UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
May 1, 2012
FREDERICK W. GUNDLACH, PLAINTIFF,
INTERNATIONAL BUSINESS MACHINES CORPORATION, IBM JAPAN, LTD, COGNOS K.K., AND JOHN DOE OR JANE DOES, DEFENDANTS.
The opinion of the court was delivered by: Seibel, J.
OPINION AND ORDER
Before the Court are the Motions to Dismiss of Defendants International Business Machines Corporation ("IBM US"), (Doc. 33), and IBM Japan, Ltd. ("IBM Japan"), (Doc. 31), (collectively, "IBM"). IBM US seeks dismissal of Plaintiff Frederick Gundlach's discrimination claims under Federal Rule of Civil Procedure 12(b)(6) and on forum non conveniens grounds. IBM Japan seeks dismissal of Plaintiff's breach of contract and Japanese Labor Law claims under Federal Rules of Civil Procedure 12(b)(2), (4), (5), and (6), and on forum non conveniens grounds. For the following reasons, IBM US's Motion is GRANTED and IBM Japan's Motion is DENIED without prejudice to renewal.
All of Plaintiff's factual allegations are accepted as true for the purposes of these Motions and construed in the light most favorable to Plaintiff.
A. Plaintiff's Employment with Cognos K.K.
In February 2008, Plaintiff commenced employment as a financial consultant in Japan with Cognos K.K. ("Cognos"), a Japanese company. (FAC ¶ 20 at 6; IBM US's Mem. 1.)*fn1
Plaintiff and Cognos signed an employment contract, dated February 25, 2008, which laid out the conditions of his employment and included the following terms: (1) his job as a contracted employee would begin on February 25, 2008 and end on July 11, 2008, with the possibility of renewal if both parties consented; (2) he would perform accounting work as a financial consultant; (3) he would be based in Tokyo, Japan; and (4) Cognos could terminate him at any time with thirty days' advance notice. (FAC Ex. C.)*fn2 Plaintiff asserts that this contract contained a number of "irregularities" and "flaws," (id. ¶¶ 22, 26 at 6), and that it was not ultimately honored by Cognos because, as an example, Cognos failed to pay him overtime, (id. ¶ 25 at 6).
Shortly thereafter, Cognos's Finance Manager for Japan left the company, and on March 7, 2008, Plaintiff took over that role. (Id. Ex. Q at 1; id. ¶ 27 at 6.) Plaintiff asserts that this switch in positions did not come with a written contract. To memorialize the change in employment duties and status, specific terms were deleted from the February 25th contract.
The monthly salary remained the same; the exchange was for 'regular' or what is also called permanent employment in Japan. (In Japanese: kikan no sadame no nai, "without end date", or sei sha'in status.) (Id. ¶ 28 at 6.) Plaintiff does not state who memorialized the changes. The copy of the contract attached as Exhibit C to the FAC has two provisions crossed out: the one providing for a fixed term of employment and the one specifying Plaintiff's supervisor. The provision allowing termination on thirty days' notice was not crossed out. The cross-outs are accompanied by a round red stamp, the significance of which is unexplained. Plaintiff does not say who crossed those provisions out or who supposedly agreed to permanent employment. On March 17, 2008, Plaintiff emailed two superiors at Cognos, Steve Gazzard and Representative Director Rohan Persaud, requesting that those two provisions be removed. (See id. Ex. D.) Gazzard emailed Persaud stating that he was "comfortable that we remove the end date -- it has no real meaning given that there is a notice period in the contract." (Id.) There is no allegation that Persaud agreed or that a new contract was ever concluded. According to Plaintiff, however, the March 2008 events converted him from a term-limited employee to a sei sha'in, or permanent, employee. (Id. ¶¶ 28--34 at 6--7.)
