Caught in the net of vicarious jurisdiction.
TABLE OF CONTENTS I. Introduction 193 II. Factual Background 195 A. Alphabet Soup: PPIN, PPITS, and PSL's Consulting Services Agreement 197 B. Johnson's Contract of Employment 198 C. Johnson's Lawsuit Fails 198 1. Transocean Ltd 199 2. Afren, PLC 199 3. Petroleum Services Limited (PSL) 199 4. PPI Technology Services, L.P. (PPITS) 199 5. PPI Technology Services Nigeria (PPIN) 200 6. Global Santa Fe Offshore Services, Inc. (GSF) 200 III. The Law of Personal Jurisdiction 201 A. The Traditional Approach: State Sovereignty 201 B. The Modern Approach: Due Process 202 1. The "Purposeful Availment" Requirement 203 IV. Piercing the Corporate Veil: A Brief Summary 204 V. Piercing the Corporate Veil to Assert Personal Jurisdiction Over Corporate Affiliates 206 A. Strict Observance of Corporate Separateness: The Cannon Doctrine 206 B. Cannon is Alive and Well in the Fifth Circuit 208 1. The "Control Over Daily Operations" Factor has Little Significance in the Fifth Circuit 209 VI. Recap: Johnson Fails to Establish Personal Jurisdiction Over PSL 211 VII. Discussion: Substantive Veil-Piercing Standards Should Not Be Used in Personal Jurisdiction Disputes 212 A. The Cannon Doctrine is No Longer Valid as a Due Process Authority 212 B. The Cannon Doctrine Relies on Unpredictable Veil- Piercing Standards 214 1. Uncertainty in the Maritime Industry 214 C. Veil-Piercing is Irrelevant to the Concerns of Due Process 216 D. Consequences in the Maritime Industry: Multinational Corporate Structures are Difficult to Pierce 217 E. The Alternative: "Control Over Litigation-Triggering Event" 219 VIII. Conclusion 220
The modern proliferation of multinational corporations has complicated the question of whether a foreign corporation may be subject to jurisdiction in a state due to the activities of its relative corporation within that state. (1) Multinational corporations establish foreign entities for a number of reasons: to secure production opportunities, (2) to comply with the laws of the host nation, (3) and to limit liability. (4) Indeed, limited liability is the "bedrock proposition of corporate law that a shareholder's risk of loss is generally limited to the amount of the shareholder's investment." (5) However, when the shareholder is a corporation, it has been argued that corporate groups "shift too much risk to creditors, especially tort creditors who are unable to bargain for protection against limited liability." (6)
In the maritime industry, risk is sometimes borne by the seaman. To illustrate, consider the following scenario: Three related corporations, Company A (American), Company B (Belizean), and Company N (Company B's Nigerian Subsidiary), agree that Company A will recruit skilled manpower to work for Company N off the coast of Nigeria. While Company A and Company B share corporate officers and employees, their roles are distinct. Company A handles all negotiations regarding employment-but only Company B is mentioned in the actual employment agreement. Alas, when the employee is injured while working in Nigeria, which company is liable as his employer?
The United States District Court for the Eastern District of Louisiana and the United States Court of Appeals for the Fifth Circuit addressed this issue in Johnson v. PPI Tech. Servs., L.P. (7) and Johnson v. GlobalSantaFe Offshore Servs., Inc. (8) (collectively Johnson Litigation) and concluded that injured seaman James Johnson's claims failed as a matter of law. Simply put, Company B (9) was dismissed for lack of personal jurisdiction, (10) and Johnson failed to establish that Company A (11) was his employer because it was not a party to the employment agreement. (12) The court rejected Johnson's argument that personal jurisdiction existed over Company B due to Company A's contacts with the forum state. (13)
The attribution of contacts of one business entity to another for jurisdictional purposes, i.e., vicarious jurisdiction, is frequently invoked in personal jurisdiction disputes. (14) This doctrine is an alternative to the traditional constitutional analysis for personal jurisdiction. (15) It enables courts to reach an out-of-state corporation that lacks the requisite contacts for personal jurisdiction in a suit arising out of a relative entity's contacts with the forum. (16) Thus, vicarious jurisdiction evaluates the nature and character of the relationship between the out-of-state corporation and its relative entity. (17) However, incorporating substantive law into jurisdictional analysis can be problematic. (18) Whereas reliance on the corporate law doctrine of veil-piercing may be useful to identify contacts with the forum, "it may be misused in a manner that produces jurisdictional determinations that are neither sound nor necessary." (19)
This Comment examines the intersection of substantive veil-piercing and personal jurisdiction. Part II gives a brief factual background of the Johnson Litigation, which illustrates the proliferation of complex corporate structures in the maritime industry. Part III summarizes the current law of personal jurisdiction in the United States. Part IV briefly discusses some issues associated with the substantive veil-piercing doctrine. Part V examines how the substantive veil-piercing doctrine was incorporated into personal jurisdiction, and how the Fifth Circuit has adopted this approach. Part VI reviews the Johnson court's personal jurisdiction decision. Finally, Part VII argues that substantive veil-piercing standards are ill suited for the question of personal jurisdiction.
II. FACTUAL BACKGROUND
On November 8, 2010, James Johnson was working on the HIGH ISLAND VII as a drilling superintendent off the coast of Nigeria when Nigerian gunmen boarded the rig and shot him in the leg. (20) According to Johnson, the gunmen were able to board the rig by using stairs that other rig employees had left extended in violation of safety precautions. (21)
About a year later, Johnson filed a complaint seeking remedies under the Jones Act and general maritime law against (1) PPI Technology Services, L.P. (PPITS); (2) PSL, Ltd. (PSL); (3) Transocean Ltd.; (4) Afren, PLC (Afren); and (5) GlobalSantaFe Offshore Services, Inc. (GSF). (22) Understandably, there was some confusion as to which company might be liable. (23) Aside from the five defendants, several other inter-related entities were involved in the HIGH ISLAND VII's operations. (24) To visualize how the HIGH ISLAND VII was managed, see the diagram below. Defendant (25) Transocean Ltd. provides international contract drilling services and owns over 360 subsidiaries. (26) In 2007, GlobalSantaFe Corporation, Defendant GSF's parent company, merged with Transocean Inc., a subsidiary of Defendant Transocean Ltd. (27) As a result of the merger, Defendant GSF became an indirect subsidiary of Defendant Transocean Ltd. (28) GlobalSantaFe International Drilling Inc. was the owner of the HIGH ISLAND VII; however, its relationship to Defendant GSF "is unclear." (29) In 2010, bareboat charterer (30) Sedco Forex International Inc. (31) and Transocean Support Services Nigeria Limited (TSSNL) agreed to provide the HIGH ISLAND VII and drilling services to Afren Resources Limited (Afren Nigeria). (32) Afren Nigeria was entitled to the extracted mineral rights, but needed skilled manpower. (33) To fulfill this need, Afren Nigeria contracted with PPI Technology Services Nigeria (PPIN), Defendant PSL's Nigerian subsidiary, to provide the needed workers. (34)
A. Alphabet Soup: PPIN, PPITS, and PSL's Consulting Services Agreement
To meet its contractual obligations to Afren Nigeria, PPIN entered into a Consulting Services Agreement (Consulting Agreement) with Defendants PSL, and PPITS. Under the Consulting Agreement, Defendant PPITS was essentially an employment agency for PPIN and Defendant PSL, staffing PPIN's worksite. (35) To satisfy its staffing obligations to PPIN and Defendant PSL, Defendant PPITS recruited Johnson. (36) However, Johnson was instructed to sign his employment agreement with Defendant PSL because "international guys" (37) were run through a separate corporation. (38)
B. Johnson's Contract of Employment
Johnson's employment agreement provided that Johnson would work on behalf of Defendant PSL for the benefit of Afren Nigeria. (39) The contract notified Johnson:
Your services have been contracted to Afren. You will get your instructions, duty charges, job responsibilities, etc. from Afren. You will be expected to adhere to Afren rules and regulations at all times during periods of compensation, i.e. from the time you board the plane to come to Nigeria until you disembark from the plane in your home country. (40)
In return, Defendant PSL agreed to pay Johnson's salary, reimburse his out of pocket expenses, and provide medical coverage. (41) The contract also provided that Johnson was an independent contractor and not a PSL employee. (42)
C. Johnson's Lawsuit Fails
As noted above, all of Johnson's claims failed as a matter of law. (43) This section briefly discusses how each defendant was successfully dismissed. 1. Transocean Ltd.
