jurisdiction over any and
every vendor that is tangentially involved in a contract to which Siemens
Germany is a party. Plaintiffs do not argue otherwise.
Plaintiffs also allege that Siemens Austria has a website which allows
users to place orders for rail vehicles and other products. For the
proposition that "this website in and of itself is a basis for
jurisdiction over Siemens Austria," plaintiffs cite Agency Rent-A-Car
Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29-30 (2d Cir. 1996)
and Hsin Ten Enter. USA v. Clark Enter., 138 F. Supp.2d 449, 455
(S.D.N.Y. 2000). Pl. Opp. at 18. The problem, however, is that both Hsin
Ten and Agency Rent-A-Car address specific jurisdiction, not general
jurisdiction. See Kaprun I, at *3 (explaining the difference between
general and specific jurisdiction). "[T]he fact that a foreign
corporation has a website accessible in New York is insufficient to
confer jurisdiction under CPLR § 301." Id. (quoting Spencer Trask
Ventures v. Archos S.A., No. 01 Civ. 1169, 2002 WL 417192, at *6-*7
(S.D.N.Y. Mar. 18, 2002)) (quotation marks omitted).
In fact, the plaintiff in Hsin Ten only argued that jurisdiction
existed pursuant to CPLR § 302, not general jurisdiction as provided
for in CPLR § 301. See Hsin Ten, 138 F. Supp.2d at 455. Nor did the
issue as to whether general jurisdiction can be premised on Internet or
electronic contacts arise in Aqency Rent-A-Car. "Transacting business,"
which the Second Circuit found existed in Agency Rent-A-Car, is not
synonymous with "doing business," as required by CPLR § 301.
"Transacting" is a term of art that is only relevant for jurisdictional
purposes when the plaintiff's suit is related to the transaction in
question. There is no contention in this case that the accident in
Kaprun, Austria "arises from" or shares a substantial nexus with Siemens
Austria's Pocket Reader contract in the United States, or any of its
transactions over the Internet. Agency Rent-A-Car, 98 F.3d at 31.
Finally, plaintiffs argue that Siemens Austria has various contacts
with "the United States." Pl. Opp. at 13-16 *(entitling sections of their
brief "Siemens Austria is Present in the United States" and "Other United
States Based Contacts"). In 2001, Siemens Austria "successfully concluded
. . . negotiations for the delivery of 94 metro trains to the Boston
Transport Authority." Id. (citing Siemens Austria's 2001 Annual Report,
Ex. 2 to Pl. Opp.' at 48-49). That same year, Siemens Austria completed a
longstanding project in San Juan, Puerto Rico. Id. at 14 (citing Siemens
Austria's 2001 Annual Report, Ex. 2 to Pl. app., at 48-49). Siemens
Austria also holds a United States patent. See id. at 13. In addition,
plaintiffs devote a paragraph to a discussion of the English training that
Siemens Austria provides for its employees — in an attempt to show
Siemens Austria's "concerted effort to penetrate [the United States]
market" and to demonstrate the "international focus" of the company. Id.
at 13-14 (citing titles of courses offered by Siemens Austria to its
employees, e.g., "Basics in Business English for Purchasing
Plaintiffs cite no case from the courts of this State or any state that
would allow New York courts to exercise general jurisdiction over a
foreign corporation on the basis of its "United States-based contacts" or
language courses it arranges for its employees. These arguments betray a
sense of insecurity on plaintiffs' part. English is spoken in the United
States as well as in the United Kingdom, Canada and Australia, and is the
common language of international business. Foreign language training is
simply a good business practice. Plaintiffs' attempt to make a prima
facie showing of general jurisdiction by New
York courts based on English
language courses for its employees, one United States patent, and a
smattering of contacts in Massachusetts and Puerto Rico — verges on
Defendant, by contrast, has submitted a sworn affidavit to the effect
that Siemens Austria does not do any business in New York. See Wehsely
Decl. ¶ 5. Siemens Austria is not qualified or registered to do
business here, does not employ any personnel or maintain an office here,
and has not authorized or appointed any entity to act as its general
agent for accepting service of process on its behalf in New York. See
id. It does not have a telephone listing or mailing address in New York.
