April 1, 1992
______________________________
No. 91-1824
No. 91-1947
UNITED ELECTRICAL, RADIO AND MACHINE WORKERS OF AMERICA, ET AL.,
Plaintiffs, Appellees,
v.
163 PLEASANT STREET CORPORATION, ET AL.
Defendants, Appellees,
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INTERNATIONAL TWIST DRILL (HOLDINGS), LIMITED,
Defendant, Appellant.
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No. 91-2001
UNITED ELECTRICAL, RADIO AND MACHINE WORKERS OF AMERICA, ET AL.,
Plaintiffs, Appellants,
v.
163 PLEASANT STREET CORPORATION, ET AL.,
Defendants, Appellees.
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APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. A. David Mazzone, U.S. District Judge]
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Before
Breyer, Chief Judge,
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Selya and Cyr, Circuit Judges.
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Mark D. Stern, with whom Robin Alexander was on brief, for
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plaintiffs.
Mark D. Stern, with whom Edward J. Dailey was on brief, for
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defendant Blue Cross and Blue Shield.
Charles L. Janes, with whom James C. Stokes, R. Scott
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Henderson, and Bingham, Dana & Gould were on brief, for defendant
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International Twist Drill (Holdings), Limited.
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SELYA, Circuit Judge. These appeals call upon us to
SELYA, Circuit Judge.
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ascertain the extent of a federal court's power, in an ERISA
case, to assert personal jurisdiction over a foreign corporation.
To complete our task, we must also consider when, and on what
terms, separate corporate identities can be disregarded, to the
end that a parent corporation may be sued and held responsible
for a subsidiary's employee benefit obligations. At the
conclusion of our odyssey, we find that the court below lacked
personal jurisdiction over the primary defendant in this case.
Hence, we vacate the orders which lie at the heart of these
appeals.
I. BACKGROUND
I. BACKGROUND
We begin by sketching the factual background mindful
that, as is often true at the preliminary injunction stage, the
record is somewhat scanty. For present purposes, we credit the
undisputed facts presented below and adopt the district court's
findings as to controverted matters to the extent they are
supported by the record and not clearly erroneous.
The plaintiffs comprise an employees' union, the United
Electrical, Radio and Machine Workers of America (the Union), and
certain retired or disabled employees of 163 Pleasant Street
Corporation (PSC). PSC is a Delaware corporation having its
principal place of business in New Bedford, Massachusetts. The
individual plaintiffs include both union and nonunion employees,
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some of whom worked for PSC's predecessor-in-interest, Morse
1These appeals do not require us to differentiate between
Tool, Inc.1 All these employees had entered into, or were
PSC retirees and Morse Tool retirees or to consider separately
widows of former employees.
3
beneficiaries of, agreements under which PSC contracted to pay
retirees' health-care premiums.
The chief defendant is International Twist Drill
(Holdings), Ltd. (ITD), a corporation organized under the laws of
Scotland and maintaining its headquarters there. In June 1987,
ITD purchased all the common stock of Morse Tool, which
thereafter became PSC. At the time of purchase, Morse Tool was
mired in bankruptcy. Although the Commonwealth of Massachusetts,
through its Economic Stabilization Trust, held 150,000 shares of
Morse Tool's non-voting preferred stock in connection with a
preexisting debt, ITD was the sole voting shareholder. To all
intents and purposes, then, PSC became a wholly owned subsidiary
of ITD.
Both before and after the acquisition, ITD maintained
an active role in connection with PSC's affairs. During the
period when purchase was under consideration, John Lindsay, a
principal of ITD, became involved in negotiations regarding the
company's collective bargaining agreement but ITD was not
itself a signatory to that pact. After the purchase had been
consummated, ITD appointed PSC's directors, selecting primarily
members of its own board to serve in that capacity. Lindsay
acted for a period of time as PSC's president. Robert Massie,
another principal of ITD, served for a different period as PSC's
chief executive officer and treasurer. Throughout, ITD paid
Lindsay's and Massie's salaries. Moreover, at the end of each
month, James Dee, PSC's controller, telephoned Scotland to
4
discuss the subsidiary's fiscal affairs and obtain directions on
how to manage its finances. ITD provided PSC with (1) ITD's
financial statements (which PSC disseminated to its suppliers in
order to assuage fears about its credit); (2) funds (when
necessary to ameliorate PSC's often precarious fiscal situation);
and (3) certain goods and services that PSC required from time to
time. All in all, ITD pumped $8,000,000, more or less, into its
subsidiary.
ITD's largesse notwithstanding, PSC was unable to
survive. The company halted manufacturing operations in early
1990. In a letter dated June 1, 1991, PSC informed the
plaintiffs that it would cease paying their health insurance
premiums and that, consequently, coverage would expire at the end
of July.
Plaintiffs filed suit in the United States District
Court for the District of Massachusetts, naming PSC, ITD, and the
health-care insurer as defendants. The complaint alleged that
the planned cessation of payments would violate Massachusetts
common law, the Labor-Management Relations Act (LMRA), 29 U.S.C.
141-187 (1988), and the Employee Retirement Income Security
Act (ERISA), 29 U.S.C. 1001-1461 (1988). On July 24, 1991,
the district court held a hearing and entered a temporary
restraining order maintaining the insurance coverage in force.
On August 13, the court denied ITD's motion to quash the
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complaint for want of personal jurisdiction and ordered ITD to
2To be precise, the preliminary injunction required that PSC
pay the health-care premiums pendente lite, as they accrued.2
pay the insurance premiums on or before August 23, 1991; and, if
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it failed to do so, then ITD was to make the payments.
5
In granting the injunction, the district court found
"that ITD . . . does not have ties to Massachusetts except
through [PSC] or Morse Tool." Those ties, the court said,
constitute "clear and convincing evidence that ITD Holdings did
play an active and direct role in [PSC's] management." Although
"[t]he mere fact that a subsidiary company does business within
Massachusetts does not confer jurisdiction over its nonresident
parent company, even if the parent is the sole owner of the
subsidiary," the ITD/PSC relationship was, in the court's view,
"sufficient to establish both personal jurisdiction and liability
on the part of . . . ITD."
On August 15, 1991, ITD filed a notice of appeal. It
also sought to stay the injunction. The stay was denied, first
by the district court, then by a duty panel of this court. On
August 22, PSC filed for bankruptcy without paying the disputed
premiums. When ITD refused to make the payments, the district
court granted plaintiffs' motion to hold ITD in contempt and
imposed daily fines to continue for as long as the contemnor
remained obdurate. ITD sought unsuccessfully to stay the
contempt order and filed a second notice of appeal.3
II. THE DECISIONAL FRAMEWORK
II. THE DECISIONAL FRAMEWORK
Although the defendant's notices of appeal target the
district court's preliminary injunction and contempt decree,
respectively, both of those orders were premised on the district
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3The plaintiffs have cross-appealed, challenging an
incidental ruling. See infra Part V(A).
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6
court's finding that ITD was subject to personal jurisdiction in
Massachusetts a finding that ITD has consistently disputed.
Our initial investigation proceeds along those lines. After all,
an absence of jurisdictional authority would render both orders
void. See Kulko v. Superior Court, 436 U.S. 84, 91 (1978) ("It
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has long been the rule that a valid judgment . . . may be entered
only by a court having jurisdiction over the person of the
defendant."); see also Willy v. Coastal Corp., 60 U.S.L.W. 4187,
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4189 (U.S. March 3, 1992) ("Given that civil contempt is designed
to coerce compliance with the court's decree, it is logical that
the [contempt] order itself should fall with a showing that the
court was without authority to enter the [underlying] decree.").
The parties have focused singlemindedly on the strength
of PSC's corporate veil as the linchpin of the jurisdictional
inquiry. We deem it advisable to take a step backward. While we
are cognizant that a certain symbiosis exists between the
jurisdictional inquiry and the corporate inquiry, the inquiries
are separate and unequivalent. We think it best, therefore, to
begin by scrutinizing ITD's amenability to suit in Massachusetts
without reference to veil piercing. Only if this query produces
negative results must we proceed to the question of whether ITD
can be subjected to jurisdiction by disregarding PSC's
independent corporate identity.
III. DIRECT PERSONAL JURISDICTION
III. DIRECT PERSONAL JURISDICTION
The case at bar presents a golconda of questions
7
concerning the assertion of personal jurisdiction over an alien
corporation in a situation where subject matter jurisdiction is
premised upon the existence of a federal question. See 28 U.S.C.
___
1331 (1988) (grant of federal question jurisdiction); 29 U.S.C.
