REVISED SEPTEMBER 10, 1999
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 98-50119
LISA CERZA GARDEMAL, Administrator of the
Estate of John W. Gardemal, Deceased,
Plaintiff-Appellant,
VERSUS
WESTIN HOTEL COMPANY, doing business as Westin
Regina Resort; WESTIN MEXICO SA DE CV,
Defendants-Appellees.
Appeal from the United States District Court
For the Western District of Texas
August 17, 1999
Before EMILIO GARZA, DeMOSS, and PARKER, Circuit Judges.
DeMOSS, Circuit Judge:
Plaintiff-appellant, Lisa Cerza Gardemal (“Gardemal”), sued
defendants-appellees, Westin Hotel Company (“Westin”) and Westin
Mexico, S.A. de C.V. (“Westin Mexico”), under Texas law, alleging
that the defendants were liable for the drowning death of her
husband in Cabo San Lucas, Mexico. The district court dismissed
the suit in accordance with the magistrate judge’s recommendation
that the court grant Westin’s motion for summary judgment, and
Westin Mexico’s motion to dismiss for lack of personal
jurisdiction. We affirm the district court’s rulings.
I.
In June 1995, Gardemal and her husband John W. Gardemal, a
physician, traveled to Cabo San Lucas, Baja California Sur, Mexico,
to attend a medical seminar held at the Westin Regina Resort Los
Cabos ("Westin Regina"). The Westin Regina is owned by Desarollos
Turisticos Integrales Cabo San Lucas, S.A. de C.V. (“DTI”), and
managed by Westin Mexico. Westin Mexico is a subsidiary of Westin,
and is incorporated in Mexico. During their stay at the hotel, the
Gardemals decided to go snorkeling with a group of guests.
According to Gardemal, the concierge at the Westin Regina directed
the group to “Lovers Beach” which, unbeknownst to the group, was
notorious for its rough surf and strong undercurrents. While
climbing the beach’s rocky shore, five men in the group were swept
into the Pacific Ocean by a rogue wave and thrown against the
rocks. Two of the men, including John Gardemal, drowned.
Gardemal, as administrator of her husband’s estate, brought
wrongful death and survival actions under Texas law against Westin
and Westin Mexico, alleging that her husband drowned because Westin
Regina’s concierge negligently directed the group to Lovers Beach
2
and failed to warn her husband of its dangerous condition.1 Westin
then moved for summary judgment, alleging that although it is the
parent company of Westin Mexico, it is a separate corporate entity
and thus could not be held liable for acts committed by its
subsidiary. The magistrate judge agreed with Westin, and
recommended that Westin be dismissed from the action. In reaching
its decision the magistrate judge rejected Gardemal’s assertion
that the state-law doctrines of alter-ego and single business
enterprise allowed the court to disregard Westin’s separate
corporate identity. After Westin filed its motion for summary
judgment, Westin Mexico also moved to dismiss the suit. In a Rule
12(b)(2) motion, Westin Mexico alleged that there were insufficient
minimum contacts to bring it within the personal jurisdiction of
the court. Finding that there was neither general nor specific
jurisdiction over Westin Mexico, the magistrate judge concluded
that personal jurisdiction was in fact lacking and recommended that
Westin Mexico be dismissed.
Gardemal timely objected to the magistrate judge’s two
recommendations. Applying a de novo standard of review, the
district court accepted the magistrate judge’s recommendations and
dismissed Gardemal’s suit. Gardemal now appeals, alleging that the
district court erred in granting Westin’s motion for summary
1
Gardemal also asserted a claim under the Texas Deceptive
Trade Practices Act (“DTPA”). Tex. Bus. & Com. Code § 17.41, et
seq.
3
judgment, and Westin Mexico’s motion to dismiss. We affirm.
II.
We review a district court’s grant of summary judgment de
novo. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986); Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1451 (5th
Cir. 1995). Summary judgment is appropriate if the record reveals
“that there is no genuine issue as to any material fact and the
moving party is entitled to a judgment as a matter of law.” Fed.
R. Civ. P. 56(c). In making this determination, we must evaluate
the facts in the light most favorable to the non-moving party.
Matsushita, 475 U.S. at 587; Todd, 47 F.3d at 1451.
A district court’s dismissal for want of personal jurisdiction
is subject to de novo review. Jobe v. ATR Mktg., Inc., 87 F.3d
751, 753 (5th Cir. 1996). When a nonresident defendant moves to
dismiss for lack of personal jurisdiction, the plaintiff bears the
burden of demonstrating the district court’s jurisdiction over the
defendant. Wilson v. Belin, 20 F.3d 644, 649 (5th Cir. 1994).
