Central States, Southeast & Southwest Areas Pension Fund v. Reimer Express World Corp. ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-1502
Central States, Southeast and Southwest
Areas Pension Fund, and Howard McDougall,
trustee,
Plaintiffs-Appellants,
v.
Reimer Express World Corporation,
a Canadian corporation, and Reimer Express
Enterprises Limited, a Canadian corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 2524--James B. Moran, Judge.
Argued September 13, 2000--Decided October 18, 2000
Before Flaum, Chief Judge, and Bauer and Kanne,
Circuit Judges.
Flaum, Chief Judge. Central States, Southeast
and Southwest Areas Pension Fund, and its trustee
Howard McDougall (collectively, the "Fund")
appeal the dismissal of their suit and the denial
of their motion to conduct discovery against
Reimer Express Enterprises, Limited ("REE"), and
Reimer Express World Corporation ("REWCOR"). The
Fund challenges the district court’s
determinations that personal jurisdiction over
the defendants, two Canadian companies, was
lacking and that discovery on this issue was
unnecessary. For the reasons stated herein, we
affirm.
I. Background
REE is a Canadian holding company corporation
with its principal place of business in Winnipeg,
Manitoba, Canada. In January 1986, REE owned all
the stock of a Canadian corporation named 141622
Canada, Inc., when this corporation purchased all
the common stock of another Canadian company,
140593 Canada, Inc. The record does not reveal
where this acquisition took place, but the
district court concluded that the transaction
occurred in Canada. 140593 Canada, Inc. owned all
the stock of Inter-City Truck Lines, Inc.
("ICTL"). Thus, from January 1986 until February
1994 when REE sold 141622 Canada, Inc., REE was
the corporate "great-grandparent" of ICTL.
REWCOR, which was formed as a Canadian
corporation on November 29, 1993, is a wholly
owned subsidiary of REE.
ICTL was a Canadian corporation with its
principal place of business in Canada that also
operated a United States trucking enterprise out
of Detroit, Michigan. ICTL engaged in extensive
business in the United States and participated in
the Fund. Under collective bargaining agreements
between ICTL and Local 299 of the International
Brotherhood of Teamsters, ICTL was obligated to
contribute to the Fund on behalf of ICTL’s
employees. The Fund is a multiemployer pension
plan within the meaning of the Employee
Retirement Income Security Act ("ERISA"), 29
U.S.C. sec.sec. 1002(37), 1301(a)(3), and is
administered from Rosemont, Illinois.
ICTL contributed to the Fund under a collective
bargaining agreement covering April 1, 1988
through March 31, 1991. From the beginning of
this period until March 1990, the Fund sent bills
to ICTL’s address in Detroit. In March 1990, ICTL
requested that its billing address be changed to
a street address in Winnipeg, Manitoba, which was
not the address of the registered office of REE.
In January 1991, ICTL asked that the Fund change
its address to a post office box, which also was
located in Winnipeg.
On November 13, 1991, the Fund received via fax
a document titled "Fringe Benefit Agreement"
whose cover page was on REE’s letterhead. This
agreement extended ICTL’s obligation to
contribute to the Fund on the terms provided by
a national collective bargaining agreement. It
was signed by J.D. Cockburn, whose title was
described on the document as Manager of Human
Resources and Industrial Relations of REE and
whose address was that of REE. The fax legend
named the sender of the document as "REE/ICTL."
In November 1992, the Fund received a fax from
Linda Messel, whose position was listed as "ICTL
(Payroll)." The letterhead of the fax cover page
read "Reimer Express Enterprises Ltd.,
Administration Centre, Winnipeg." The attachments
to this fax related to ICTL’s obligation to remit
contributions to the Fund. Prior to this fax, the
Fund had received a fax from the same person with
a cover page reading "Reimer Express Lines,"
which was a subsidiary of REE at the time.
In May 1993, ICTL went out of business and
ceased to have an obligation to contribute to the
Fund. This constituted a withdrawal under the
Multiemployer Pension Plan Amendments Act of 1980
("MPPAA") to ERISA. 29 U.S.C. sec. 1383. Under
MPPAA, an employer that withdraws from a pension
plan incurs withdrawal liability. 29 U.S.C. sec.
1381. Businesses under common control are jointly
and severally liable for the withdrawal liability
of any affiliate./1 29 U.S.C. sec. 1301(b)(1).
The Fund assessed ICTL’s withdrawal liability to
be $310,922.12. The Fund prevailed in a suit
against ICTL for this amount plus interest, but
this judgment has not been satisfied. After
determining that REE and REWCOR were affiliated
with ICTL, on June 23, 1994, the Fund sent a
notice demanding payment of ICTL’s withdrawal
liability plus interest. The defendants asked for
a review of the Fund’s determination, which was
denied by the Fund on November 1, 1994. The
Canadian companies have refused to pay the
withdrawal liability.