185(c), 1132(e)(1) (establishing subject matter jurisdiction
under LMRA and ERISA, respectively). We take a step-by-step
approach.
A.
A.
__
Because the instant case is premised on a federal
question, it is distinguishable from cases that address personal
jurisdiction in the context of diversity jurisdiction, 28 U.S.C.
1332 (1988) a context in which the focal point is, of
necessity, the Fourteenth Amendment. The distinction is of
potential consequence. When a district court's subject matter
jurisdiction is founded upon a federal question, the
constitutional limits of the court's personal jurisdiction are
fixed, in the first instance, not by the Fourteenth Amendment but
by the Due Process Clause of the Fifth Amendment. See Lorelei
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Corp. v. County of Guadalupe, 940 F.2d 717, 719 (1st Cir. 1991)
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(per curiam); Whistler Corp. v. Solar Elecs., Inc., 684 F. Supp.
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1126, 1128 (D. Mass. 1988). Inasmuch as the federalism concerns
which hover over the jurisdictional equation in a diversity case
are absent in a federal question case, a federal court's power to
assert personal jurisdiction is geographically expanded. In such
circumstances, the Constitution requires only that the defendant
have the requisite "minimum contacts" with the United States,
8
rather than with the particular forum state (as would be required
in a diversity case). See Lorelei, 940 F.2d at 719; Trans-
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Asiatic Oil Ltd. v. Apex Oil Co., 743 F.2d 956, 959 (1st Cir.
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1984).
Nevertheless, while courts in federal question cases
have found "that sufficient contacts [to justify the assertion of
personal jurisdiction] exist whenever the defendant is served
within the sovereign territory of the United States," Lorelei,
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940 F.2d at 719 (citing cases), the basis for service of process
returnable to a particular court must be grounded within a
federal statute or Civil Rule. See, e.g., id. at 719-20; Johnson
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Creative Arts, Inc. v. Wool Masters, Inc., 743 F.2d 947, 950 (1st
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Cir. 1984). In other words, though personal jurisdiction and
service of process are distinguishable, they are inextricably
intertwined, since service of process constitutes the vehicle by
which the court obtains jurisdiction. See Lorelei, 940 F.2d at
___ _______
719 n.1; cf. Robertson v. Railroad Labor Bd., 268 U.S. 619, 622
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(1925) (a federal court cannot acquire personal jurisdiction over
a defendant unless the defendant is properly served with
process).
Civil Rule 4 constitutes the principal mechanism for
service of process in the federal courts.4 In the majority of
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4The rule states in relevant part:
Whenever a statute of the United States . . .
provides for service of a summons . . . upon
a party not an inhabitant of or found within
the state in which the district court is
held, service may be made under the
9
cases, Rule 4(f) limits service of process "to the territorial
limits of the state in which the court is held." Johnson, 743
_______
F.2d at 950. But, a number of federal laws provide for either
nationwide or worldwide service, see 2 James W. Moore et al,
___
Moore's Federal Practice 4.42[2.-1] (2d ed. 1991) (listing
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statutes), and Rule 4(e) authorizes extraterritorial service in
such circumstances.
ERISA is a statute that contemplates extraterritorial
service.5 It provides in pertinent part:
Where an action under [ERISA] is brought in a
district court of the United States . . .
process may be served in any other district
where a defendant resides or may be found.
29 U.S.C. 1132(e)(2). By its express terms, this provision
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circumstances and in the manner prescribed by
the statute . . . or, if there is no
provision therein prescribing the manner of
service, in a manner stated in this rule.
Whenever a statute or rule of court of the
state in which the district court is held
provides . . . for service of a summons . . .
upon a party not an inhabitant of or found
within the state, . . . service may . . . be
made under the circumstances and in the
manner prescribed in the statute or rule.
Fed. R. Civ. P. 4(e).
All process other than a subpoena may be
served anywhere within the territorial limits
of the state in which the district court is
held, and, when authorized by a statute of
the United States or by these rules, beyond
the territorial limits of that state . . . .
Fed. R. Civ. P. 4(f).
5The LMRA, on the other hand, makes no provision for either
nationwide or worldwide service. See Central Operating Co. v.
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Utility Workers of Am., 491 F.2d 245, 249-50 (4th Cir. 1974).
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10
limits extraterritorial service to a nationwide, not a worldwide,
scope.6 Accord Rodd v. Region Constr. Co., 783 F.2d 89, 91 (7th
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Cir. 1986); Cannon v. Gardner-Martin, Etc., 699 F. Supp. 265, 266
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(M.D. Fla. 1988).
Hence, our analysis comes full circle. When
insufficient statutory authorization for extraterritorial service
exists, Rule 4(e) allows such service "only to the extent
permitted by the law of the state in which the district court
sits." Lorelei, 940 F.2d at 720; see also Johnson, 743 F.2d at
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950. It follows that, absent a federal statute permitting
service of process on ITD in Scotland, our threshold inquiry must
focus on Massachusetts law concerning personal jurisdiction,
notwithstanding that this is a federal question case. And,
because state law is subject to Fourteenth Amendment limitations,
the minimum contacts doctrine, while imposing no direct state-by-
state constraint on a federal court in a federal question case,
acts indirectly as a governing mechanism for the exercise of
personal jurisdiction. See Lorelei, 940 F.2d at 720.
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6Congressional intent to limit extraterritorial service in
ERISA cases to our national boundaries is, perhaps, most
graphically illustrated when one views section 1132(e)(2) against
the linguistic backdrop of those federal statutes providing for
worldwide service of process. See, e.g., 15 U.S.C. 22 (1988)
___ ____
(Clayton Act) ("[A]ll process . . . may be served in the district
of which [the corporate defendant] is an inhabitant, or wherever
it may be found."); 15 U.S.C. 77v (1988) (Securities Act)
(similar); 15 U.S.C. 78aa (1988) (Securities Exchange Act)
(similar); 15 U.S.C. 79y (1988) (Public Utility Holding Company
Act) (similar); 15 U.S.C. 80a-43 (1988) (Investment Company
Act) (similar); 28 U.S.C. 1608 (1988) (Foreign Sovereign
Immunities Act) (similar).
11
B.
B.
__
In Massachusetts, a court may exercise personal
jurisdiction over a foreign defendant if such jurisdiction is
authorized by state statute or rule and its exercise does not
___
offend due process. See Ealing Corp. v. Harrods Ltd., 790 F.2d
___ ____________ _____________
978, 981 (1st Cir. 1986); Bond Leather Co. v. Q.T. Shoe Mfg. Co.,
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764 F.2d 928, 931 (1st Cir. 1985); Carlson Corp. v. Univ. of Vt.,
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402 N.E.2d 483, 485 (Mass. 1980).
On the first prong of the furcula, the "soliciting
business" statute, Mass. Gen. L. ch. 223, 38 (1990), often
employed as a basis for jurisdiction in commercial cases, is
inhospitable to the plaintiffs' cause. Section 38 requires that
a defendant's business presence in Massachusetts be substantial
or have a significant impact upon the transaction that forms the
basis for the cause of action. See Mas Marques v. Digital Equip.
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Corp., 637 F.2d 24, 28 (1st Cir. 1980). Since the district court
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supportably found that ITD's only ties with Massachusetts derive
from the PSC connection ITD itself does not own property,
maintain bank accounts, hold a license to do business, sell
goods, advertise, or solicit business in Massachusetts the less
demanding Massachusetts long-arm statute, Mass. Gen. L. ch. 223A,
3 (1990), offers the most appropriate jurisdictional mooring
for the plaintiffs' claim.7
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7The statute provides in relevant part:
A court may exercise personal
jurisdiction over a person, who acts directly
or by an agent, as to a cause of action in
12
Both federal and state courts have regularly construed
the "transacting any business" language of the statute in a
generous manner. See, e.g., Hahn v. Vermont Law School, 698 F.2d
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48, 50 (1st Cir. 1983); Nova Biomedical Corp. v. Moller, 629 F.2d
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190, 193 (1st Cir. 1980); Heins v. Wilhelm Loh Wetzlar Optical
_____ ____________________________
Mach. GmbH & Co., 522 N.E.2d 989, 991 (Mass. App. Ct.), rev.
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denied, 525 N.E.2d 678 (1988). The defendant need not have a
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physical presence in Massachusetts. See Bond, 764 F.2d at 933.
