Court Opinion

ID: 3031428
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:45:58.338049+00
Date Added: 2024-06-11T11:40:42.418757
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 02-2160
                                    ___________

William A. Epps and                       *
Leslie A. Epps, on behalf of              *
themselves and all others                 *
similarly situated,                       *
                                          *    Appeal from the United States
            Appellants,                   *    District Court for the Eastern
                                          *    District of Arkansas.
      v.                                  *
                                          *
Stewart Information Services Corp.,       *
                                          *
            Appellee.                     *

                                    ___________

                               Submitted: November 7, 2002

                                   Filed: April 1, 2003
                                    ___________

Before RILEY, BEAM, and SMITH, Circuit Judges.
                            ___________

SMITH, Circuit Judge.

      William and Leslie Epps filed a class-action suit against Stewart Information
Services Corporation ("SISCO").1 The Eppses claimed that during the class period,

      1
       SISCO is a holding company that owns stock in various companies including
Stewart Title and Guaranty (“Stewart Guaranty”), a wholly-owned subsidiary of
SISCO, and Stewart Title Company of Arkansas, Inc. (“Stewart Title”), a wholly-
SISCO illegally compensated realty companies and brokers in violation of the Real
Estate Settlement Practices Act (“RESPA”).The District Court2 dismissed their
complaint for lack of personal jurisdiction pursuant to Federal Rule of Civil
Procedure 12(b)(2). We affirm.

                                          I.
                                     Background
       The Eppses complained that SISCO will pay referral fees to realty companies
and brokers if those companies’ agents sell title insurance to buyers through a SISCO
company named "TitleMax." The Eppses contended that TitleMax's receipt of
payments turns the referring agent into a provider of title services. They alleged that
SISCO performs all settlement services and that the real estate agent retains up to
60% of the settlement-services fees paid by the purchaser. The Eppses further claimed
that SISCO does not disclose to home buyers the financial arrangement it has with the
brokers as required by RESPA. Finally, the Eppses claimed that SISCO leased office
space in buildings owned by realty companies and paid those companies rent at
higher-than-market-value rates. The Eppses alleged that these overpayments are
actually "kickbacks" made in exchange for referrals.

       SISCO moved to dismiss the Eppses’ complaint for lack of personal
jurisdiction. In support of its motion, SISCO offered the affidavit of Sue Pizzitola, its
Assistant Vice President and Assistant Secretary-Treasurer. Pizzitola averred that

owned subsidiary of Stewart Guaranty. Although the Eppses used the name “Stewart”
throughout its brief to denote SISCO and some of its subsidiaries and related
companies, including Stewart Title and Stewart Guaranty, SISCO is the only
defendant named in the complaint.
      2
       The Honorable James M. Moody, United States District Court Judge for the
Eastern District of Arkansas.

                                          -2-
SISCO had no direct connection to Stewart Title.3 The Eppses countered with an
affidavit from their attorney. He asserted that SISCO’s internal documentation and
its Securities and Exchange Commission ("SEC") reports showed SISCO maintained
contacts with Stewart Title substantial enough to warrant the District Court’s exercise
of personal jurisdiction.4 Through these documents, the Eppses sought to demonstrate