See id. Further, Siemens Austria has no bank accounts here, and owns no
real or personal property in New York. See id. 8/6/02 Reply Declaration
of Hans Wehsely ("Wehsely Reply Decl."), Ex. B to Siemens Austria's Reply
Memorandum in Support of its Motion to Dismiss ("Def. Reply"), ¶ 2.
In light of these statements and the lack of any meaningful contact
alleged by plaintiffs, Siemens Austria cannot be said to conduct
"systematic and continuous" business in New York.
2. Whether Siemens Austria is a Mere
Department of Its Parent, Siemens Germany
Plaintiffs next argue that Siemens Austria is present in New York
because it is an alter ego or "mere department" of Siemens Germany, which
this Court has previously determined is present in New York by its agent
Siemens Corporation.*fn9 "The continuous presence and substantial
activities that satisfy the requirements of doing business do not
necessarily need to be conducted by the foreign corporation itself."
Wiwa, 226 F.3d at 95. While "the presence of [a] subsidiary alone does
not establish the parent's presence in the state," Jazini, 148 F.3d at
184 (citing Volkswagenwerk AG v. Beech Aircraft Corp., 751 F.2d 117, 120
(2d Cir. 1984)), personal jurisdiction over a foreign parent exists where
its New York subsidiary is either a "mere department," or an "agent," of
the parent. Id. (citing Koehler v. Bank of Bermuda, Ltd., 101 F.3d 863,
865 (2d Cir. 1996)). Conversely, jurisdiction exists over a subsidiary
that is a mere department of a parent corporation which has a presence in
New York. See Cornell, 2000 WL 284222, at *3 (holding that the agency and
mere department tests may be applied where the foreign parent is doing
business in New York and plaintiffs seek to attribute its contacts to a
subsidiary, i.e., the "converse" of "the ordinary CPLR § 301
attribution case") (citing cases).
To determine whether Siemens Austria is a mere department or alter ego
of Siemens Germany, the Court must consider the four factors outlined in
Beech Aircraft: (1) common ownership, which is essential; (2) financial
dependency of the subsidiary on the parent; (3) the degree to which the
parent interferes in the selection and assignment of the subsidiary's
fails to observe corporate formalities; and (4) the degree
of control that the parent exercises over the subsidiary's marketing and
operational policies. Beech Aircraft, 751 F.2d at 120-22. Plaintiffs are
entitled to limited discovery on this issue if they make out a prima
facie case that Siemens Austria is a mere department of Siemens Germany.
See, e.g., Schenker v. Assicurazioni Generali S.p.A., No. 98 Civ. 9186,
2002 WL 1560788, at *1-*2 (S.D.N.Y. July 15, 2002).
"A corporate entity is considered to be a `mere department' of a parent
company only where the control of the lesser entity is `pervasive enough
that the corporate separation is more formal than real.'" Jacobs, 160 F.
Supp.2d at 734 (quoting H. Heller & Co. v. Novacor Chem. Ltd.,
726 F. Supp. 49, 54 (S.D.N.Y. 1988)). Parent corporations are allowed a
range of normal shareholder involvement in the operations of their
subsidiaries — without rendering those subsidiaries "mere
departments" for jurisdictional purposes. See, e.g., Beech Aircraft, 751
F.2d at 121 (parent corporations normally control the board of directors
of a subsidiary in their representative capacity as controlling
shareholders). In contrast, plaintiffs must show that Siemens Germany has
"disregarded the separate corporate existence of" Siemens Austria, or
vice versa. Jacobs, 160 F. Supp.2d at 734.
Plaintiffs' showing that Siemens Austria is wholly owned by Siemens
Germany satisfies the first and essential Beech Aircraft factor. See
Levant Line v. Marine Enter., 166 B.R. 221 231-32 (S.D.N.Y. 1994) (citing
cases). They next allege that the second Beech Aircraft factor is
satisfied because Siemens Austria is financially dependent on Siemens
Germany. This assertion rests on the factual allegation that Siemens
Germany funds the stock option component of the compensation received by
managers employed by Siemens Austria and other subsidiaries in the
Siemens Group.*fn10 See Pl. Opp. at 10 (citing to Siemens's,*fn11 "Ten
Point Program" ("Ten Point Program"), Ex. 9 to Pl. Opp.). As such, the
assertion is not wholly conclusory. See Jazini, 143 F.3d at 185
(rejecting plaintiffs' mere assertion that Nissan U.S.A. was financially
dependent on Nissan Japan as conclusory, and dismissing for failure to
state a prima facie case that Nissan U.S.A. is a mere department of
Nissan Japan). On the other hand, this assertion, without more, does not
sufficiently allege that Siemens Austria is financially dependent on its
parent, i.e., that Siemens Austria cannot run its businesses without the
financial backing of its parent.
