United States District Court Southern District of New York
July 27, 2007
MOATAZ ABDELHAMID, PERSONAL REPRESENTATIVE OF THE ESTATE OF SHEREEN GAZAYERLI-ABDELHAMID, PLAINTIFF,
ALTRIA GROUP, INC., A VIRGINIA CORPORATION, PHILIP MORRIS INTERNATIONAL, A DELAWARE CORPORATION, PHILIP MORRIS PRODUCTS S.A., A SWITZERLAND CORPORATION, AND LOUTFY MANSOUR INTERNATIONAL DISTRIBUTION COMPANY, AN ARAB REPUBLIC OF EGYPT COMPANY, JOINTLY AND SEVERALLY, DEFENDANTS.
The opinion of the court was delivered by: Shira A. Scheindlin, District Judge
OPINION AND ORDER
Moataz Abdelhamid brings this diversity *fn1 action against, inter alia, Altria Group, Inc. ("Altria") and Philip Morris International *fn2 ("PMI") ("the defendants") claiming that his wife suffered grave injury as a result of their negligence and/or gross negligence. The claim arises from the electrocution and death of Abdelhamid's wife, Shereen Gazayerli-Abdelhamid, at a concert she attended in Cairo, Egypt, on August 12, 2005. Abdelhamid seeks damages for, inter alia, his wife's medical and funeral expenses, her pain and suffering, his loss of companionship and society, as well as punitive damages and all other damages recoverable under the New York Wrongful Death Act.
On January 31, 2007 Abdelhamid amended his complaint. Altria and PMI now move to dismiss the Amended Complaint for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. On April 4, 2007, in a separate submission, both defendants move for Rule 11 sanctions against plaintiff based on the filing of the Amended Complaint.
After reviewing the parties' submissions, I requested additional briefing on the applicability of Egyptian law. For the reasons that follow, defendants' motions to dismiss and for sanctions are granted.
A. Distribution of Marlboro Cigarettes in Egypt
In 2002, Altria was the parent company and sole owner of PMI. *fn4 Both companies conducted business throughout the world. *fn5 Philip Morris Products S.A. ("PMP") was a business unit of PMI that was incorporated in Switzerland. *fn6
On or about January 1, 2002, Mansour, an Egyptian company, entered into two agreements with PMI through PMI's business unit, PMP.*fn7 The first agreement was an agreement to license, manufacture, package, promote, sell, trademark, and distribute cigarettes, including cigarettes produced under the Marlboro brand.*fn8 The second agreement was an agreement with Mansour and another company permitting Mansour to manufacture, supply, deliver and distribute cigarettes under the Marlboro brand.*fn9
B. The Diplomat Village Concert
On August 12, 2005, Shereen Gazayerli-Abdelhamid paid an admission fee and attended a party and concert on the beach at Diplomat Village in Cairo, Egypt.*fn10 Over one thousand people attended this concert and there were numerous advertising booths along the beach.*fn11 These booths displayed the names of various sponsors, and there were a number of booths that displayed the Marlboro brand name.*fn12
One of the booths that displayed the Marlboro brand name was used to market and distribute Marlboro cigarettes pursuant to Mansour's licensing and manufacturing agreements with PMI.*fn13 Power from an electrical generator illuminated the booth which was attached to a generator by an electrical cord. *fn14 During the evening of August 12th and the morning of August 13th, a number of patrons who touched the electrical cord or the Marlboro booth received an electrical shock. *fn15 These patrons notified a Marlboro employee-defined in the Amended Complaint as an agent of Altria, PMI, PMP and/or Mansour-of what happened. *fn16 The Marlboro employee did nothing to remedy the electrical hazard.*fn17
On August 13, 2005, at the conclusion of the concert, Ms. Abdelhamid stepped on the electrical cord and then touched a metal portion of the booth, resulting in her death by electrocution. *fn18
III. LEGAL STANDARD
A. Rule 12(b)(6)-Motion to Dismiss
"Federal Rule of Civil Procedure 8(a)(2) requires ... `a short and plain statement of the claim showing that the pleader is entitled to relief.' " *fn19 When deciding a defendant's motion to dismiss under Rule 12(b)(6), the court must "accept as true all of the factual allegations contained in the complaint" *fn20 and "draw all reasonable inferences in plaintiff's favor." *fn21
Nevertheless, to survive a 12(b)(6) motion to dismiss, the allegations in the complaint must meet the standard of "plausibility."*fn22 Although the complaint need not provide "detailed factual allegations," *fn23 it must "amplify a claim with some factual allegations ... to render the claim plausible." *fn24 The test is no longer whether there is "no set of facts" that plaintiff could prove "which would entitle him to relief." *fn25 Rather, the complaint must provide "the grounds upon which [the plaintiff's] claim rests through factual allegations sufficient `to raise a right to relief above the speculative level.' " *fn26
Although the court must take the plaintiff's allegations as true, "the claim may still fail as a matter of law ... if the claim is not legally feasible." *fn27 In addition, "bald assertions and conclusions of law will not suffice." *fn28
B. Rule 11 Sanctions
