Court Opinion

ID: 18514
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:16:13+00
Date Added: 2024-06-11T16:46:50.103356
License: Public Domain

REVISED SEPTEMBER 10, 1999

                 UNITED STATES COURT OF APPEALS
                      For the Fifth Circuit

                          No. 98-50119

            LISA CERZA GARDEMAL, Administrator of the
              Estate of John W. Gardemal, Deceased,

                                              Plaintiff-Appellant,

                             VERSUS

         WESTIN HOTEL COMPANY, doing business as Westin
             Regina Resort; WESTIN MEXICO SA DE CV,

                                             Defendants-Appellees.

          Appeal from the United States District Court
                For the Western District of Texas
                         August 17, 1999

Before EMILIO GARZA, DeMOSS, and PARKER, Circuit Judges.
DeMOSS, Circuit Judge:

     Plaintiff-appellant, Lisa Cerza Gardemal (“Gardemal”), sued

defendants-appellees, Westin Hotel Company (“Westin”) and Westin

Mexico, S.A. de C.V. (“Westin Mexico”), under Texas law, alleging

that the defendants were liable for the drowning death of her

husband in Cabo San Lucas, Mexico.    The district court dismissed
the suit in accordance with the magistrate judge’s recommendation

that the court grant Westin’s motion for summary judgment, and

Westin   Mexico’s     motion     to   dismiss     for       lack     of    personal

jurisdiction.   We affirm the district court’s rulings.

                                      I.

     In June 1995, Gardemal and her husband John W. Gardemal, a

physician, traveled to Cabo San Lucas, Baja California Sur, Mexico,

to attend a medical seminar held at the Westin Regina Resort Los

Cabos ("Westin Regina").        The Westin Regina is owned by Desarollos

Turisticos Integrales Cabo San Lucas, S.A. de C.V. (“DTI”), and

managed by Westin Mexico. Westin Mexico is a subsidiary of Westin,

and is incorporated in Mexico.        During their stay at the hotel, the

Gardemals   decided   to   go    snorkeling     with    a    group    of   guests.

According to Gardemal, the concierge at the Westin Regina directed

the group to “Lovers Beach” which, unbeknownst to the group, was

notorious for its rough surf and strong undercurrents.                       While

climbing the beach’s rocky shore, five men in the group were swept

into the Pacific Ocean by a rogue wave and thrown against the

rocks.   Two of the men, including John Gardemal, drowned.

     Gardemal, as administrator of her husband’s estate, brought

wrongful death and survival actions under Texas law against Westin

and Westin Mexico, alleging that her husband drowned because Westin

Regina’s concierge negligently directed the group to Lovers Beach

                                       2
and failed to warn her husband of its dangerous condition.1          Westin

then moved for summary judgment, alleging that although it is the

parent company of Westin Mexico, it is a separate corporate entity

and thus could not be held liable for acts committed by its

subsidiary.      The    magistrate     judge   agreed   with   Westin,   and

recommended that Westin be dismissed from the action.           In reaching

its decision the magistrate judge rejected Gardemal’s assertion

that the state-law doctrines of alter-ego and single business

enterprise    allowed    the   court   to   disregard   Westin’s   separate

corporate identity.            After Westin filed its motion for summary

judgment, Westin Mexico also moved to dismiss the suit.            In a Rule

12(b)(2) motion, Westin Mexico alleged that there were insufficient

minimum contacts to bring it within the personal jurisdiction of

the court.    Finding that there was neither general nor specific

jurisdiction over Westin Mexico, the magistrate judge concluded

that personal jurisdiction was in fact lacking and recommended that

Westin Mexico be dismissed.

     Gardemal   timely     objected    to   the   magistrate   judge’s   two

recommendations.        Applying a de novo standard of review, the

district court accepted the magistrate judge’s recommendations and

dismissed Gardemal’s suit. Gardemal now appeals, alleging that the

district court erred in granting Westin’s motion for summary

     1
          Gardemal also asserted a claim under the Texas Deceptive
Trade Practices Act (“DTPA”). Tex. Bus. & Com. Code § 17.41, et
seq.

                                       3
judgment, and Westin Mexico’s motion to dismiss.        We affirm.

                                  II.

     We review a district court’s grant of summary judgment de

novo.   Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986); Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th

Cir. 1995).     Summary judgment is appropriate if the record reveals

“that there is no genuine issue as to any material fact and the

moving party is entitled to a judgment as a matter of law.”          Fed.

R. Civ. P. 56(c).     In making this determination, we must evaluate

the facts in the light most favorable to the non-moving party.

Matsushita, 475 U.S. at 587; Todd, 47 F.3d at 1451.