The court dismissed Transocean Ltd. because Johnson did not present evidence opposing Transocean's motion to dismiss for lack of personal jurisdiction. (44)
2. Afren, PLC
Johnson voluntarily dismissed Afren, although the court did not provide reasons why he did so. (45)
3. Petroleum Services Limited (PSL)
As stated above, PSL was dismissed for lack of personal jurisdiction. (46) PSL is incorporated in Belize and has no contacts in the Eastern District of Louisiana. (47) Johnson conceded that the court did not have personal jurisdiction over PSL directly. (48) However, he argued that PSL was an alter ego of PPITS; therefore, PPITS's contacts with Louisiana should be imputed to PSL to satisfy personal jurisdiction. (49) The court acknowledged that there was a "clear overlap between the two entities" (50) and that PPITS and PSL's corporate structure was "not easily understood." (51) Nonetheless, the court concluded that it did not have personal jurisdiction over PSL because PSL and PPITS had observed "modest" formalities of corporate separateness. (52)
4. PPI Technology Services, L.P. (PPITS)
The court granted PPITS's motion for summary judgment on its status as Johnson's employer and for lack of a legal duty. (53) PPITS argued that it was not Johnson's employer, and therefore could not be liable under the Jones Act or general maritime law. (54) The court agreed, holding that PPITS did not exert sufficient control over Johnson's work to be considered his employer. (55) Although some PPITS employees supervised Johnson, the court found that these individuals were acting as PSL consultants at the time and not in their capacities as PPITS employees. (56) The court rejected Johnson's subjective beliefs that PPITS, PSL, and PPIN were the same entity. (57)
5. PPI Technology Services Nigeria (PPIN)
After the court granted PPITS's motion for summary judgment, "Johnson sought leave to amend his complaint in order to name PPIN as a defendant." (58) The court denied Johnson's request under Rule 15 of the Federal Rules of Civil Procedure because the amended complaint did not relate back to the original complaint. (59) Although the claims against PPIN arose out of the incident set forth in the original complaint, the court found that Johnson's amended complaint did not relate back to the original complaint because "he did not demonstrate that his failure to sue PPIN was a matter of mistake." (60)
6. Global Santa Fe Offshore Services, Inc. (GSF)
Johnson sought to hold GSF vicariously liable for the negligence of the rig hands that allowed the Nigerian gunmen to board the HIGH ISLAND VII. (61) However, the court granted GSF's motion for summary judgment, holding that no reasonable jury could find that GSF was the rig hands' employer. (62) The court found that GSF, as payroll services provider, did not exert sufficient control over the rig hands' work to be considered their employer. (63) As a last resort, Johnson urged the court to consider the consequences of its findings, maintaining that they would lead to "a situation in which overseas rig hands will now fluctuate wildly in and out of employment relationships based merely upon where the rig is operating." (64) Although the court rejected Johnson's policy argument as it pertained to his case, it did acknowledge in a footnote that "companies conceivably could delegate through contract each obligation reflecting an employment relationship, such that no one company exercises sufficient control over a tortfeasor to support vicarious liability." (65)
III. THE LAW OF PERSONAL JURISDICTION
Personal or "in personam" jurisdiction refers to a court's authority over the defendant, i.e., the power to bring a person into court and render a valid judgment over that person. (66) Without this type of jurisdiction, the court must dismiss the defendant. (67) Before analyzing any personal jurisdiction issue, it is essential to understand how its underlying principles have evolved. (68) The law of personal jurisdiction can be divided into two eras of jurisprudence: (1) state sovereignty and (2) due process. (69)
A. The Traditional Approach: State Sovereignty
State sovereignty was the original focus of personal jurisdiction. (70) It is based on the principle that each state's authority extends to its boundaries, and that no state shall infringe on the authority of another. (71) In 1877, the Supreme Court in Pennoyer v. Neff (Pennoyer) articulated this principle by limiting a court's jurisdiction to the territorial limits of the state in which it sits. (72) The Supreme Court held that a court in Oregon did not have personal jurisdiction over a California resident who was not present in Oregon. (73) The Court reasoned that allowing Oregon to exercise personal jurisdiction over the California resident would violate California's sovereignty. (74)
Doctrinally, Pennoyer established three circumstances that warrant the exercise personal jurisdiction: (1) the defendant is a resident of the forum state, (2) the defendant is personally served within the forum state, or (3) the defendant consents to jurisdiction. (75) This philosophy was a practicable solution at the time Pennoyer was decided in 1877. (76) However, "as the United States became a mobile, industrialized society, the doctrine of Pennoyer proved to be inadequate and the courts were forced to deviate from its principles and adjust then to the changing times." (77)
B. The Modern Approach: Due Process
In 1945, the Supreme Court rejected the rigid territorialism of Pennoyer and established due process as the fundamental principle of personal jurisdiction. (78) In this regard, the Due Process Clause of the United States Constitution is premised on two basic concepts: (1) "connecting factors" and (2) "reasonable expectations." (79) The seminal case of International Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement (Int'l Shoe) established these concepts for the first time. (80) In Int'l Shoe, the State of Washington sued a Delaware corporation in Washington state court. (81) The corporation's only contact with Washington was the employment of salesmen who solicited orders there. (82) The corporation argued that it was not subject to personal jurisdiction because its activities in Washington did not "manifest its presence there." (83) The Supreme Court disagreed, holding that--even if the defendant is not present in the forum state--due process is satisfied if the defendant has "certain minimum contacts with [the state] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice."' (84)
The Court explained that when a corporation conducts business in the forum state, it enjoys the protections of the state's laws, but the exercise of that benefit also gives rise to obligations under those laws:
The exercise of that privilege may give rise to obligations; and, so far as those obligations arise out of or are connected with the activities within the state, a procedure which requires the corporation to respond to a suit brought to enforce them can, in most instances, hardly be said to be undue. (85)
This standard has developed into a three-step inquiry called "specific jurisdiction," requiring that (1) the plaintiffs cause of action arise out of or relate to the defendant's contacts with the forum state; (2) the defendant purposely directs its activities, particularly as they relate to the plaintiff's cause of action, toward the forum state or purposely avails itself of the privilege of conducting activities therein; and (3) the exercise of jurisdiction over the defendant be reasonable and fair. (86)
1. The "Purposeful Availment" Requirement
The purposeful availment requirement ensures that defendants have a sufficient degree of voluntary control over where they may be amenable to suit. (87) Essentially, it limits personal jurisdiction to contacts that would give an out-of-state defendant fair warning that she may be sued in a particular forum state. (88) It denies personal jurisdiction if the defendant's contacts with the forum state are "random," "fortuitous," or "attenuated." (89)
IV. PIERCING THE CORPORATE VEIL: A BRIEF SUMMARY
Plaintiffs often look to shareholders for relief when a corporate defendant is unable to provide the desired remedy. (90) Yet, courts generally treat corporations as legal entities separate from their shareholders. (91) It is a fundamental principle of corporate law that a shareholder is not liable for the obligations of the corporation beyond the amount of the shareholder's investment. (92) This principle of limited liability imposes corporate liability on the entity itself, rather than the individuals who own or act on behalf of the entity. (93)
