United States District Court, N.D. New York
April 8, 2005.
ORISKA INSURANCE COMPANY, Plaintiff,
BROWN & BROWN OF TEXAS, INC.; BROWN & BROWN, INC.; CONTRACTOR'S ADVANTAGE, INC.; and SELLAR ADMINISTRATION, INC., Defendants.
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.
A. Fed.R.Civ.P. 12(b)(2)
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.
A. Personal Jurisdiction
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." Schenck v. Walt Disney Co.,
742 F. Supp. 838, 842 (S.D.N.Y. 1990) (citing Grill v. Walt Disney Co., 683 F. Supp. 66, 69 (S.D.N.Y. 1988);
Saraceno, 83 F.R.D. at 67). Plaintiff advances both of these
An agency relationship exists for jurisdictional purposes where
one corporation "does all the business which [the other
corporation] could do were it here by its own officials."
Frummer, 19 N.Y.2d at 537. This standard has been interpreted
by the Second Circuit
to mean that a foreign corporation is doing business
in New York `in the traditional sense' 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.
In attempting to establish the existence of an agency
relationship between B & B Texas and B & B Inc., plaintiff
submits the following facts: the two companies use consolidated
finance reporting; the B & B Inc. website lists the identical
address of B & B Texas as one of its "Retail Divisions" and also
lists B & B Texas' president as B & B Inc.'s representative at
that address; when the problem concerning B & B Texas' issuance
of Oriska insurance certificates arose, B & B Inc. officials
dealt with the situation, the two companies are jointly
represented and claim collectively to have been injured as parent
and subsidiary in related litigation on-going in Texas, and the B
& B Inc. logo pervades B & B Texas' correspondence, such as
letterhead, with third parties.
While such facts indicate that B & B Texas and B & B Inc. do
have a relationship, they are insufficient for a prima facie
showing of agency. Plaintiff fails to offer facts showing that B
& B Inc. "does all the business which [B & B Texas] could do were
it [in New York] by its own officials." See Frummer,
19 N.Y.2d at 537. Therefore, since an agency relationship has not been shown to exist between B & B Texas and B & B Inc.,
the existence of such a relationship cannot serve as a basis for
jurisdiction over B & B Texas.
Alternatively, plaintiff contends that B & B Texas is a "mere
department" of B & B Inc. In order to determine whether B & B
Texas is a "mere department" of B & B Inc., four factors must be
considered: (1) common ownership, which is essential; (2) the
subsidiary's financial dependence on the parent corporation; (3)
the degree to which the parent interferes in the selection and
assignment of the subsidiary's executive personnel and fails to
observe corporate formalities; and (4) the degree of control over
the marketing and operational policies of the subsidiary
exercised by the parent. See Jazini, 148 F.3d at 185;
Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp.,
751 F.2d 117, 120-22 (2d Cir. 1984). The overall weighing of the
various factors thus necessitates a balancing process, and not
every factor need weigh entirely in the plaintiff's favor. ESI,
Inc. v. Coastal Corp., 61 F. Supp. 2d 35, 51-52 (S.D.N.Y. 1999).
Plaintiff claims B & B Texas is a "mere department" of B & B
Inc. by stating that the two companies' financial and corporate
affairs are intertwined, they are both held out to the public as
related, and that they function in all relevant respects as a
single entity. These conclusory statements do not amount to a
showing of common ownership, financial dependance, the degree of
interference with the selection of executive personnel and
observance of corporate formalities, and the amount of control
exercised over marketing and operation policies. See Jazini,
148 F.3d at 185. B & B Texas cannot be held to be a "mere
department" of B & B Inc. since plaintiff has failed to allege
specific facts to meet the standard for such a showing.*fn3 Therefore, jurisdiction may
not be exercised over B & B Texas as a "mere department" of B & B
Plaintiff has failed to establish under either of its theories
that jurisdiction may be exercised over B & B Texas. Plaintiff
cannot show that B & B Inc. acted as B & B Texas' agent or that B
& B Inc.'s control over it "is so complete that the subsidiary is
a `mere department' of the parent." See Schenck,
742 F. Supp. at 842.
B. Transfer of Venue
Although jurisdiction over B & B Texas has not been
established, a district court may transfer an action under
28 U.S.C. § 1404(a) notwithstanding its lack of personal
jurisdiction over the defendant. Goldlawr, Inc. v. Heiman,
369 U.S. 463, 465-66 (1962); Fort Knox Music, Inc. v. Baptiste,
257 F.3d 108, 112 (2d Cir. 2001).
"[D]istrict courts [have] discretion to transfer cases
according to `an individualized, case-by-case consideration of
convenience and fairness.'" Id. (quoting Stewart Org., Inc. v.