     A district court’s dismissal for want of personal jurisdiction

is subject to de novo review.      Jobe v. ATR Mktg., Inc., 87 F.3d
751, 753 (5th Cir. 1996).      When a nonresident defendant moves to

dismiss for lack of personal jurisdiction, the plaintiff bears the

burden of demonstrating the district court’s jurisdiction over the

defendant.      Wilson v. Belin, 20 F.3d 644, 649 (5th Cir. 1994).

When, as in this case, the district court rules on the motion

without an evidentiary hearing, the plaintiff may satisfy its

burden by presenting a prima facie case for jurisdiction.       Felch v.

Transportes Lar-Mex S.A. de C.V., 92 F.3d 320, 326 (5th Cir. 1996).

In   deciding    whether   a   prima    facie   case   has   been    made,

“uncontroverted allegations in the plaintiff’s complaint must be

                                   4
taken as true, and conflicts between the facts contained in the

parties’ affidavits must be resolved in the plaintiff’s favor.”

Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990).

                                   III.

     Two separate issues confront us in this appeal.           The first is

whether the district court properly granted Westin’s motion for

summary judgment.      The second is whether the district court erred

in granting Westin Mexico’s motion to dismiss for lack of personal

jurisdiction.      We address each in turn.

                                    A.

     In this action Gardemal seeks to hold Westin liable for the

acts of Westin Mexico by invoking two separate, but related, state-

law doctrines. Gardemal first argues that liability may be imputed

to Westin because Westin Mexico functioned as the alter ego of

Westin.   See Castleberry v. Branscum, 721 S.W.2d 270, 272 (Tex.

1986) (explaining that under Texas law corporate form may be

disregarded   if    corporation   functions   as   alter-ego    of   another

corporation).      Gardemal next contends that Westin may be held

liable on the theory that Westin Mexico operated a single business

enterprise.     See Old Republic Ins. Co. v. Ex-Im Servs. Corp., 920
S.W.2d 393, 395-96 (Tex. App--Houston [1st Dist.] 1996, no writ)

(explaining that under Texas law corporate form may be disregarded

                                    5
when corporations are not operated as separate entities but rather

integrate their resources to achieve a common business purpose).

We consider first the issue of whether Westin may be held liable on

an alter-ego theory.

                                 1.

       Under Texas law the alter ego doctrine allows the imposition

of liability on a corporation for the acts of another corporation

when the subject corporation is organized or operated as a mere

tool or business conduit.    Hall v. Timmons, 987 S.W.2d 248, 250

(Tex. App.--Beaumont 1999, no writ); Castleberry, 721 S.W.2d at

272.    It applies “when there is such unity between the parent

corporation and its subsidiary that the separateness of the two

corporations has ceased and holding only the subsidiary corporation

liable would result in injustice.”    Harwood Tire--Arlington, Inc.

v. Young, 963 S.W.2d 881, 885 (Tex. App.--Fort Worth 1998, writ

dism’d by agr.).   Alter ego is demonstrated “by evidence showing a

blending of identities, or a blurring of lines of distinction, both

formal and substantive, between two corporations. Hideca Petroleum

Corp. v. Tampimex Oil Int’l Ltd., 740 S.W.2d 838, 843 (Tex. App.--

Houston [1st Dist.] 1987, no writ).   An important consideration is

whether a corporation is underfunded or undercapitalized, which is

an indication that the company is a mere conduit or business tool.

                                  6
Lucas v. Texas Indus., Inc., 696 S.W.2d 372, 374 (Tex. 1984).2

     On appeal Gardemal points to several factors which, in her

opinion, show that Westin is operating as the alter ego of Westin

Mexico.   She claims, for example, that Westin owns most of Westin

Mexico’s stock; that the two companies share common corporate

officers; that Westin maintains quality control at Westin Mexico by

requiring Westin Mexico to use certain operations manuals; that

Westin oversees advertising and marketing operations at Westin

Mexico through two separate contracts; and that Westin Mexico is

grossly undercapitalized.   See United States v. Jon-T Chemicals,

Inc., 768 F.2d 686, 691-92 (5th Cir. 1985) (listing the numerous

factors used in alter ego analysis); Castleberry, 721 S.W.2d at

272 (same).    Gardemal places particular emphasis on the last

purported factor, that Westin Mexico is undercapitalized.      She

insists that this factor alone is sufficient evidence that Westin

Mexico is the alter ego of Westin.   See Jon-T Chemicals, Inc., 768
F.2d at 692-93 (explaining that undercapitalization is an important

factor in alter-ego analysis).   We are not convinced.

     The record, even when viewed in a light most favorable to

     2
          The rationale behind the “alter ego” theory is that if
the shareholders    themselves, or the corporations themselves,
disregard the legal separation, distinct properties, or proper
formalities of the different corporate enterprises, then the law
will likewise disregard them so far as is necessary to protect
individual and corporate creditors. Castleberry, 721 S.W.2d at
272.