Limited liability also allows corporations to shift the risk of loss from shareholders to creditors. (94) This shift encourages business investment and overall economic growth. (95) Without this protection, a corporation's creditors would be able to seize a shareholder's non-corporate assets. (96) Creditors who voluntarily deal with limited liability companies can accept this risk by bargaining for collateral or shareholder guarantees. (97) On the other hand, involuntary creditors, such as tort victims, are not given the opportunity to evaluate risk. (98)
Limited liability is not absolute. (99) In some cases, courts will disregard the separateness of the corporation--i.e., "pierce the corporate veil"--and hold a shareholder liable for the corporation's actions as if they were the shareholder's own. (100) Discerning the boundaries of this exception, however, is notoriously problematic. (101)
Further complicating the issue, the question arises as to whether the same stringent veil-piercing standards should apply to relative entities of the corporate defendant. (102) Some have argued that strict standards may be appropriate for individual shareholders, but not corporate shareholders. (103) Historically, corporations were prohibited from owning shares in other corporations because of the perceived potential for abuse. (104) Some commentators posit that corporate groups today are allowed to "nest limited liability within limited liability resulting] in too great a shift of risk away from the aggregate business enterprise." (105) Furthermore, the primary rationale of limited liability--promoting investments of new business ventures--is absent in the case of relative corporations. (106) Nonetheless, courts generally apply the same standards to both corporate and individual shareholders. (107) Therefore, evidence that one corporation controls another, or that there is significant overlap between corporations is usually insufficient to rebut the presumption of separateness. (108) V. PIERCING THE CORPORATE VEIL TO ASSERT PERSONAL JURISDICTION OVER CORPORATE AFFILIATES
In cases where the relative entity has sufficient contacts with the forum state but the out-of-state corporation does not, courts forego the minimum contacts inquiry with respect to the out-of-state corporation. (109) Instead, courts analyze the relationship between the corporate entities to determine whether the circumstances warrant piercing the corporate veil for jurisdictional purposes. (110)
There is a good argument that the veil-piercing doctrine does not speak to issues of jurisdiction. (111) The principle of limited liability is statutory and only provides that liabilities of the corporation will not be attributed to its shareholders. (112) Yet, jurisprudence concludes otherwise. The presumption of corporate separateness also applies to jurisdictional disputes. (113) Thus, an out-of-state corporation is generally shielded from personal jurisdiction for the contacts its relative entity has in the forum state. (114)
A. Strict Observance of Corporate Separateness: The Cannon Doctrine
The principle that courts should strictly observe corporate separateness is based on the 1925 Supreme Court ruling in Cannon Manufacturing Co. v. Cudahy Packing Co. (115) In that case, a North Carolina corporation filed suit in a North Carolina court against a Maine corporation. (116) Service of process was made upon the local agent of the wholly-owned subsidiary of the defendant. (117) The plaintiff argued that the service was valid because an identity relationship existed between the defendant and its subsidiary whose agent was present in North Carolina. (118) Despite complete exercise of control by the defendant, the Court found that personal jurisdiction was lacking because the two companies maintained corporate formalities of separateness. (119) The Court explained:
Through ownership of the entire capital stock and otherwise, the defendant dominates the Alabama corporation, immediately and completely; and exerts its control both commercially and financially in substantially the same way, and mainly through the same individuals, as it does over those selling branches or departments of its business not separately incorporated which are established to market the Cudahy products in other States. The existence of the Alabama company as a distinct corporate entity is, however, in all respects observed. Its books are kept separate. All transactions between the two corporations are represented by appropriate entries in their respective books in the same way as if the two were wholly independent corporations. (120)
The Court added that "[t]he corporate separation, though perhaps merely formal, was real. It was not pure fiction." (121) Thus, the Supreme Court refused to attribute the presence of the subsidiary in North Carolina to the defendant for the purposes of showing that the defendant was doing business in North Carolina. (122)
Simply put, the Cannon doctrine incorporates substantive veil-piercing standards into the personal jurisdiction analysis. (123) If a parent company maintains formal separation from its subsidiary, the parent will not be subject to personal jurisdiction just because the forum state has personal jurisdiction over its subsidiary. (124) Because the Supreme Court was not persuaded by the fact that the parent corporation exercised substantial control over the subsidiary, some courts have construed Cannon as an even higher standard than the substantive veil-piercing doctrine. (125)
Despite reports that Cannon has eroded over time, (126) the case is still cited with great frequency. (127) Since its publication in 1925, Cannon has been cited in more than 645 published decisions, and it has been cited more frequently in recent years than in the decade after it was decided. (128)
B. Cannon is Alive and Well in the Fifth Circuit
In Hargrave v. Fibreboard Corp., the court acknowledged the Fifth Circuit's approval of Cannon and its use of veil-piercing standards in personal jurisdiction disputes. (129) The court provided that personal jurisdiction is warranted when a "parent corporation exerts such domination and control over its subsidiary that they do not in reality constitute separate and distinct corporate entities." (130)
To determine whether the imputation of contacts is appropriate, the court articulated what have become known as the "Hargrove factors," which include:
(1) The amount of common stock owned by the corporate entities; (2) Whether the entities share corporate headquarters; (3) Whether the entities share common officers and directors; (4) Whether the entities observe corporate formalities; (5) Whether the entities share bank accounts, accounting and payroll systems, insurance contracts, budgets, financial records, and tax returns; (6) Whether the parent has authority over general policy decisions of the subsidiary; and (7) Whether the parent has authority over the subsidiary's day-to-day business and operations decisions. (131)
Although the out-of-state parent in Hargrave owned all the stock of the subsidiary, and had complete authority over the internal affairs of the subsidiary, the court found imputation of contacts was inappropriate given that the entities (1) observed corporate formalities; (2) maintained separate headquarters; (3) shared no common officers and only one common director; (4) maintained separate bank accounts, accounting and payroll systems, insurance contracts, budgets, financial records, and tax returns; and (5) each made their own day-to-day business and operational decisions. (132)
Thus, the court in Hargrave interpreted Cannon as "both endorsing formalism and approving a necessary exception to such formalism." (133) Stated differently, a corporate group will be treated as separate entities unless excessive control by one of its members has been exerted. (134)
1. The "Control Over Daily Operations" Factor has Little Significance in the Fifth Circuit