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The test focuses instead upon whether the defendant attempted to
participate in the commonwealth's economic life. See Hahn, 698
___ ____
F.2d at 52; Nova, 629 F.2d at 195. Since the "extent of a
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nonresident's involvement . . . is properly relevant to the
constitutional, not the statutory[,] dimension of the
jurisdiction inquiry," Bond, 764 F.2d at 932, even somewhat
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exiguous acts on a defendant's part can, at times, suffice to
satisfy the long-arm statute's threshold for transacting
business. See, e.g., id. at 933 (mailing four letters into
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Massachusetts "evidencing a single guaranty of payment for goods
sold"); Hahn, 698 F.2d at 51 (mailing application information and
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acceptance letter to plaintiff in Massachusetts); Nova, 629 F.2d
____
at 195, 197 (mailing two letters, which charged patent
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law or equity arising from the person's
(a) transacting any business in
this commonwealth;
(b) contracting to supply services
or things in this commonwealth[.]
Mass. Gen. L. ch. 223A, 3 (1990).
13
infringement and threatened litigation, into Massachusetts);
Carlson, 402 N.E.2d at 485 (signing a contract in Massachusetts).
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Nonetheless, the mere ownership of a subsidiary by a passive
investor, standing alone, has been held insufficient to satisfy
the statutory requirement. See Kleinerman v. Morse, 533 N.E.2d
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221, 224 (Mass. App. Ct. 1989).
We do not believe that Kleinerman is dispositive here.
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In this case, plaintiffs alleged, and arguably proved, more than
passive investment: ITD's agent was enmeshed in the negotiations
for a collective bargaining agreement between PSC and the Union;
ITD paid the salaries for top executives of PSC; ITD communicated
with PSC regarding management of the business; ITD allowed
financial statements to be used to shore up PSC's credit rating;
and ITD made advances to PSC, in cash and in kind. In light of
the expansive interpretation accorded to Mass. Gen. L. ch. 223A,
3, we think the lower court's ruling that ITD was "transacting
business" in Massachusetts is likely sustainable.
We can reserve definitive judgment on this point,
however, because the long-arm statute also demands that
plaintiffs' cause of action arise from the defendant's
transaction of business in the commonwealth. See Marino v. Hyatt
___ ______ _____
Corp., 793 F.2d 427, 428 (1st Cir. 1986); Hahn, 698 F.2d at 51;
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Singer v. Piaggio & C., 420 F.2d 679, 681 (1st Cir. 1970). The
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statute's relatedness requirement mirrors a key constitutional
requirement for the exercise of specific jurisdiction. See
___
Ealing, 790 F.2d at 983 ("Explicit in the [Massachusetts] long-
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14
arm statute is the specific-jurisdiction requirement that the
cause of action arise from the defendant's activity within the
state."). It behooves us, therefore, to truncate our statutory
analysis and enter the constitutional copse.
C.
C.
__
In Donatelli v. National Hockey League, 893 F.2d 459,
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462-65 (1st Cir. 1990), we explicated the general policies and
concerns animating the jurisprudence of personal jurisdiction.
Rather than fully repastinating that ground, we concentrate here
on the constitutional touchstone for personal jurisdiction:
minimum contacts.
The minimum contacts standard requires that a court
asserting personal jurisdiction determine that the nonresident
defendant possesses sufficient contacts with the forum state so
that subjecting him, her, or it to the forum's jurisdiction does
not offend "traditional notions of fair play and substantial
justice." International Shoe Co. v. Washington, 326 U.S. 310,
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316 (1945) (citation omitted). The test is far from precise:
"the criteria by which we mark the boundary line between those
activities which justify the subjection of a corporation to suit,
and those which do not, cannot be simply mechanical or
quantitative." Id. at 319. Each case requires an individualized
___
weighing of the material facts. Burger King Corp. v. Rudzewicz,
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471 U.S. 462, 485-86 (1985); Kulko, 436 U.S. at 92. In
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constructing such a weighbeam, the measuring points will rarely
be written in gleaming black or glistening white. "The greys are
15
dominant and even among them the shades are innumerable." Estin
_____
v. Estin, 334 U.S. 541, 545 (1948).
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In analyzing a defendant's contacts, the
decisionmaker's attention must be focused on "the relationship
among the defendant, the forum, and the litigation." Shaffer v.
_______
Heitner, 433 U.S. 186, 204 (1977). To this end, the concept of
_______
"purposeful availment" comes into play:
The application of [the minimum contacts]
rule will vary with the quality and nature of
the defendant's activity, but it is essential
in each case that there be some act by which
the defendant purposefully avails itself of
the privilege of conducting activities within
the forum State, thus invoking the benefits
and protections of its laws.
Hanson v. Denckla, 357 U.S. 235, 253 (1958); see also Keeton v.
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Hustler Magazine, Inc., 465 U.S. 770, 774 (1984) (purposeful
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availment requirement assures that jurisdiction will not be based
solely upon a defendant's "random, isolated, or fortuitous"
contacts with the forum state).
The Court has also introduced concepts of
reasonableness and foreseeability into minimum contacts analysis,
demanding that a defendant's "conduct and connection with the
forum State [be] such that he should reasonably anticipate being
haled into court there." World-Wide Volkswagen Corp. v. Woodson,
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444 U.S. 286, 297 (1980). This means that, even where
purposefully generated contacts exist, courts must consider a
panoply of other factors which bear upon the fairness of
subjecting a nonresident to the authority of a foreign tribunal.
See Donatelli, 893 F.2d at 464-65. The Court has identified five
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16
relevant criteria: (1) the defendant's burden of appearing, (2)
the forum state's interest in adjudicating the dispute, (3) the
plaintiff's interest in obtaining convenient and effective
relief, (4) the judicial system's interest in obtaining the most
effective resolution of the controversy, and (5) the common
interests of all sovereigns in promoting substantive social
policies. Burger King, 471 U.S. at 477. We have termed these
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five criteria the "Gestalt factors." Donatelli, 893 F.2d at
_________
465.8
In analyzing minimum contacts, we have recognized two
types of personal jurisdiction: general and specific. See,
___
e.g., id. at 462-63. General jurisdiction exists when the
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litigation is not directly founded on the defendant's forum-based
contacts, but the defendant has nevertheless engaged in
continuous and systematic activity, unrelated to the suit, in the
forum state. See Helicopteros Nacionales de Colombia, S.A. v.
___ __________________________________________
Hall, 466 U.S. 408, 414-16 & n.9 (1984). ITD's contacts are
____
manifestly insufficient to ground a claim of general jurisdiction
in the present case. The court below found that ITD's sole
connection with Massachusetts concerned a single forum-based
company, PSC. The transactions and communications in this
respect were qualitatively less than those found non-pervasive in
Helicopteros. Thus, plaintiffs' case necessarily depends upon
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____________________
8For present purposes, we think it has some significance
that the Court recently assayed the Gestalt factors in
considering a jurisdictional dispute involving a defendant from
another nation. See Asahi Metal Indus. Co. v. Superior Court,
___ _______________________ ______________
480 U.S. 102, 113-16 (1987).
17
the presence or absence of specific jurisdiction.
D.
D.
__
Specific personal jurisdiction may be asserted where
the cause of action arises directly out of, or relates to, the
defendant's forum-based contacts. See id. at 414 & n.8;
___ ___
Donatelli, 893 F.2d at 462. The cases that address the question
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of when this phenomenon occurs tend to be fact-specific. See,
___
e.g., Glater v. Eli Lilly & Co., 744 F.2d 213, 215-16 (1st Cir.
____ ______ _______________
1984). Overall, courts have played the tortoise in designing an
analytic framework aimed at constructing a reasoned answer to
this conundrum.9
For our part, we have formulated a few, rather
abecedarian precepts pertaining to the relatedness requirement.
First, we steadfastly reject the exercise of personal
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9Some circuits have made strides in this direction. The
Ninth Circuit has suggested that "the critical focus in the
'arising out of' prong is whether, 'but for' the defendant's
forum-related activities, the injury would have occurred; that
is, whether the 'entire course of events . . . was an
uninterrupted whole which began with, and was uniquely made
possible by, the [defendant's] contacts in [the forum state].'"
Alexander v. Circus Circus Enters., Inc., 939 F.2d 847, 853 (9th
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Cir. 1991) (citation omitted). The Sixth Circuit has articulated
a less rigorous standard, mandating that "the cause of action, of
whatever type, have a substantial connection with the defendant's
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in-state activities." Third Nat'l Bank v. WEDGE Group Inc., 882
________________ ________________
F.2d 1087, 1091 (6th Cir. 1989) (emphasis in original; citation
omitted), cert. denied, 493 U.S. 1058 (1990). And the Seventh
_____ ______
Circuit has interpreted a long-arm statute's "arising from"
requirement in a similar vein, ruling that if the contract which
forms the basis for a suit "lies in the wake" of a defendant's
forum-state contacts, causality exists. Deluxe Ice Cream Co. v.
