United States District Court, Southern District of New York
July 17, 1990
BRIAN J. SCHENCK, AS ADMINISTRATOR OF THE ESTATE OF PATRICIA A. SCHENCK, AND BRIAN J. SCHENCK, INDIVIDUALLY, AND BRIAN J. SCHENCK, JR. BY HIS FATHER AND NATURAL GUARDIAN, BRIAN J. SCHENCK, PLAINTIFFS,
WALT DISNEY COMPANY AND WALT DISNEY WORLD COMPANY, DEFENDANTS.
The opinion of the court was delivered by: Cannella, District Judge:
MEMORANDUM AND ORDER
Defendant's motion to dismiss is denied. Fed.R.Civ.P.
12(b)(2). Defendant's motion to transfer is granted. 28 U.S.C. § 1406(a).
On October 9, 1989, Patricia Schenck, a New York resident
visiting Walt Disney World in Orlando, Florida, was killed when
the small rental boat she was piloting collided with a
500-person ferry boat. Brian Schenck, the deceased's husband,
subsequently commenced a wrongful death action in New York
State Supreme Court against Walt Disney World Company ["WDW"]
and its parent, Walt Disney Company ["Disney Co."]. The action
was thereafter removed to the United States District Court for
the Southern District of New York.
Defendant WDW now moves to dismiss the complaint for lack of
personal jurisdiction pursuant to Rule 12(b)(2) of the Federal
Rules of Civil Procedure or, alternatively, for a transfer of
venue to the Middle District of Florida pursuant to 28 U.S.C. § 1404(a).
Plaintiff opposes the motion and claims that WDW is
subject to personal jurisdiction under section 301 of the New
York Civil Practice Law and Rules ["CPLR"] because it is "doing
business" in the State of New York.
The law regarding personal jurisdiction is well established
and need not be discussed in detail. Personal jurisdiction over
a defendant in a diversity action is determined by the law of
the forum in which the court sits. See Marine Midland
Bank, N.A. v. Miller, 664 F.2d 899, 901 (2d Cir. 1981).
Plaintiff must ultimately establish personal jurisdiction over
defendant by a fair preponderance of the credible evidence. See
Cutco Indus. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986).
However, where the court relies on pleadings and affidavits,
instead of holding an evidentiary hearing, plaintiff need only
make a prima facie showing that personal jurisdiction
exists.*fn1 See Hoffritz for Cutlery, Inc. v. Amajac, Ltd.,
763 F.2d 55, 57 (2d Cir. 1985); Marine Midland, 664 F.2d at
904. In the absence of an evidentiary hearing, all pleadings
and affidavits are construed in the light most favorable to
plaintiff. See Cutco, 806 F.2d at 365.
Section 301 of the CPLR provides that "[a] court may exercise
such jurisdiction over persons, property, or status as might
have been exercised heretofore." This section preserves earlier
New York case law which holds that "a corporation is `doing
business' and is therefore `present' in New York and subject to
personal jurisdiction with respect to any cause of action,
related or unrelated to the New York contacts, if it does
business in New York `not occasionally or casually, but with a
fair measure of permanence and continuity.'" Hoffritz, 763 F.2d
at 58 (quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259,
267, 115 N.E. 915, 917 (1917)). The test of whether a foreign
corporation is doing business in New York is a "simple
pragmatic one," Bryant v. Finnish Nat'l Airline, 15 N.Y.2d 426,
432, 208 N.E.2d 439, 441, 260 N.Y.S.2d 625, 629 (1965), in
which the court determines whether the foreign corporation's
activities in New York are "continuous and systematic."
Hoffritz, 763 F.2d at 58. In applying this test, the court must
decide whether "the quality and nature of the corporation's
contacts with the State . . . make it reasonable and just
according to `traditional notions of fair play and substantial
justice' that it be required to defend the action [in New
York]." Laufer v. Ostrow, 55 N.Y.2d 305, 310, 434 N.E.2d 692,
694, 449 N.Y.S.2d 456, 458 (1982) (quoting International Shoe
Co. v. State of Washington, 326 U.S. 310, 316, 66 S.Ct. 154,
158, 90 L.Ed. 95 (1945)).
In support of its motion to dismiss, WDW argues that it does
not engage in the type of regular and systematic activities
required for a finding of corporate "presence" in New York. WDW
points out that it is a Delaware corporation which is qualified
to do business in Florida and which maintains its principal
place of business in Florida. Affidavit of Sydney L. Jackowitz,
¶ 2, 90 Civ. 1773 (JMC) (S.D.N.Y. Mar. 22, 1990) ["Jackowitz
Affidavit"]. In addition, WDW is not qualified to do business
in New York, has no office or place of business in New York,
has no telephone listing in New York, and has no officers,
agents or employees in New York. Id. at ¶ 4. Furthermore, WDW
has neither incurred nor paid taxes to New York and has no
assets in New York. Id. at ¶¶ 4-5.