Some commentators have argued that by incorporating control as a factor in the analysis, the Fifth Circuit in Hargrave departed from the Cannon doctrine. (135) However, in reality, the question of control is merely considered as one of many veil-piercing factors. (136) For example, in Dalton v. R & W Marine, Inc., an injured deckhand brought Jones Act and general maritime claims against his employer, Hartley Marine Corp. (Hartley). (137) The deckhand later added Hartley's parent company, Midland Enterprises, Inc. (Midland), as a defendant. (138) Both defendants filed motions to dismiss, arguing that the Eastern District of Louisiana lacked personal jurisdiction. (139) Hartley had no contacts with Louisiana. (140) Midland, on the other hand, owned five Louisiana subsidiaries, was the record owner of most of the boats and barges operated by those Louisiana subsidiaries, and oversaw advertising in Louisiana. (141) The deckhand argued that personal jurisdiction was warranted because Midland was the alter ego of its Louisiana subsidiaries and Hartley was the alter ego of Midland. (142)
The court stated that "several" of the Hargrave factors pointed to Midland as the alter egos of its subsidiaries: (1) Midland owned 100% of its subsidiaries; (2) it exercised authority over general policy; (3) the subsidiaries "funnel[ed] their revenues into central bank accounts and file[d] a consolidated federal tax return with Midland;" and (4) Midland provided benefit plans to its subsidiaries' employees. (143) Nonetheless, the court held: "[T]hese factors are outweighed, albeit modestly, by the fact that Midland observes corporate formalities, makes its subsidiaries responsible for daily operations including all personnel decisions, and allows each subsidiary to keep its records and accounts in separate books and file its own state tax return." (144)
Recent Fifth Circuit decisions have cited Dalton for the proposition that "[e]ven where some factors suggest that one entity is the alter ego of another, the maintenance of corporate formalities tips in favor of finding that the entities are not alter egos." (145) Furthermore, some lower courts--including the Eastern District of Louisiana in Johnson--have relied on Dalton to hold that "modest" observation of corporate formalities will defeat personal jurisdiction. (146) These interpretations imply that the decision ultimately hinges on whether the defendants maintain formalities of corporate separation, and illustrate the Fifth Circuit's application of substantive veil-piercing standards. (147)
VI. RECAP: JOHNSON FAILS TO ESTABLISH PERSONAL JURISDICTION OVER PSL
The court in Johnson concluded that PPITS's contacts with Louisiana could not be imputed onto PSL in order to assert personal jurisdiction over PSL. (148) The court did not cite Hargrave; instead it considered the following factors:
(1) common ownership, directors and officers, employees, and offices; (2) unified control; (3) inadequate capitalization; (4) non-compliance with corporate formalities; (5) centralized accounting; (6) unclear allocation of profits and losses between corporations; (7) one corporation paying the salaries, expenses, or losses of another corporation; [and] (8) undocumented transfers of funds between entities. (149)
Johnson argued that PSL and PPITS were essentially one and the same for the following five reasons: (1) "one of [PPITS]'s employees, Sandra Birkline (Ms. Birkline) spen[t] approximately 80% of her time reconciling PSL's bank statements and managing PSL's operating functions including drafting wire transfer paperwork, QuickBooks reconciliation, and coordinating contractor's contracts/invoices;" (2) Ms. Birkline worked out of PPITS's office in Houston, Texas; (3) PSL had very little funds in its bank account and therefore was undercapitalized; (4) PSL did not comply with corporate formalities because Ms. Birkline arranged all payments to PSL employees; and (5) PSL had maintained a bank account in Houston, Texas. (150)
The court disagreed with Johnson and concluded that PSL was not an alter ego of PPITS because (1) PSL and PPITS did not share unified control, (2) PSL complied with the capitalization requirements under Belizean law, (3) PSL complied with the incorporation requirements imposed by Belizean law, (151) (4) there was no unclear distribution of profits and losses between PSL and PPITS, and (5) all transfers of funds between PSL and PPITS were documented in invoices. (152) The court noted that the companies' "modest" observation of corporate formalities outweighed the fact that there was a clear overlap between PPITS and PSL. (153)
VII. DISCUSSION: SUBSTANTIVE VEIL-PIERCING STANDARDS SHOULD NOT BE USED IN PERSONAL JURISDICTION DISPUTES
The Cannon doctrine of vicarious jurisdiction should be replaced because it applies unpredictable veil-piercing standards that are irrelevant to the due process concerns of personal jurisdiction. (154)
A. The Cannon Doctrine is No Longer Valid as a Due Process Authority
Cannon's validity as a due process authority in personal jurisdiction cases has been questioned on multiple fronts. (155) First, the Supreme Court expressly stated that its holding was not based on constitutional grounds. (156) Second, the Court relied on federal common law, which was later ruled subordinate to state common law in Erie R.R. u. Tompkins. (157) Third, Cannon was superseded by Int'l Shoe, which established the modern due process standard for personal jurisdiction. (158)
The case usually cited for the proposition that Cannon is no longer valid is Energy Reserves Group, Inc. u. Superior Oil Co. (159) In Energy Reserves, Superior Oil Company (Superior), a Nevada corporation, had extensive contacts with Kansas. (160) Superior contracted with Energy Reserves Group, Inc. (Energy Reserves) for exploration rights in the North Sea. (161) Energy Reserves signed the contract in Kansas, while Superior signed the contract in Texas. (162) Superior Overseas Development Co., Ltd. (Superior Overseas), a Nevada corporation with its headquarters in England, also incurred rights and obligations but was not a party to the contract. (163)
When Energy Reserves sued in Kansas to enforce the contract, Superior Overseas filed a Motion to Dismiss for Lack of Personal Jurisdiction. (164) Superior Overseas argued that its only contact with Kansas was mailing the contract to Energy Reserves and that Cannon required that Superior and Superior Overseas be treated as separate entities absent a showing that the corporate veil should be pierced. (165) The court disagreed, finding that Cannon was no longer sound law because its holding rested on the physical presence doctrine of Pennoyer. (166)
When Cannon was decided in 1925, a corporation was "present" in states where it was found to be "doing business." (167) Because Int'l Shoe rejected presence as a constitutional requirement for personal jurisdiction, the court determined that it was no longer necessary to decide whether a non-resident corporation was doing business in the forum state. (168) Instead, the court concluded that the nature of the relationship between the corporate affiliates should be examined to determine whether the resulting contact with the forum state establishes personal jurisdiction, regardless of whether that relationship warrants piercing the corporate veil. (169) Thus, an out-of-state corporation's relationship with an affiliated entity within the forum state would be a contact to consider, especially where the affiliate provides funds or benefits to the out-of-state corporation. (170)
B. The Cannon Doctrine Relies on Unpredictable Veil-Piercing Standards
Standards for substantive veil-piercing vary by jurisdiction. (171) The law is presented as contrasting doctrines that the courts freely apply or ignore. (172) Some courts attach conclusory terms like "sham," "shell," "alter ego," or "instrumentality," to corporate entities suitable for piercing. (173) Other courts consult lengthy "laundry lists" of factors. (174) Still other courts use a "character test," focusing on the business ethics of the corporation, whether or not related to the asserted claims. (175) Due to this inconsistency, some commentators lament that the same facts that appear in cases allowing piercing are also present in cases denying it. (176) As a result, companies and litigants struggle to predict when the corporate shield will be disregarded. (177)
The veil-piercing doctrine is equally volatile when applied in the jurisdictional context. (178) Vicarious jurisdiction cases generally require more effort in gathering and analyzing facts because of the ambiguity of the veil-piercing doctrine. (179) Consequently, litigation costs increase through additional discovery and other pretrial matters. (180)
1. Uncertainty in the Maritime Industry