A pleading, motion or other paper violates Rule 11 either when it "has been interposed for any improper purpose, or where, after reasonable inquiry, a competent attorney could not form a reasonable belief that the pleading is well-grounded in fact and warranted by existing law or a good faith argument for the extension, modification or reversal of existing law." *fn29 " `Although arguments for a change of law are not required to be specifically so identified, a contention that is so identified should be viewed with greater tolerance under the rule.' " *fn30 In determining whether a Rule 11 violation has occurred, the court should use an objective standard of reasonableness.*fn31 Nevertheless, "the extent to which a litigant has researched the issues and found some support for its theories even in minority opinions, in law review articles, or through consultation with other attorneys should certainly be taken into account." *fn32
To be sure, the Supreme Court has cautioned that Rule 11 "must be read in light of concerns that it will ... chill vigorous advocacy." *fn33 Thus, "[w]hen divining the point at which an argument turns from merely losing to losing and sanctionable" courts must "resolve all doubts in favor of the signer of the pleading." *fn34 Sanctions should be imposed only " `where it is patently clear that a claim has absolutely no chance of success.' " *fn35 Normally, "the principal objective of the imposition of Rule 11 sanctions is not compensation of the victimized party but rather the deterrence of baseless filings and the curbing of abuses." *fn36
If, after notice and a reasonable opportunity to respond, the court determines that the Rule 11 standard has been violated, the court may impose sanctions upon the attorneys, law firms, or parties.*fn37 "The court has significant discretion in determining what sanctions, if any, should be imposed for a violation, subject to the principle that the sanctions should not be more severe than reasonably necessary to deter repetition by the offending person or comparable conduct by similarly situated persons." *fn38 Among the types of sanctions that the court may choose are: a fine or penalty paid to the court, an award of reasonable expenses and attorneys' fees incurred as a result of the misconduct, an order precluding the introduction of certain evidence, and dismissal of the action.*fn39
IV. APPLICABLE LAW
A. Choice of Law
"[I]n diversity cases the federal courts must follow conflict of laws rules prevailing in the states in which they sit." *fn40 As a result, New York's choice of law rules will apply for the purpose of determining which state's or which country's law defines whether Abdelhamid has stated a claim against Altria and/or PMI. "The New York Court of Appeals has held that `the relevant analytical approach to choice of law in tort actions in New York' is the `[i]nterest analysis.' " *fn41 Under the interest analysis, " `[t]he law of the jurisdiction having the greatest interest in the litigation will be applied and ... the [only] facts or contacts which obtain significance in defining State interests are those which relate to the purpose of the particular law in conflict.' " *fn42 Significant facts or contacts consist of, " `almost exclusively, the parties' domiciles and the locus of the tort....' " *fn43
"Under the interest-analysis test, torts are divided into two types, those involving the appropriate standards of conduct, rules of the road, for example and those that relate to allocating losses that result from admittedly tortious conduct ... such as those limiting damages in wrongful death actions, vicarious liability rules, or immunities from suit."*fn44 When conduct-regulating rules are at issue, " `the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders.' " *fn45
When loss-allocating rules are at issue, and the location of the accident is the domicile of one or both of the parties, the interest analysis will turn mainly on consideration of the parties' domiciles.*fn46 However, when "the injured party and the defendant reside in different jurisdictions and the accident occurred in a third jurisdiction, the law of the place of the accident presumptively applies" for loss-allocation as well. *fn47 "That presumption may be overcome ... if `it can be shown that displacing [the law of the third jurisdiction] will advance the relevant substantive law purposes without impairing the smooth working of the multi-state system or producing great uncertainty for litigants.' " *fn48 In other words, the party seeking to overcome this presumption must show that "[New York's] connection with the controversy is sufficient to justify displacing the rule of the lex loci delictus." *fn49
"Choice of law does not matter, however, unless the laws of the competing jurisdictions are actually in conflict." *fn50 "Laws are in conflict `[w]here the applicable law from each jurisdiction provides different substantive rules.' " *fn51 "In the absence of substantive difference, however, a New York court will dispense with choice-of-law analysis, and if New York law is among the relevant choices, New York courts are free to apply it." *fn52
B. New York Law