The Fund filed the current action in federal
district court in Illinois and served process on
REE and REWCOR in Canada. The defendants filed a
motion seeking to dismiss under Federal Rules of
Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6).
As part of that motion, the defendants submitted
the affidavit of W.A. Redekopp, the general
counsel of REWCOR. Redekopp said that REE, REWCOR
and its subsidiaries such as ICTL have observed
all corporate formalities, and that neither
defendant exercised day-to-day management control
of ICTL, 141622 Canada, Inc., or 140593 Canada,
Inc. Redekopp also stated that REE or REWCOR have
not done any business, have not had an office or
telephone number, or owned or leased any property
in Illinois or anywhere in the United States.
Accompanying the defendants’ reply brief was an
affidavit from James D. Cockburn and a second
affidavit from Redekopp. Cockburn stated that in
1991 he was employed by REE and served as a
consultant to REE’s operating subsidiaries on
labor matters. REE charged its subsidiaries a fee
for the use of Cockburn’s services. Cockburn
further averred that prior to executing the
aforementioned fringe benefit agreement, he
discussed the matter with Hugh Richardson, then
president of ICTL, who orally authorized Cockburn
to sign the document on behalf of ICTL. Thus,
Cockburn claims that he was serving as an agent
of ICTL and not REE when he signed the agreement.
Redekopp stated that REE provided administrative
services to its subsidiaries in return for fees.
Redekopp explained that Messel was employed by
REE and, at the request and direction of ICTL
management, provided payroll services to ICTL,
which was charged by REE for these services. He
also claimed that none of these REE employees
were involved in the day-to-day management of the
subsidiaries.
The trial judge granted the defendants’ motion
to dismiss because personal jurisdiction was
absent, without ruling on the other grounds for
dismissal./2 The court stated that corporate
ownership generally is not a sufficient basis for
personal jurisdiction. Likewise, the provision of
administrative services by a parent for a
subsidiary does not trigger personal jurisdiction
over the parent. The Fund had not alleged that
REE and REWCOR were the alter egos of ICTL,
controlled ICTL to the degree necessary to pierce
the corporate veil, or exerted substantial
control over ICTL’s day-to-day activities. The
court also denied the Fund’s request for
discovery, finding that the activities plaintiffs
wished to investigate were attributable only to
ICTL and were not related to the ERISA cause of
action. The Fund timely appealed.
II. Discussion
A. Personal Jurisdiction
The Fund argues that the district court had
specific personal jurisdiction/3 over the
defendants based on their contacts either with
Illinois or with the United States as a whole. It
claims that the standard rule that corporate
ownership cannot confer jurisdiction over the
parent does not apply in the context of a
statutory scheme that premises liability on such
affiliation. The Fund also asserts that REE and
REWCOR had enough other contacts with either
Illinois or the United States to be subject to
jurisdiction by the district court.
Dismissals for lack of personal jurisdiction are
reviewed de novo. See Logan Productions, Inc. v.
Optibase, Inc., 103 F.3d 49, 52 (7th Cir. 1996).
The plaintiff bears the burden of demonstrating
personal jurisdiction. See RAR, Inc. v. Turner
Diesel, Ltd., 107 F.3d 1272, 1276 (7th Cir.
1997). We first determine whether there are
federal or state statutory grounds for personal
jurisdiction, then see whether the state
constitution bars such jurisdiction if it is
based on a state statute, and finally determine
if the exercise of jurisdiction over the
defendant would be consistent with the federal
Constitution.
1. Statutory basis.
The Fund served process on REE and REWCOR in
Canada. Service is sufficient to establish
personal jurisdiction if the defendant could be
subject to jurisdiction in courts of the state
where the district court is located. Fed.R.Civ.P.
4(k)(1)(A). If no state could exercise
jurisdiction, then service will establish
personal jurisdiction for claims arising under
federal law if the exercise of jurisdiction is
consistent with the Constitution and laws of the
United States. Fed.R.Civ.P. 4(k)(2). The Fund
argues that the district court has personal
jurisdiction over REE and REWCOR under either the
Illinois long-arm statute or, if Illinois cannot
assert jurisdiction, Federal Rule of Civil
Procedure 4(k)(2) since the MPPAA is a federal
statute and no other state could exercise
jurisdiction.
a) Illinois long-arm.
The Illinois long-arm statute permits its courts
to exercise jurisdiction on any basis permitted
by the Illinois and United States Constitutions.
