in support of their motion to dismiss Shine's state law petition. See Patrick Burke's Declaration (docket no. 9-2); see also Jihan Nelson's Declaration (docket no. 9-3). Patrick Burke, an assistant corporate secretary and an authorized representative of AIG, Inc., is allegedly "familiar with the nature of AIG, Inc.'s business and corporate structure." Patrick Burke's Declaration at 1. Jihan Nelson, a paralegal in the Corporate Governance and Transactions Group for AIG Property Casualty, is also allegedly "familiar with the nature of AIG Property Casualty's business and corporate structure." Jihan Nelson's Declaration at 1. I will briefly summarize the pertinent facts provided in Burke's and Nelson's declarations.
According to Burke and Nelson, AIG, Inc. and AIG Property Casualty are "corporation[s] duly organized and existing under the laws" of Delaware and their principal places of business are in New York, New York. Patrick Burke's Declaration at 1; Jihan Nelson's Declaration at 1. These entities have no offices or employees in Iowa. They do not own or lease properties in Iowa. The entities do not conduct business in Iowa, and neither entity is registered to do business in Iowa. Rather, both AIG, Inc. and AIG Property Casualty are "holding compan[ies]" and "corporate parent[s] to numerous subsidiary corporations." Patrick Burke's Declaration at 2; Jihan Nelson's Declaration at 2. Both companies have "numerous affiliates and subsidiaries, including insurance company subsidiaries and affiliates that write property, casualty, marine, life, worker's compensation, and other liens of insurance and collectively do business in numerous countries and jurisdictions." Patrick Burke's Declaration at 2; Jihan Nelson's Declaration at 2. Nelson's declaration provides that AIG Property Casualty "does not advertise, " "file business and occupation tax returns" in Iowa, or "exercise control over the operations of any business in the State of Iowa." Jihan Nelson's Declaration at 2. In contrast, Burke's declaration is silent on these matters with regard to AIG, Inc. Patrick Burke's Declaration at 2.
AIG, Inc. and AIG Property Casualty do not "sell, write or issue primary or excess insurance or reinsurance, either on [their] own account[s] or for any insurer, including but not limited to [their] indirect subsidiary, [AIG Specialty]." Patrick Burke's Declaration at 2; Jihan Nelson's Declaration at 2. Because neither entity "sell[s], write[s], issue[s] or reinsure[s] primary or excess insurance policies, " Burke and Nelson assert that the entities "could not have sold, written, issued or reinsured any policy which is the subject of the above-captioned litigation." Patrick Burke's Declaration at 2; Jihan Nelson's Declaration at 2. Based on these facts, according to Burke and Nelson, neither entity was "involved in any way in the administration or handling of any claim which is the subject of the above-captioned litigation." Patrick Burke's Declaration at 2; Jihan Nelson's Declaration at 2.
Finally, Burke's and Nelson's declarations provide that AIG, Inc. and AIG Property Casualty maintain their own corporate records, "separate and distinct" from their various subsidiaries, including AIG Specialty. Patrick Burke's Declaration at 2; Jihan Nelson's Declaration at 3. AIG, Inc. and AIG Property Casualty also have their "own separate Board of Directors, members, managers, partners and corporate officers." Patrick Burke's Declaration at 2; Jihan Nelson's Declaration at 3. The declarations further provide that the direct and indirect subsidiaries of AIG, Inc. and AIG Property Casualty are "separate and distinct" and those subsidiary corporations maintain their "own corporate formalities necessary for their separate corporate existence, including separate bylaws, separate corporate books and records, a separate Board of Directors, and generally [they] [follow] other corporate requirements separately." Patrick Burke's Declaration at 2-3; Jihan Nelson's Declaration at 3.
I address three issues in this Memorandum Opinion and Order: (1) Whether this Court has general or specific personal jurisdiction over AIG, Inc. and AIG Property Casualty to overcome the defendants' Rule 12(b)(2) motion; (2) Whether Shine has stated a claim against AIG, Inc. and AIG Property Casualty to survive the defendants' Rule 12(b)(6) motion; and (3) Whether Shine should be permitted to conduct jurisdictional discovery before I make a final ruling on the defendants' motion to dismiss pursuant to Rules 12(b)(2) and 12(b)(6).
A. Rule 12(b)(2) Motion: Lack of Personal Jurisdiction
The defendants challenge this Court's personal jurisdiction over AIG, Inc. and AIG Property Casualty. Rule 12(b)(2) of the Federal Rules of Civil Procedure authorizes a pre-answer motion to dismiss for "lack of personal jurisdiction." FED. R. CIV. P. 12(B)(6). As the Eighth Circuit Court of Appeals has explained,
"To allege personal jurisdiction, a plaintiff must state sufficient facts in the complaint to support a reasonable inference that the defendant[ ] can be subjected to jurisdiction within the state.'" Wells Dairy, Inc. v. Food Movers Int'l, Inc., 607 F.3d 515, 518 (8th Cir. 2010) (quoting Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir. 2004)), cert. denied, ___ U.S. ___, 131 S.Ct. 472, 178 L.Ed.2d 289 (2010). "If the defendant controverts or denies jurisdiction, the plaintiff bears the burden of proving facts supporting personal jurisdiction." Id. Its "showing must be tested, not by the pleadings alone, but by the affidavits and exhibits presented with the motions and in opposition thereto." Id. (internal quotation marks omitted).
