The opinion of the court was delivered by: DAVID HURD, District Judge
MEMORANDUM-DECISION and ORDER
On April 26, 2002, plaintiff Oriska Insurance Company
("Oriska") filed suit against defendants Brown & Brown of Texas,
Inc. ("B & B Texas"), Professional Employers Assurance Group
("PEAG"), and Mitchell Zogob ("Zogob"), who was the owner of
PEAG, claiming that they falsely represented to insurance
customers in Texas that they had the authority to issue
certificates of insurance on Oriska's behalf.*fn1 Defendants
allegedly wrongfully issued the certificates which verified
workers' compensation and employers' liability insurance issued
by Oriska. Brown & Brown, Inc. ("B & B Inc.") was added as an
additional defendant on May 6, 2004, by amended complaint.
Plaintiff alleged that B & B Texas was an instrumentality of B &
B Inc., and therefore, B & B Texas and B & B Inc. are engaged in
an agency relationship.
Pursuant to Fed.R. Civ. Pro. 12(b)(2), defendant B & B Texas
moves to dismiss for lack of personal jurisdiction. Additionally,
defendant B & B Inc. moves to dismiss for failure to state a
claim under Fed.R. Civ. Pro. 12(b)(6). Alternatively, pursuant
to 28 U.S.C. § 1404(a), both move to transfer venue to the
Southern District of Texas. Plaintiff opposes and cross moves for
further discovery on the issue of personal jurisdiction. Oral
arguments were heard on this matter on November 12, 2002, in
Utica, New York. Decision was reserved. II. FACTS
The underlying facts giving rise to this dispute are as
follows. In February 2002, Zogob entered into a Confidential Data
Release and Indemnification Agreement with Oriska. The agreement
granted Zogob access to Oriska's confidential business
information in exchange for Zogob's promise to identify and
procure persons interested in investing in Oriska. Zogob, and/or
his company PEAG, breached the agreement and misrepresented to B
& B Texas that he was an agent of Oriska authorized to confer
upon B & B Texas authority to bind Oriska to insurance coverage
in Texas. Then B & B Texas, acting as Oriska's authorized
representative, issued approximately 8,000 certificates of
insurance for the benefit of customer employers of a professional
employer organization (defendants Contractor's Advantage, Inc.
and Steller Administration, Inc.).*fn2 The certificates
indicated that plaintiff had issued those customers workers'
compensation and employers' liability coverage. Plaintiff claims
to have been damaged because the customers who received such
certificates have made claims on the insurance policies
purportedly issued by it, but which it never gave Zogob, PEAG, or
B & B Texas authority to issue.
Following plaintiff's initial filing of suit, the parties
engaged in substantial motion practice. B & B Texas moved to
dismiss for lack of personal jurisdiction and was denied without
prejudice while plaintiff was granted limited discovery on the
issue of whether B & B Texas' relationship with non-party B & B Inc. would render it
subject to jurisdiction in New York. As noted, plaintiff then
amended its complaint to add twelve causes of action against B &
B Texas, including federal statutory claims and eight common law
causes of action, and four new defendants including B & B Inc.
These motions have followed.
On a Fed.R.Civ.P. 12(b)(2) motion to dismiss for lack of
personal jurisdiction, "plaintiff bears the burden of showing
that the court has jurisdiction over the defendant." Bank
Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779,
784 (2d Cir. 1999) (citing Robinson v. Overseas Military Sales
Corp., 21 F.3d 502, 507 (2d Cir. 1996)). A plaintiff may carry
this burden "by pleading in good faith . . . legally sufficient
allegations of jurisdiction, i.e., by making a `prima facie
showing' of jurisdiction." Jazini v. Nissan Motor Co., Ltd.,
148 F.3d 181, 184 (2d Cir. 1998) (quoting Ball v. Metallurgie
Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)).
Therefore, plaintiff may make a prima facie showing solely on the
allegations. Ball, 902 F.2d at 197. Further, "all allegations
are construed in the light most favorable to the plaintiff and
doubts are resolved in the plaintiff's favor[.]" Whitaker v. Am.
Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (quoting
A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d
In diversity cases the federal courts generally apply state law
in deciding substantive questions and federal law in deciding
procedural ones. See Hanna v. Plumer, 380 U.S. 460, 465
(1965). "The amenability of a foreign corporation to suit in a
federal court in a diversity action [, however,] is determined in
accordance with the law of the state where the court sits, with
`federal law' entering the picture only for the purpose of
deciding whether a state's assertion of jurisdiction contravenes a constitutional
guarantee." Arrowsmith v. United Press Int'l, 320 F.2d 219, 223
(2d Cir. 1963). Therefore, New York law is used to determine
whether personal jurisdiction may be exercised over defendant in
B & B Texas claims that New York lacks personal jurisdiction
over this action as it has no meaningful connections to New York.
In response, plaintiff maintains that New York may exercise
personal jurisdiction over B & B Texas, a foreign subsidiary, due
to its relationship with, and the activities conducted by, its
parent, B & B Inc., in New York. It contends that B & B Texas is
"doing business" under CPLR § 301 or "transacting business" under
CPLR § 302 in New York because (1) B & B Texas and B & B Inc. are
engaged in such a relationship that gives rise to the valid
inference of an agency relationship; or (2) B & B Texas is a
"mere department" of B & B Inc.
It is well established that "the `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). Instead, "the presence
of the parent company may serve as a basis of jurisdiction over
the [foreign] 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." ...