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R.C.H. Tool Corp., 726 F.2d 1209, 1216 (7th Cir. 1984). While
_________________
these tests help to focus the causality inquiry, their predictive
force is open to debate.
18
jurisdiction whenever the connection between the cause of action
and the defendant's forum-state contacts seems attenuated and
indirect. See Donatelli, 893 F.2d at 463. Instead, the
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defendant's in-state conduct must form an "important, or [at
least] material, element of proof" in the plaintiff's case.
Marino, 793 F.2d at 430 (construing Massachusetts statute).
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Thus, in a contract case, the defendant's forum-based activities
must be "instrumental in the formation of the contract." Hahn,
____
698 F.2d at 51 (construing Massachusetts statute). We have
likewise suggested an analogy between the relatedness requirement
and the binary concept of causation in tort law under which both
elements cause in fact (i.e., the injury would not have
occurred "but for" the defendant's forum-state activity) and
legal cause (i.e., the defendant's in-state conduct gave birth to
the cause of action) must be satisfied to find causation
sufficient to support specific jurisdiction. Pizarro v. Hoteles
_______ _______
Concorde Int'l, C.A., 907 F.2d 1256, 1259 (1st Cir. 1990)
_____________________
(construing Puerto Rico statute). In this inquiry,
foreseeability is critical. See id. at 1259-60.
___ ___
To summarize these principles, we today suggest a
tripartite test for the ascertainment of specific jurisdiction.
First, the claim underlying the litigation must directly arise
out of, or relate to, the defendant's forum-state activities.
Second, the defendant's in-state contacts must represent a
purposeful availment of the privilege of conducting activities in
the forum state, thereby invoking the benefits and protections of
19
that state's laws and making the defendant's involuntary presence
before the state's courts foreseeable. Third, the exercise of
jurisdiction must, in light of the Gestalt factors, be
reasonable.
E.
E.
__
We turn now to the work of applying this test to the
case at hand. In considering the first segment relatedness
it is important to bear in mind the nature of plaintiffs' claim.
Their cause of action centers on ITD's supposed breach of a
contractual and statutory duty to pay health-care premiums. Of
the forum-related contacts mentioned by the district court, only
Lindsay's involvement in negotiation of the collective bargaining
agreement can be thought to give rise, or relate, to this cause
of action. See Hahn, 698 F.2d at 51. The breach of contract
___ ____
cannot conceivably be said to have arisen directly from, or been
caused proximately by, ITD's remaining Massachusetts contacts
all of which related to financial and business assistance
delivered after initial execution of the collective bargaining
agreement. For purposes of the second and third prongs of the
test, therefore, we can restrict our inquiry to Lindsay's
involvement in the labor negotiations.
Before exploring whether ITD, through Lindsay's
participation in the collective bargaining process, purposefully
availed itself of a Massachusetts venue in any constitutionally
relevant sense, we remark the obvious: the contacts of a
20
corporation's agent can subject the corporation to personal
jurisdiction. This result flows naturally from the corporate
form. "Since the corporate personality is a fiction, although a
fiction intended to be acted upon as though it were a fact, it is
clear that unlike an individual its 'presence' without, as well
as within, the state of its origin can be manifested only by
activities carried on in its behalf by those who are authorized
to act for it." International Shoe, 326 U.S. at 316 (citation
___________________
omitted). Inasmuch as ITD had not purchased PSC when Lindsay, a
part-owner of ITD, first became involved in the negotiations, we
can assume, at least for argument's sake, that he was acting as
an agent of ITD.
The Supreme Court, when analyzing personal jurisdiction
in contract cases, has taken a holistic approach, emphasizing
that a contract is an "intermediate step" in a process involving
"prior . . . negotiations [and] future consequences." Burger
______
King, 471 U.S. at 479 (quoting Hoopeston Canning Co. v. Cullen,
____ _____________________ ______
318 U.S. 313, 317 (1943)). Starting from this coign of vantage,
courts have found that participating in significant negotiations
within the forum state anent important contract terms can
constitute "minimum contacts" with the state for purposes of a
subsequent claim asserting breach of that contract. See, e.g.,
___ ____
Complete Concepts, Ltd. v. General Handbag Corp., 880 F.2d 382,
_______________________ ______________________
388-89 (11th Cir. 1989) (per curiam); Williams Elec. Co. v.
___________________
Honeywell, Inc., 854 F.2d 389, 392-93 (11th Cir. 1988) (per
________________
curiam); Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d
________________ ________________________
21
834, 840 (9th Cir. 1986); Data Disc Inc. v. Systems Technology
______________ __________________
Assocs., Inc., 557 F.2d 1280, 1287-88 (9th Cir. 1977).
_____________
The present case, however, is at a considerable remove.
Here, unlike the defendants in the cited cases, ITD was not a
party to the contract. Here, unlike the cited cases, there is no
indication in the record that Lindsay's involvement in the
negotiations took place in the forum state or by means of
communications to and from the forum.10 The location of the
negotiations is vitally important to the jurisdictional inquiry
in a case like this one. If the negotiations occurred outside
the forum state, their existence cannot serve to bolster the
argument for the assertion of jurisdiction in the forum. See
___
Pathe Computer Control Systems Corp. v. Kinmont Indus., Inc., ___
____________________________________ ____________________
F.2d ___, ___ (1st Cir. 1992) [No. 91-1534, slip op. at 6].
Here, the negotiations constitute too thin a reed to support the
district court's exercise of personal jurisdiction over ITD. For
aught that appears, Lindsay might have played his part by
telephone calls from Scotland to the Union's national offices in
Pennsylvania, or by attending meetings held in a law firm's
conference room in Delaware, New York City, or some other venue.
The record leaves these important facts entirely open to
____________________
10On this point, the district judge simply noted that an
affidavit submitted on plaintiffs' behalf "says that Lindsay was
involved in all the contract negotiations with the union." This
statement accurately summarizes the affidavit in question. The
plaintiffs presented no other evidence regarding the manner of
Lindsay's involvement, the ways in which he participated, the
means he employed, or his whereabouts at the time. The record
below is equally barren of any proof as to where the negotiations
were conducted.
22
conjecture, speculation, and surmise.
When personal jurisdiction is contested, plaintiffs
bear the burden of proving the facts upon which the existence of
jurisdiction depends. See McNutt v. General Motors Acceptance
___ ______ __________________________
Corp., 298 U.S. 178, 189 (1936); General Contracting & Trading
_____ ______________________________
Co. v. Interpole, Inc., 899 F.2d 109, 115 (1st Cir. 1990); Good
___ _______________ ____
Hope Indus., Inc. v. Ryder Scott Co., 389 N.E.2d 76, 78 (Mass.
__________________ ________________
1979). The present plaintiffs, veil piercing aside, failed to
carry the devoir of persuasion. Because there is insufficient
evidence in the record to find that ITD, through its own
affirmative conduct, purposefully availed itself of the privilege
of conducting activities in Massachusetts such that it could
reasonably anticipate being haled into court there, the district
court lacked direct jurisdiction over ITD based upon the latter's
contacts with the commonwealth.11
IV. VEIL PIERCING
IV. VEIL PIERCING
Our task is not yet finished. Although ITD, in its own
right, lacked sufficient minimum contacts with Massachusetts to
permit the assertion of jurisdiction over its corporate person,
PSC was unarguably subject to the jurisdiction of the
Massachusetts courts. Hence, if PSC's contacts can be attributed
to ITD, then the jurisdictional hurdle can be vaulted. The
district court thought that such attribution was legally proper
____________________
11Absent proof of the necessary minimum contacts, we need
not address the question of reasonableness. The Gestalt factors
come into play only if the first two segments of the test for
specific jurisdiction have been fulfilled. Cf. Donatelli, 893
___ _________
F.2d at 465.
23
on the theory that PSC's corporate veil was susceptible to
piercing. On this record, we are constrained to disagree.
A.
A.
__
The principle of limited liability is a pillar of
corporate law. See DeBreceni v. Graf Bros. Leasing, Inc., 828
___ _________ _________________________
F.2d 877, 879 (1st Cir. 1987), cert. denied, 484 U.S. 1064
_____ ______
(1988). Mighty though it may be, however, the limited liability
principle is not an immutable rule. Moreover, while it is
generally true that questions of "[l]iability and jurisdiction
are independent," Sher v. Johnson, 911 F.2d 1357, 1365 (9th Cir.