Plaintiffs fail to allege any facts to support the third factor, the
"degree to which the parent corporation interferes in the selection and
assignment of the subsidiary's executive personnel and fails to observe
corporate formalities." Beech Aircraft, 751 F.2d at 120-22. Their
allegation that "Siemens-Germany [and] Siemens-Austria . . . fail to
observe proper corporate formalities," MC ¶ 40, is entirely
conclusory. "Legal conclusions couched as factual allegations are not
fact[ual allegations] and cannot substitute for them." Schenker, 2002 WL
1560788, at *2 (holding that plaintiffs' conclusory allegations were
insufficient to make out prima facie case for mere department status of
foreign corporation defendant). Further, defendant offers sworn testimony
[A]ll corporate formalities between the companies
are observed; the companies have separate officers
and independent boards of directors; the companies
conduct separate board meetings and maintain
separate minutes of such meetings; the companies
maintain separate books, records, and financial
accounts; the companies have separate headquarters,
files and office space; and, any transactions
between the companies are conducted on an "arms
length" basis and are recorded by appropriate
entries in the books and records of the companies
in accordance with generally recognized accounting
Wehsely Decl. ¶ 4.
Plaintiffs make several arguments with respect to the fourth factor,
the degree of control Siemens Germany exercises over Siemens Austria's
marketing and operational policies. They contend that the Ten-Point
Program demonstrates that Siemens Germany controls and influences Siemens
Austria to achieve its own "financial and strategic business goals." Pl.
app, at 10. This allegation has no legal significance because it is
perfectly appropriate for a parent corporation to urge companies it owns
to achieve its strategic and financial goals: that is, in fact, the
purpose behind owning a portfolio of companies.
Plaintiffs also point to the webpages of the companies, which share a
"unified presentation" and use the same corporate logo. Id. at 11-12.
This fact shows that Siemens Germany exerts some control over Siemens
Austria's marketing policies, but is insufficient to show "pervasive" or
"complete" control, or that the distinction between the companies is more
formal than real.
Plaintiffs also argue that Siemens Austria is a mere department of
Siemens Germany because the two companies hold themselves out to the
world as a single entity. Siemens Germany has stated that "cross-group
and cross-regional cooperation" between companies within the Siemens
Group is "crucial for the success of [Siemens's] Global Network of
Innovation." 2002 Siemens Germany Website, Ex. 13 to Pl. app. Both
companies use the name "Siemens" in their advertising. This Court,
however, has previously rejected this theory of jurisdiction:
These statements (use of common trade name "Sprint"
on web page, reference to conglomerate as a
collective entity, etc.), intended to be read by the
consuming public, cannot create a single entity
structure given the sophistication and complexity of
today's corporate world.
Aerotel, 100 F. Supp.2d at 193. See also Jazini, 143 F.3d at 185 (holding
that statements by a foreign corporation to the effect that the company
"needs to become a truly global company" and requests for "worldwide
cooperation" from its subsidiaries does not show the pervasive control
required to meet the prima facie test for mere department status);
J.L.B. Equities v. Ocwen Fin. Corp., 131 F. Supp.2d 544, 550 (S.D.N.Y.
2001) ("In absence of direct evidence of control, J.L.B. relies on
Ocwen's webpage, which, according to J.L.B., treats Ocwen and Ocwen Bank
as one. [T]he Court is not persuaded that failure to distinguish between
and subsidiary on a webpage is sufficient to show that the parent
controls the subsidiary's marketing and operational policies."); Bellomo
v. Pennsylvania Life Co., 488 F. Supp. 744, 745 (S.D.N.Y. 1980) (holding
that a parent does not subject itself to jurisdiction merely by
portraying an affiliate as part of a unitary enterprise).