B. Plaintiff's Employment with IBM Japan
IBM Japan is a "100% wholly-ow[n]ed subsidiary of defendant [IBM US]" and does business in Japan. (Id. ¶¶ 1, 10 at 3--4.) Plaintiff asserts that IBM acquired Cognos and that May 1, 2008 was set as the date for Cognos employees to transfer to IBM Japan, (id. ¶¶ 19, 33 at 6--7), but that the "management of IBM Japan, and in particular a John Doe or John Does, insisted that plaintiff not be transferred to IBM Japan," (id. ¶ 35 at 7). Plaintiff attributes this sentiment to discrimination based on national origin. (Id.)
Plaintiff was not transferred to IBM Japan as an employee but was given an employment contract. (Id. ¶¶ 35, 43 at 7--8.) According to Plaintiff, his contract with IBM Japan "did not honor the terms of the Cognos employment," (id. ¶ 38 at 7), in that it was term-limited, (id. ¶¶ 42--44 at 8). Plaintiff construed this action as a "threat" by IBM Japan, intended to "cause a breach of plaintiff's employment agreement with Cognos" and induce Plaintiff to "accept unequal terms and conditions as were offered to the remaining Cognos employees, the overwhelming number of whom . . . were Japanese." (Id. ¶ 39 at 8.)
On April 22, 2008, Plaintiff signed a fixed-term employment contract with IBM Japan for the period May 1, 2008 through January 31, 2009. (Id. ¶ 69 at 11; IBM Japan's Mem. 2;*fn3 Bloom Aff. Ex. A.) Sometime before January 31, 2009, Plaintiff was notified that his employment with IBM Japan would end on January 31, 2009, and he was subsequently terminated on that date. (FAC ¶¶ 79--80 at 12.) Plaintiff claims that after his termination, his "work was divided and given to employees, one or all of whom were at least 10 years younger than plaintiff," (id. ¶ 82 at 12), and attributes this action to age discrimination, (id. ¶ 84 at 12). Plaintiff's permission to work in Japan expired on November 17, 2010, and he returned to the United States on December 20, 2010. (Id. ¶ 96 at 14.) He currently resides in Pennsylvania.
C. Procedural History
On October 8, 2008, Plaintiff contacted the EEOC via its website and notified them of his national origin and/or age discrimination claims. (Id. ¶ 76 at 12.) He informed the Human Resources departments of IBM US and IBM Japan of the same. (Id. ¶ 75 at 12.) On November 12, 2008, Plaintiff filed a formal charge with the EEOC alleging that he faced discrimination when IBM Japan accepted "all the other employees in the [Cognos] transfer as 'sei sha'in,'" or permanent employees, but made him "'keiyaku sha'in,'"-a contract employee with limited terms and conditions of employment. (Id. Ex. B at 1.) IBM US responded to the charge on February 23, 2009, contending that it could not be held responsible for the actions of IBM Japan because it did not "control" IBM Japan within the meaning of the relevant employment discrimination statutes. (Id. ¶ 86 at 13; P's IBM US Opp'n Mem. Attachment 1.) The EEOC sought a substantive response from IBM US, and on September 13, 2010, IBM US responded again, maintaining its initial defense and asserting that no discrimination had taken place. (FAC ¶¶ 88--89 at 13.) By letter dated November 2, 2010, the EEOC notified Plaintiff of its determination that no violation of federal law had been established and provided Plaintiff with a right to sue letter. (Id. Ex. A.) Plaintiff commenced this lawsuit by filing a complaint on February 7, 2011, (Doc. 1); he amended his complaint on July 29, 2011, (Doc. 28).
A. Motion to Dismiss Standard "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (internal citations and quotation marks omitted). While Federal Rule of Civil Procedure 8 "marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, . . . it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Iqbal, 556 U.S. at 678--79.
In considering whether a complaint states a claim upon which relief can be granted, the court "begin[s] by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth," and then determines whether the remaining well-pleaded factual allegations, accepted as true, "plausibly give rise to an entitlement to relief." Id. at 679. Deciding whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not 'shown' -- 'that the pleader is entitled to relief.'" Id. (quoting Fed. R. Civ. P. 8(a)(2)).