                                 7
Gardemal,    reveals   nothing   more   than   a   typical   corporate

relationship between a parent and subsidiary.         It is true, as

Gardemal points out, that Westin and Westin Mexico are closely tied

through stock ownership, shared officers, financing arrangements,

and the like.     But this alone does not establish an alter-ego

relationship. As we explained in Jon-T Chemicals, Inc., there must

be evidence of complete domination by the parent.

            The control necessary . . . is not mere
            majority or complete stock control but such
            domination of finances, policies and practices
            that the controlled corporation has, so to
            speak, no separate mind, will or existence of
            its own and is but a business conduit for its
            principal.

Id. at 691 (citation and quotation omitted).       Thus, “one-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.”    Id.

     In this case, there is insufficient record evidence that

Westin dominates Westin Mexico to the extent that Westin Mexico

has, for practical purposes, surrendered its corporate identity.

In fact, the evidence suggests just the opposite, that Westin

Mexico functions as an autonomous business entity.           There is

evidence, for example, that Westin Mexico banks in Mexico and

deposits all of the revenue from its six hotels into that account.

The facts also show that while Westin is incorporated in Delaware,

Westin Mexico is incorporated in Mexico and faithfully adheres to

                                  8
the required corporate formalities. Finally, Westin Mexico has its

own staff, its own assets, and even maintains its own insurance

policies.

     Gardemal is correct in pointing out that undercapitalization

is a critical factor in our alter-ego analysis, especially in a

tort case like the present one.        See Jon-T Chemicals, Inc., 768
F.2d at 693.   But as noted by the district court, there is scant

evidence that Westin Mexico is in fact undercapitalized and unable

to pay a judgment, if necessary.       This fact weighs heavily against

Gardemal because the alter ego doctrine is an equitable remedy

which prevents a company from avoiding liability by abusing the

corporate form.   “We disregard the corporate fiction . . . when the

corporate form has been used as part of a basically unfair device

to achieve an inequitable result.”        Castleberry, 721 S.W.2d at

271-72 (citation and quotation omitted); see also Roy E. Thomas

Construction Co. v. Arbs, 692 S.W.2d 926, 938 (Tex. App.--Fort

Worth 1985, writ ref’d n.r.e.) (“It is not possible to more

emphatically express the necessity for a plaintiff to prove that he

will suffer some type of harm or injustice by adhering to the

corporate fiction before the corporate veil will be pierced.”). In

this case, there is insufficient evidence that Westin Mexico is

undercapitalized or uninsured.     Moreover, there is no indication

that Gardemal could not recover by suing Westin Mexico directly.

As a result, equity does not demand that we merge and disregard the

                                   9
corporate identities of Westin and Westin Mexico.                  We reject

Gardemal’s attempt to impute liability on Westin based on the

alter-ego doctrine.

                                       2.

       Likewise, we reject Gardemal’s attempt to impute liability to

Westin based on the single business enterprise doctrine.                 Under

that doctrine, when corporations are not operated as separate

entities,    but   integrate   their    resources   to   achieve   a   common

business purpose, each constituent corporation may be held liable

for the debts incurred in pursuit of that business purpose.                Old

Republic Ins. Co. v. Ex-Im Serv. Corp., 920 S.W.2d 393, 395-96

(Tex. App--Houston [1st Dist.] 1996, no writ).           Like the alter-ego

doctrine, the single business enterprise doctrine is an equitable

remedy which applies when the corporate form is “used as part of an

unfair device to achieve an inequitable result.”           Id. at 395.

       On appeal, Gardemal attempts to prove a single business

enterprise by calling our attention to the fact that Westin Mexico

uses   the   trademark    “Westin   Hotels   and    Resorts.”      She    also

emphasizes that Westin Regina uses Westin’s operations manuals.

Gardemal also observes that Westin allows Westin Mexico to use its

reservation system.      Again, these facts merely demonstrate what we

would describe as a typical, working relationship between a parent

and subsidiary.     Gardemal has pointed to no evidence in the record

                                       10
demonstrating that the operations of the two corporations were so

integrated    as     to   result   in   a   blending   of   the   two    corporate

identities.    Moreover, Gardemal has come forward with no evidence

that she has suffered some harm, or injustice, because Westin and

Westin Mexico maintain separate corporate identities.

       Reviewing the record in the light most favorable to Gardemal,

we conclude that there is insufficient evidence that Westin Mexico

was Westin’s alter ego.        Similarly, there is insufficient evidence

that the resources of Westin and Westin Mexico are so integrated as

to constitute a single business enterprise. Accordingly, we affirm

the district court’s grant of Westin’s motion for summary judgment

on that issue.       We turn next to whether the district court erred in

granting Westin Mexico’s motion to dismiss for lack of personal

jurisdiction.

                                         B.