"Under New York law, the elements of a negligence claim are: (i) a duty owed to the plaintiff by the defendant; (ii) breach of that duty; and (iii) injury substantially caused by that breach." *fn53 A claim for gross negligence is stated where " `there is a reckless indifference to the safety of human life or intentional failure to perform a manifest duty to the public.' " *fn54
2. Vicarious Liability
a. Respondeat Superior
Under the common law doctrine of respondeat superior, an employer may be held liable for the tortious acts of an employee committed within the scope of his employment.*fn55 This doctrine, however, does not render a parent company liable for the conduct of a subsidiary.*fn56
b. Joint Enterprise
A party can be jointly liable for the tortious acts of another when both parties are part of a joint enterprise. To allege a joint enterprise, a plaintiff must allege that there was " `(1) an express or tacit agreement to participate in a common plan ... to commit a tortious act, (2) tortious conduct by each defendant, and (3) the commission by one of the defendants, in pursuance of the agreement, of an act that constitutes a tort.' " *fn57 In addition, the plaintiff must allege that each member of the joint enterprise had an equal right to direct or control the other members.*fn58 A claim based on joint enterprise liability will fail if the plaintiff does not allege that a participant in a joint enterprise could control the other participants with respect to the particular course of conduct that caused the plaintiff's injury.*fn59
A. Egyptian Law-Joint Enterprise Liability
The parties disagree about whether there is a conflict between New York law and Egyptian law on the issue of joint enterprise liability. *fn60 Abdelhamid contends that there is no conflict because both jurisdictions recognize "the concept" of joint enterprise liability.*fn61 Defendants argue that there is a conflict because "there is no concept of joint enterprise ... liability under Egyptian law." *fn62
Abdelhamid argues that Egyptian law "recognizes the concept of joint enterprise liability and [that] its elements are the same as New York's law of joint enterprise." *fn63 While he concedes " `that the Egyptian Civil Code does not have a provision that explicitly replicates the American legal terminology as to joint enterprises,' " *fn64 Abdelhamid argues that the " `legal commentary and cumulative judicial precedents on sections 169 and 174 [of the Egyptian Civil Code] clearly engender the same legal concepts and standards [as those] relating to joint enterprises in American jurisprudence." *fn65 Section 169,*fn66 in Abdelhamid's view, means that when "defendants are acting as an `effective partnership' or `as a single unit' ... either by contract or by law, [the] defendants are jointly and severally liable for any tort committed by a member of such enterprise." *fn67 Section 174,*fn68 he further argues, has been relied on by Egyptian courts to impute the negligence of one company " `to other companies functioning within a common enterprise' " *fn69 " `as long as a certain hierarchical structure existed among investors' " *fn70 and " `the principal company is in a position to [exercise its supervisory prerogative] either by law or contract.' " *fn71
Defendants argue that there is no concept of joint enterprise liability in Egyptian law. In defendants' view, Section 169 of the Egyptian Civil Code requires that each actor or member of the partnership must act wrongfully-"commit a fault"-to be liable.*fn72 Section 174 is limited to "the employment context"-"it applies only `where the employee in the course or as a result of the performance of the tasks entrusted to him by the employer commits a fault.' " *fn73
I conclude that Egyptian law does not recognize joint enterprise liability. The plain text of the Egyptian Civil Code, section 169-"when several persons are responsible for a harmful act"-suggests that a party must act and cause injury in order to be liable, and cannot be vicariously liable for the acts or omissions of another. Likewise, the plain text of section 174-which uses the words "principal," "subordinate," and "employment"-applies to the employer-employee relationship rather than to a joint enterprise where the parties have an equal right of control.*fn74
Abdelhamid's argument that Egyptian court precedent supports his expansive reading of these two sections is faulty. Egypt is a civil law jurisdiction so, as defendants point out, "an Egyptian court has no power to exceed the scope of rules enacted by the legislature." *fn75 Even if this Court turned to Egyptian court rulings for guidance on the scope of the Code's provisions, however, Abdelhamid does not cite a single Egyptian case in support of his argument.*fn76
B. Conflict of Laws Analysis
There is a conflict between New York law and Egyptian law on the issue of joint enterprise liability because New York law recognizes this doctrine and Egyptian law does not. Therefore, under New York's choice of law rules, Egyptian law presumptively applies unless it can be shown that New York's connection with the case justifies displacing Egyptian law.