"While pro se complaints must contain sufficient factual allegations to meet the plausibility standard, [courts] read them with 'special solicitude' and interpret them 'to raise the strongest arguments that they suggest.'" Roman v. Donelli, 347 F. App'x 662, 663 (2d Cir. 2009) (summary order) (emphasis in original) (quoting Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 474--75 (2d Cir. 2006)).*fn4 Where, however, the plaintiff is an attorney, as Plaintiff is here, he or she is not entitled to the same liberality afforded other pro se plaintiffs. See Cohen v. Cnty. of Nassau, No. 10-CV-5836, 2011 WL 2604345, at *1 n.1 (E.D.N.Y. June 29, 2011) ("Given that plaintiff is an attorney, his pleadings are not entitled to the degree of liberality ordinarily given to pro se plaintiffs."); Fenner v. City of N.Y., No. 08-CV-2355, 2009 WL 5066810, at *3 (E.D.N.Y. Dec. 21, 2009) ("Although pro se litigants are generally entitled to a broad reading of their submissions because of their lack of familiarity with the law, that is not the case with attorneys who have chosen to proceed pro se. It is well settled in the Second Circuit that since the reason for affording pro se litigants special deference is not present when the litigant is an attorney, no special consideration is required.") (internal citation omitted).
B. Claims Against IBM US
Plaintiff alleges that IBM US discriminated against him on the basis of his national origin and age. IBM US contests the merits of Plaintiff's claims and also asserts that it cannot be held responsible for the actions of IBM Japan because the federal laws at issue are not applicable to employment actions taken by a foreign employer when the foreign employer is not "controlled" by a U.S. company. See 42 U.S.C. § 2000e-1(c)(2). (See also IBM US's Mem. 3.) I need not determine whether IBM Japan is "controlled" by IBM US because Plaintiff has failed to state a claim against IBM US for employment discrimination.
1. Title VII-National Origin Discrimination
Plaintiff alleges that IBM Japan (and by association, IBM US) discriminated against him on the basis of national origin when he was not offered permanent employment with IBM Japan after having negotiated a permanent position at Cognos, but rather was relegated to a term-limited contract, while other, primarily Japanese employees, received the same terms of employment that they enjoyed at Cognos. (FAC ¶¶ 35, 40, 44--48 at 7--8.)
To state a claim for national origin discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., a plaintiff must "demonstrate membership in a protected class, qualification for his [or her] position, an adverse employment action, and circumstances that support an inference of discrimination." Gorokhovsky v. City of N.Y., No. 10-CV-8848, 2011 WL 2019423, at *6 (S.D.N.Y. May 19, 2011). At the pleading stage, a plaintiff need not establish a prima facie case of discrimination, but rather, need only plead sufficient facts to meet the general pleading requirements under Twombly and Iqbal. See Anderson v. Davis Polk & Wardwell LLP, No. 10-CV-9338, 2012 WL 734120, at *2 (S.D.N.Y. Mar. 6, 2012) ("Reconciling Swierkiewicz, Twombly,and Iqbal, a complaint need not establish a prima facie case of employment discrimination to survive a motion to dismiss; however, the claim must be facially plausible and must give fair notice to the defendants of the basis for the claim.") (emphasis in original) (internal quotation marks omitted); Lugo-Young v. Courier Network, Inc., No. 10-CV-3197, 2012 WL 847381, at *3--4 (E.D.N.Y. Mar. 13, 2012) (same).