When, as in this case, the district court rules on the motion
without an evidentiary hearing, the plaintiff may satisfy its
burden by presenting a prima facie case for jurisdiction. Felch v.
Transportes Lar-Mex S.A. de C.V., 92 F.3d 320, 326 (5th Cir. 1996).
In deciding whether a prima facie case has been made,
“uncontroverted allegations in the plaintiff’s complaint must be
4
taken as true, and conflicts between the facts contained in the
parties’ affidavits must be resolved in the plaintiff’s favor.”
Bullion v. Gillespie, 895 F.2d 213, 217 (5th Cir. 1990).
III.
Two separate issues confront us in this appeal. The first is
whether the district court properly granted Westin’s motion for
summary judgment. The second is whether the district court erred
in granting Westin Mexico’s motion to dismiss for lack of personal
jurisdiction. We address each in turn.
A.
In this action Gardemal seeks to hold Westin liable for the
acts of Westin Mexico by invoking two separate, but related, state-
law doctrines. Gardemal first argues that liability may be imputed
to Westin because Westin Mexico functioned as the alter ego of
Westin. See Castleberry v. Branscum, 721 S.W. 2d 270, 272 (Tex.
1986) (explaining that under Texas law corporate form may be
disregarded if corporation functions as alter-ego of another
corporation). Gardemal next contends that Westin may be held
liable on the theory that Westin Mexico operated a single business
enterprise. See Old Republic Ins. Co. v. Ex-Im Servs. Corp., 920
S.W. 2d 393, 395-96 (Tex. App--Houston [1st Dist.] 1996, no writ)
(explaining that under Texas law corporate form may be disregarded
5
when corporations are not operated as separate entities but rather
integrate their resources to achieve a common business purpose).
We consider first the issue of whether Westin may be held liable on
an alter-ego theory.
1.
Under Texas law the alter ego doctrine allows the imposition
of liability on a corporation for the acts of another corporation
when the subject corporation is organized or operated as a mere
tool or business conduit. Hall v. Timmons, 987 S.W. 2d 248, 250
(Tex. App.--Beaumont 1999, no writ); Castleberry, 721 S.W. 2d at
272. It applies “when there is such unity between the parent
corporation and its subsidiary that the separateness of the two
corporations has ceased and holding only the subsidiary corporation
liable would result in injustice.” Harwood Tire--Arlington, Inc.
v. Young, 963 S.W. 2d 881, 885 (Tex. App.--Fort Worth 1998, writ
dism’d by agr.). Alter ego is demonstrated “by evidence showing a
blending of identities, or a blurring of lines of distinction, both
formal and substantive, between two corporations. Hideca Petroleum
Corp. v. Tampimex Oil Int’l Ltd., 740 S.W. 2d 838, 843 (Tex. App.--
Houston [1st Dist.] 1987, no writ). An important consideration is
whether a corporation is underfunded or undercapitalized, which is
an indication that the company is a mere conduit or business tool.
6
Lucas v. Texas Indus., Inc., 696 S.W. 2d 372, 374 (Tex. 1984).2
On appeal Gardemal points to several factors which, in her
opinion, show that Westin is operating as the alter ego of Westin
Mexico. She claims, for example, that Westin owns most of Westin
Mexico’s stock; that the two companies share common corporate
officers; that Westin maintains quality control at Westin Mexico by
requiring Westin Mexico to use certain operations manuals; that
Westin oversees advertising and marketing operations at Westin
Mexico through two separate contracts; and that Westin Mexico is
grossly undercapitalized. See United States v. Jon-T Chemicals,
Inc., 768 F.2d 686, 691-92 (5th Cir. 1985) (listing the numerous
factors used in alter ego analysis); Castleberry, 721 S.W. 2d at
272 (same). Gardemal places particular emphasis on the last
purported factor, that Westin Mexico is undercapitalized. She
insists that this factor alone is sufficient evidence that Westin
Mexico is the alter ego of Westin. See Jon-T Chemicals, Inc., 768
F.2d at 692-93 (explaining that undercapitalization is an important
factor in alter-ego analysis). We are not convinced.
The record, even when viewed in a light most favorable to
2
The rationale behind the “alter ego” theory is that if
the shareholders themselves, or the corporations themselves,
disregard the legal separation, distinct properties, or proper
formalities of the different corporate enterprises, then the law
will likewise disregard them so far as is necessary to protect
individual and corporate creditors. Castleberry, 721 S.W. 2d at
272.
7
Gardemal, reveals nothing more than a typical corporate
relationship between a parent and subsidiary. It is true, as
Gardemal points out, that Westin and Westin Mexico are closely tied
through stock ownership, shared officers, financing arrangements,
and the like. But this alone does not establish an alter-ego
relationship. As we explained in Jon-T Chemicals, Inc., there must
be evidence of complete domination by the parent.