       The due process clause limits the power of a state to assert

personal jurisdiction over a nonresident defendant.                 Its require-

ments are satisfied when the nonresident defendant has “certain

minimum contacts with [the forum] such that the maintenance of the

suit   does   not    offend    ‘traditional     notions     of    fair   play   and

substantial justice.’"         International Shoe Co. v. Washington, 326
U.S. 310,     316,    (1945)   (citation      and   quotation     omitted).      In

evaluating minimum contacts with the forum, we must determine

                                         11
whether the nonresident has purposefully availed himself 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).       To assist in the minimum

contacts analysis, the Supreme Court has drawn a distinction

between specific and general jurisdiction.    See Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 472 (1985); Helicopteros Nacionales de

Colombia, S.A. v. Hall, 466 U.S. 408, 413 (1984); Coats v. Penrod

Drilling, 5 F.3d 877, 884 (5th Cir. 1993).        Each, if proven,

supports the exercise of personal jurisdiction over the defendant.

Coats, 5 F.3d at 884.

     To establish specific jurisdiction, the defendant must have

purposely directed his activities at the resident of the forum, and

the litigation must result from the alleged injuries that “arise

out of or relate to” the defendant’s activities directed at the

forum.   Burger King, 471 U.S. at 474; Aviles v. Kunkle, 978 F.2d
201, 204 (5th Cir. 1992).   The focus is on the relationship between

the defendant, the forum, and the litigation.      Burger King, 471
U.S. at 474.   Where the cause of action is not related to or does

not arise from the defendant’s activities in the forum, the forum

may still assert general jurisdiction over the defendant if the

defendant’s contacts with the forum are of a “continuous and

systematic” nature. Helicopteros, 466 U.S. at 414-15. Due process

requires “continuous and systematic” contacts because the forum

                                 12
state does not have a direct interest in the underlying dispute.

Helicopteros, 466 U.S. at 415-16.       As such, “the minimum contacts

inquiry is broader and more demanding when general jurisdiction is

alleged, requiring a showing of substantial activities in the forum

state.”    Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d
1061, 1068 (5th Cir. 1992).

     On appeal Gardemal contends that the district court has

specific   jurisdiction   over   Westin   Mexico   because   her   husband

decided to attend the seminar after reading a brochure about the

Westin Regina resort.     We disagree.      As noted by the district

court, the record reflects that the medical seminar at Cabo San

Lucas was arranged and promoted by Smith & Nephew Richards, Inc.,

a supplier of orthopedic hardware.        The facts also show that the

Gardemals obtained the brochure from Smith & Nephew Richards, Inc.

with the registration materials for the seminar.             There is no

specific evidence that Westin Mexico, or the Westin Regina, were

involved in promoting the seminar or soliciting the Gardemals.

Accordingly, there is simply no basis for the exercise of specific

jurisdiction over Westin Mexico.

     Gardemal also asserts that there is general jurisdiction over

Westin Mexico.    In an effort to prove continuous and systematic

contacts between Westin Mexico and Texas, Gardemal claims that

Westin Mexico advertised in several newspapers and magazines in

Texas.     She also contends that Westin Mexico contracted with

                                   13
numerous Texas businesses, like American Airlines, Continental

Airlines, and various wholesalers in the travel industry.      The

magistrate judge rejected that argument, finding that “there is no

evidence . . . as to how frequently Westin Mexico ran ads in

[newspapers or magazines] or how much business they generated.”

The court also found no “proof as to the specific relationship

between Westin Mexico and the Texas tourist companies or the amount

of business these companies have generated for Westin Mexico.”

Having reviewed the record, we too find no basis for exercising

general jurisdiction in this case.

     Gardemal’s assertions are vague and overgeneralized.     They

give no indication as to the extent, duration, or frequency of

Westin Mexico’s business dealings in Texas. Thus, even if taken as

true, Gardemal’s assertions amount to little more than a vague

claim that Westin Mexico conducts business in Texas. Additionally,

the record in this case reveals that Westin Mexico has no employees

in Texas, has no office or address in Texas, and, as noted by the

magistrate judge, has “never owned, bought, sold, or leased any

property in Texas, or been registered to transact business in

Texas.”   On these facts, we cannot conclude that Westin Mexico has

the continuous and systematic contacts necessary for the exercise

of general jurisdiction.

                                 14
        We conclude that the district court did not err in finding

that personal jurisdiction is lacking over Westin Mexico.       We

affirm the district court’s grant of Westin Mexico’s motion to

dismiss.3

                AFFIRMED.

        3
        In this appeal Gardemal also contends that the district
court erred in (1) granting summary judgment on her state law claim
under the DTPA, (2) refusing to allow Gardemal to file a second
amended complaint asserting additional claims under the DTPA, and
(3) striking an affidavit from Gardemal’s expert witness. These
arguments are without merit.

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