The opinion of the court was delivered by: Wood, U.S.D.J.
Plaintiff Angela Tese-Milner ("Plaintiff"), the Chapter 7 Bankruptcy Trustee of the Estate of W.B. David & Co., Inc. ("W.B. David"), brings this antitrust action against Defendants Diamond Trading Company, Ltd. ("DTC"), Central Selling Organization ("CSO"), CSO Valuations A.G. ("CSOV"), Diamond Development Company N.V. ("Diamdel N.V."), Diamond Development Company S.A. ("Diamdel S.A."), Diamond Development Company, Ltd. ("Diamdel Ltd."), De Beers Consolidated Mines, Ltd. ("Consolidated"), De Beers Centenary A.G. ("Centenary"), De Beers S.A. ("DBSA"), and DB Investments, Inc. ("DBI") (collectively "Defendants"), alleging restraint of trade and unlawful conspiracy in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2, and Section 340 of the Donnelly Act, N.Y. Gen. Bus. L. § 340(1).
Currently pending before the Court are: (1) Defendants Diamdel Ltd.'s, Consolidated's, Centenary's, DBSA's, and DBI's ("Moving Defendants*fn1 ") motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(2), for lack of personal jurisdiction*fn2 (D.E. 154); (2) Defendants CSOV's, Diamdel N.V.'s, Diamdel Ltd.'s, Consolidated's, Centenary's, and DBSA's motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(5), for insufficiency of service (D.E. 154); and (3) Defendants CSOV's, DBI's, DBSA's, Consolidated's, Centenary's, Diamdel Ltd.'s, Diamdel N.V.'s, and DTC's motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim for which relief can be granted (D.E. 162).
For the reasons stated below, the Court GRANTS Moving Defendants' motion to dismiss for lack of personal jurisdiction with respect to Defendant Diamdel Ltd. As to all remaining Moving Defendants, the Court DENIES the motion to dismiss for lack of personal jurisdiction, without prejudice to refiling after the completion of limited jurisdictional discovery as to whether Non-Moving Defendants are either agents or departments of Moving Defendants, such that the actions of Non-Moving Defendants can be imputed to Moving Defendants.
Because the Court finds this jurisdictional issue to be antecedent to questions of propriety of service and the sufficiency of Plaintiff's claims, the Court also DENIES the motion to dismiss for insufficiency of service and the motion to dismiss for failure to state a claim for which relief can be granted, also without prejudice to refiling after the completion of jurisdictional discovery.
All Defendants are business entities affiliated with the De Beers Group ("De Beers"). De Beers is the name of a group of related business entities involved in the production, purchase, and sale of diamonds. De Beers has played a leading role in the diamond industry for decades. (Am. Compl. ¶ 4.)
The parties disagree as to whether Defendants should be treated as separate entities or as a single integrated enterprise*fn3 by this Court.
Plaintiff alleges that Defendants, some of whom own and manage other Defendant companies, some of whom produce diamonds, and some of whom sell and market diamonds, form an "integrated enterprise in which the production and sale of diamonds are entangled in a 'symbiotic relationship.'" (Opp'n Mem. 1.) Plaintiff refers to that integrated enterprise as De Beers, and often refers to individual Defendants as De Beers as well.*fn4
Defendants, however, maintain that Defendants are all "stand-alone firms engaged in their own world-wide businesses." (Reply Mem. 2.)
Plaintiff is the Chapter 7 Bankruptcy Trustee of the Estate of W.B. David. (Am. Compl. ¶ 5.) W.B. David was a corporation engaged in the purchase and sale of diamonds in New York City, and was also the original plaintiff in this action. (Am. Compl.
Unsecured creditors of W.B. David filed an involuntary Chapter 7 bankruptcy petition against W.B. David in January 2006. Subsequently, Plaintiff was appointed Trustee of the Estate of W.B. David. Plaintiff now prosecutes her claim on W.B. David's behalf. (Am. Compl. ¶¶ 5-6.)
B. Plaintiff's Allegations
Plaintiff's claims arise from W.B. David's longstanding business relationship with Defendants. From 1969 to 2003, W.B. David was a De Beers "Sightholder." (Am. Compl. ¶ 3.) In that capacity, W.B. David regularly purchased rough diamonds from De Beers entities. (Am. Compl. ¶ 4.)
Plaintiff alleges that De Beers dominated the "diamond business" during the time period relevant to her claims, and maintained its dominance by various improper means, including controlling supply, managing prices, and acting collusively with others in the diamond business. (Am. Compl. ¶ 25.) Plaintiff alleges that De Beers set out as a matter of business policy to violate United States' antitrust laws, and regularly and openly acknowledged its illegal monopolistic activities. (Id.)
Plaintiff alleges that because of the monopolistic and anticompetitive activity of Defendants, W.B. David suffered harms, inter alia, paying a supracompetitive price for diamonds purchased from De Beers during the years W.B. David was a Sightholder. (Am. Compl. ¶¶ 34, 39.)
C. Procedural Posture and Settlement in Related Case
In July 2004, W.B. David filed a lengthy complaint against over 100 defendants, including some of the current Defendants ("Original De Beers Defendants"), alleging violation of federal and state antitrust and racketeering laws in connection with the production, purchase, and sale of diamonds.