New York's connection is tenuous at best. The State's only relevant connection is that Altria was domiciled in New York when Ms. Abdelhamid was electrocuted in Egypt. New York has little or no interest in ensuring that its domiciliary corporations are held vicariously liable for injuries to non-domiciliaries in foreign jurisdictions.*fn77
By contrast, Egypt has multiple connections to the case: Ms. Abdelhamid was electrocuted in Egypt; the advertising booth was constructed in Egypt; and Mansour-the company responsible for marketing and promoting Marlboro cigarettes in Egypt-was incorporated and is domiciled in Egypt. Egypt also has a strong interest in determining the potential tort liability of foreign business entities that do business with domestic corporations. Accordingly, Egyptian law governs on the issue of joint enterprise liability.
C. Direct Liability
Abdelhamid alleges that "Altria, [PMI], PMP, and/or Mansour" are directly liable for his wife's death because they owed duties to the individuals who attended the August 12th concert "to ... provide an advertising booth ... that was relatively safe" and that "Altria, [PMI], PMP and/or Mansour breached [this] duty." *fn78 He alleges that "in advance of the party and concert Altria, [PMI], PMP and/or Mansour were responsible for hiring and/or employing ... experienced and safe electricians." *fn79 He further alleges that the Marlboro employee at the concert who did nothing to remedy the electrical defect was "Altria's, [PMI]'s, PMP's and/or Mansour's agent." *fn80
Abdelhamid's allegations of direct liability are simply not plausible. His allegations that Altria and PMI acted negligently in building and operating the booth, or in hiring the contractor fail to adequately state a claim. There are no facts alleged in the Amended Complaint from which a court could reasonably infer that these American companies were responsible for hiring local electricians in Cairo, Egypt to set up a booth at a concert or that the employee manning the booth was an agent of Altria or PMI.*fn81 Both Altria and PMI are American businesses that manage numerousproducts and brands around the world. They both rely on subsidiaries and contractors to market and distribute their products and promote their brands in foreign countries. It is also implausible-even drawing reasonable inferences in Abdelhamid's favor- that either company had any direct involvement in the wiring of an advertising booth at a beach concert in Egypt, particularly given that PMP contracted Mansour to market and promote Marlboro cigarettes in Egypt. The construction and wiring of a booth to promote Marlboro cigarettes are precisely the kinds of tasks that would be undertaken by Mansour pursuant to this contract. The Amended Complaint's legal conclusions as to agency law and negligence need not be credited and indeed are not supported by any factual allegations in the Amended Complaint. Accordingly, the Amended Complaint fails to state a claim based on defendants' direct liability to Abdelhamid.
D. Vicarious Liability
In the alternative, Abdelhamid claims that Altria and PMI should be held vicariously liable for Ms. Abdelhamid's death. He pleads respondeat superior, but also argues in his brief a theory of joint enterprise. Both theories fail.
With respect to joint enterprise, as discussed above, Egyptian law applies here and does not recognize joint enterprise liability.*fn82 Accordingly, these defendants cannot be held liable as part of a joint enterprise.
In addition, the defendants cannot be held liable under the doctrine of respondeat superior. Both New York law and Egyptian law recognize this doctrine. The key element of respondeat superior, however, is an employment relationship between the alleged tortfeasor and the party that the plaintiff is seeking to hold vicariously liable. The alleged tortfeasor here is the builder and operator of the booth. As already discussed, the Amended Complaint fails to allege that either Altria or PMI directly "employed" the contractors who built the booth or controlled the persons who operated it. Accordingly, Abdelhamid has likewise failed to allege the prerequisite for liability under New York's doctrine of respondeat superior. "Because [Abdelhamid] [has] not nudged [his] claims across the line from conceivable to plausible, [his] [amended] complaint must be dismissed." *fn83
E. Defendants' Motion for Sanctions
The defendants have also moved for sanctions against Abdelhamid's counsel pursuant to Rule 11. They charge that not only was there no evidentiary support for many of the allegations in the Amended Complaint, but that Abdelhamid's counsel was aware of evidence that directly contradicted many of the allegations.*fn84 They also charge that existing law did not support a claim of vicarious liability based on respondeat superior as alleged in the Amended Complaint.*fn85 The defendants, who notified Abdelhamid's counsel of these alleged deficiencies after the Amended Complaint was filed on January 31 but before they moved for sanctions on April 4, *fn86 have requested that the Court sanction Abdelhamid's counsel in the amount of $60,607-the attorneys' fees that the defendants have incurred in prosecuting their motion to dismiss the Amended Complaint.*fn87