      3
        In her affidavit, Pizzitola asserted that SISCO: (1) has only one office, located
in Houston, Texas; (2) is not licensed or qualified to do business in Arkansas; (3)
does not pay taxes in Arkansas; (4) has no places of business, mailing addresses, bank
accounts, or telephone listings in Arkansas; (5) does not own, use, or possess any real
or personal property in Arkansas; (6) has never marketed, sold, or distributed any
goods or services in Arkansas; (7) has never contracted to provide goods or services
in Arkansas; 8) did not own TitleMax or any capital stock of Stewart Title, and did
not finance their operations; 9) did not have common directors or officers with or
finance the operations of Stewart Title; 10) did not induce Stewart Title’s
incorporation or subscribe to any of its capital stock; 11) did not pay any of Stewart
Title’s salaries, expenses, or losses; 12) did not transact business with Stewart Title
or use its property; 13) that Stewart Title was not a department or division or
subsidiary of SISCO; 14) SISCO did not give direction to Stewart Title; 15) Stewart
Title’s business or financial responsibility was not described as SISCO’s business or
financial responsibility.
      4
         The Eppses’ attorney’s affidavit attached various exhibits, including: 1)
copies of SISCO’s 2000 SEC 10-K filed with the SEC indicating that Stewart
Guaranty was a wholly-owned subsidiary whose debts and assets were considered
SISCO’s debts and assets; 2) a letter from Stewart Title Guaranty Company to Pulaski
Title indicating that the company’s president and CEO held an office in SISCO and
that Stewart Guaranty was a “Stewart Information Services company”; 3) SISCO’s
company directory noting that Malcolm Morris was President of Stewart Guaranty
and Chairman/Co-CEO of SISCO, and that Stewart Morris was Chairman of Stewart
Guaranty and President/Co-Chairman of SISCO; (4) excerpts from the deposition of
Jeffrey Fuller, an Arkansas real estate agent who had engaged in business with
TitleMax; 5) a screen print of www.titlemax.com showing the connection between
TitleMax and Stewart Title; 6) a copy of Stewart Title’s Regional Directory printed
from SISCO’s website, showing Craig Gill as Stewart’s Arkansas underwriter for
Region G; 7) a copy of Region G of SISCO’s Regional Map, also printed from

                                          -3-
that SISCO did not draw any distinction between itself and its subsidiaries, but
instead held itself out as a title insurance company providing title insurance and other
settlement services “in all 50 states.” SISCO acknowledged owning subsidiaries,
including some in Arkansas. SISCO maintained, however, that it was merely a
holding company and that the Eppses' proof failed to establish that SISCO, and not
its subsidiaries, had minimum contacts with Arkansas. In their response, the Eppses
attached a SISCO press release announcing the results of the company's 2001 fourth
quarter and yearly earnings. In the release, SISCO stated that it provided title
insurance and related information services through issuing locations in the United
States, including Arkansas.

      After reviewing the parties' pleadings and affidavits, the District Court
dismissed the Eppses' complaint without prejudice pursuant to Federal Rule of Civil
Procedure 12(b)(2). The District Court determined that the Eppses failed to show that
SISCO had sufficient minimum contacts with Arkansas to allow the court to exercise
personal jurisdiction over SISCO.

                                            II.
                                  Standard of Review
       Rule 12(b)(2) motions are reviewed de novo. First National Bank of Lewisville,
Ark. v. First National Bank of Clinton, Kentucky, 258 F.3d 727, 729 (8th Cir. 2001);
Moog World Trade Corp. v. Bancomer, S.A., 90 F.3d 1382, 1384 (8th Cir.1996). If
the District Court does not hold a hearing and instead relies on pleadings and
affidavits, then we must look at the facts in the light most favorable to the nonmoving
party and resolve all factual conflicts in favor of that party. First National, 258 F.3d
at 729.

SISCO’s website, showing Arkansas in Region G; and 8) a copy of SISCO’s "Exhibit
of Subsidiaries" from its 2000 SEC 10-K filing, which included “Stewart Title of
Arkansas” as a subsidiary.

                                          -4-
        To defeat a motion to dismiss for lack of personal jurisdiction, the nonmoving
party need only make a prima facie showing of jurisdiction. Falkirk Min. Co. v. Japan
Steel Works, Ltd., 906 F.2d 369, 373 (8th Cir.1990); Watlow Elec. Mfg. v. Patch
Rubber Co., 838 F.2d 999, 1000 (8th Cir.1988). The party seeking to establish the
court's in personam jurisdiction carries the burden of proof, and the burden does not
shift to the party challenging jurisdiction. Gould v. P.T. Krakatau Steel, 957 F.2d 573,
575 (8th Cir.1992); Newhard, Cook & Co. v. Inspired Life Centers, Inc., 895 F.2d
1226, 1228 (8th Cir.1990). While the plaintiffs bear the ultimate burden of proof,
jurisdiction need not be proved by a preponderance of the evidence until trial or until
the court holds an evidentiary hearing. Dakota Industries, Inc. v. Dakota Sportswear,
Inc., 946 F.2d 1384, 1387 (8th Cir. 1991) (citing Cutco Ind. v. Naughton, 806 F.2d
361, 365 (2d Cir.1986)).