In October 2005, the Court entered default against the Original De Beers Defendants. The Original De Beers Defendants moved to vacate the entry of default in December 2005, and the Court granted their motion in March 2007.
In July 2007, Plaintiff filed a shorter, Amended Complaint against the ten current Defendants.
Two months later, various groups of Defendants filed the three motions to dismiss currently before the Court.
In May 2008, Judge Stanley R. Chesler in the District of New Jersey approved a settlement agreement in Sullivan v. DB Investments, Inc., et. al., 04-2819 (SRC) (D.N.J.), a class action filed against various De Beers entities, including some of the current Defendants. Plaintiff is a member of the Sullivan settlement class.
In June 2008, the Court ordered and received supplemental briefing from the parties on (1) the implications of the settlement agreement's release clause on the claims remaining before this Court; and (2) the implications of the settlement on this Court's personal jurisdiction over Defendants.
The parties agree that the settlement limits Plaintiff's claims in the instant case to those based on W.B. David's purchases as a Sightholder, and bars any claims based on W.B. David's purchases in a non-Sightholder capacity. The parties disagree as to the impact of the Sullivan settlement on the personal jurisdiction issue, see infra Section II.C.2.
II. Motion to Dismiss for Lack of Personal Jurisdiction
The Court must first address Moving Defendants' motion to dismiss for lack of personal jurisdiction. Arrowsmith v. United Press Int'l, 320 F.2d 219, 221 (2d Cir. 1963) (stating that logic compels "initial consideration of the issue of jurisdiction over the defendant - a court without such jurisdiction lacks power to dismiss a complaint for failure to state a claim"); Mende v. Milestone Tech., Inc., 269 F. Supp. 2d 246, 251 (S.D.N.Y. 2003) (noting that "[b]efore addressing Defendants' Rule 12(b)(6) motion to dismiss, the Court must first address the preliminary questions of service and personal jurisdiction").
On a motion to dismiss for lack of personal jurisdiction, "the plaintiff bears the burden of showing that the court has jurisdiction over the defendant." Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999). Prior to discovery, a plaintiff need make only a prima facie showing of jurisdiction to survive a motion to dismiss. A prima facie showing of jurisdiction means that the plaintiff "must plead facts which, if true, are sufficient in themselves to establish jurisdiction." Bellepointe, Inc. v. Kohl's Dep't Stores, Inc., 975 F. Supp. 562, 564 (S.D.N.Y. 1997). Allegations that merely restate the legal standard are insufficient to constitute a prima facie showing. Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 184 (2d Cir. 1998).
B. Jurisdictional Allegations
When deciding a motion to dismiss, the Court is not limited to considering facts alleged in the complaint. A plaintiff may make its prima facie showing through "affidavits and supporting materials [,] containing an averment of facts that, if credited ..., would suffice to establish jurisdiction over the defendant." Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, 208 (2d Cir. 2001) (internal quotation marks and citations omitted) (alterations in original). At the motion to dismiss stage, all allegations are construed in the light most favorable to the plaintiff, and all doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party. See A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993).
1. Allegations Relating to All Defendants
A majority of Plaintiff's jurisdictional allegations are based on the underlying assumption that Defendants operate as an integrated enterprise. The Court first reviews allegations in this category. They include: (1) allegations that De Beers is an integrated enterprise; and (2) allegations that jurisdiction is appropriate over De Beers, as an integrated enterprise.
a. Allegations that De Beers Is an Integrated Enterprise
According to Plaintiff, De Beers is not operated as numerous separate entities, but as one integrated entity. (Opp'n Mem. 1.) Plaintiff alleges that De Beers openly admits the integrated nature of its business operations. For instance, Plaintiff submits evidence of a 2001 De Beers' publication that proclaims "De Beers is an integrated company whose core business is the mining and marketing of rough diamonds." (Stamell Aff. Ex. 7.)
Pursuant to her theory of De Beers' corporate organization, Plaintiff alleges that Non-Moving Defendants are the "sales arms" of De Beers, and are controlled by and accountable to Moving Defendants, who are the production, management, and ownership "arms" of De Beers. Plaintiff alleges that although W.B. David directly interacted only with De Beers' sales arms, i.e. Non-Moving Defendants, all "defendants are equally subject to this Court's jurisdiction because De Beers is in fact an integrated company" and Non-Moving Defendants "are agents of their ultimate parents," i.e. Moving Defendants. (Opp'n Mem. 13.)
In support of her agency argument, Plaintiff makes numerous allegations about the relationships among Defendants. Plaintiff alleges, for instance, that the money paid to DTC and the Diamdels from diamond sales flows through to Consolidated, Centenary, and DBSA. Plaintiff also alleges that CSO, DTC, and the Diamdels provide necessary services for their parent companies that the parent companies would otherwise have to perform themselves. (Opp'n Mem. 3.) Plaintiff submits an Affidavit from a former De Beers' employee stating that De Beers' "[d]iamonds are produced, i.e. mined or otherwise extracted, for purposes of sale. If the CSO did not sort them, and DTC and Diamdel sell them, [Consolidated or Centenary] or DBSA would ...