____ _______
1990), the factors that we must consider for purposes of piercing
the veil separating two corporations in the liability context
also inform the jurisdictional inquiry. See Donatelli, 893 F.2d
___ _________
at 465-66. With this brief prelude, then, we turn to the case at
bar.
Ordinarily, courts respect the legal independence of a
corporation and its subsidiary when determining if a court's
jurisdiction over the offspring begets jurisdiction over the
parent. See, e.g., Cannon Mfg. Co. v. Cudahy Packing Co., 267
___ ____ ________________ ___________________
U.S. 333, 336-37 (1925); Pathe Computer, ___ F.2d at ___ [slip
_______________
op. at 6-7]; Donatelli, 893 F.2d at 465; Escude Cruz v. Ortho
_________ ___________ _____
Pharmaceutical Corp., 619 F.2d 902, 905 (1st Cir. 1980). But,
_____________________
the "presumption of corporate separateness [may] be overcome by
clear evidence that the parent in fact controls the activities of
the subsidiary." Escude Cruz, 619 F.2d at 905; accord Third
___________ ______ _____
Nat'l Bank v. WEDGE Group Inc., 882 F.2d 1087, 1090 (6th Cir.
__________ _________________
24
1989), cert. denied, 493 U.S. 1058 (1990); cf. Mangual v. General
_____ ______ ___ _______ _______
Battery Corp., 710 F.2d 15, 21 (1st Cir. 1983) ("While the
______________
parent-subsidiary relationship in itself is insufficient to
justify the exercise of jurisdiction, the close relationship
between the two companies is a relevant factor that may be
considered."). Thus, if the record contains facts that warrant
disregarding PSC's corporate independence, the district court was
entitled to find ITD subject to personal jurisdiction in
Massachusetts on the basis of its relationship with its
subsidiary. See Donatelli, 893 F.2d at 466 ("Since the essence
___ _________
of personal jurisdiction is to bring responsible parties before
the court, a corporation which is actually responsible for its
subsidiary's decision to undertake instate activities should, in
all fairness, be within the state courts' jurisdictional
reach.").
B.
B.
__
Under Massachusetts common law, disregarding the
corporate form is permissible only in rare situations. See
___
Pepsi-Cola Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10,
_______________________________ _______________
15-16 (1st Cir. 1985) (limning criteria to be evaluated in
considering veil piercing under Massachusetts law); My Bread
________
Baking Co. v. Cumberland Farms, Inc., 233 N.E.2d 748, 751-52
___________ _______________________
(Mass. 1968) (similar). It would, however, serve no useful
purpose to explore the interstices of the state-law standard.
This is, after all, a federal question case and in federal
question cases, courts are wary of allowing the corporate form to
25
stymie legislative policies. See, e.g., First Nat'l City Bank v.
___ ____ _____________________
Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 630
___________________________________________
(1983); Bangor Punta Operations, Inc. v. Bangor & A. R.R., 417
_____________________________ _________________
U.S. 703, 713 (1974). For this reason, a federal court, in
deciding what veil-piercing test to apply, should "look closely
at the purpose of the federal statute to determine whether the
statute places importance on the corporate form, an inquiry that
usually gives less respect to the corporate form than does the
strict common law alter ego doctrine." Town of Brookline v.
__________________
Gorsuch, 667 F.2d 215, 221 (1st Cir. 1981) (citations omitted).
_______
We think that in disputes involving workers' claims to
ERISA benefits, whether derived through collective bargaining
under the LMRA or from individual employment contracts, a federal
court should apply a federal common law standard of corporate
separateness. See Lumpkin v. Envirodyne Indus., Inc., 933 F.2d
___ _______ _______________________
449, 460-61 (7th Cir.), cert. denied, 112 S. Ct. 373 (1991);
_____ ______
United Steelworkers of Am. v. Connors Steel Co., 855 F.2d 1499,
__________________________ _________________
1506-07 (11th Cir. 1988), cert. denied, 489 U.S. 1096 (1989);
_____ ______
Alman v. Danin, 801 F.2d 1, 3-4 (1st Cir. 1986); Laborers Clean-
_____ _____ _______________
Up Contract Admin. Trust Fund v. Uriarte Clean-Up Serv., Inc.,
______________________________ _____________________________
736 F.2d 516, 523 (9th Cir. 1984).12
____________________
12While the veil-piercing inquiry in an ERISA case is thus
rooted in federal law, state law is not rendered completely
irrelevant. See Massachusetts Laborers' Health & Welfare Fund v.
___ _____________________________________________
Starrett Paving Corp., 845 F.2d 23, 27 (1st Cir. 1988) (order
_____________________
denying rehearing) (federal veil-piercing standard in ERISA cases
"takes its content in part from related state law"); Uriarte, 736
_______
F.2d at 523 ("In considering whether to disregard the corporate
form [in an ERISA case], we apply federal substantive law,
although we may look to state law for guidance.").
26
In an ERISA case, the applicable federal standard can
sometimes be less rigorous than its state common law
counterparts. The rationale for encouraging a modicum of
corporate disregard in ERISA cases is grounded on congressional
intent. Congress enacted ERISA to protect the interests of
employee benefit plan participants and their beneficiaries. See
___
Ingersoll-Rand Co. v. McClendon, 111 S. Ct. 478, 482 (1990);
___________________ _________
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 108 (1989);
____________________________ _____
see also 29 U.S.C. 1001 (statement of congressional findings
___ ____
and declaration of policy). Against this backdrop, it is logical
to conclude that the corporate form must on occasion yield in
cases concerning employee benefits. See, e.g., Lowen v. Tower
___ ____ _____ _____
Asset Management, Inc., 829 F.2d 1209, 1220 (2d Cir. 1987)
_______________________
("Courts have without difficulty disregarded form for substance
where ERISA's effectiveness would otherwise be undermined.");
Alman, 801 F.2d at 3 (ERISA "cannot be said to attach great
_____
weight to corporate form"); cf. Connors Steel, 855 F.2d at 1505-
___ _____________
07 (applying similar reasoning to cases brought under LMRA). A
contrary rule, giving fully as much tensile strength to the
corporate shield in ERISA litigation as is bestowed by state
common law, would permit "the shareholders of a marginal
corporation to invoke the corporate shield in circumstances where
it is inequitable for them to do so and thereby avoid financial
obligations to employee benefit plans." Alman, 801 F.2d at 4.
_____
Moreover, sanctioning conduct of this type would put the courts
at cross purposes with Congress and thwart Congress's discernible
27
intent. See Lumpkin, 933 F.2d at 461 ("[T]he congressional
___ _______
intent of ERISA is to hold employers responsible for pension
benefits, so that when the corporate form poses a bar to
liability, 'concerns for corporate separateness are secondary to
what we view as the mandate of ERISA.'") (quoting Pension Benefit
_______________
Guar. Corp. v. Ouimet Corp., 711 F.2d 1085, 1093 (1st Cir.),
____________ ____________
cert. denied, 464 U.S. 961 (1983)).
_____ ______
C.
C.
__
Adopting a federal veil-piercing standard for ERISA
cases is not tantamount to saying that separate corporate
identities can be overlooked at will or at whim. The federal
standard still demands a substantial showing. In determining
when it may be appropriate to disregard corporate separateness in
an ERISA-related dispute, a court using the federal standard
should consider (1) whether the parent and the subsidiary ignored
the independence of their separate operations, (2) whether some
fraudulent intent existed on the principals' part, and (3)
whether a substantial injustice would be visited on the
proponents of veil piercing should the court validate the
corporate shield. See Alman, 801 F.2d at 4; United Paperworkers
___ _____ ___________________
Int'l Union v. Penntech Papers, Inc., 439 F. Supp. 610, 617-21
____________ ______________________
(D. Me. 1977), aff'd sub nom. United Paperworkers Int'l Union v.
_____ ___ ____ _______________________________
T. P. Property Corp., 583 F.2d 33 (1st Cir. 1978). Several of
_____________________
our sister circuits have adopted substantially similar tests.
See Lumpkin, 933 F.2d at 461; Connors Steel, 855 F.2d at 1507;
___ _______ _____________
Contractors, Laborers, Teamsters & Eng'rs Health & Welfare Plan
_________________________________________________________________
28
v. Hroch, 757 F.2d 184, 190 (8th Cir. 1985); Uriarte, 736 F.2d at
_____ _______
524. In sum, litigants who insist that the corporate veil be
brushed aside must first prove three things: lack of corporate
independence, fraudulent intent, and manifest injustice.