Ricoh Corp., 487 U.S. 22, 29 (1988)). "For the convenience of
parties and witnesses, in the interest of justice, a district
court may transfer any civil action to any other district or
division where it might have been brought." 28 U.S.C. § 1404(a).
In applying this standard, two inquiries must be made. First, it
must be determined "whether the action sought to be transferred
is one that `might have been brought' in the transferee court.
Second, the court must determine whether, considering the
`convenience of parties and witnesses' and the interest of
justice, a transfer is appropriate. Lynch v. Nat'l Prescription
Adm'rs, No. 03 Civ. 1303(GBD), 2004 WL 385156, at *1 (S.D.N.Y. Mar. 1, 2004) (citing
Wilshire Credit Corp. v. Barrett Capital Mgmt. Corp.,
976 F.Supp. 174 (W.D.N.Y. 1997).
In deciding whether to transfer, courts have considered several
private interest factors, including:
(1) the convenience of witnesses; (2) the location of
relevant documents and relative ease of access to
sources of proof; (3) the convenience of the parties;
(4) the locus of operative facts; (5) the
availability of process to compel the attendance of
unwilling witnesses; (6) the relative means of the
parties; (7) the forum's familiarity with the
governing law; (8) the weight accorded the
plaintiff's choice of forum; and (9) trial efficiency
and the interest of justice, based on the totality of
Id. at *2 (citing MBCP Peerlogic LLC v. Critical Path, Inc.,
No. 02 Civ. 3310(SWK), 2002 WL 31729626, at *3 (S.D.N.Y. 2002)
(citing Constitution Reins. Corp. v. Stonewall Ins. Co.,
872 F. Supp. 1247, 1250 (S.D.N.Y. 1995)). "There is `no rigid formula
for balancing these factors and no single one of them is
determinative.'" Id. (citing Citigroup, Inc. v. City Holding
Co. and City Nat'l Bank, 97 F. Supp. 2d 549
, 561 (S.D.N.Y.
2000). "Unless the balance of convenience and justice weigh
heavily in favor of defendant's proposed forum," the court must
defer to the plaintiff's choice of forum. Id. Additionally, the
"defendant has the burden of making out a strong case for a
transfer." Filmline (Cross-Country) Prods., Inc. v. United
Artists Corp., 865 F.2d 513
, 521 (2d Cir. 1989) (quoting Ford
Motor Co. v. Ryan, 182 F.2d 329
, 330 (2d Cir. 1950)).
In applying the standard for transfer of venue, first, it must
be acknowledged that the instant action "might have been brought"
in the Southern District of Texas as B & B Texas is a Texas
corporation with its principal place of business in Houston,
Texas. See 28 U.S.C. § 1404(a). Second, the factors used to
determine whether transfer is appropriate must be examined. See Lynch, 2004 WL 385156, at *2.
Consideration of these factors reveals that it is appropriate to
transfer this action to Texas.
The first factor, the convenience of witnesses, "is considered
the single most important factor in the analysis of whether a
transfer should be granted." Lynch, 2004 WL 385156, at *2
(citing Aerotel, Ltd. v. Sprint Corp., 100 F. Supp. 2d 189, 197
(S.D.N.Y. 2000)). Here, all of the non-party witnesses are
located in Texas, including B & B Texas' current and former
employees and the hundreds of injured customers who received
certificates of insurance. Therefore, this factor weighs heavily
in favor of transfer.