735 Ill.Comp.Stat. 5/2-209(c). Thus, we next turn
to the Illinois constitution. The Illinois
constitution’s guarantee of due process are not
necessarily the same as those provided by the
federal Constitution, see Rollins v. Ellwood, 565
N.E.2d 1302, 1316 (Ill. 1990), but Illinois case
law does not elucidate any differences regarding
the instant personal jurisdiction question. See
RAR, 107 F.3d at 1276. Illinois courts exercise
jurisdiction over parents based on the activities
of the subsidiary where the corporate veil can be
pierced, or perhaps where all the corporate
formalities are observed but the subsidiary’s
only purpose is to conduct the business of the
parent. See IDS Life Ins. Co. v. SunAmerica Life
Ins. Co., 136 F.3d 537, 541 (7th Cir. 1998).
However, whether corporate ownership alone or
coupled with some administrative activities by
the parent on behalf of the subsidiary is
sufficient for jurisdiction under the Illinois
constitution is unclear. See id. In any case, the
defendants do not argue that state constitutional
law prohibits the exercise of jurisdiction, and
so we assume arguendo that personal jurisdiction
here would not violate the Illinois constitution.
See RAR, 107 F.3d at 1277 (finding Illinois
constitutional law unclear on the question of
personal jurisdiction and so moving to next step
of analyzing federal constitutional law). Thus,
neither the state statute nor constitution
prohibits personal jurisdiction, and so we must
determine whether jurisdiction comports with the
federal Constitution.
b) Federal Rule of Civil Procedure 4(k)(2).
The Fund argues that if Illinois courts cannot
exercise personal jurisdiction over REE and
REWCOR, then jurisdiction is proper under Rule
4(k)(2) because it served process on the
defendants. Four conditions must be present for
Rule 4(k)(2) to apply: (1) the plaintiff’s claims
must be based on federal law; (2) no state court
could exercise jurisdiction over the defendants;
(3) the exercise of jurisdiction must be
consistent with the laws of the United States;
and (4) the exercise of jurisdiction must be
consistent with the Constitution. The Fund is
suing under MPPAA so the first condition is met.
The defendants do not argue that jurisdiction is
proper in some state besides Illinois, so we may
assume that if jurisdiction is not proper in
Illinois that it is not proper in any state.
Whether personal jurisdiction in these
circumstances would be constitutional is
addressed below; in this subsection we address
whether such jurisdiction would be consistent
with the laws of the United States.
REE and REWCOR claim that the exercise of
jurisdiction would be inconsistent with ERISA and
MPPAA’s service of process sections,/4 and
buttress their argument with a citation to United
Elec., Radio and Mach. Workers of America v. 163
Pleasant St. Corp., 960 F.2d 1080, 1086 (1st Cir.
1992). We have previously held that the RICO
statute, whose service of process provision, 18
U.S.C. sec. 1965(d),/5 is similar to those of
ERISA, does not authorize worldwide service of
process. See Stauffacher v. Bennett, 969 F.2d
455, 460-61 (7th Cir. 1992). However, both of
these cases were decided under old Fed.R.Civ.P.
4(f) (repealed 1993) which stated that all
process (besides a subpoena) could be served
beyond the territorial limits of the state in
which the districts courts sits "when authorized
by a statute of the United States or by these
rules." (emphasis added)./6 The word
"authorized" indicates that some affirmative
expression from Congress through a statute was
necessary before process could be served
extraterritorially. See generally Omni Capital
Int’l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97,
108-111 (1987). The RICO and ERISA service of
process provisions state that service may be made
in "any district," which indicates that Congress
authorized service only in the judicial districts
of the United States and not worldwide. In
comparison, Congress authorized worldwide service
in laws stating that service could be made
"wherever the defendant may be found," or similar
language, which is not limited to the judicial
districts of the United States. See Robinson
Eng’g Co. Pension Plan and Trust v. George, 223
F.3d 445, 449 (7th Cir. 2000).
We find that Rule 4(k)(2), which was enacted
after United Workers and Stauffacher, permits
jurisdiction to be exercised by the service of
process even if a statute does not specifically
state that service is proper, as long as the
Rule’s conditions are satisfied and no other
statute prohibits jurisdiction or indicates that
jurisdiction would be improper. Three reasons
support this conclusion, two based on principles
of statutory interpretation and the third
grounded in the purposes of Congress in enacting
Rule 4(k)(2).
First, Rule 4(k)(2) provides that for claims
arising under federal law where no state could
exercise jurisdiction, service of process is
sufficient to establish personal jurisdiction if
"consistent with the Constitution and laws of the
United States." (emphasis added). Different words
in a statute, in this case "authorized" and
"consistent," should be given different meanings
unless the context indicates otherwise. See,
e.g., Bailey v. United States, 516 U.S. 137, 143
(1995). Similarly, we give statutory words their
ordinary meaning absent some indication that
Congress intended these to have a different
import. See, e.g., Williams v. Taylor, ___ U.S.