In determining whether PPITS and PSL were alter egos, the court in Johnson cited factors applied in the Fifth Circuit case Jackson v. Tanfoglio Giuseppe, S.R.L. (181) In Jackson, Louisiana residents brought product liability claims against three Italian gun manufacturers. (182) Because jurisdiction was based on diversity of citizenship (i.e., Louisiana plaintiffs and Italian defendants), the court applied factors enunciated under Louisiana law to determine whether an alter-ego relationship existed between the defendants. (183) Johnson, on the other hand, involved Jones Act and general maritime claims, which invoke federal jurisdiction regardless of the parties' citizenship. (184) The Fifth Circuit also applied the Hargraue factors in previous Jones Act and general maritime cases. (185)
Admittedly, it is questionable whether applying the Hargrave factors would have changed the outcome in Johnson. The Fifth Circuit in Century Hotels v. United States recognized that "[o]ur non-diversity alter ego cases rarely state whether a state or federal standard controls, and apply state and federal cases interchangeably." (186) In addition, it has been suggested that applying the veil-piercing doctrine does not necessarily lead to wrong results because "the judicial hunch usually carries through to a correct decision." (187) The argument against vicarious jurisdiction, however, is not premised on results. (188) The real problem is that ambiguous rules produce significant social and economic costs. (189)
C. Veil-Piercing is Irrelevant to the Concerns of Due Process
In substantive veil-piercing cases, the question of whether affiliated corporations maintain formal separation has nothing to do with the wrongful conduct that caused the alleged harm. (190) Vicarious jurisdiction is similarly infirm because it is irrelevant to the due process concerns of personal jurisdiction. (191)
Proponents of vicarious jurisdiction describe it as an equitable safeguard for those left with no other legal remedy. (192) They argue that personal jurisdiction cases involving out-of-state corporations cannot be resolved under the Int'l Shoe minimum contacts standard. (193) Instead, a veil-piercing doctrine is appropriate when the out-of-state corporation lacks direct minimum contacts with the forum state. (194) This argument fails to explain why a court has personal jurisdiction under a veil-piercing doctrine when it would otherwise lack constitutional authority. (195) Indeed, there is no explanation because veil-piercing standards are irrelevant to the constitutional interests that must be balanced in personal jurisdiction disputes. (196) The fact that a corporate group fails to preserve formal separation says nothing about its contacts with the forum state, nor does it shed light on the plaintiffs interest in prosecuting the suit there. (197)
D. Consequences in the Maritime Industry: Multinational Corporate Structures are Difficult to Pierce
Most vicarious jurisdiction cases analyze the corporate relationship between a parent company and its subsidiaries. (198) In the maritime industry, however, entities often form international corporate groups consisting of multiple co-equal entities. (199) For example, in Johnson it was unclear whether PPITS was PSL's parent corporation, or vice versa. (200) Even the court was unsure, bluntly reasoning that PPITS, PSL, and PPIN "created a complex corporate structure which [was] not easily understood." (201) The following clause of Johnson's employment agreement justifies the court's uncertainty: "WHEREAS, PSL and [PPITS] desire to enter into this Agreement, for the Benefit of PSL, to retain [PPITS] supply technical, accounting, legal, Marketing, administrative and logistical support to its wholly Owned subsidiary, [PPIN]." (202) Reasonable minds could differ as to whether PPITS or PSL owned PPIN.
Furthermore, the Fifth Circuit in Dickson Marine Inc. v. Panalpina, Inc. suggested that an even stronger showing of veil-piercing factors should be required when the defendants are co-equal siblings in the same corporate structure. (203) In that case, Dickson's vessel was damaged while operating off the coast of West Africa. (204) To procure the needed repairs, Dickson contacted the New Orleans office of Panalpina, Inc. (Panalpina NJ), an American corporation based in New Jersey. (205) Unable to assist directly, Panalpina NJ referred Dickson to Air Sea Broker, Ltd. (Air Sea). (206) Air Sea then referred Dickson to Panalpina Transports Mondiaux Gabon S.A. (Panalpina Gabon) for the repairs. (207) Panalpina Gabon did not have actual repair capabilities so it subcontracted with SATRAM and SEMTS to conduct the needed repairs. (208) During the repair work, Dickson's vessel capsized. (209)
Dickson sued Panalpina NJ, Panalpina Gabon, Air Sea, SATRAM, and SEMTS in Louisiana state court. (210) After the case was removed to federal court, Dickson dismissed SEMTS and did not seek a default judgment against SEMTS for failure to appear. (211) The district court then dismissed Panalpina NJ on summary judgment. (212) The remaining defendants, Panalpina Gabon and Air Sea, were subsidiaries of Panalpina World Transport, Inc. (Panalpina World), an international conglomerate having operations through subsidiaries on six continents. (213) Panalpina Gabon filed a Motion to Dismiss for Lack of Personal Jurisdiction. (214)
First, the court concluded that the verbal agreement was not sufficient to establish specific personal jurisdiction directly over Panalpina Gabon because the negotiations were conducted primarily in Gabon and were initiated by Dickson. (215) Second, the court rejected Dickson's argument that Air Sea's contacts with Louisiana could be attributed to Panalpina Gabon. (216) The court reasoned that, because only a sibling relationship existed between Air Sea and Panalpina Gabon, an even stronger showing under the Hargrave factors should be required. (217) Hence, the court concluded that Dickson failed to satisfy the Hargrave factors by analogy because neither entity controlled the other's daily operations, nor did the entities disregard corporate formalities to the point of Air Sea being the alter ego of Panalpina Gabon. (218)
Johnson and Dickson illustrate the difficulty of piercing multinational corporate structures in the maritime industry. First, the court in Dickson provided that the presumption of corporate separateness can be rebutted only by "clear evidence," which is a more stringent burden of proof than is ordinarily applicable in normal personal jurisdiction cases. (219) Second, the court implied that even "clear evidence" would not be adequate in the case of sibling corporations. (220) Finally, the most important factor considered by the Fifth Circuit, "corporate formalities of separation," (221) is almost impossible to establish when the entities in question do not share a parent-subsidiary relationship.
E. The Alternative: "Control Over Litigation-Triggering Event"
The Int'l Shoe minimum contacts standard can and should replace vicarious jurisdiction. (222) As an inquiry that focuses on the out-of-state defendant's relationship with an affiliated corporation rather than with the forum state, vicarious jurisdiction struggles to comply with the purposeful availment requirement of personal jurisdiction. (223) Nevertheless, other courts have articulated an inquiry of the corporate relationship that is consistent with the purposeful availment requirement. (224)
The Fifth Circuit in Hargrave almost accomplished this. (225) The court aptly recognized undue control as an exception to Cannon's strict application of the veil-piercing doctrine. (226) But, the question of control was applied "as part of an imprecise doctrinal litmus test for deciding whether to lift the corporate veil." (227) Instead, the court should have considered control as evidence of the out-of-state defendant's direct involvement in the "litigation-triggering event." (228) A close relationship between otherwise separate entities should only be relevant in determining the out-of-state defendant's degree of involvement in the underlying dispute. (229) In effect, this approach replaces ambiguous veil-piercing standards with a more exacting analysis that is consistent with the due process concerns of personal jurisdiction. (230)
There is a strong argument that the Cannon doctrine of vicarious liability was rendered obsolete by Int'l Shoe. (231) Yet the Fifth Circuit's continued use of veil-piercing standards has effectively enshrined Cannon as the validating source for invoking vicarious jurisdiction. (232) This Comment argues that the Fifth Circuit should reconsider its approach in light of modern jurisdictional doctrine.