Despite these facts, plaintiff contends that WDW is "doing
business" in two ways: (1) through the solicitation of business
by its New York representatives and (2) through the presence in
New York of its parent, Disney Co. The Court will address each
of these contentions in turn.
I. Solicitation of Business in New York
Mere solicitation of business in New York by a foreign
corporation does not constitute "doing business" for
jurisdictional purposes. See Laufer, 55 N.Y.2d at 310, 434
N.E.2d at 694, 449 N.Y.S.2d at 459; Carbone v. Fort Erie Jockey
Ltd., 47 A.D.2d 337, 339, 366 N.Y.S.2d 485, 487 (4th Dep't
1975). However, where a foreign corporation engages in
"activities of substance in addition to solicitation there is
presence and, therefore, jurisdiction." Laufer, 55 N.Y.2d at
310, 434 N.E.2d at 695, 449 N.Y.S.2d at 459; see also
Aquascutum of London, Inc. v. S.S. American Champion,
426 F.2d 205, 211 (2d Cir. 1970) ("[O]nce solicitation is found in any
substantial degree very little more is necessary to a
conclusion of `doing business.'"). This so called "solicitation
plus" rule is satisfied when, in addition to solicitation, the
foreign corporation is involved in some financial or commercial
dealings in New York or holds itself out as operating in New
York. See Aquascutum, 426 F.2d at 212. In assessing the type of
activities that satisfy this rule, courts "tend to focus on a
physical corporate presence," Artemide SpA v. Grandlite Design
& Mfg. Co., 672 F. Supp. 698, 701 (S.D.N.Y. 1987), for example,
the maintenance of an office, officers or a bank account in New
York, or the occurrence of financial transactions or meetings
in New York. See Laufer, 55 N.Y.2d at 310, 434 N.E.2d at 695,
449 N.Y.S.2d at 459 (citing cases).
Plaintiff argues that WDW has satisfied the "solicitation
plus" rule through the activities of its New York
representatives.*fn2 Specifically, plaintiff contends that
WDW: (1) "solicits business in New York through the television,
radio and print advertisements of its licensees, including
Delta Airlines, Inc., [and] Greyhound Bus Lines, Inc. . . .;"
(2) "maintain[s] a contract with a New York advertising firm
. . . to promote Walt Disney World in the New York area;" and
(3) "pays commissions to travel agents on all bookings at the
seven resorts which comprise the Walt Disney World Resort."
Affirmation in Opposition, ¶ 6, B. iii, iv, v, 90 Civ. 1773
(JMC) (S.D.N.Y. Apr. 16, 1990).
The seminal New York case dealing with the principles of
personal jurisdiction and agency is Frummer v. Hilton Hotels
International, Inc., 19 N.Y.2d 533, 227 N.E.2d 851, 281
N YS.2d 41, cert. denied, 389 U.S. 923, 88 S.Ct. 241, 19
L.Ed.2d 266 (1967). In Frummer, the Court of Appeals found that
a British hotel was subject to personal jurisdiction in New
York through the activities of its agent, an affiliated
company, where the New York agent not only solicited business
and performed public relations activities, but also accepted
and confirmed reservations on behalf of the foreign hotel.
After noting the various activities that the agent performed
for the hotel, the Court of Appeals concluded that the
"significant and pivotal factor" is that "the [agent] does all
the business which the [British hotel] could do were it here by
its own officials." Id. at 537, 227 N.E.2d at 854, 281 N.Y.S.2d
at 44. The Second Circuit, in interpreting Frummer, has held
a foreign corporation is doing business in New
York . . . when its New York representative
provides services beyond `mere solicitation' and
these services are sufficiently important to the
foreign corporation that if it did not have a
representative to perform them, the corporation's
own officials would undertake to perform
substantially similar services.
Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116
, 121 (2d Cir.
1967), cert. denied, 390 U.S. 996
, 88 S.Ct. 1198
, 20 L.Ed.2d 95
(1968). In Gelfand, as in Frummer, the court focused on the New
York representative's ability to accept and confirm
reservations. See id.; see also Welinsky v. Resort of the World
D.N.V., 839 F.2d 928
, 930 (2d Cir. 1988) (authority to make and
confirm reservations without checking with foreign defendant
goes beyond "mere solicitation of business").