___, 120 S. Ct. 1479, 1488 (2000). Unlike
"authorized," whose meaning is described above,
use of the word "consistent" in Fed.R.Civ.P.
4(k)(2) does not require that a statute
explicitly permit worldwide service of process
for service to be proper. A law of the United
States and the act of exercising jurisdiction are
consistent unless exercising jurisdiction
contradicts, conflicts with, or is in opposition
to a law. Thus, if a statutory provision permits
nationwide service but is silent with respect to
worldwide service, then worldwide service is
"consistent" with this statute, since such
service does not contradict or oppose the
statutory language. Rule 4(k)(2), if its other
requirements are met, more or less reverses the
presumption of old Rule 4(f). Under the old rule,
service could not be made internationally unless
expressly permitted by federal statute; under the
new rule, again when its other requirements are
satisfied, service may be made internationally
unless doing so would contradict or be in tension
with another federal statute.
Second, current Rule 4(k)(1)(D) states that
service of process is sufficient to establish
personal jurisdiction "when authorized by a
statute of the United States." Rule 4(k)(1)(D)
provides for jurisdiction whenever a statute
explicitly authorizes service of process. If
establishing personal jurisdiction by serving
process was considered inconsistent with a law
which is silent on the issue, then Rule 4(k)(2)
would not have any effect. Under the defendants’
argument, whenever a statute explicitly permits
jurisdiction, Rule 4(k)(1)(D) would apply; if the
statute did not explicitly permit jurisdiction,
Rule 4(k)(2) could not apply. Rule 4(k)(2) would
be meaningless, contradicting the interpretive
principle that every word or provision of a
statute must, if possible, be given some effect.
See, e.g., Public Lands Council v. Babbitt, ___
U.S. ___, 120 S. Ct. 1815, 1826 (2000). Thus,
jurisdiction can be exercised under Rule 4(k)(2)
even where not explicitly provided for in another
federal statute./7
Third, Rule 4(k)(2) was intended as a response
to the Supreme Court’s decision in Omni Capital,
484 U.S. 97. Fed.R.Civ.P. 4 advisory committee’s
note. Omni Capital, which was decided under old
Fed.R.Civ.P. 4(f), involved a plaintiff who
served process on a foreign defendant in an
attempt to initiate an action under the
Commodities Exchange Act ("CEA"), which was
silent on the question of international service.
The Supreme Court held that courts could not
create their own rules for service of process,
and thus the plaintiff’s service was improper and
the district court lacked personal jurisdiction
over the defendants. 484 U.S. at 108-09. However,
the Court suggested that "[a] narrowly tailored
service of process provision, authorizing service
on an alien in a federal-question case when the
alien is not amenable to service under the
applicable state long-arm statute, might well
serve the ends of the CEA and other federal
statutes." Id. at 111. Rule 4(k)(2) responds to
this suggestion and is meant to permit
international service of process where statutes
are silent, like the CEA at the time of Omni
Capital. This history of Rule 4(k)(2) further
supports the interpretation that it provides a
statutory basis for personal jurisdiction through
service of process unless this contradicts or
conflicts with another federal law.
Rule 4(k)(2) may be applicable to our case.
Permitting personal jurisdiction through
international service does not conflict with and
is not in tension with the ERISA service of
process provisions or any other federal statute
that has been brought to our attention. Thus,
three of the requirements for the use of Rule
4(k)(2), all except the constitutional issue, are
satisfied if no state long-arm statute can be
used. If Illinois cannot exercise jurisdiction
over REE and REWCOR, Rule 4(k)(2) may provide a
statutory basis for personal jurisdiction if
there is no constitutional barrier.
2. Constitutional basis.
The Fund has alleged two sufficient alternative
statutory bases for obtaining personal
jurisdiction over the defendants. The remaining
question that must be answered is whether the
exercise of such jurisdiction would be
constitutional. We begin by analyzing the state
long-arm statute and determining if Illinois
could exercise personal jurisdiction over REE and
REWCOR.
In order for personal jurisdiction to be
proper, a defendant must have purposefully
established minimum contacts with the forum. See
Burger King Corp. v. Rudzewicz, 471 U.S. 462,
474-76 (1985); RAR, 107 F.3d at 1277. The
generalized foreseeability of the defendant’s
action causing harm in the forum is not
sufficient for the exercise of jurisdiction.