Vicarious jurisdiction is fundamentally flawed as a doctrinal tool for analyzing personal jurisdiction. (233) The current state of the substantive veil-piercing doctrine is unpredictable and these standards are no less volatile when applied in the jurisdictional context. (234) In addition, vicarious jurisdiction is irrelevant to the due process concerns of personal jurisdiction. (235) These infirmities are amplified in the international maritime industry, where attempting to discern the contours of corporate relationships is like navigating a maze. Accordingly, this Comment proposes the following solution already implemented by many courts: Focus on the out-of-state defendant's control over the event that triggered the lawsuit. (236)
This approach will not necessarily make cases like Johnson routine or predictable. (237) There will be instances where the out-of-state defendant's control over the litigation-triggering event is unclear. (238) That situation is especially likely when the out-of-state defendant undertakes strategic behavior to avoid liability. (239) The Fifth Circuit in Johnson acknowledged that "companies conceivably could delegate through contract each obligation reflecting an employment relationship, such that no one company exercises sufficient control over a tortfeasor to support vicarious liability." (240) Rejecting vicarious jurisdiction will not change this, but it will be a step in the right direction. (241)
Alex Lauricella (*)
(*) J.D. Candidate 2017, Loyola University New Orleans College of Law; B.A. 2013, Tulane University.
(1.) See Hanson v. Denckla, 357 U.S. 235, 250-51 (1958) (observing that "[a]s technological progress has increased the flow of commerce between States, the need for jurisdiction over nonresidents has undergone a similar increase").
(2.) This has been described as "Backward Vertical Expansion." Mauro F. Guillen, Understanding and Managing the Multinational Firm, The Wharton School (2007), http://www-management.wharton.upenn.edu/guillen/files/MNEConcept.pdf (last visited on Oct. 14, 2016).
(3.) See, e.g., The Companies and Allied Matters Act 1990, Cap. (59), [section] 54(1) (Nigeria) (providing that "every foreign company which before or after the commencement of this Decree was incorporated outside Nigeria, and having the intention of carrying on business in Nigeria shall take all steps necessary to obtain incorporation as a separate entity in Nigeria for that purpose, but until so incorporated, the foreign company shall not carry on business in Nigeria... ").
(4.) Jennifer A. Schwartz, Piercing the Corporate Veil of an Alien Parent for Jurisdictional Purposes: A Proposal for A Standard That Comports with Due Process, 96 CALIF. L. REV. 731, 731-32 (2008).
(5.) John A. Swain & Edwin E. Aguilar, Piercing the Veil to Assert Personal Jurisdiction Over Corporate Affiliates: An Empirical Study of the Cannon Doctrine, 84 B.U. L. REV. 445, 446 (2004).
(6.) Id. at 446-447.
(7.) Johnson v. PPI Tech. Servs.. L.P., Civil Action Nos. 11-2773, 12-1534, 2014 WL 1330086 (E.D. La. Apr. 3, 2014), affd, 605 F. App'x 366 (5th Cir. 2015).
(8.) Johnson v. GlobalSantaFe Offshore Servs., Inc., 799 F.3d 317 (5th Cir. 2015).
(9.) "Company B" refers to Petroleum Services Ltd., the Belizean company in Johnson Litigation.
(10.) Johnson v. PPI Tech. Servs., L.P., Civil Action Nos. 11-2773, 12-1534, 2013 WL 2404237 (E.D. La. May 31, 2013).
(11.) "Company A" refers to PPI Tech. Services, L.P., the American company in Johnson Litigation.
(12.) GlobalSantaFe Offshore, 799 F.3d at 327.
(13.) Johnson v. PPI Tech. Servs.. L.P., 2013 WL 2404237, at *4.
(14.) Lonny Sheinkopf Hoffman, The Case Against Vicarious Jurisdiction, 152 U. PA. L. REV. 1023, 1026 (2004).
(15.) Id. at 1025.
(16.) Schwartz, supra note 4, at 734.
(18.) Hoffman, supra note 14, at 1026.
(19.) Hoffman, supra note 14, at 1026-27.
(20.) GlobalSantaFe Offshore, 799 F.3d at 319.
(25.) "Defendant" is used here to indicate which entities were named as defendants in Johnson.
(26.) GlobalSantaFe Offshore, 799 F.3d at 319-20.
(27.) Id. at 320.
(29.) Id. at 320.
(30.) See Jean F. Rydstrom, Annotation, What Constitutes Demise or Bareboat Charter of Vessel Imposing on Charterer Liabilities of Owner Pro Hac Vice, 14 A.L.R. Fed. 544 (1973) ('In a 'demise charter' or 'bareboat charter,' the charterer is owner pro hac vice of the vessel, and the charterer is treated as the owner of the vessel with a sufficient property interest to recover lost profits; the demise charter is tantamount to, though just short of, an outright transfer of ownership." (citing American Petroleum and Transport, Inc. v. City of New York, 737 F.3d 185 (2d Cir. 2013))).
(31.) Original Brief of Defendant-Appellee at *3, James Johnson, Plaintiff-Appellant v. PPI Tech., Servs., L.P., Defendant-Appellant, 2014 WL 5106164 (2014) (No. 14-30423).
(32.) GlobalSantaFe Offshore Servs., Inc., 799 F.3d at 320; Brief of Appellant at *3, James Johnson, Plaintiff-Appellant v. PPI Tech., Servs., L.P., Defendant-Appellant, 2014 WL 5106164 (2014) (No. 14-30423).
(33.) Johnson v. PPI Tech. Servs., L.P., 605 F. App'x 366, 371 (5th Cir. 2015).
(34.) Id. at 368.
(35.) Johnson v. PPI Tech. Servs., L.P., 605 F. App'x at 368.
(36.) Id. at 368-69.
(37.) Id. at 369.
(39.) Id. at 369.
(40.) Johnson v. PPI Tech. Servs., L.P., 605 F. App'x at 369.
(43.) GlobalSantaFe Offshore Servs., Inc., 799 F.3d at 320.
(44.) GlobalSantaFe Offshore Servs., Inc., 799 F.3d at 320.
(46.) Johnson v. PPI Tech. Servs., L.P., 2013 WL 2404237, at *6 (E.D. La. May 31,2013).
(47.) Id. at *2. Johnson conceded that PSL had no contacts with Louisiana. Id.
(48.) Id. at *4.
(50.) Id. at *5.
(51.) Johnson v. PPI Tech. Servs., L.P., 2014 WL 1330086, at *8 (E.D. La. Apr. 3, 2014).
(52.) Johnson v. PPI Tech. Servs., L.P., 2013 WL 2404237, at *5 (E.D. La. May 31, 2013) (citing Dalton v. R & W Marine, Inc., 897 F.2d 1359, 1363 (5th Cir. 1990)).
(53.) Johnson v. PPI Tech. Servs., L.P., 2014 WL 1330086 (E.D. La. Apr. 3. 2014).
(54.) Johnson v. PPI Tech. Servs., L.P., 2014 WL 1330086, at *1 (E.D. La. Apr. 3, 2014).
(55.) Id. at *8-9.
(56.) Id. at *5.