Plaintiff's claim that he was treated differently from other former Cognos employees when he was not offered permanent employment, but rather a term-limited contract, culminating in his termination at the end of January 2009, fails. First, Plaintiff does not plausibly allege that he suffered an adverse employment action. Plaintiff does not dispute that his initial employment contract with Cognos was term-limited but claims that he became a permanent employee of Cognos when he took on the role of Finance Manager for Japan on March 7, 2008. (FAC ¶¶ 26-- 28.) This claim is not plausible. Plaintiff did not receive a new contract to confirm this switch to permanent employment status, and the documentary evidence at best demonstrates that one of Plaintiff's superiors merely stated that he felt "comfortable" removing the end date from Plaintiff's employment contract only because "it ha[d] no real meaning" anyway, given that Cognos could still terminate him at any time with thirty days' notice. (Id. Ex. D.) This exchange demonstrates, contrary to Plaintiff's argument, that while at Cognos even after March 2008, Cognos reserved the right to dismiss him and did not accord him permanent employee status. Continuation of the non-permanent status at IBM is thus not an adverse action. Furthermore, Plaintiff's assertion that "[u]nder Japanese law, certain conforming writings are required not to confer 'regular employment,'" actually undermines his argument. (P's IBM US Opp'n Mem. 12 (emphasis in original).) Nothing in the record indicates that his initial employment contract with Cognos ceased to apply after March 7, 2008, notwithstanding the alleged removal of the termination date. (See FAC Ex. D.) Therefore, Plaintiff's employment was in fact governed by a conformed writing, indicating, under Plaintiff's logic, that he was not a "regular" employee. Finally, Plaintiff's assertion that the acquisition of Cognos took place in February 2008, so both his promotion to Finance Manager and any changes to his employment contract or status as a result thereof, occurred on IBM's watch, (see P's IBM US Opp'n Mem. 12), proves nothing, and in any event is undercut by his assertion that as of April 2008, Cognos may still have been hiring people without IBM Japan's knowledge, (see FAC ¶ 49 at 8).
Second, Plaintiff has failed to plausibly plead that the circumstances under which he went from Cognos to IBM Japan involved discriminatory conduct. The thrust of Plaintiff's argument is that all non-American employees transferred from Cognos to IBM Japan "were given regular ('sei sha'in') employment status, which they had previously. But plaintiff was not given the same." (P's IBM US Opp'n Mem. 13.) Plaintiff has not, however, pointed to a single fact that supports the allegation that his treatment was based on his national origin. The fact that Plaintiff may have been the only American employed by Cognos until April 2008, (FAC ¶ 45 at 8), without more-e.g., a comment relating to Plaintiff's nationality or outward hostility towards Americans*fn5 -does not raise an inference of discrimination. If Plaintiff were similarly situated to Cognos's other employees-i.e., if they had contracts allowing their termination on thirty days' notice-and they were all nevertheless given permanent employee status at IBM Japan, Plaintiff might have a plausible argument that his not being accorded that status was based on his national origin. But absent facts supporting an allegation that he was similarly situated to the non-American employees, no such inference arises. See Hilton v. Bedford Paving, LLC, 769 F. Supp. 2d 92, 101 (W.D.N.Y. 2010) (complaint did not adequately plead claim for disparate treatment discrimination because African-American plaintiff did not "plausibly allege that he was treated differently than any similarly-situated white employee"); Horne v. Buffalo Police Benevolent Ass'n, No. 07-CV-781, 2010 WL 2178813, at *8 (W.D.N.Y. May 28, 2010) (plaintiff failed to allege violation of Title VII where complaint lacked facts suggesting action was taken on basis of race or gender and did not provide examples of similarly situated officers being treated differently); Billue v. Praxair, Inc., No. 05-CV-170, 2007 WL 1231841, at *4 (D. Conn. Apr. 26, 2007) (to raise inference of discrimination, plaintiff may show that "defendant treated him less favorably than a similarly situated employee outside his protected group," but in so doing, plaintiff must ultimately "specifically show himself to be similarly situated in all material respects to the individuals with whom he compares h[im]self") (internal quotation marks omitted).