The control necessary . . . is not mere
majority or complete stock control but such
domination of finances, policies and practices
that the controlled corporation has, so to
speak, no separate mind, will or existence of
its own and is but a business conduit for its
principal.
Id. at 691 (citation and quotation omitted). Thus, “one-hundred
percent ownership and identity of directors and officers are, even
together, an insufficient basis for applying the alter ego theory
to pierce the corporate veil.” Id.
In this case, there is insufficient record evidence that
Westin dominates Westin Mexico to the extent that Westin Mexico
has, for practical purposes, surrendered its corporate identity.
In fact, the evidence suggests just the opposite, that Westin
Mexico functions as an autonomous business entity. There is
evidence, for example, that Westin Mexico banks in Mexico and
deposits all of the revenue from its six hotels into that account.
The facts also show that while Westin is incorporated in Delaware,
Westin Mexico is incorporated in Mexico and faithfully adheres to
8
the required corporate formalities. Finally, Westin Mexico has its
own staff, its own assets, and even maintains its own insurance
policies.
Gardemal is correct in pointing out that undercapitalization
is a critical factor in our alter-ego analysis, especially in a
tort case like the present one. See Jon-T Chemicals, Inc., 768
F.2d at 693. But as noted by the district court, there is scant
evidence that Westin Mexico is in fact undercapitalized and unable
to pay a judgment, if necessary. This fact weighs heavily against
Gardemal because the alter ego doctrine is an equitable remedy
which prevents a company from avoiding liability by abusing the
corporate form. “We disregard the corporate fiction . . . when the
corporate form has been used as part of a basically unfair device
to achieve an inequitable result.” Castleberry, 721 S.W. 2d at
271-72 (citation and quotation omitted); see also Roy E. Thomas
Construction Co. v. Arbs, 692 S.W. 2d 926, 938 (Tex. App.--Fort
Worth 1985, writ ref’d n.r.e.) (“It is not possible to more
emphatically express the necessity for a plaintiff to prove that he
will suffer some type of harm or injustice by adhering to the
corporate fiction before the corporate veil will be pierced.”). In
this case, there is insufficient evidence that Westin Mexico is
undercapitalized or uninsured. Moreover, there is no indication
that Gardemal could not recover by suing Westin Mexico directly.
As a result, equity does not demand that we merge and disregard the
9
corporate identities of Westin and Westin Mexico. We reject
Gardemal’s attempt to impute liability on Westin based on the
alter-ego doctrine.
2.
Likewise, we reject Gardemal’s attempt to impute liability to
Westin based on the single business enterprise doctrine. Under
that doctrine, when corporations are not operated as separate
entities, but integrate their resources to achieve a common
business purpose, each constituent corporation may be held liable
for the debts incurred in pursuit of that business purpose. Old
Republic Ins. Co. v. Ex-Im Serv. Corp., 920 S.W. 2d 393, 395-96
(Tex. App--Houston [1st Dist.] 1996, no writ). Like the alter-ego
doctrine, the single business enterprise doctrine is an equitable
remedy which applies when the corporate form is “used as part of an
unfair device to achieve an inequitable result.” Id. at 395.
On appeal, Gardemal attempts to prove a single business
enterprise by calling our attention to the fact that Westin Mexico
uses the trademark “Westin Hotels and Resorts.” She also
emphasizes that Westin Regina uses Westin’s operations manuals.
Gardemal also observes that Westin allows Westin Mexico to use its
reservation system. Again, these facts merely demonstrate what we
would describe as a typical, working relationship between a parent
and subsidiary. Gardemal has pointed to no evidence in the record
10
demonstrating that the operations of the two corporations were so
integrated as to result in a blending of the two corporate
identities. Moreover, Gardemal has come forward with no evidence
that she has suffered some harm, or injustice, because Westin and
Westin Mexico maintain separate corporate identities.
Reviewing the record in the light most favorable to Gardemal,
we conclude that there is insufficient evidence that Westin Mexico
was Westin’s alter ego. Similarly, there is insufficient evidence
that the resources of Westin and Westin Mexico are so integrated as
to constitute a single business enterprise. Accordingly, we affirm
the district court’s grant of Westin’s motion for summary judgment
on that issue. We turn next to whether the district court erred in
granting Westin Mexico’s motion to dismiss for lack of personal
jurisdiction.
B.