(57.) Johnson v. PPI Tech. Servs., L.P., 2014 WL 1330086, at *8 (E.D. La. Apr. 3, 2014).
(58.) Johnson v. PPI Tech. Servs., L.P., 605 F. App'x 366, 372 (5th Cir. 2015).
(59.) Id. at 373. FRCP 15(c) provides that for statute of limitation purposes, the amended complaint must "relate back" to the original complaint, that is, the defendant named in the amended complaint must have "(i) received such notice of the action that it will not be prejudiced in defending on the merits; and (ii) knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity." FED. R. CIV. P. 15(c).
(60.) Johnson v. PPI Tech. Servs., L.P., 605 F. App'x 366, 373 (5th Cir. 2015).
(61.) GlobalSantaFe Offshore, 799 F.3d at 319.
(63.) GlobalSantaFe Offshore, 799 F.3d at 326.
(65.) Id. at 327 n.3.
(66.) CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE [section] 1064 (4th ed. 2015).
(67.) Id. [section] 1063.1.
(68.) Id. [section] 1064.
(71.) Justin Kesselman, Multinational Corporate Jurisdiction & the Agency Test: Should the United States Be A Forum for the World's Disputes?, 47 NEW ENG. L. REV. 361, 362 (2012).
(72.) Pennoyer v. Neff, 95 U.S. 714, 722-23 (1877).
(73.) Id. at 734.
(74.) Id. at 732-733. The out-of-state defendant owned land in Oregon, which would have been sufficient for exercising in rem jurisdiction over the property. Id. at 717. However, because the Oregon property was not the subject of the suit, the plaintiffs only option was to assert in personam jurisdiction over the out-of-state defendant. Id.
(75.) Pennoyer, 95 U.S. at 720.
(76.) WRIGHT, ET AL., supra note 66, [section] 1064.
(78.) Simona Grossi, Personal Jurisdiction: A Doctrinal Labyrinth with No Exit, 47 AKRON L. REV. 617, 623 (2014).
(79.) "[C]onnecting factors must link the defendant to the forum under circumstances that should invest the defendant with a reasonable expectation of being sued there." Id. at 618.
(80.) WRIGHT, ET AL., supra note 66, [section] 1067.
(81.) Int'l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 311 (1945).
(82.) Id. at 313.
(83.) Id. at 315.
(84.) Int'l Shoe Co., 326 U.S. at 316.
(85.) Id. at 319.
(86.) WRIGHT, ET AL., supra note 66, [section] 1069.
(87.) Schwartz, supra note 4, at 753.
(88.) Id. (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 486 (1985)).
(90.) Swain & Aguilar, supra note 5, at 446. As a result, "[p]iercing the corporate veil is the most litigated issue in corporate law." Id. (quoting Robert B. Thompson, Piercing the Corporate Veil: An Empirical Study, 76 CORNELL L. REV. 1036 (1991)).
(91.) Note, Piercing the Corporate Law Veil: The Alter Ego Doctrine Under Federal Common Law, 95 HARV. L. REV. 853 (1982).
(92.) Robert B. Thompson, Piercing the Corporate Veil: An Empirical Study, 76 CORNELL L. REV. 1036, 1039(1991).
(95.) Swain & Aguilar, supra note 5, at 451.
(96.) Thompson, supra note 92, at 1039.
(98.) Swain & Aguilar, supra note 5, at 451. "To this extent, limited liability shifts some costs of doing business away from the corporation to other parts of society." Thompson, supra note 92, at 1040.
(100.) Thompson, supra note 92, at 1041-42.
(101.) Swain & Aguilar, supra note 5, at 451.
(102.) Id. at 452.
(106.) Swain & Aguilar, supra note 5, at 452.
(107.) Id. at 451.
(109.) Schwartz, supra note 4, at 742.
(111.) Swain & Aguilar, supra note 5, at 453.
(113.) Schwartz, supra note 4, at 743.
(114.) Id. For example, a foreign corporation will create American subsidiaries to minimize its direct contacts with the United States. Id. at 743-44.
(115.) Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 335 (1925) (holding that the formalities of corporate separation was "in all respects observed" between Cudahy, a Maine corporation, and its Alabama subsidiary, Cannon, and thereby declining to exercise personal jurisdiction over Cudahy in a breach of contract action in North Carolina).
(116.) Id. at 334.
(117.) Cannon Mfg. Co., 267 U.S. at 334.
(119.) Id. at 335.
(121.) Id. at 337.
(122.) Cannon Mfg. Co., 267 U.S. at 338.
(123.) Hoffman, supra note 14, at 1055-56.
(124.) Schwartz, supra note 4, at 747.
(125.) Swain & Aguilar, supra note 5, at 455-56.
(126.) Schwartz, supra note 4, at 750.
(127.) Swain & Aguilar, supra note 5, at 456 (concluding that "reports of Cannon's death have been premature").
(128.) Kesselman, supra note 71, at 370 (citing Swain & Aguilar, supra note 5, at 456).
(129.) Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1160 (5th Cir. 1983) (providing that "[c]ases in this circuit appear to have followed the Cannon rule... although sometimes without explicit citation").
(130.) Id. at 1159.
(131.) Hargrave, 710 F.2d at 1162-63.
(132.) Id. at 1162.
(133.) Hoffman, supra note 14, at 1062.
(134.) Id. at 1061.
(135.) Schwartz, supra note 4, at 748 (noting that "[a]s the Cannon doctrine has eroded and been criticized over time, more courts have employed the control approach to piercing the corporate veil in order to impute minimum contacts to the parent [corporation]").
(136.) Hoffman, supra note 14, at 1090.
(137.) Dalton v. R & W Marine, Inc., 897 F.2d 1359, 1360 (5th Cir. 1990).
(138.) Id. at 1360.
(139.) Dalton, 897 F.2d at 1360-61.
(140.) Id. at 1361.
(142.) Id. at 1363.
(144.) Dalton, 897 F.2d at 1363.
(145.) Jackson v. Tanfoglio Giuseppe, S.R.L., 615 F.3d 579, 588 (5th Cir. 2010) (citing Dalton, 897 F. 2d at 1363).
(146.) Johnson v. PPI Tech. Servs., L.P., 2013 WL 2404237, at *5; Stewart v. Ruston Louisiana Hosp. Co., LLC, Civil Action No. 14-00083, 2014 WL 1772945, at *6 (W.D. La. 5/2/14). Arguably, these interpretations mischaracterize what the Dalton court said. The court did not say that Midland observed corporate formalities modestly; it was only explaining that the Hargrave factors that pointed to Midland being an alter ego of its Louisiana subsidiaries were almost sufficient to rebut the presumption of corporate separateness.
(147.) See Hoffman, supra note 14, at 1087 (observing that the Fifth Circuit's "focus on control morphed from a valid consideration of control as evidence of the absent corporation's direct involvement in the litigation-triggering events to the question of whether to pierce the corporate veil").
(148.) Johnson v. PPI Tech. Servs., L.P., 2013 WL 2404237, at *6.
(149.) Id. at *4-5.
(150.) Id. at *2.
(151.) Pursuant to Belizean law, PSL maintained its corporate office, address, and registered agent in Belize; kept a list of all its shareholders, directors, and mortgage holders at its registered office in Belize; filed registered returns in Belize; and paid annual license fees to the Belizean government. Id. at *5 n.4.
(152.) Id. at *5.
(153.) Id. (citing Dalton, 897 F.2d at 1363).
