Appeal from a final judgment of the United States District Court for the Southern District of New York, Kevin Thomas Duffy, Judge, dismissing the complaint for lack of personal jurisdiction over defendant. Reversed and remanded.
Before Meskill and Kearse, Circuit Judges, and Markey, Chief Judge.*fn*
This is an appeal from a final judgment of the United States District Court for the Southern District of New York dismissing this diversity action for lack of personal jurisdiction over the defendant. Plaintiff Marine Midland Bank, N.A. ("Marine Midland") sued defendant James W. Miller, a nondomiciliary of New York, to recover damages resulting from Miller's alleged grossly negligent misrepresentations. The district court ruled that because Miller's acts in New York were performed solely in his capacity as Chief Executive Officer of J.W. Miller & Associates ("Miller & Associates"), his actions were insufficient to permit the court to exercise jurisdiction over Miller in his individual capacity under New York's long-arm statute, N.Y. Civ.Prac. Law & R. ("CPLR") § 302(a) (McKinney 1972 & Supp. 1980). For the reasons below, we reverse and remand.
In 1977, a group of investors, subsequently known as Atlas-Dirty Devil Mining ("ADDM"), sought to borrow approximately $6 million from Marine Midland in order to finance a planned coal mining project. ADDM submitted to Marine Midland a feasibility report prepared by Miller & Associates, a coal consulting firm incorporated under the laws of West Virginia (the "Miller Report"). The Miller Report stated that the proposed mine would yield nearly twenty-seven million tons of coal of commercially acceptable quality. Thereafter, Miller, the president of Miller & Associates and a resident of West Virginia, made at least two visits to Marine Midland's offices in New York, where he presented and confirmed orally the findings and conclusions of the Miller Report. Marine Midland retained a second coal consulting firm, Keplinger & Associates, Inc. ("Keplinger") to evaluate the Miller Report. Keplinger confirmed the conclusions of Miller & Associates. After receiving all of this information, Marine Midland agreed to lend ADDM approximately $6 million. This amount was subsequently increased to more than $9 million.
In March 1979, Keplinger informed Marine Midland that the Miller Report and the Keplinger confirmation had overstated both the quality and the quantity of ADDM's coal resources. In fact, almost no coal could economically be mined by ADDM. Consequently, ADDM was unable to repay the funds it borrowed from Marine Midland and it has filed a petition under Chapter XI of the Bankruptcy Act.
In May 1980, Marine Midland filed the present suit against Miller,*fn1 alleging that Miller had been grossly negligent in making false statements to the bank while at its offices in New York. In addition, it alleged that Miller was responsible for the false statements contained in the Miller Report because he had participated in its preparation, because he had presented the report to the bank, and because Miller & Associates was merely a shell that was in actuality Miller's "alter ego."
Miller moved, pursuant to Fed.R.Civ.P. 12(b)(2), to dismiss the complaint for lack of personal jurisdiction. In opposition to Miller's motion Marine Midland presented deposition testimony by Miller and several affidavits to support, inter alia, its contention that Miller & Associates was merely a shell for Miller personally. The affidavits described a certain fluidity of the lines of demarcation between Miller & Associates and other business entities wholly owned by Miller, with respect to contract formation and performance, services and billing, and so forth. In addition, one affidavit cited Miller's counsel as having stated, in his position as counsel for Miller & Associates in Marine Midland's suit against that entity (see note 1 supra), that Miller & Associates had a net worth of just $30,000 and was in effect nothing more than a telephone number and stationery.
The District Court's Decision
The district court granted Miller's motion to dismiss the action for lack of jurisdiction.*fn2 Recognizing that the law of the forum state governs the exercise of personal jurisdiction in a diversity case in federal court, Braman v. Mary Hitchcock Hospital, 631 F.2d 6 (2d Cir. 1980); Arrowsmith v. UPI, 320 F.2d 219 (2d Cir. 1963) (en banc), the court, in an opinion reported at 512 F. Supp. 602, sought to resolve the jurisdictional issue by looking to New York's long-arm statute, CPLR § 302(a). Section 302(a) provides in relevant part as follows:
(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary ... who in person or through an agent:
1. transacts any business within the state; or
2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; ...
In construing these provisions, the district court distinguished between activities undertaken by a person in his individual capacity and those undertaken in his role as a corporate employee, and applied what has come to be known as the "fiduciary shield" doctrine, see, e.g., United States v. Montreal Trust Co., 358 F.2d 239, 243 (2d Cir.), cert. denied, 384 U.S. 919, 86 S. Ct. 1366, 16 L. Ed. 2d 440 (1966), which holds that acts performed by a person in his capacity as a corporate fiduciary may not form the predicate for the exercise of jurisdiction over him in his individual capacity. 512 F. Supp. at 604. On the basis of the affidavits and other documentary evidence presented on the motion, the court concluded that Miller's acts in New York had been performed only in his capacity as president of Miller & Associates. It found that Miller had prepared the Miller Report not alone, but rather with five associates; that, in his oral presentation to Marine Midland, Miller merely repeated what was already contained in the report; that the payments for the report had been made not to Miller personally but to Miller & Associates; and that Miller had received no benefits other than his salary as a member of the corporation. The court thus ruled that Miller was protected by the fiduciary shield. The court rejected Marine Midland's argument that Miller was personally subject to the court's jurisdiction ...