The due process clause limits the power of a state to assert
personal jurisdiction over a nonresident defendant. Its require-
ments are satisfied when the nonresident defendant has “certain
minimum contacts with [the forum] such that the maintenance of the
suit does not offend ‘traditional notions of fair play and
substantial justice.’" International Shoe Co. v. Washington, 326
U.S. 310, 316, (1945) (citation and quotation omitted). In
evaluating minimum contacts with the forum, we must determine
11
whether the nonresident has purposefully availed himself of the
privilege of conducting activities within the forum state, thus
invoking the benefits and protections of its laws. Hanson v.
Denckla, 357 U.S. 235, 253 (1958). To assist in the minimum
contacts analysis, the Supreme Court has drawn a distinction
between specific and general jurisdiction. See Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 472 (1985); Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 413 (1984); Coats v. Penrod
Drilling, 5 F.3d 877, 884 (5th Cir. 1993). Each, if proven,
supports the exercise of personal jurisdiction over the defendant.
Coats, 5 F.3d at 884.
To establish specific jurisdiction, the defendant must have
purposely directed his activities at the resident of the forum, and
the litigation must result from the alleged injuries that “arise
out of or relate to” the defendant’s activities directed at the
forum. Burger King, 471 U.S. at 474; Aviles v. Kunkle, 978 F.2d
201, 204 (5th Cir. 1992). The focus is on the relationship between
the defendant, the forum, and the litigation. Burger King, 471
U.S. at 474. Where the cause of action is not related to or does
not arise from the defendant’s activities in the forum, the forum
may still assert general jurisdiction over the defendant if the
defendant’s contacts with the forum are of a “continuous and
systematic” nature. Helicopteros, 466 U.S. at 414-15. Due process
requires “continuous and systematic” contacts because the forum
12
state does not have a direct interest in the underlying dispute.
Helicopteros, 466 U.S. at 415-16. As such, “the minimum contacts
inquiry is broader and more demanding when general jurisdiction is
alleged, requiring a showing of substantial activities in the forum
state.” Jones v. Petty-Ray Geophysical, Geosource, Inc., 954 F.2d
1061, 1068 (5th Cir. 1992).
On appeal Gardemal contends that the district court has
specific jurisdiction over Westin Mexico because her husband
decided to attend the seminar after reading a brochure about the
Westin Regina resort. We disagree. As noted by the district
court, the record reflects that the medical seminar at Cabo San
Lucas was arranged and promoted by Smith & Nephew Richards, Inc.,
a supplier of orthopedic hardware. The facts also show that the
Gardemals obtained the brochure from Smith & Nephew Richards, Inc.
with the registration materials for the seminar. There is no
specific evidence that Westin Mexico, or the Westin Regina, were
involved in promoting the seminar or soliciting the Gardemals.
Accordingly, there is simply no basis for the exercise of specific
jurisdiction over Westin Mexico.
Gardemal also asserts that there is general jurisdiction over
Westin Mexico. In an effort to prove continuous and systematic
contacts between Westin Mexico and Texas, Gardemal claims that
Westin Mexico advertised in several newspapers and magazines in
Texas. She also contends that Westin Mexico contracted with
13
numerous Texas businesses, like American Airlines, Continental
Airlines, and various wholesalers in the travel industry. The
magistrate judge rejected that argument, finding that “there is no
evidence . . . as to how frequently Westin Mexico ran ads in
[newspapers or magazines] or how much business they generated.”
The court also found no “proof as to the specific relationship
between Westin Mexico and the Texas tourist companies or the amount
of business these companies have generated for Westin Mexico.”
Having reviewed the record, we too find no basis for exercising
general jurisdiction in this case.
Gardemal’s assertions are vague and overgeneralized. They
give no indication as to the extent, duration, or frequency of
Westin Mexico’s business dealings in Texas. Thus, even if taken as
true, Gardemal’s assertions amount to little more than a vague
claim that Westin Mexico conducts business in Texas. Additionally,
the record in this case reveals that Westin Mexico has no employees
in Texas, has no office or address in Texas, and, as noted by the
magistrate judge, has “never owned, bought, sold, or leased any
property in Texas, or been registered to transact business in
Texas.” On these facts, we cannot conclude that Westin Mexico has
the continuous and systematic contacts necessary for the exercise
of general jurisdiction.
14
We conclude that the district court did not err in finding
that personal jurisdiction is lacking over Westin Mexico. We
affirm the district court’s grant of Westin Mexico’s motion to
dismiss.3
AFFIRMED.
3
In this appeal Gardemal also contends that the district
court erred in (1) granting summary judgment on her state law claim
under the DTPA, (2) refusing to allow Gardemal to file a second
amended complaint asserting additional claims under the DTPA, and
(3) striking an affidavit from Gardemal’s expert witness. These
arguments are without merit.
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