D.
D.
__
The plaintiffs' effort to justify jurisdiction over
ITD, en route to establishing ITD's liability for health-care
premiums, founders on the middle ("fraudulent intent")
component.13 In addressing this component, it is important to
bear in mind that corporations which simply try to limit their
overall liability by establishing, or acquiring, separately
incorporated subsidiaries do not thereby transgress legal or
ethical norms. In our commercially sophisticated society,
limited liability is often a paramount consideration in the
decision to maintain corporate separateness, and properly so.
See, e.g., Anderson v. Abbott, 321 U.S. 349, 362 (1944) ("Limited
___ ____ ________ ______
liability is the rule, not the exception."). It is only when the
quest to limit corporate responsibility evolves into a specific
effort to evade a parent corporation's legal obligations that the
possibility of veil piercing begins to loom. See N.L.R.B. v.
___ ________
Fullerton Transfer & Storage Ltd., 910 F.2d 331, 338 (6th Cir.
__________________________________
1990). A more free-wheeling approach to veil piercing would
hamstring established businesses in their legitimate efforts to
expand into new fields; undermine the predictability of corporate
____________________
13Concluding, as we do, that the record will not support a
finding of fraudulent intent, we need not address here either the
first or third components.
29
risk-taking; and provide a huge disincentive for the investment
of venture capital. Not surprisingly, therefore, the cases that
permit veil piercing in the ERISA milieu all emphasize that a
finding of some fraudulent intent is a sine qua non to the
remedy's availability.
To be sure, the word "fraud" has a protean quality. It
connotes different things in different settings. In the ERISA
veil-piercing sense, "fraud" may inhere even short of the
reprehensible behavior necessary to prove, say, criminal fraud or
independently actionable civil fraud. Then, too, the kind and
quantum of fraud may be less than under some state-law veil-
piercing rules. But, although the fraud threshold is lower when
veil piercing is attempted in an ERISA case, the threshold is not
invisible. The case law invariably requires, as a prerequisite
to corporate disregard in an ERISA matter, some cognizable
showing that the parent corporation maintained the subsidiary to
avoid its statutory responsibilities, acted in a blameworthy
manner, looted the subsidiary, or so undercapitalized the
subsidiary that the latter could not reasonably have been
expected to meet its obligations. See, e.g., Laborers' Pension
___ ____ _________________
Trust Fund v. Sidney Weinberger Homes, Inc., 872 F.2d 702, 705
___________ ______________________________
(6th Cir. 1988) (per curiam) (allowing veil piercing because
owner looted subsidiary); Lowen, 829 F.2d at 1221 (allowing veil
_____
piercing because subsidiary's capital was "wholly inadequate" and
owners looted subsidiary); Alman, 801 F.2d at 4 (allowing veil
_____
piercing because owners undercapitalized subsidiary and dealt in
30
bad faith with unions); Hroch, 757 F.2d at 191 (allowing veil
_____
piercing because owner used subsidiary "in an inequitable fashion
to avoid its obligations"); see generally J.A. Bryant, Jr.,
___ _________
Annotation, Liability of Corporation for Contracts of Subsidiary,
____________________________________________________
38 A.L.R.3d 1102, 1135 (1971) ("something on the order of moral
culpability on the part of the parent is required to warrant
holding it liable for an obligation of its subsidiary").
In this case, there is a glaring shortfall in the
proof. The district court made no finding, expressly or by fair
implication, that PSC was either a sham or inadequately
capitalized; that ITD maintained PSC's separate corporate
identity as a subterfuge; that ITD intended to use PSC as a shell
in order corruptly to avoid obligations owed to the Union under
the collective bargaining agreement or otherwise; or that ITD had
any other malevolent purpose. The court did not mention any
attempts by ITD to loot its subsidiary, skirt labor law
obligations, or subvert ERISA's policies by reliance on the
technicalities of the corporate form. The court cited no
evidence that ITD was, from the start or thereafter, playing a
rogue's game.
The plaintiffs attempt to fill this void by arguing
that PSC was so thinly capitalized that an ulterior motive can be
inferred from the silent record. The lyrics have a soothing
ring, but the tune is completely off-key. In the first place, we
are inclined to view the absence of a finding to this effect as
fatal, whether or not the evidence, scanty though it is, might
31
support a permissive inference such as the plaintiffs describe.
In the second place, the evidence, howsoever recast, simply does
not substantiate the inference.
Inadequate capitalization can, of course, be a badge of
fraud. But, the record here does not reflect a shoestring
operation. Rather, it reveals an investor spending freely in
what has all the earmarks of a good-faith, if ultimately
unsuccessful, endeavor to resurrect a moribund company. As the
plaintiffs admit, in the thirty months during which PSC endured,
ITD injected roughly $8,000,000, partly in cash and partly in
kind, in a fruitless effort to revivify PSC's manufacturing
operations. To draw an inference of fraudulent intent from so
forthcoming a history defies logic. Cf. Uriarte, 736 F.2d at 525
___ _______
(distinguishing the propriety of veil piercing in a case where a
subsidiary was undercapitalized from a case where a subsidiary
"was once adequately capitalized but subsequently fell upon bad
financial times").
We have previously examined this very issue in a case,
not cited by any party, which possesses uncanny similarities to
the case at bar. In United Paperworkers Int'l Union v. Penntech
_______________________________ ________
Papers, Inc., 439 F. Supp. 610 (D. Me. 1977), aff'd sub nom.
_____________ _____ ___ ____
United Paperworkers Int'l Union v. T. P. Property Corp., 583
_________________________________ _____________________
F.2d 33 (1st Cir. 1978), a paper mill, operated by Kennebec
Corporation, had a collective bargaining agreement with the
Paperworkers Union. The mill was shut down by its parent company
because the operation proved unprofitable. Later on, Penntech,
32
an unrelated company, exhibited an interest in buying Kennebec.
Kennebec and the union bargained in anticipation of the
acquisition. Penntech, which had not yet acquired the mill, made
suggestions on how to structure the collective bargaining
agreement. These suggestions were incorporated into the final
version of the pact. During the same period, Penntech also
negotiated with Kennebec's creditors in a successful attempt to
write down some of Kennebec's outstanding debt.
Two days after Kennebec and the union signed the
collective bargaining agreement, the sale was consummated.
Penntech became the sole owner of Kennebec (which retained its
separate corporate identity). The mill operated under Penntech's
stewardship for approximately one year. The ties between parent
and subsidiary were close. Penntech staffed Kennebec's board
with individuals who were associated with Penntech; elected
several insiders as officers; and loaned Kennebec over $100,000
to get the mill back on its feet. Nevertheless, Kennebec's
losses mounted. After a year, the mill folded.
Basing its claims on the LMRA, the union then attempted
to hold Penntech, a non-signatory, to the terms of the collective
bargaining agreement. The district court rejected the union's
attempt to subject Penntech to Kennebec's labor agreement. We
affirmed. Like the district court, we refused to disregard the
corporate form absent evidence of Penntech's fraudulent intent in
acquiring and maintaining Kennebec. See T. P. Property, 583 F.2d
___ ______________
at 35-36; Penntech, 439 F. Supp. at 617-21. This fraud
________
33
requirement:
holds true even when the subsidiary is found
to be an alter ego or instrumentality of the
parent. It is particularly so in contract
cases because contracts are private,
consensual relationships in which each party
has a clear and equal obligation to weigh the
potential benefits and risks of the
agreement. Unless fraud or misrepresentation
is involved, there can be little
justification for disregarding corporate
entities which the parties obviously expected
to remain intact.
Penntech, 439 F. Supp. at 618.
________
The striking factual and legal similarities between the
United Paperworkers cases and the present case solidify our
____________________
belief that the district court erred in concluding that PSC's
corporate veil could be pierced.14 Veil piercing cannot occur
without some degree of moral culpability on the parent
corporation's part. See American Bell Inc. v. Federation of Tel.
___ __________________ __________________
Workers, 736 F.2d 879, 887 (3d Cir. 1984) ("[T]here is no policy
_______
of federal labor law, either legislative or judge-made, that a
parent corporation is bound by its subsidiary's labor contracts
simply because it controls the subsidiary's stock and
participates in the subsidiary's management.") (citing T. P.