Burger King, 471 U.S. at 474. Instead, whether
the defendant’s conduct and connection with the
forum are such that it should reasonably
anticipate being hailed into court there is the
crucial inquiry. Id.; RAR, 107 F.3d at 1277. To
establish such a reasonable anticipation the
defendant must have purposefully availed itself
of the privilege of conducting activities in the
forum, invoking the benefits and protections of
its laws. Burger King, 471 U.S. at 474-75; RAR,
107 F.3d at 1277. Once minimum contacts have been
shown to exist, a court must examine other
factors, such as the forum’s interest in
adjudicating the dispute and the burden on the
defendant, to determine whether the exercise of
personal jurisdiction satisfies traditional
notions of fair play and substantial justice.
Burger King, 471 U.S. at 476-77. In certain
limited circumstances, these factors may show
that a forum has such a strong interest in
adjudicating a dispute that a lesser showing of
minimum contacts than is normally the case may
suffice for jurisdiction. Id. at 477. To exercise
specific personal jurisdiction, the plaintiff’s
cause of action must arise out of or be related
to these minimum contacts that sufficiently
comport with fairness and justice. See
Helicopteros, 466 U.S. at 414 & n.8; RAR, 107
F.3d at 1277.
a) Corporate affiliation.
The Fund acknowledges the general rule that
corporate ownership alone is not sufficient for
personal jurisdiction. Nevertheless, the Fund
claims that this principle does not apply in the
context of withdrawal liability under MPPAA
because 29 U.S.C. sec. 1301(b)(1) states that all
businesses under common control shall be treated
as a single entity. The Fund argues that because
this provision has been in effect since 1980, REE
and REWCOR should have reasonably anticipated
being subject to MPPAA liability in Illinois and
the United States. The Fund concludes that
because a district court in Illinois was able to
assert personal jurisdiction over ICTL, Illinois
can exercise such jurisdiction over the
defendants.
While we have not squarely considered this
issue before, we hold that constitutional due
process requires that personal jurisdiction
cannot be premised on corporate affiliation or
stock ownership alone where corporate formalities
are substantially observed and the parent does
not exercise an unusually high degree of control
over the subsidiary. Though we are mindful of the
Supreme Court’s admonition that "mechanical"
tests generally should not be relied upon in
determining when personal jurisdiction is
constitutional, Burger King, 471 U.S. at 478, the
Court itself has suggested this rule, see Keeton
v. Hustler Magazine, Inc., 465 U.S. 770, 781 n.13
(1984) ("[N]or does jurisdiction over a parent
corporation automatically establish jurisdiction
over a wholly owned subsidiary."). We join other
courts in finding that stock ownership in or
affiliation with a corporation, without more, is
not a sufficient minimum contact. See, e.g., Dean
v. Motel 6 Operating L.P., 134 F.3d 1269, 1273-74
(6th Cir. 1998); Miller v. Honda Motor Co., 779
F.2d 769, 771-72 (1st Cir. 1985); Transure, Inc.
v. Marsh and McLennan, Inc., 766 F.2d 1297, 1299
(9th Cir. 1985); see also Shaffer v. Heitner, 433
U.S. 186, 216 (1977) (holding that ownership of
shares in a corporation located in a particular
forum is not purposeful availment of that forum);
Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S.
333, 336-37 (1925) (holding, though not on
constitutional grounds, that jurisdiction over a
subsidiary does not provide for jurisdiction over
the parent where the two are separate entities).
A couple of reasons support this holding.
First, where corporate formalities are
substantially observed and the parent does not
dominate the subsidiary, a parent and a
subsidiary are two separate entities and the acts
of one cannot be attributed to the other. The
Supreme Court, in a discussion of whether
jurisdiction over the subsidiary can be leveraged
into jurisdiction over the parent, has stated
that "[e]ach defendant’s contacts with the forum
State must be assessed individually." Keeton, 465
U.S. at 781 n.13. The unilateral activity of an
entity cannot subject a nonresident defendant to
personal jurisdiction in the entity’s forum. See
Burger King, 471 U.S. at 474-75 (quoting Hanson
v. Denckla, 357 U.S. 235, 253 (1958)). Where two
corporations are in fact separate, permitting the
activities of the subsidiary to be used as a
basis for personal jurisdiction over the parent
violates this principle and thus due process.
Second, the primary purpose of the corporate form
is to prevent a company’s owners, whether they
are persons or other corporations, from being
liable for the activities of the company. Where
corporate formalities have been observed, a
company’s owners reasonably expect that they
cannot be held liable for the faults of the
company. Thus, such owners do not reasonably
anticipate being hailed into a foreign forum to
defend against liability for the errors of the
corporation.