The location of relevant documents and relative ease of access
to sources of proof, which is the second factor, is rendered
neutral "[i]n today's era of photocopying, fax machines and
Federal Express." See Coker v. Bank of America,
984 F. Supp. 757, 766 (S.D.N.Y. 1997).
The third factor, the convenience of the parties, weighs
neither for nor against transfer. Since plaintiff is located in
New York and B & B Texas is located in Texas, it would seemingly
be more convenient for plaintiff to remain in New York and B & B
Texas to remain in Texas. The parties have set forth no
additional facts indicating that one jurisdiction would be more
convenient than the other for any other reasons.
The fourth factor, the location of the operative facts, has
traditionally been considered an important factor in deciding
venue. Mobile Video Servs., Ltd. v. National Ass'n of Broadcast
Employees and Technicians, AFL-CIO, 574 F. Supp. 668, 670-71
(S.D.N.Y. 1983). Here, all of the operative facts relevant to
plaintiff's claims, i.e., the fraudulent issuance of insurance
certificates that allegedly damaged plaintiff, took place in
Texas. Therefore, this factor weighs in favor of transfer. The availability of process to compel the attendance of
unwilling witnesses, the fifth factor, also weighs in favor of
transfer. As stated above, essentially all of B & B Texas'
witnesses are located in Texas. Since they potentially may be
unwilling to testify in New York, the Southern District of Texas'
subpoena power would ensure such witnesses' availability at
The sixth factor, the relative means of the parties, is
considered when determining venue "[w]here a disparity exists
between the means of the parties." Lynch, 2004 WL 385156, at *
4. There is no indication in the record that there is any
disparity between the means of the parties. Therefore, this
factor is neutral.
In addressing the seventh factor, the forum's familiarity with
the governing law, the underlying claims of this action must be
considered. This case involves both federal and state law claims
and will turn on whether B & B Texas made misrepresentations to
customers in Texas concerning the sale Oriska's insurance
certificates. The Southern District of Texas will likely be more
familiar with Texas law, which will apply to any state law claims
brought by plaintiff. Therefore, this factor weighs in favor of
The weight accorded the plaintiff's choice of forum, which is
the eighth factor, requires the plaintiff's choice of forum to be
given considerable weight unless there is little connection
between the forum and the facts. Lynch, 2004 WL 385156, at *5.
Here, there is virtually no connection between New York and the
allegedly fraudulent issuance of plaintiff's insurance
certificates. The only possible connection is plaintiff's
presence in New York, which is irrelevant when considering that
the action is based on the allegedly fraudulent sale of insurance
certificates in Texas. Additionally, three of the four entities
that plaintiff complains of are located in Texas and there are
already three actions pending in state court in Texas concerning the same dispute where plaintiff and B & B
Texas are parties. Therefore, this factor does not weigh against
The ninth factor, trial efficiency and the interest of justice,
"is a broad concept that requires the court to consider the
totality of the circumstances presented." Id. at *6. B & B
Texas maintains that the State of Texas has a public interest in
seeing plaintiff's claim litigated there as they concern unlawful
practices concerning the selling of insurance in Texas.
Additionally, the record does not indicate that trial in New York
or Texas will be more efficient. Therefore, this factor does not
weigh against transfer.
Although several of the preceding factors remain neutral for
making a determination on whether transfer is appropriate, the
two most important factors indicate that transfer is proper.
Since Texas is the most convenient forum for the witnesses and is
also where virtually all of the operative facts are located, this
action will be transferred.
Oriska has failed to establish that B & B Texas and B & B Inc.
are engaged in a relationship such that personal jurisdiction may
be exercised over B & B Texas pursuant to CPLR §§ 301 or 302.
Therefore, B & B Texas' motion to dismiss for lack of personal
jurisdiction must be granted. However, it is appropriate to
transfer this action to the Southern District of Texas.
Accordingly it is
1. Defendant Brown & Brown of Texas Inc.'s' motion to dismiss
for lack of personal jurisdiction is GRANTED; 2. Defendant Brown & Brown Inc.'s motion to dismiss for failure
to state a claim is DENIED, without prejudice;
3. Defendants Brown & Brown of Texas, Inc. and Brown & Brown
Inc.'s request to transfer venue to the Southern District of
Texas is GRANTED; and
4. Plaintiff Oriska Insurance Company's motion for further
discovery as to the issue of jurisdiction is DENIED as moot.
The Clerk is directed to transfer the file to the Southern
District of Texas.
IT IS SO ORDERED.