In the Amended Complaint, Abdelhamid asserted new factual allegations about Altria and PMI's corporate activities. These allegations, however, were directly contradicted by the deposition testimony of Altria and PMI corporate officers and appear to be without any grounding in fact. First, the Amended Complaint alleged that PMI did business all over the world, including in Egypt. *fn88 On December 5, 2006, however, Ann Marie Kaczorowski, PMI's Corporate Secretary, testified at a deposition that PMI was a holding company whose sole purpose was to receive dividends from affiliates and deliver those dividends to Altria.*fn89 Second, the Amended Complaint alleged that PMI entered into licensing and manufacturing agreements with Mansour through PMP. *fn90 Yet Kaczorowski testified that PMI did not engage in advertising, marketing or licensing and exercised no direction, supervision or control over PMP's business.*fn91 Counsel for PMI also emailed a copy of the licensing agreement-an agreement between Mansour, PMP and Eastern Company S.A.E.- to Abdelhamid's counsel in November of 2006, which also supported PMI's lack of involvement.*fn92 Third, the Amended Complaint alleged that "Altria, [PMI], PMP and/or Mansour were responsible for hiring and/or employing reasonably experienced and safe electricians" to inspect the booth that advertised Marlboro cigarettes.*fn93 On December 5, 2006, however, G. Penn Holsenbeck, the Vice President of Altria, testified at a deposition that Altria never manufactured, advertised or distributed cigarettes in Egypt. *fn94 Moreover, it was factually impossible for PMI to have been responsible for hiring or employing electricians because PMI had no employees. *fn95 Finally, the Amended Complaint alleged that the employee at the booth was "Altria's, [PMI]'s, PMP's and/or Mansour agent." *fn96 Because PMI had no employees, however, the allegation that the employee at the booth could have been PMI's agent is baseless.*fn97
Abdelhamid's counsel did not provide the Court with any evidence of the factual bases for his allegations in his response to the defendants' motion, nor did he even contend that "there is (or likely will be) `evidentiary support' for the allegation[s]." *fn98 He also did not seek to amend his pleading to retract these allegations within the twenty-one day "safe harbor" period. Accordingly, the Court finds that Abdelhamid's counsel violated Rule 11(b)(3) because "a competent attorney could not form a reasonable belief that [the allegations in the Amended Complaint] were well grounded in fact." *fn99
In addition, the Amended Complaint asserted that Altria and PMI were vicariously liable under the doctrine of respondeat superior.*fn100 As discussed above in the motion to dismiss discussion, this contention is not supported by existing law. In his brief in opposition to the motion to dismiss, Abdelhamid abandoned his respondeat superior theory and advanced a new theory of vicarious liability under the doctrine of joint enterprise. *fn101 He argued that a defendant corporation could be liable for the tortious actions of a partner in the course of a plan to market a product. Although the Court did not reach the issue of whether this theory has any merit because Egyptian law applies and does not recognize joint enterprise liability, it was reasonable for his counsel to believe that this was a non-frivolous argument for the extension of existing law. Therefore, the argument does not violate Rule 11(b)(2).
Defendants' requested sanction of an award of their legal fees is unduly harsh and is therefore denied. There is no evidence that Abdelhamid's counsel made his allegations in bad faith or with the intent to harass or injure. It is conceivable that his counsel felt that these allegations were accurate within the context of his theory of joint enterprise liability. It is also possible that his counsel believed that-given the vast and complex nature of Altria's corporate structure-further discovery would unearth evidence supporting his allegations against the defendants.*fn102
A more appropriate sanction is the dismissal of Abdelhamid's Amended Complaint with respect to Altria and PMI. Although the Court has already decided to dismiss the Amended Complaint for failure to state a claim, this sanction under Rule 11 serves as an alternative ground for dismissal.
Given the lack of direct liability and the inapplicability of vicarious liability, Abdelhamid has failed to state a claim against Altria and PMI for Ms. Abdelhamid's death. For these reasons, defendants' motion to dismiss the First Amended Complaint is granted with respect to Altria and PMI. For the reasons discussed above, defendants' Rule 11 motion is granted to the extent that the pleading violations provide an alternative ground on which to dismiss the Amended Complaint as to these defendants. However, the request for the recovery of attorneys' fees is denied. The Clerk of the Court is directed to close these motions [Docket Nos. 24, 29]. A conference is scheduled for August 30, 2007, at 4:30 p.m., after Philip Morris Products S.A. serves a responsive pleading.