The Fund’s argument that this analysis changes
where a federal statute premises liability on
corporate affiliation ignores the process by
which courts determine whether specific personal
jurisdiction exists and confuses liability and
jurisdiction. To decide whether specific personal
jurisdiction may be exercised, a court must
engage in three distinct steps in the following
order: (1) identify the contacts the defendant
has with the forum; (2) analyze whether these
contacts meet constitutional minimums and whether
exercising jurisdiction on the basis of these
minimum contacts sufficiently comports with
fairness and justice; (3) determine whether the
sufficient minimum contacts, if any, arise out of
or are related to the causes of action involved
in the suit. If the court determines at the
second step that a defendant does not have
sufficient minimum contacts with the forum, then
its personal jurisdiction analysis ends without
examining the plaintiff’s causes of action. The
laws on which the suit are based would be
irrelevant because a state or federal statute
cannot transmogrify insufficient minimum contacts
into a basis for personal jurisdiction by making
these contacts elements of a cause of action,
since this would violate due process. See AT & T
Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586,
590-91 (9th Cir. 1996). Similarly, jurisdiction
and liability are two separate inquiries. See
id.; Carty v. Beech Aircraft Corp., 679 F.2d
1051, 1061 (1st Cir. 1982); Witt v. Scully, 539
F.2d 950, 951-52 (3d Cir. 1976). The fact that a
defendant would be liable under a statute if
personal jurisdiction over it could be obtained
is irrelevant to the question of whether such
jurisdiction can be exercised. MPPAA’s definition
of corporate affiliation as an element of
withdrawal liability cannot confer personal
jurisdiction on the basis of such affiliation any
more than a California cause of action’s
inclusion of a defective product as an element of
liability can confer jurisdiction over a Japanese
manufacturer whose defective product causes
injury in California but who does not have
sufficient minimum contacts with that state. See
Asahi Metal Indus. v. Superior Court of
California, Solano County, 480 U.S. 102, 105-06,
112-13 (1987) (opinion of O’Connor, J.). In many
circumstances, the conduct of a foreign defendant
may satisfy the elements of liability contained
in a statute, but this defendant will escape
judgment because personal jurisdiction is
lacking. Thus, MPPAA’s control group provision
regarding withdrawal liability does not alter the
rule that corporate affiliation or ownership is
not a sufficient minimum contact for the exercise
of personal jurisdiction./8
Applying our above holding to this case,
corporate affiliation cannot serve as a basis for
personal jurisdiction over REE or REWCOR. ICTL
conducted business as a corporate entity distinct
from REE and REWCOR. ICTL maintained separate
books, records, financial statements, and tax
returns, as well as observing all corporate
formalities. Neither REE nor REWCOR exercised
day-to-day management control over ICTL. The Fund
does not claim that REE or REWCOR were mere alter
egos of ICTL, or that the two defendants
exercised an abnormal degree of control over
ICTL. The Fund does claim that a fax cover page’s
indication that it was sent by "REE/ICTL"
suggests an erosion of corporate distinctions.
However, a more obvious interpretation is that
REE was sending the fax on behalf of ICTL, whose
jurisdictional significance is discussed below.
In any case, a mere fax legend is insufficient to
show either that corporate formalities were not
substantially observed or that REE controlled
ICTL to an unusually high degree. Thus, the facts
of this case do not demonstrate that REE or
REWCOR can be subjected to personal jurisdiction
on the basis of their affiliation with ICTL.
At this point in our analysis, we affirm the
dismissal of defendant REWCOR. The only contact
REWCOR has with either Illinois or the United
States was affiliation with ICTL. REWCOR was not
a parent of ICTL and apparently did not exercise
any control whatsoever over ICTL, much less the
domination necessary for us to find personal
jurisdiction over a parent based on the actions
of the subsidiary. Thus, regardless of whether
the Illinois long-arm statute or Fed.R.Civ.P
4(k)(2) provides the statutory basis for
jurisdiction, REWCOR lacks sufficient minimum
contacts with either forum.
b) Other contacts.
The Fund claims that REE has other contacts
with Illinois and the United States that are
sufficient for the exercise of jurisdiction.
These contacts include the correspondence the
Fund received with REE’s letterhead on the fax
cover pages and the fringe benefit agreement that
was signed by an REE employee.
We adopt the rule that a corporate parent may
provide administrative services for its
subsidiary in the ordinary course of business
without calling into question the separateness of
the two entities for purposes of personal
jurisdiction. See, e.g., Dunn v. A/S Em. Z.
Svitzer, 885 F. Supp. 980, 988-89 (S.D. Tex.