______
Property). Without a finding of fraudulent intent indeed,
________
without the slightest evidentiary basis for such a finding ITD
could not be subjected to jurisdiction because of its
____________________
14We recognize, of course, that the United Paperworkers
___________________
cases did not deal with the special policy concerns implicated by
ERISA. But, this is a distinction without a difference. As we
have explained, the ERISA cases consistently require a showing of
fraud as a precondition to piercing the corporate veil.
34
relationship to PSC.
E.
E.
__
The plaintiffs try to escape from the consequences of
their failure to show some vestige of fraudulent intent by
reliance on a somewhat different aspect of the Massachusetts
"alter ego" doctrine. This doctrine allows corporate disregard,
even absent a finding of fraud, if "there is a confused
intermingling of activity of two or more corporations engaged in
a common enterprise with substantial disregard of the separate
nature of the corporate entities, or serious ambiguity about the
manner in which the various corporations and their respective
representatives are acting." My Bread, 233 N.E.2d at 752.
_________
Accordingly, when a parent and its subsidiary fail "to make clear
which corporation is taking action in a particular situation," or
neglect to honor "the formal barriers between the corporations
with a proper segregation of their separate businesses, records,
and finances," their separate entities may occasionally be
disregarded "in order to prevent gross inequity." Id. (citation
___
omitted).
This effort fails for two reasons. First, as we have
previously explained, state law does not govern here. Rather,
the federal courts have developed, and must perforce use, their
own federal common law standard for determining corporate
independence in cases involving ERISA plans. See, e.g., Lumpkin,
___ ____ _______
933 F.2d at 460-61; Connors Steel, 855 F.2d at 1506-07; Alman,
______________ _____
801 F.2d at 3-4; Uriarte, 736 F.2d at 523; T. P. Property, 583
_______ _______________
35
F.2d at 35-36. We are aware of no case applying the federal
_______
standard which permits the piercing of a corporate veil on a
showing of something less than fraud (as we have defined it, see
___
supra pp. 29-30).
_____
Second, if we were to assume arguendo that, under
________
federal common law, a doctrine roughly congruent to the
Massachusetts alter ego doctrine (or even a slightly milder
varietal thereof) might be recognized as a basis for veil
piercing in an appropriate ERISA case, cf., e.g., cases cited
___ ____
supra note 12, the present plaintiffs still could not prevail.
_____
Successful invocation of the alter ego doctrine requires a
showing that businesses, although separately incorporated, have
been operated in so imbricated a manner as to justify a
reasonable perception that they were one and the same. See
___
Westcott Constr. Corp. v. Cumberland Constr. Co., 328 N.E.2d 522,
______________________ ______________________
525-26 (Mass. App. Ct. 1975). There is no such evidence in this
record. Similarly, there is no suggestion here that ITD
manipulated its interest in PSC in such a way as to "blur the
practical distinctions" between the two corporate entities. Oman
____
Int'l Fin. Ltd. v. Hoiyong Gems Corp., 616 F. Supp. 351, 364
________________ ___________________
(D.R.I. 1985). PSC alone signed the collective bargaining
agreement and the individual labor contracts; executing the pacts
in this manner "ma[de] clear which corporation [was] taking
action" with respect to the promise to pay health-case premiums.
My Bread, 233 N.E.2d at 752. In short, the evidence does not
________
begin to approach the level of "confused intermingling" or
36
"serious ambiguity" needed to support a finding that PSC and ITD
had become alter egos. Compare, e.g., WJM, Inc. v. Massachusetts
_______ ____ _________ _____________
Dep't of Pub. Welfare, 840 F.2d 996, 1009-10 (1st Cir. 1988)
_______________________
(respecting corporate separateness); Miller v. Honda Motor Co.,
______ _______________
779 F.2d 769, 772-73 (1st Cir. 1985) (same); Evans v. Multicon
_____ ________
Constr. Corp., 574 N.E.2d 395, 398-400 (Mass. App. Ct.) (same),
_____________
rev. denied, 577 N.E.2d 309 (1991); and Westcott, 328 N.E.2d at
____ ______ ________
526 (same) with Pepsi-Cola, 754 F.2d at 14-15 (disregarding
____ __________
corporate separateness).
F.
F.
__
In a final, apopemptic effort to salvage their victory
below, plaintiffs contend that, even if the lower court erred in
piercing the corporate veil, jurisdiction over ITD was
nonetheless exercisable under an "integrated enterprise" theory.
Whatever the cogency of this asseveration and we are highly
skeptical of its merits in light of the conspicuous lack of
support in the case law for transplanting this theory from the
liability context to the jurisdictional context the plaintiffs
have forfeited the opportunity to seek appellate review of this
contention.
It is frequently true that legal theories not squarely
presented in the nisi prius court are deemed waived on appeal.
See, e.g., McCoy v. Massachusetts Inst. of Technology, 950 F.2d
___ ____ _____ __________________________________
13, 22 (1st Cir. 1991), petition for cert. filed, 60 U.S.L.W.
_________________________
3601 (U.S. Feb. 14, 1992); Clauson v. Smith, 823 F.2d 660, 666
_______ _____
(1st Cir. 1987). Square presentation implies timely
37
presentation. In this instance, plaintiffs did not raise the
argument distinctly or in a timely fashion in the court below.
This deficiency is fatal even though plaintiffs appear here as
appellees for, although an appellate court has the power to
affirm a judgment on any independently sufficient ground
documented by the record, whether or not relied on below, see,
___
e.g., Polyplastics, Inc. v. Transconex, Inc., 827 F.2d 859, 860-
____ __________________ ________________
61 (1st Cir. 1987), the plaintiffs' dilatoriness in presenting
the integrated enterprise point, coupled with the nonchalant
nature of their allusion to it, have combined to leave the
present record without a basis adequate to permit judicial
evaluation of the doctrine's applicability.15 The record
simply does not contain satisfactory proof of the criteria upon
which the availability of the doctrine depends. See, e.g., Radio
___ ____ _____
& Television Broadcast Technicians, Etc. v. Broadcast Serv.,
___________________________________________ _________________
Inc., 380 U.S. 255, 256 (1965) (per curiam) (elucidating criteria
____
for operation of integrated enterprise doctrine); Rivas v.
_____
Federacion de Asociaciones Pecuarias, 929 F.2d 814, 820 n.16 (1st
____________________________________
____________________
15To be sure, the plaintiffs made a fleeting reference to
this theory in some papers handed to the district judge during
the preliminary injunction hearing. Neither the court nor ITD,
however, had time to consider or analyze the theory before the
court granted the preliminary injunction. Under the
circumstances, the plaintiffs' casual proffer was too little, too
late. See, e.g., McCoy, 950 F.2d at 22 (court of appeals will
___ ____ _____
not review claims that were "merely insinuated rather than
actually articulated in the trial court"); Mack v. Great Atlantic
____ ______________
& Pacific
__________
Tea Co., 871 F.2d 179, 183 (1st Cir. 1989) ("A litigant has the
_______
duty to spell out her theories clearly and distinctly before the
nisi prius court, on pain of preclusion.").
38
Cir. 1991) (similar). As a result, the court below did not
consider the theory. We are equally disadvantaged more so,
perhaps, because there are no pertinent findings for an appellate
court to review. Hence, plaintiffs' argument suffers from a
fatal insufficiency of proof.
We hasten to add that, were we willing to entertain an
attempt to assert jurisdiction over ITD under this newly emergent
theory, such evidence as there is suggests that the plaintiffs
would not be benefitted. While ITD owned PSC, that fact, without
more, is not enough to justify the invocation of the integrated
enterprise doctrine. See United Tel. Workers v. N.L.R.B., 571
___ ____________________ ________
F.2d 665, 667 (D.C. Cir.), cert. denied, 439 U.S. 827 (1978).
_____ ______
And as we have pointed out in a slightly different context, see
___
supra Part IV(E), other criteria for the application of the
_____
integrated enterprise doctrine are lacking. In sum, our
examination of the record fully persuades us that there is
insufficient evidence concerning the interrelationship of the
corporations' management and operations to bring the integrated
enterprise doctrine into play.
V. MISCELLANEOUS MATTERS
V. MISCELLANEOUS MATTERS
Finding a want of in personam jurisdiction on the
__ ________
record as it stands, we are left with two additional matters
initiated by the plaintiffs. We consider them seriatim.
________
A.
A.
__
The plaintiffs' cross-appeal makes but a single point.