Finally, plaintiffs allege an "overlap in management" between the two
companies: Heinrich Pierer, the President and C.E.O. of Siemens Germany,
serves on Siemens Austria's Board of Directors, and Jurgen Radomski, who
is on the Managing Board at Siemens Germany, also serves on Siemens
Austria's Board of Directors. See Pl. app, at 9-10 n. 7. In a different
case, this Court granted jurisdictional discovery on the issue of
interrelatedness between parent and subsidiary in light of some alleged
overlap in management. See Aerotel, 100 F. Supp.2d at 193 (noting
"considerable" overlap between the management of the parent corporation
and one of the defendants, and a lesser degree of overlap between the
parent and another defendant). Here, there are only two Siemens
Germany-affiliated directors at Siemens Austria, and plaintiffs do not
even allege "common management." Id. (executives at Sprint Corporation
allegedly held comparable positions at Sprint Communications). Both men
are managers or executives at Siemens Germany, but only serve Siemens
Austria in a director capacity.
Moreover, "[i]t is not uncommon for a parent company and its
subsidiaries to have common directors and/or owners." Vendetti et al. v.
Fiat Auto S.p.A., 802 F. Supp. 886, 893 (W.D.N.Y. 1992) (citing Saraceno
v. S.C. Johnson & Son, 83 F.R.D. 65, 70 (S.D.N.Y. 1979)). See also
Jerge v. Potter, No. 99 Civ. 312, 2000 WL 1160459, at *2-*3 (W.D.N.Y.
Aug. 11, 2000) ("Having common directors and officers is a normal
business practice of a multi-national corporation and absent complete
control [it] is no justification to labeling a subsidiary a mere
department of the parent.") (quotation marks, citation omitted). "It has
been established that overlapping officers and directors are `intrinsic
to the parent-subsidiary relationship, and that they are not
determinative as to whether the subsidiary is a `mere department' of the
parent." J.L.B. Equities, 131 F. Supp.2d at 550.
Because plaintiffs have failed to make out a prima facie case for this
Court's exercise of personal jurisdiction, based either on Siemens
Austria's direct contacts with this forum or its status as a subsidiary
of a foreign corporation with a presence here, they are not entitled to
discovery. See Jazini, 148 F.3d at 185-86 (denying request for
jurisdictional discovery for failure to make out prima facie case);
Cornell, 2000 WL 284222, at *1 (same); see also Jerge, 2000 WL 1160459,
at *2-*3 (dismissing case for lack of personal jurisdiction where no
discovery had been conducted, because plaintiff failed to make out prima
facie case); Laborers Local 17, 26 F. Supp.2d at 597-98, 604 (same). This
Court "recognize[s] that without discovery it may be extremely difficult
for plaintiffs in [this] situation to make a prima facie showing of
jurisdiction over a foreign corporation that they seek to sue in the
federal courts in New York." Jazini, 148 F.3d at 186. It is nevertheless
The rules governing establishment of jurisdiction
over such a foreign corporation are clear and
settled, and it would be inappropriate for us to
deviate from them or to create an exception to them
because of the problems plaintiffs may have in
meeting their somewhat strict standards.
Id. Further, such difficulties are "the consequence of problems inherent
in attempting to sue a foreign corporation that has carefully structured
its business so as to separate itself from the operation of its
wholly-owned subsidiaries . . . as it properly may do." Id. See also
Mareno v. Rowe, 910 F.2d 1043, 1045-46 (2d Cir. 1990) (emphasizing
corporate separateness in jurisdictional context); Amsellem v. Host
Mariott Corp., 721 N.Y.S.2d 318, 320 (1st Dep't 2001) (same).
If, as in Jazini, plaintiffs' allegations and the webpages they proffer
were sufficient to establish a prima facie case of jurisdiction over
Siemens Austria, and thus subject it to jurisdictional discovery, "it
would not be difficult for [any] plaintiff suing a multinational foreign
corporation in the federal courts in New York, to make similar conclusory
non-fact-specific [or legally insufficient] allegations [of jurisdiction]
and thus obtain extensive discovery on that issue." Jazini, 148 F.3d at
185. As this "would require the federal courts to conduct substantial
jurisdictional discovery over foreign corporations — a practice in
which they have not hitherto engaged," id., it is not the rule.
For the foregoing reasons, Siemens Austria's motion to dismiss the case
against it for lack of personal jurisdiction must be granted.