The instant case is distinguishable from cases such as
Frummer. The fact that WDW advertises in New York through its
licensees and has a contract with a New York advertising agency
amounts to nothing more than mere solicitation. More
importantly, although WDW sends promotional material to travel
agents in New York and may pay commissions to those travel
agents, "[a]ll reservations must be confirmed by [WDW] in
Florida." Jackowitz Affidavit, at ¶ 3. There is no evidence
that any of WDW's New York representatives perform services
that can contractually bind WDW. See Rolls-Royce Motors, Inc.
v. Charles Schmitt & Co., 657 F. Supp. 1040, 1048 (S.D.N Y
1987). Thus, WDW's New York representatives are unable to do
all the business WDW could do "were it here by its own
officials." Frummer, 19 N.Y.2d at 537, 227 N.E.2d at 854, 281
N YS.2d at 44. The Court finds, therefore, that the WDW is not
"doing business" in New York through the activities of its New
II. Presence of Parent Company in New York
Plaintiff contends that WDW is subject to jurisdiction in New
York because of the presence of its parent, Disney Co.*fn3 It
is well established, however, that "[t]he `doing business' test
does not subject a subsidiary corporation to personal
jurisdiction simply because a state has jurisdiction over the
parent, even if the parent is the sole shareholder of the
subsidiary." Saraceno v. S.C. Johnson & Son, Inc., 83 F.R.D.
65, 67 (S.D.N.Y. 1979) (citing cases); see also Ross v.
Colorado Outward Bound School, Inc., 603 F. Supp. 306, 310
(W.D.N.Y. 1985) (mere existence of "garden-variety"
parent-subsidiary relationship is not sufficient to establish
jurisdiction). Rather, the presence of the parent company may
serve as a basis of jurisdiction over the subsidiary only if
the parent is acting as the agent of the subsidiary or if the
control by the parent over the subsidiary is so complete that
the subsidiary is a "mere department" of the parent. See Grill
v. Walt Disney Co., 683 F. Supp. 66, 69 (S.D.N.Y. 1988);
Saraceno, 83 F.R.D. at 67; cf. Bialek v. Racal-Milgo, Inc.,
545 F. Supp. 25, 32 (S.D.N.Y. 1982) (discussing jurisdiction over
parent through activities of subsidiary).
In Grill, the court considered the question of whether the
presence of Disney Co. in New York was sufficient to establish
jurisdiction over WDW. The court concluded that "[t]here is
nothing in the record which suggests that Disney Co. acts as
agent for [WDW], or that [WDW] is merely a department of Disney
Co." Grill, 683 F. Supp. at 69. Similarly, in the instant case
plaintiff has failed to present evidence that Disney Co.
conducts any activities on behalf of WDW in New York. Disney
Co. does not accept or confirm reservations for WDW. See
Jackowitz Affidavit, at ¶ 7. Furthermore, Disney Co. does not
perform services for WDW in New York or supervise the day to
day activities of WDW. See id. Although the two companies may
share common directors, this alone is an insufficient basis for
establishing personal jurisdiction over WDW. See Grill, 683
F. Supp. at 69.
In sum, the Court cannot draw an inference that Disney Co.
acts as WDW's agent in New York or that WDW is a mere
department of Disney Co. Accordingly, plaintiff has failed to
present prima facie evidence that WDW is "doing business" in
New York because of the presence of Disney Co.
Although the Court lacks personal jurisdiction over WDW it
need not dismiss the action. As the court concluded in
[T]he Court's lack of in personam jurisdiction does
not require dismissal of the action because
28 U.S.C. § 1406(a) permits transfer of an action
commenced in the wrong judicial district to the
proper district in the interest of justice.
Goldlawr v. Heiman, 369 U.S. 463, 82 S.Ct. 913, 8
L.Ed.2d 39 (1962). Here, transfer is appropriate
because defendants have actual notice of the
litigation and therefore will not be prejudiced.
Grill, 683 F. Supp. at 69; see also Corke v. Sameiet M.S. Song
of Norway, 572 F.2d 77, 80 (2d Cir. 1978) (ordering transfer in
the interests of justice notwithstanding the fact that the
transferor court was without personal jurisdiction over
defendants); Ross, 603 F. Supp. at 310 (transferring action
pursuant to 28 U.S.C. § 1406(a) despite lack of personal
jurisdiction over defendant).
In the instant case, there is no allegation that defendants
will suffer any prejudice if the action is transferred to
Florida.*fn4 Furthermore, transfer would apparently enable
plaintiff to obtain jurisdiction over WDW.*fn5 Accordingly,
the Court finds that the instant case should be transferred, in
the interest of justice, to the Middle District of Florida.
Defendant's motion to dismiss is denied. Fed.R.Civ.P.
12(b)(2). Defendant's motion to transfer is granted. 28 U.S.C. § 1406(a).
The Clerk of the Court is directed to transfer this action to
the United States District Court for the Middle District of