Furthermore, the allegations in the FAC actually undermine Plaintiff's differential treatment argument. Plaintiff asserts that Laszio Domonkos, an American, was hired by Cognos in April 2008 as a permanent employee, (see FAC ¶ 49 at 8; id. Ex. R), and was among those transferred to IBM Japan as permanent employees on May 1, 2008, (id. ¶¶ 49, 51 at 8--9). Therefore, IBM clearly did not give permanent status to everyone except the American employees. Finally, Plaintiff's argument that out of five non-Japanese employees who were transferred from Cognos to IBM Japan, the only three remaining at IBM Japan for a "considerable length of time are of Asian country nationality (Korea, Philippines, Indonesia)," (id. ¶ 57 at 9)-the American (Domonkos) and an Australian left voluntarily, (see id. Ex. R)- fails to raise an inference of discrimination. That three non-Japanese employees lasted longer than two other non-Japanese employees says nothing about whether Plaintiff was discriminated against as an American when they all left Cognos and joined IBM Japan.
In sum, the FAC fails to set forth facts rendering plausible the conclusions that Plaintiff's status was downgraded upon IBM Japan's acquisition of Cognos or that any such action occurred becausehe was American. See Ortega v. N.Y.C. Off-Track Betting Corp., No. 97-CV-7582, 1999 WL 342353, at *5 (S.D.N.Y. May 27, 1999) (complaint failed to raise inference of discrimination because it did not specify how complained-of actions were "motivated by, or g[a]ve rise to an inference of, discrimination" based on protected characteristic); cf. Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010) (complaint must have enough factual content to allow court to draw reasonable inference that defendant is liable for alleged misconduct); LaFlamme v. Societe Air France, 702 F. Supp. 2d 136, 154 (E.D.N.Y. 2010) ("[B]ecause the allegations in the Complaint, however true, do not allow the court to infer any more than the mere possibility of misconduct, dismissal here is required.") (internal quotation marks omitted). Accordingly, Plaintiff's Title VII claim is dismissed.
2. ADEA Claim
Plaintiff alleges that IBM discriminated against him on the basis of age in violation of the Age Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. § 621 et seq. The ADEA provides that an employer may not "fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age." 29 U.S.C. § 623(a)(1). A complaint alleging age discrimination "must permit a court to infer that it is plausible that the plaintiff suffered an adverse employment action because of his age." Anderson, 2012 WL 734120, at *9.
Plaintiff has failed to plausibly plead that he was treated differently because of his age. Assuming for the sake of argument that Plaintiff is over forty years old and therefore entitled to the protections of the ADEA,*fn6 see 29 U.S.C. § 631(a); Miller v. Nat'l Ass'n of Sec. Dealers, Inc., 703 F. Supp. 2d 230, 243 (E.D.N.Y. 2010) ("class entitled to the statutory protection of the ADEA is limited to persons 40 years of age or older")-a fact which Plaintiff has not alleged- his claim still fails. Plaintiff's only allegation of age discrimination is his statement that after he was terminated, his work was divided among other personnel, at least one of whom was considerably younger. (FAC ¶¶ 82, 84 at 12.) This statement hardly shows that "IBM terminated plaintiff for reasons having to do with [his] age," (id. ¶ 84 at 12; see P's IBM US Opp'n Mem. 14), or that IBM considered his age in any way when it terminated him at the end of his fixed-term contract.*fn7 See Foster v. Humane Soc'y of Rochester & Monroe Cnty., Inc., 724 F. Supp. 2d 382, 390--91 (W.D.N.Y. 2010) (proposed amended complaint failed to state age discrimination claim where plaintiff alleged that she was over forty when fired, defendant fired two other upper level management employees over forty, and that after plaintiff was terminated, she was replaced by a woman in her thirties); id. at 391 (plaintiff's allegation that she was replaced by woman in her early thirties "is not enough to give rise to an age discrimination claim . . . . If it were, then any time an ADEA-covered employer terminated an employee over age forty, the employer would be unable to replace that employee with someone younger, without exposing itself to potential liability for age discrimination. That is not the law."); Liburd,2008 WL 3861352, at *6 (allegation that plaintiff was replaced by younger employee after termination, "without more, is not enough to survive a motion to dismiss"); Wilson v. Family Dollar Stores, No. 06-CV-639, 2007 WL 952066, at *9 (E.D.N.Y. Mar. 29, 2007) (plaintiff's age discrimination claim failed where she did not allege her age, and did "nothing more than simply state that she was discriminated against based on her age and has failed to state any of the events or incidents that she believes form the basis of her . . . claim").