(154.) See Hoffman, supra note 14, at 1078.
(155.) See Swain & Aguilar, supra note 5, at 456.
(156.) Id. (quoting Cannon, 267 U.S. at 336 ("No question of the constitutional power of the State, or of the federal Government, is directly presented.")).
(157.) See id.; see also Erie R.R. Co. v. Thompkins, 304 U.S. 64, 78 (1938).
(158.) See Swain & Aguilar, supra note 5, at 456.
(159.) 460 F. Supp. 483 (D. Kan. 1978).
(160.) Energy Reserves, 460 F. Supp. at 491.
(161.) Id. at 489.
(162.) Id. at 493.
(163.) Id. at 488, 493.
(164.) Id. at 489.
(165.) Energy Reserves, 460 F. Supp. at 489, 495.
(166.) Id. at 495-96.
(167.) Id. at 496.
(168.) Id. at 504.
(169.) Id. at 508.
(170.) Energy Reserves, 460 F. Supp. at 507.
(171.) See Hoffman, supra note 14. at 1076.
(172.) See Thompson, supra note 92, at 1036.
(173.) See Swain & Aguilar, supra note 5, at 451.
(174.) Hoffman, supra note 14, at 1076.
(175.) Swain & Aguilar, supra note 5, at 452.
(176.) See Thompson, supra note 92, at 1037.
(177.) See Hoffman, supra note 14, at 1076-77.
(178.) Id. at 1078.
(179.) Id. at 1080.
(181.) Johnson v. PPI Tech. Servs., L.P., 2013 WL 2404237, at *4 (citation omitted).
(182.) Jackson, 615 F.3d at 582.
(183.) Id. at 587 (providing that under Louisiana law, the factors courts consider include, among other things: " common ownership, directors and officers, employees, and offices;  unified control;  inadequate capitalization;  noncompliance with corporate formalities;  centralized accounting;  unclear allocation of profits and losses between corporations;  one corporation paying the salaries, expenses, or losses of another corporation; and  undocumented transfers of funds between entities").
(184.) Johnson v. PPI Tech. Servs., L.P., 2014 WL 1330086, at *1; see also 28 U.S.C. [section] 1333 (2012) ("The district courts shall have original jurisdiction, exclusive of the courts of the States, of: (1) Any civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled.").
(185.) Dalton, 897 F.2d at 1363. The Fifth Circuit has adopted the Hargrave factors in cases construing federal common law. See Administrators of Tulane Educ. Fund v. Ipsen, S.A., 450 F. App'x 326, 330 n.54 (5th Cir. 2011) (citing Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 338-39 (5th Cir. 1999)).
(186.) 952 F.2d 107, 110 n.4 (5th Cir. 1992).
(187.) Thompson, supra note 92, at 1037 (quoting Elvin R. Latty, The Corporate Entity as a Solvent of Legal Problems, 34 MICH. L. REV. 597, 621-30 (1936)).
(188.) Hoffman, supra note 14, at 1081.
(189.) Id. (citing Cass R. Sunstein, Problems with Rules, 83 CAL. L. REV. 955, 976 (1995) (observing that "[i]n modern regulation, a pervasive problem is that members of regulated classes face ambiguous and conflicting guidelines, so that they do not know how to plan")).
(190.) Hoffman, supra note 14, at 1077. Yet, maintaining corporate formalities is usually the decisive factor in determining whether to hold shareholders personally liable. See id. at 1078 (citing Thompson, supra note 92, at 1039 (concluding that when a defendant has failed to maintain corporate formalities the courts pierce nearly sixty-seven percent of the time)). In addition, the more relevant issue of whether the corporate defendant is undercapitalized is not usually regarded as a dispositive factor. Id.
(191.) Id. at 1102.
(192.) Sam F. Halabi, Veil-Piercing's Procedure, 67 RUTGERS U. L. REV. 1001, 1012 (2015).
(193.) Schwartz, supra note 4, at 747.
(195.) Hoffman, supra note 14, at 1085.
(196.) See id.
(197.) See id.
(198.) See, e.g., Hargrove, 710 F.2d at 1160.
(199.) See Johnson v. PPI Tech. Servs., L.P., 2014 WL 1330086, at *8 (analyzing the corporate structure through which Johnson chose to be compensated).
(200.) See id.
(201.) Johnson v. PPI Tech. Servs., L.P., 2014 WL 1330086, at *8.
(202.) Original Brief on Behalf of Appellant, James Johnson at 15, Johnson v. PPI Tech. Services, L.P., 2014 WL 4184560 (5th Cir. 2014) (No. 14-30423).
(203.) Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 339 (5th Cir. 1999).
(204.) Id. at 335.
(208.) Dickson, 179 F.3d at 339.
(213.) Dickson, 179 F.3d at 339.
(215.) Id. at 338.
(217.) Id. at 338-39.
(218.) Dickson, 179 F.3d at 338-39.
(219.) Dickson, 179 F.3d at 338. In normal personal jurisdiction cases, most courts require that the plaintiff make a prima facie showing of the minimum contacts requirement, i.e., "affirmative proof beyond the pleadings, such as affidavits, testimony or other competent evidence of specific facts." Procedural Aspects of Personal Jurisdiction, 4 FED. PRAC. & PROC CIV. [section] 1067.6 (4th ed.), Westlaw (database updated Apr. 2016). In some cases, the parties will be granted additional time to conduct discovery relevant to the issue of personal jurisdiction. Id. In assessing the evidence, courts require more than a prima facie showing of jurisdiction by the plaintiff, but no uniform standard has been articulated. Id. In these situations, the Fifth Circuit has applied the "preponderance of the evidence" standard. See Felch v. Transportes Lar-Mex SA DE CV, 92 F.3d 320, 326 (5th Cir. 1996).
(220.) Dickson, 179 F.3d at 338-39.
(221.) See generally id. at 339.
(222.) Hoffman, supra note 14, at 1097.
(223.) Schwartz, supra note 4, at 754.
(224.) See Hoffman, supra note 14, at 1098 (citing Heritage House Rest., Inc. v. Cont'l Funding Grp., Inc., 906 F.2d 276, 283 (7th Cir. 1990)).
(225.) See id. at 1087 (observing that the Hargrave court's "focus on control morphed from a valid consideration of control as evidence of the absent corporation's direct involvement in the litigation-triggering events to the question of whether to pierce the corporate veil").
(227.) Hoffman, supra note 14, at 1087.
(229.) Id. at 1097-98.
(230.) Id. at 1098.
(231.) Id. at 1102.
(232.) Hoffman, supra note 14, at 1102; Hargrove, 710 F.2d at 1160 (providing that "[c]ases in this circuit appear to have followed the Cannon rule... although sometimes without explicit citation").
(233.) See Hoffman, supra note 14, at 1102.
(234.) Daniel G. Brown, Jurisdiction Over A Corporation on the Basis of the Contacts of an Affiliated Corporation: Do You Have to Pierce the Corporate Veil?, 61 U. Cin. L. Rev. 595, 622 (1992).
(235.) Hoffman, supra note 14, at 1102.
(236.) Hoffman, supra note 14, at 1097-98.
(237.) See id. at 1100.
(239.) Id. at 1101.
(240.) GlobalSantaFe Offshore, 799 F.3d at 319 n.3.
(241.) Hoffman, supra note 14, at 1101.
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|Date:||Jan 1, 2017|
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