The opinion of the court was delivered by: LASKER
Yoram Almogy and Four G Investment, Inc. move to dismiss the complaint for lack of personal jurisdiction. Puerto Rico Maritime Shipping Authority ("PRMSA") moves to declare that the service of process on APF, Ltd. was valid under Rule 4(i)(1)(D) of the Federal Rules of Civil Procedure.
This action arises out of the termination of an agency agreement between PRMSA and Star Lines, Ltd. Pursuant to the agreement, in connection with PRMSA's common carrier service operated between the United States east coast and the Persian Gulf, Star Lines, Ltd. acted as PRMSA's agent in soliciting and booking cargo, collecting monies, and conducting port and cargo operations in foreign ports.
Disputes between PRMSA and Star Lines, Ltd. arising out of this agreement were arbitrated and the resulting award was confirmed by this court on December 27, 1979.
Star Lines, Ltd. is one corporation in a network of corporations who themselves or their parents have been owned wholly or in part by various holding companies which allegedly have been controlled and owned primarily by Yoram Almogy.
PRMSA sues to recover the arbitration award from Star Lines, Ltd., Almogy individually, and the various corporations which comprise this network. PRMSA claims that the corporations constituted a "combine which has no existence different or distinct from that of Yoram Almogy," and that the corporations were operated by Almogy as a single unit to promote his "personal business, wealth and aggrandizement." Complaint, PP 32, 33.
Almogy moves to dismiss the complaint against him on the grounds that there is no jurisdiction over him because he was a resident of London from December 1976 to May 1979, and of Haifa, Israel thereafter, and has not engaged in any acts in New York with respect to the transactions involved here except in his capacity as an officer or director of one of the corporations (Affidavit of Yoram Almogy, sworn to July 1980). He argues that he is not subject to the jurisdiction of this court based on his activities on behalf of the corporations because he is protected by the "fiduciary shield" theory. According to that doctrine of New York law, activity in New York by a corporate officer for corporate business purposes provides a basis for jurisdiction over the corporation but not over the individual.
PRMSA argues that Almogy should not be protected by "a corporate entity through which he conducted his own business and whose corporate funds he used as his own." Memorandum of Law of Puerto Rico Maritime Shipping Authority, p. 7.
The fiduciary shield protects an individual from personal jurisdiction only to the extent that the activities of a corporate officer or director are in furtherance of corporate business, and not to further the personal business of the individual. In United States v. Montreal Trust Company, 358 F.2d 239 (2d Cir.), cert. denied, 384 U.S. 919, 86 S. Ct. 1366, 16 L. Ed. 2d 440 (1966), the government sued to collect taxes due from the deceased, Isidor J. Klein. Klein, the managing director of United Distilleries Ltd., a whiskey producer, allegedly had United's distribution agents direct profits to his friends and relatives, which profits the government claimed should be attributed to Klein's income. The court rejected the defendant's argument that there was no personal jurisdiction because Klein's contacts were in his corporate capacity only.
"While it is true that (the distribution agents) were the contractual agents of the corporations Klein managed, the government has charged that they were also his personal agents in a scheme to divert funds to Klein's designees. Based on the allegations and findings, Klein could not have been acting in his role as a corporate officer when he allegedly directed a course of payments to his relatives and friends. It would be ironic, indeed, if the very corporations whose funds Klein is charged with diverting were to supply him with a shield against suit for tax liability allegedly incurred in connection with this purported breach of fiduciary duty."
Id. at 243. See Bastille Properties, Inc. v. Hometels of America, Inc., 476 F. Supp. 175, 176 (S.D.N.Y.1979); Alosio v. Iranian Shipping Lines, S.A., 307 F. Supp. 1117, 1119 (S.D.N.Y.1970).
Here, PRMSA alleges that the network of corporations was controlled by Almogy to conduct his personal business and for his personal gain. If these allegations are proven, then Almogy's activities in New York on behalf of the corporations would not be protected by the fiduciary shield and he would be subject to personal jurisdiction in New York.
It should be noted that for purposes of this motion, PRMSA, who has not yet had full discovery, need not prove its claim that it is entitled to pierce the corporate veil to hold Almogy liable. Rather, in cases such as this, in which those facts which establish jurisdiction also establish the claim for relief, only a prima facie showing need be made to survive a motion to dismiss. United States v. Montreal Trust Company, 358 F.2d 239, 242 (2d Cir.), cert. denied, 384 U.S. 919, ...