                                         III.
                                      Discussion
       On appeal, the Eppses argue that they made a prima facie showing of personal
jurisdiction through evidence of SISCO’s connection with and control of its Arkansas
subsidiaries, Stewart Guaranty and Stewart Title. Specifically, the Eppses argue that
the law is clear that when one corporation is so organized and controlled by another
that the subsidiary is merely an instrumentality or adjunct of its parent corporation,
the parent can be found to have subjected itself to jurisdiction under a state’s long-
arm statute. They contend their documentary evidence established conclusively that
SISCO directed its activities towards Arkansas residents to such an extent that it
could be said to have been doing business in Arkansas.

       SISCO responds that the District Court does not have personal jurisdiction over
it because SISCO has no contacts with the State of Arkansas other than its ownership
of stock in companies that have ties to Arkansas, and that this is not sufficient to
subject it to Arkansas’s long-arm statute. As such, in order for the Eppses to prevail,
they must show by clear proof that SISCO either abused its corporate organizational

                                          -5-
form for improper purposes or that SISCO so controls the “operational minutia” of
its subsidiaries that have minimum contacts with Arkansas that SISCO itself can be
said to be doing business in Arkansas. SISCO argues that the court correctly found
that the proof offered by SISCO was insufficient to show the nature, quantity, or
quality of SISCO’s contacts with Arkansas. We agree.

                                        A.
                                  Applicable Law
       Because Arkansas's long-arm statute extends jurisdiction over nonresidents to
the maximum extent permitted by the Due Process Clause, see Ark. Code Ann. § 16-
4-101 (Repl. 1999), our inquiry is whether the exercise of personal jurisdiction over
SISCO would comport with due process. First National, 258 F.3d at 729; Gould, 957
F.2d at 575. Due process requires sufficient "minimum contacts" between the
defendant and the forum state so that "maintenance of the suit does not offend
traditional notions of fair play and substantial justice." World-Wide Volkswagen
Corp. v. Woodson, 444 U.S. 286, 291-92 (1980). "[I]t is essential in each case that
there be some act by which the defendant purposefully avails itself of the privilege
of conducting activities within the forum state, thus invoking the benefits and
protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958). Defendant's
contacts must be more than "random, fortuitous, or attenuated." Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 475 (1985).

       In International Shoe Co. v. Washington, 326 U.S. 310 (1945), the United
States Supreme Court expanded the limits of state jurisdiction over nonresident
defendants, while leaving in place basic due process limitations on that power. The
Court focused not on the presence of the defendant in the state, as it had fifty years
earlier in Pennoyer v. Neff, 95 U.S. 714 (1877), but rather on the nature of the
contacts that the nonresident defendant had with the forum state. The Court stated
that attention must be paid to the "quality and nature" of the contacts, as well as to
whether the defendant, through those contacts, enjoyed the "benefits and protections"

                                         -6-
of the laws of the foreign state. International Shoe, 326 U.S. at 319. The Court further
noted that situations exist in which a nonresident defendant's contacts with a forum
state may be so substantial and continuous as to justify jurisdiction over that
defendant even though the cause of action is "entirely distinct from those activities."
Id. at 318. The Court's touchstone inquiries ask whether personal jurisdiction over the
nonresident defendant is based on "minimum contacts" and whether assumption of
personal jurisdiction would offend "traditional notions of fair play and substantial
justice." Id. at 316.