Dairy Farmers of Am., Inc., 702 F.3d at 474-75. Although I may consider affidavits and other matters outside of the pleadings on a Rule 12(b)(2) motion, the pleader's burden, in the absence of an evidentiary hearing, is only to make a "minimal" prima facie showing of personal jurisdiction, and I "must view the evidence in the light most favorable to the [pleader] and resolve all factual conflicts in its favor in deciding whether the [pleader] has made the requisite showing." K-V Pharm. Co. v. Uriach & CIA, S.A., 648 F.3d 588, 581-82 (8th Cir. 2011). The Eighth Circuit Court of Appeals reviews de novo a district court's order granting a dismissal pursuant to Rule 12(b)(2). Johnson v. Arden, 614 F.3d 785, 793 (8th Cir. 2010).
The exercise of personal jurisdiction is only permissible to the extent that it is "permitted by the forum state's long-arm statute and by the Due Process Clause of the Constitution." Dakota Indus., Inc. v. Ever Best Ltd., 28 F.3d 910, 915 (8th Cir. 1994) (citing Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir. 1991)). As Iowa's Supreme Court explained, when interpreting Iowa's long-arm statute, codified in Iowa Rule of Civil Procedure 1.306,  the statue "expands Iowa's jurisdictional reach to the widest due process parameters allowed by the United States Constitution." Hammond v. Florida Asset Financing Corp., 695 N.W.2d 1, 5 (Iowa 2005) (citing Hodges v. Hodges, 572 N.W.2d 549, 552 (Iowa 1997)). Therefore, I must determine whether personal jurisdiction over AIG, Inc. and AIG Property Casualty comport with constitutional due process restrictions. See Wells Dairy, Inc., 607 F.3d at 518; see also Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816, 819 (8th Cir. 1994) (noting that when a long-arm statute is broadly construed, "the inquiry collapses into the single question of whether exercise of personal jurisdiction comports with due process.").
"Due process requires that a defendant have certain minimum contacts' with the forum state for personal jurisdiction to be exercised." Myers v. Casino Queen, Inc., 689 F.3d 904, 911 (8th Cir.2012) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). More specifically,
Contacts with the forum state must be sufficient that requiring a party to defend an action would not "offend traditional notions of fair play and substantial justice." [ Int'l Shoe Co., 326 U.S.] at 316, 66 S.Ct. 154, 90 L.Ed. 95 (internal quotation marks and citation omitted). "The substantial connection' between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State." Asahi Metal Indus. Co. v. Super. Ct. of Cal., 480 U.S. 102, 112, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987) (internal citations omitted).
We developed a five-factor test to evaluate whether a defendant's actions are sufficient to support personal jurisdiction: (1) the nature and quality of the contacts with the forum state; (2) the quantity of those contacts; (3) the relationship of those contacts with the cause of action; (4) [the state's] interest in providing a forum for its residents; and (5) the convenience or inconvenience to the parties. See, e.g., Precision Const. Co. v. J.A. Slattery Co., Inc., 765 F.2d 114, 118 (8th Cir.1985) (noting that the first three factors are of primary importance and the last two of secondary importance).
Myers, 689 F.3d at 911.
"Personal jurisdiction over a defendant represents the power of a court to enter a valid judgment imposing a personal obligation or duty in favor of the plaintiff.'" Viasystems, Inc. v. EBM-Papst St. Georgen GmbH & Co., KG, 646 F.3d 589, 593 (8th Cir. 2011) (quoting Kulko v. Superior Court of Cal., 436 U.S. 84, 91 (1978)). "The Supreme Court has recognized two theories for evaluating personal jurisdiction: general and specific jurisdiction." VGM Fin. Servs. v. Singh, 708 F.Supp.2d 822, 830-31 (N.D. Iowa 2010) (quoting Steinbuch v. Cutler, 518 F.3d 580, 586 (8th Cir. 2008) in turn citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 411 (1984)); see also Dever, 380 F.3d at 1073 ("The Supreme Court has set forth two theories for evaluating minimum contacts, general jurisdiction and specific jurisdiction."). "Specific jurisdiction refers to jurisdiction over causes of action arising from or related to a defendant's actions within the forum state, ' while [g]eneral jurisdiction refers to the power of a state to adjudicate any cause of action involving a particular defendant, regardless of where the cause of action arose.'" Viasystems, Inc., 646 F.3d at 593 (quoting Miller v. Nippon Carbon Co., 528 F.3d 1087, 1091 (8th Cir. 2008) in turn quoting Bell Paper Box, Inc., 22 F.3d at 819). In the five-factor minimum contact analysis discussed above, "[t]he third factor distinguishes between specific and general [personal] jurisdiction." Myers, 689 F.3d at 911. According to the Eighth Circuit Court of Appeals, this is so, because "[s]pecific personal jurisdiction, unlike general jurisdiction, requires a relationship between the forum, the cause of action, and the defendant." Id. at 912. "Both theories of personal jurisdiction require some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Dever, 380 F.3d at 1073 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)).