1995); Calvert v. Huckins, 875 F. Supp. 674, 678-
79 (E.D. Cal. 1995). The basis for this
proposition is much the same as for the more
general principle that jurisdiction over a parent
cannot be based merely on jurisdiction over a
subsidiary. Parent corporations regularly provide
certain services to their subsidiaries. Such
parents do not expect that performing these
activities may subject them to liability because
of the actions of the subsidiaries. Thus, such
standard services are not sufficient minimum
contacts to support the exercise of jurisdiction.
The fringe benefit agreement extended ICTL’s
obligation to contribute to the Fund. This
contract did not impose any obligation on or
otherwise involve REE. Cockburn, an employee of
REE, did sign the agreement. However, the
uncontroverted affidavit of Cockburn explains
that he serves as a consultant to REE’s
subsidiaries, and that the subsidiaries pay REE
for his services./9 He states that he signed the
fringe benefit agreement on behalf of ICTL at the
direction of Hugh Richardson, who was the
president of ICTL. When the parent receives
compensation for the subsidiary’s use of the
services of an employee of the parent, the
employee acts on behalf of the subsidiary and not
the parent, and the employee acts at the
direction of the subsidiary’s officers, the
parent, at most, provides standard administrative
services to the subsidiary. Thus, the fringe
benefit agreement is not a sufficient minimum
contact.
The other contacts alleged by the Fund fail for
similar reasons. Messel was an employee of REE,
but provided payroll services for ITCL at the
direction of ITCL, who paid REE for her services.
Her use of REE letterhead when she sent faxes to
the Fund does not change the fact that she
provided standard administrative services.
Similarly, ICTL asking the Fund to change its
billing address to Winnipeg, Manitoba shows, at
most, that REE was providing payroll services.
None of these activities constitute a sufficient
minimum contact. Thus, we conclude that Illinois
could not constitutionally exercise jurisdiction
on the basis of these administrative services
that REE provided to ICTL.
As discussed above, if Illinois could not exert
personal jurisdiction, the Fund could take
advantage of Fed.R. Civ.P. 4(k)(2), under which
we analyze all of REE’s contacts with the United
States./10 However, the Fund has not brought
to our attention any contacts that REE itself had
with the United States other than those with
Illinois. Whatever business ICTL may have done
throughout the United States is irrelevant since
this cannot be a basis for jurisdiction over
ICTL’s parent REE, a separate corporate entity.
Therefore, Fed.R.Civ.P. 4(k)(2) does not aid the
Fund. None of the contacts alleged by the Fund
would permit either Illinois or the United States
to exercise specific personal jurisdiction over
REE consistent with due process.
B. Discovery
The Fund claims that the district court should
have permitted discovery concerning whether
personal jurisdiction over REE and REWCOR would
be proper. At a minimum, the plaintiff must
establish a colorable or prima facie showing of
personal jurisdiction before discovery should be
permitted. See Ellis v. Fortune Seas, Ltd., 175
F.R.D. 308, 312 (S.D. Ind. 1997). Foreign
nationals usually should not be subjected to
extensive discovery in order to determine whether
personal jurisdiction over them exists. See
Jazini v. Nissan Motor Co., 148 F.3d 181, 185-86
(2d Cir. 1998). We review the district court’s
denial of discovery on this issue for abuse of
discretion. See Caribbean Broad. Sys., Ltd. v.
Cable & Wireless P.L.C., 148 F.3d 1080, 1089
(D.C. Cir. 1998); Noonan v. Winston Co., 135 F.3d
85, 94 (1st Cir. 1998).
We conclude that the district court did not
abuse its discretion in denying the Fund’s
request for discovery into whether REE and REWCOR
are subject to the personal jurisdiction of the
court. Almost all of the Fund’s evidence showed
only that REE and REWCOR were affiliated with
ICTL, without any showing that the defendants
exercised an unusually high degree of control
over ICTL or that corporate formalities were not
substantially observed, or that REE provided
standard administrative services to ICTL. None of
this is sufficient to show a colorable basis for
jurisdiction. Further, even if the fax cover
legend naming "REE/ICTL" as the sender suggested
a lack of corporate formalities sufficient to
support a colorable showing of personal
jurisdiction, granting the Fund’s broad
interrogatories and document requests would have
been inappropriate for two reasons, both noted by
the district court. First, most of these requests
were irrelevant to the issue of specific personal
jurisdiction. For example, such demands as that
REE and REWCOR produce all documents sent to any
United States federal or state agency from 1986
to 1993, produce all documents sent to any United
States based entity, and identify all of their
shareholders in the United States, even if they
might aid in establishing that the defendants had
minimum contacts with the United States, would
not establish any contacts arising out of or
relating to the defendants’ responsibility under
MPPAA for ICTL’s withdrawal liability. Second,
imposing such burdensome, wide-ranging discovery
against defendants from a foreign nation is not
appropriate at a stage where the district court
is trying to determine whether it has any power
over the defendants. While perhaps the district
court might have decided to permit more narrowly
targeted discovery against REE and REWCOR, we do
not find that its refusal to do so constitutes an
abuse of discretion.