        Since International Shoe, the Court has revisited and refined the analysis of
personal-jurisdiction issues. A nonresident defendant's contacts with a forum state,
for example, must be sufficient to cause the defendant to "reasonably anticipate being
haled into court there." Worldwide Volkswagen Corp., 444 U.S. at 297. The Court has
also identified two types of personal jurisdiction: general and specific. When a cause
of action arises out of or is related to a defendant's contacts with the forum state, the
exercise of personal jurisdiction is one of specific jurisdiction. Helicopteros
Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8 (1984); Burlington
Industries, Inc. v. Maples Industries, Inc., 97 F.3d 1100, 1103 (8th Cir. 1996) (citing
Wessels, Arnold & Henderson v. National Medical Waste, Inc., 65 F.3d 1427, 1432
n. 4 (8th Cir. 1995)). However, if the exercise of jurisdiction does not depend on the
relationship between the cause of action and the defendant's contacts with the forum
state, the exercise of personal jurisdiction is one of general jurisdiction. Helicopteros
Nacionales, 466 U.S. at 415 n. 9. When general jurisdiction is in question, a
defendant may be subject to the forum state's exercise of personal jurisdiction if
contacts with the state are continuous and systematic. Id. at 414.

       We have established a five-factor test – the first three factors being the most
important – to determine the sufficiency of the defendant’s contacts. Those five
factors are: (1) the nature and quality of contacts with the forum state; (2) the quantity
of such contacts; (3) the relation of the cause of action to the contacts; (4) the interest

                                           -7-
of the forum state in providing a forum for its residents; and (5) convenience of the
parties. Burlington Industries, 97 F.3d at 1102 (citing Land-O-Nod Co. v. Bassett
Furniture Indus., Inc., 708 F.2d 1338, 1340 (8th Cir. 1983)). Notably, another wrinkle
is added when the defendant is a nonresident parent corporation. In that situation,
personal jurisdiction can be based on the activities of the nonresident corporation’s
in-state subsidiary, but only if the parent so controlled and dominated the affairs of
the subsidiary that the latter's corporate existence was disregarded so as to cause the
residential corporation to act as the nonresidential corporate defendant’s alter ego.
See Contractors, Laborers, Teamsters & Engineers Health Plan v. Hroch, 757 F.2d
184, 190 (8th Cir.1985); Lakota Girl Scout Council, Inc. v. Havey Fund-Raising
Management, Inc., 519 F.2d 634, 637 (8th Cir.1975). If the resident subsidiary
corporation is the alter ego of the nonresident corporate defendant, the subsidiary’s
contacts are those of the parent corporation's, and due process is satisfied. Lakota Girl
Scout Council, 519 F.2d at 637. As we explained,

      A corporation is not doing business in a state merely by the presence of
      its wholly owned subsidiary. Cannon Manufacturing Co. v. Cudahy
      Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925).
      However, the fiction of corporate entity may be disregarded, where one
      corporation is so organized and controlled and its affairs are so
      conducted that it is, in fact, a mere instrumentality or adjunct of another
      corporation. Even a non-owned corporation may act as agent for
      another corporation. No all embracing rule has been laid down under
      which the relationship between two corporations may be determined.
      The circumstances in each case must be examined to determine whether
      a corporation through the activities of another corporation has subjected
      itself to jurisdiction in a state under its long arm statute.

Lakota Girl Scout Council, 519 F.2d at 637. (Emphasis added.) Personal jurisdiction
can be properly asserted over a corporation if another is acting as its alter ego, even

                                          -8-
if that alter ego is another corporation. Id. (citing Frazier v. Alabama Motor Club,
Inc., 349 F.2d 456, 459 (5th Cir.1965); Industrial Research Corp. v. General Motors
Corp., 29 F.2d 623, 625 (N.D.Ohio, 1928); Karlin v. Avis, 326 F.Supp. 1325
(E.D.N.Y.1971)).

       In view of these principles, a court's assertion of jurisdiction is contingent on
the ability of the plaintiffs to pierce the corporate veil. See Lakota Girl Scout Council,
519 F.2d at 638. State law is viewed to determine whether and how to pierce the
corporate veil. Id. The Arkansas courts have stated that the doctrine of piercing the
corporate veil is founded in equity and is applied when the facts warrant its
application to prevent injustice. Humphries v. Bray, 611 S.W.2d 791, 793 (Ark. Ct.
App.1981) (citing Aetna Casualty and Surety Company v. Stover, 327 F.2d 288 (8th
Cir. 1964)). Piercing the fiction of a corporate entity should be applied with great
caution. Banks v. Jones, 390 S.W.2d 108, 111 (Ark. 1965). A parent corporation is
not liable for the debts of its subsidiary merely because the parent holds the
controlling interest or because the two are managed by the same officers. Rounds &
Porter Lumber Co. v. Burns, 225 S.W.2d 1, 2 (Ark. 1949). Rather, it is only when the
privilege of transacting business in corporate form has been illegally abused to the
injury of a third person that the corporate entities should be disregarded. Id. at 3. A
corporation and its stockholders are separate and distinct entities, even though a
stockholder may own the majority of the stock. Banks, 390 S.W.2d at 110. The
conditions under which the corporate entity may be disregarded or looked upon as the
alter ego of the principal stockholder vary according to the circumstances of each
case. Humphries, 611 S.W.2d at 793; Winchel v. Craig, 934 S.W.2d 946, 950 (Ark.
Ct. App. 1996). Arkansas courts recognize the alter ego approach to piercing the
corporate veil. Id.