Both "general" and "specific" personal jurisdiction are at issue, here, because Shine asserts that, under both theories, this case is allowed to proceed. After I summarize the parties' arguments, below, I will apply the above standards and analyze the defendants' Motion to Dismiss pursuant to Rule 12(b)(2).
1. Arguments of the Parties
The defendants contend that Shine's pleading is "fatally deficient" in naming AIG, Inc. and AIG Property Casualty as defendants because they "lack the minimum contacts with Iowa necessary to bring them within the state's jurisdiction." See Defendants' Memorandum In Support Of Their Motion To Dismiss at 2, 6. The defendants argue that it would "be inconsistent with the Due Process Clause and traditional notions of fair play and substantial justice" to subject AIG, Inc. and AIG Property Casualty to the jurisdiction of this Court because the two entities "lack minimum contacts with Iowa." Defendants' Motion To Dismiss at 2.
Advancing their jurisdictional argument, the defendants make the case that this Court lacks "general jurisdiction" over AIG, Inc. and AIG Property Casualty because neither entity has "such continuous and systematic contacts' with Iowa so as to render them essentially at home in Iowa." Defendants' Memorandum In Support of Their Motion To Dismiss at 8 (citing Dever, 380 F.3d at 1073; Daimler AG v. Bauman, 134 S.Ct. 746, 755 (2014)). Rather, the entities are Delaware corporations and their principle places of business are in New York. Id. The entities are holding companies, which invest in subsidiaries, such as AIG Specialty; the entities are not insurance companies and do not issue insurance policies in any state. Id. The entities do not have "employees, offices, agents, real estate, inventory, or personal property in Iowa." Id. Neither entity is registered to do business in Iowa, nor do they conduct any business in Iowa. Id.
The defendants also dispute Shine's contention that AIG's website confers general personal jurisdiction over AIG, Inc. or AIG Property Casualty. Defendants' Reply Memorandum In Support Of Their Motion To Dismiss (docket no. 13), 2. Citing to VGM Fin. Servs., 708 F.Supp.2d 822, the defendants argue that "[a] website cannot provide general jurisdiction over an entity unless the nature and quality of the website is such that it establishes continuous and substantial contacts with the forum state." Id. According to the defendants, this case involves a "passive, " not an "active, " website, which "provides information about services available from AIG, Inc.'s subsidiaries around the globe, and generally describes the nature of the businesses of these subsidiaries." Id. at 3. This "passive" website does not establish that the defendants "are essentially at home' wherever the website is viewable" so to confer jurisdiction over them. Id. The defendants also argue that the quotations cited to by Shine on AIG's website do not subject the defendants to general personal jurisdiction in Iowa as the quotes are not directed at Iowa or Iowa residents. Instead, "[the quotations] mention customers around the globe, ' discuss worldwide operations, and describe insurance licensing requirements around the nation.'" Id. at 3-4.
In addition, the defendants make the case that this Court lacks "specific jurisdiction" over AIG, Inc. and AIG Property Casualty because the two entities did not "purposefully direct[ ] any activities toward Iowa, " and Shine's claims do not "arise from any activities of AIG, Inc. or AIG Property Casualty." Defendants' Memorandum In Support of Their Motion To Dismiss at 9. The two entities, the defendants argue, have zero contacts with Iowa. Shine now seeks relief based on an insurance policy "issued by AIG Specialty, " not AIG, Inc. or AIG Property Casualty. Id. Citing to Dever, 380 F.3d at 1073-74, the defendants further contend that the five-factors for evaluating personal jurisdiction "demonstrate that [AIG, Inc. and AIG Property Casualty] cannot be subject to jurisdiction in an Iowa court." Id.
In response to Shine's Resistance Memorandum, the defendants focus on the single letter from "AIG Claim, Inc., " which denied insurance coverage to Shine. Defendants' Reply Memorandum In Support Of Their Motion To Dismiss at 4. In doing so, the defendants argue that the single letter does not confer specific personal jurisdiction over AIG, Inc. or AIG Property Casualty for two reasons. First, the letter was sent by "AIG Claims, Inc." on behalf of AIG Specialty, which is consistent with the defendants' original motion, indicating that neither entity issues insurance policies or decides insurance claims. Id. Second, the letter sent by AIG Claims, Inc. "cannot support that [Shine's] causes of action arise out of the defendants' particular activities in the forum, because the letter is not attributable to either defendant." Id. (citing Romak ...