III. Conclusion
Corporate affiliation with and the provision of
standard administrative services to ICTL are not
sufficient minimum contacts to exercise specific
personal jurisdiction over REE and REWCOR. The
trial judge did not abuse his discretion in
denying the Fund’s discovery requests because of
the burden these would have imposed on the
foreign defendants and, in many cases, their
irrelevance to the specific personal jurisdiction
issue. Therefore, the judgment of the district
court is Affirmed.
/1 A fuller account of withdrawal liability under
ERISA and the MPPAA can be found in Central
States, Southeast and Southwest Areas Pension
Fund v. Midwest Motor Express, Inc., 181 F.3d
799, 803-04 (7th Cir. 1999).
/2 Though subject-matter jurisdiction generally
should be considered before personal
jurisdiction, a district court may dismiss for
lack of personal jurisdiction without determining
whether subject-matter jurisdiction exists. See
Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574,
578, 587-88 (1999). Since we have the benefit of
the lower court’s reasoning regarding personal
jurisdiction but not subject-matter jurisdiction,
we follow its lead and discuss personal
jurisdiction first.
/3 The Fund concedes that its evidence is
insufficient to show the systematic and
continuous contacts necessary to subject the
defendants to general personal jurisdiction. See
generally Helicopteros Nacionales de Colombia,
S.A. v. Hall, 466 U.S. 408, 414-15 & n.9 (1984).
/4 These two provisions are 29 U.S.C. sec.
1132(e)(2) ("[P]rocess may be served in any other
district where a defendant resides or may be
found."), which is the general provision, and 29
U.S.C. sec. 1451(d) ("[P]rocess may be served in
any district where a defendant resides, does
business, or may be found."), which applies only
to actions involving multiemployer plans such as
the Fund.
/5 "All other process . . . may be served on any
person in any judicial district in which such
person resides, is found, has an agent, or
transacts his affairs."
/6 As explained hereafter, the substance of this old
Rule 4(f) has been recodified in current Rule
4(k)(1)(D).
/7 Note that this interpretation of Rule 4(k)(2)
does not render Rule 4(k)(1)(D) superfluous. Rule
4(k)(1)(D) has an independent effect whenever a
federal statute authorizes service of process but
a state could exercise jurisdiction. For example,
under ERISA, if process is properly served on
defendants within the United States, those
defendants can be required to litigate in the
district where the plan is administered, even if
they have no contacts with that state. See Board
of Trustees, Sheet Metal Workers’ Nat’l Pension
Fund v. Elite Erectors, Inc., 212 F.3d 1031, 1037
(7th Cir. 2000). In such cases, Rule 4(k)(1)(D)
provides the statutory basis for jurisdiction
because the defendants would be subject to the
jurisdiction of the state in which they are
found, and so Rule 4(k)(2) would not apply.
/8 Our decision on this issue is consistent with the
Ninth Circuit’s analogous determination in AT&T,
94 F.3d 586. In that case, the plaintiffs argued
that a parent corporation was an "operator" of a
subsidiary that had incurred CERCLA liability
because of its stock ownership and control of the
subsidiary. Id. at 588. (AT&T predated the
decision in United States v. Bestfoods, 524 U.S.
51, 61-62 (1998) which held that CERCLA liability
cannot be imposed on a parent because of its
ownership of a polluting subsidiary unless the
corporate veil can be pierced.) Because the
parent corporation would be liable due to the
affiliation, the court could exercise personal
jurisdiction over the parent. The Ninth Circuit
rejected this argument and held that even if the
defendants would be liable under CERCLA, the
defendant’s ownership of the subsidiary alone was
not sufficient for personal jurisdiction and
Congress could not alter this. 94 F.3d at 590-91.
/9 The Fund forfeited any objection to the
introduction of Cockburn’s affidavit, which was
submitted with the defendants’ reply memorandum
to the motion for dismissal, by failing to raise
it during the five-and-a-half month period after
the motion was fully briefed and before the
district court ruled. See Dugan v. Smerwick
Sewerage Co., 142 F.3d 398, 406 (7th Cir. 1998).
/10 Where a federal statutory basis for jurisdiction
exists, then we analyze whether the defendant has
sufficient minimum contacts with the United
States as a whole to determine whether personal
jurisdiction is constitutional under the Due
Process Clause of the Fifth Amendment. See Elite
Erectors, 212 F.3d at 1035-36.