                                     B.
                       Personal Jurisdiction Analysis
      We must review SISCO's contacts from two perspectives. First, for purposes

                                           -9-
of specific personal jurisdiction, we must consider whether SISCO itself had
minimum contacts with Arkansas to subject itself to the personal jurisdiction of the
District Court. If direct minimum contacts are not present, we must determine
whether we can properly pierce Stewart Title's or Stewart Guaranty's corporate veil
under the alter-ego approach to establish general personal jurisdiction over SISCO.
The evidence here indicates that SISCO itself was neither present nor doing business
in Arkansas. Rather, SISCO, a Delaware Corporation, had one corporate office in
Houston, Texas, and was not authorized by the Arkansas Secretary of State to do
business in Arkansas. It has no place of business, mailing address, bank accounts, or
personal property in Arkansas to connect the company directly to the state. While
some of SISCO's corporate officers are also corporate officers of Stewart Guaranty,
there is no evidence in the record as to whether those officers conduct any business
or are located in Arkansas, and no direct evidence that they are connected to Stewart
Title. Consequently, the evidence indicates that SISCO has no direct contacts with
Arkansas; thus, it is not subject to specific personal jurisdiction in the state.

       We turn then to whether general personal jurisdiction exists through an alter-
ego approach. The facts indicate that Stewart Guaranty is a wholly-owned subsidiary
of SISCO, and Stewart Guaranty wholly owns Stewart Title. SISCO includes Stewart
Guaranty’s assets and liabilities as its own in its SEC 10-K filings. This evidence
alone, however, is insufficient to prove that SISCO directly does business in Arkansas
because the general rule is that a parent corporation that owns a subsidiary – even
wholly owns a subsidiary – is not present in a state merely because the subsidiary is
there. Applying our five-factor test from Burlington Industries, SISCO’s mere
ownership of Stewart Guaranty is too distant and limited a contact with Arkansas to
justify subjecting it to the District Court’s exercise of personal jurisdiction.
Furthermore, the Eppses never linked SISCO specifically to Arkansas except as a
parent corporation that claimed the assets and debts of its subsidiary, Stewart
Guaranty. In addition, as the District Court noted, even if we considered SISCO as
one with Stewart Guaranty, the Eppses failed to provide any evidence of significant

                                        -10-
links between Stewart Guaranty and Stewart Title. While the SEC 10-K filing raises
questions about Stewart Guaranty's independence from SISCO, this form only
supports the connection between parent and subsidiary and wholly fails to show any
relation between SISCO and Stewart Title. Moreover, even assuming that the
TitleMax website5 is directly connected to SISCO, that the website's statements are
true, and that the SEC filing information regarding SISCO’s 5,000 locations is
accurate, we are still presented with a scenario lacking “the nature and quality of
contacts” necessary to support an exercise of general personal jurisdiction.

       In sum, our decision after de novo review comports with the District Court's
determination that it lacked personal jurisdiction over SISCO. Although we review
this case in the light most favorable to the Eppses, we nonetheless conclude that the
facts do not sufficiently connect SISCO to Arkansas to bring it within the state's
personal jurisdiction under Arkansas's long-arm statute. As such, the District Court's
dismissal without prejudice is affirmed.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

      5
      The TitleMax website is owned by a Stewart company in Illinois, not by
SISCO directly.

                                        -11-