It challenges the district court's denial of the plaintiffs'
39
request to exclude certain of ITD's affidavits. This strikes us
as a non-issue, since the material in the disputed affidavits is
of only tangential relevance to the matters upon which the main
appeals hinge. When, as in this case, disputed affidavits amount
to no more than buzznacking because, come what may, they will
have no bearing upon the outcome of an appeal, a reviewing court
should simply ignore them. See Sheinkopf v. Stone, 927 F.2d
___ _________ _____
1259, 1262 n.3 (1st Cir. 1991); William J. Kelly Co. v.
_______________________
Reconstruction Fin. Corp., 172 F.2d 865, 867-68 (1st Cir. 1949).
_________________________
We follow this course. Hence, because nothing turns on the
cross-appeal, it is pretermitted.
B.
B.
__
The other matter with which we must deal is plaintiffs'
motion to dismiss ITD's appeals. In this motion, plaintiffs
argue that, because ITD "has failed to obey . . . the preliminary
injunction and the contempt order issued by the district court,"
it should not be allowed to prosecute its appeals. In support,
the plaintiffs advance a novel theory of disentitlement derived
from the fugitive-from-justice doctrine. See generally Molinaro
___ _________ ________
v. New Jersey, 396 U.S. 365 (1970) (per curiam) (discussing
__________
fugitive-from-justice doctrine); United States v. Puzzanghera,
_____________ ___________
820 F.2d 25 (1st Cir.) (similar), cert. denied, 484 U.S. 900
_____ ______
(1987). We believe the plaintiffs' reliance on this doctrine is
utterly misplaced.
The fugitive-from-justice doctrine is a prudential
device which courts may invoke to estop fugitives from
40
challenging criminal convictions in absentia. Puzzanghera, 820
___________
F.2d at 27; United States v. Tremont, 438 F.2d 1202, 1203 (1st
_____________ _______
Cir. 1971) (per curiam). The driving force behind the doctrine
is the idea that a criminal defendant, following conviction and
initiation of an appeal, should not be allowed, by absconding, to
create a "heads I win, tails you lose" situation. Thus, the
doctrine holds that a fugitive, having flouted the justice
system, should not be permitted simultaneously to milk the system
for his own benefit by seeking vacation of the very conviction
that inspired his unlawful flight.
When the claim of disentitlement is addressed to a
civil suit, the doctrine must be applied sparingly. Thus, "while
we have previously extended the application of the doctrine
beyond an appeal in a criminal case, to a civil case, it is clear
that this must be a civil case closely related to the criminal
matter from which the applicant is a fugitive." United States v.
_____________
Pole No. 3172, Hopkinton, 852 F.2d 636, 643 (1st Cir. 1988)
__________________________
(citation omitted); cf. United States v. Eng, 951 F.2d 461, 464
___ ______________ ___
(2d Cir. 1991) (the doctrine of disentitlement holds that "a
person who is a fugitive from justice may not use the resources
of the civil legal system while disregarding its lawful orders in
a related criminal action"). In this case, the plaintiffs'
argument does not get out of the starting gate: since ITD
committed no crime, the fugitive-from-justice doctrine does not
in any way bar its prosecution of the instant appeals.
Apparently recognizing the weakness of their position,
41
the plaintiffs try to conjure up a new rule of law by analogy to,
and extension of, the fugitive-from-justice doctrine. They
argue, without a shred of supporting authority, that a civil
contemnor, not having complied with the underlying decree, should
be prohibited from appealing either that decree or the contempt
order itself. In the circumstances of this case, we refuse to
essay so heroic a leap.
Disentitlement is not a matter of jurisdictional
dimension; rather, it is a concept premised on principles of
equity. See United States v. Sharpe, 470 U.S. 675, 681 n.2
___ ______________ ______
(1985); United States v. Van Cauwenberghe, 934 F.2d 1048, 1054
______________ _________________
(9th Cir. 1991). ITD is not a fugitive. It has made a series of
good-faith challenges, in the district court and on appeal, to an
adverse jurisdictional ruling. In so doing, ITD has acted within
the legal system's rules, not as an outlaw, but as a litigant
determined to assert a colorable defense in a responsible way.
We think that, in general, a court should be extremely reluctant
to invoke the equitable doctrine of disentitlement when an
appellant has not committed any criminal act.16 Cf. Pole No.
___ _________
3172, 852 F.2d at 643. No such wrongdoing can conceivably be
____
attributed to ITD. On this record, we cannot even say that ITD
stands before us with unclean hands.
____________________
16It may be, in theory, that some outrageous conduct, short
of transgressing the criminal law, might in some special
circumstances justify a disentitlement penalty. We need not
speculate as to this possibility, however, as it is clear that
ITD has done nothing sufficiently culpable to warrant so
draconian a sanction.
42
We note, too, that the plaintiffs' argument flies in
the teeth of the case law regarding litigants' attempts to
challenge contempt orders on personal jurisdiction grounds.
Because "[c]ourt orders are accorded a special status in American
jurisprudence," In re Providence Journal Co., 820 F.2d 1342, 1347
____________________________
(1st Cir. 1986), modified, 820 F.2d 1354 (1st Cir. 1987) (per
________
curiam), cert. dismissed, 485 U.S. 693 (1988), parties wishing to
_____ _________
challenge such orders must proceed within the guidelines of the
collateral bar rule. This rule dictates "that court orders, even
those that are later ruled unconstitutional, must be complied
with until amended or vacated." Id. at 1345. As a conventional
___
matter, then, a party wishing to appeal a district court's order
should either obtain a stay of the order or comply with its terms
until an appeals court amends or vacates the order. See id. at
___ ___
1346.
Nevertheless, "court orders are not sacrosanct," id. at
___
1347, and the collateral bar rule is not without exceptions. One
such exception is pertinent here. It is established beyond
peradventure that a party may bring an appeal to challenge a
contempt order, notwithstanding the failure to obtain a stay or
comply with the order's terms, if the order was entered by a
court lacking jurisdiction over the contemnor or the subject
matter. See United States Catholic Conference v. Abortion Rights
___ _________________________________ _______________
Mobilization, Inc., 487 U.S. 72, 76 (1988); United States v.
__________________ _____________
United Mine Workers, 330 U.S. 258, 293 (1947); Providence
_____________________ __________
Journal, 820 F.2d at 1347. This tenet flows naturally from the
_______
43
fact that jurisdictional concepts are not merely technical rules.
Rather, such concepts are founded
on the central principle of a free society
that courts have finite bounds of authority,
some of constitutional origin, which exist to
protect citizens from . . . the excessive use
of judicial power. The courts, no less than
the political branches of government, must
respect the limits of their authority.
Catholic Conference, 487 U.S. at 77. Were a contrary view to
____________________
prevail, "a court could wield power over parties or matters
obviously not within its authority a concept inconsistent with
the notion that the judiciary may exercise only those powers
entrusted to it by law." Providence Journal, 820 F.2d at 1347.
__________________
To say more would be to paint the lily. We refuse to
twist the fugitive-from-justice doctrine into the unfamiliar
contours envisioned by the plaintiffs. We rule that a party
previously found in contempt for failing to comply with a court
order does not lose its right to appeal if the merits of the
appeal hinge upon the trial court's want of jurisdiction. ITD is
entitled to prosecute the instant appeals.
VI. CONCLUSION
VI. CONCLUSION
We are keenly aware of the plight of the plaintiffs
working men and women who, upon retiring, had every expectation
of continued health-care coverage. It seems unfair that the
plaintiffs' expectations were dashed when PSC was forced to close
its doors. It is painful for us to turn the plaintiffs away
without redress. But, "[w]e do what we must, for 'it is the duty
of all courts of justice to take care, for the general good of
44
the community, that hard cases do not make bad law.'" Burnham v.
_______
Guardian Life Ins. Co., 873 F.2d 486, 487 (1st Cir. 1989)
_________________________
(quoting United States v. Clark, 96 U.S. (6 Otto) 37, 49 (1877)
_____________ _____
(Harlan, J., dissenting) (quoting Lord Campbell)).
We need go no further. Because the plaintiffs failed
to establish that the court below was entitled to exercise in
__
personam jurisdiction over ITD, the district court's orders were
________
coram non judice and, therefore, no more than serial nullities.
_____ ___ ______
It follows inexorably that ITD's motion to quash the complaint
for want of personal jurisdiction should have been granted.
Accordingly, the plaintiffs' motion to dismiss ITD's appeals must
be denied; the appeals themselves must be sustained; the
plaintiffs' cross-appeal must be rejected; and the case must be
remanded to the district court with directions to vacate the
preliminary injunction and contempt order previously entered, and
for further proceedings not inconsistent herewith.
Reversed and remanded.
Reversed and remanded.
_____________________
45