3. Leave to Amend
Leave to amend should be "freely give[n] when justice so requires." Fed. R. Civ. P. 15(a)(2); see Zucker v. Five Towns Coll., No. 09-CV-4884, 2010 WL 3310698, at *3 (E.D.N.Y. Aug. 18, 2010). It is within the discretion of the district court to grant or deny leave to amend, McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007), and "[l]eave to amend, though liberally granted, may properly be denied for: undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.," Ruotolo v. City of N.Y., 514 F.3d 184, 191 (2d Cir. 2008) (internal quotation marks omitted). Furthermore, a district court has no obligation to grant leave to amend sua sponte. See Gallop v. Cheney, 642 F.3d 364, 369 (2d Cir. 2011) ("[N]o court can be said to have erred in failing to grant a request [to amend the complaint] that was not made . . . .").
At a pre-motion conference on July 15, 2011, the Court and the parties discussed the deficiencies in Plaintiff's Complaint, including his failure to allege how other employees of different national origin or age were treated differently. Plaintiff was granted leave to amend his Complaint and instructed to plead facts in support of these allegations. Thus, because Plaintiff has already had the opportunity to cure the deficiencies in his Complaint relating to his discrimination claims, I decline to now sua sponte grant leave to amend. See Ariel (UK) Ltd. v. Reuters Grp., PLC, 277 F. App'x 43, 45--46 (2d Cir. 2008) (summary order) (district court did not exceed its discretion in not sua sponte granting leave to amend where Plaintiff had already amended complaint once and amendment would have been futile); Payne v. Malemathew, No. 09-CV-1634, 2011 WL 3043920, at *5 (S.D.N.Y. July 22, 2011) ("That Plaintiff was provided notice of his pleading deficiencies and the opportunity to cure them is sufficient ground to deny leave to amend sua sponte.").
C. Claims Against IBM Japan
1. Supplemental Subject-Matter Jurisdiction
Having dismissed all claims over which this Court has original jurisdiction, I ordinarily would decline to exercise supplemental jurisdiction over the non-federal claims. See Kolari v. N.Y.-Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (district court balances "the traditional values of judicial economy, convenience, fairness, and comity in deciding whether to exercise [supplemental] jurisdiction," but, "in the usual case in which all federal-law claims are eliminated before trial, the balance of factors . . . will point toward declining to exercise jurisdiction over the remaining state-law claims") (third alteration in original) (internal quotation marks and citation omitted). It appears to the Court, however, that although Plaintiff has asserted only federal-question subject-matter jurisdiction under 28 U.S.C. § 1331, (FAC at 1), and may be affirmatively disclaiming diversity jurisdiction, (see P's IBM Japan Opp'n Mem. 14),*fn8 diversity of citizenship under 28 U.S.C. § 1332(a)(2) exists between Plaintiff and IBM Japan. (See FAC at 2 (Plaintiff resides in Pennsylvania; IBM Japan resides in Japan).) Plaintiff shall have 14 days from the date of this Order to advise whether he wishes to assert diversity jurisdiction. If he does not, the remaining claims will be dismissed without prejudice. If he does, he shall file a second amended complaint conforming to this Opinion and Order within 21 days thereafter. In the meantime I will consider the pending Motions on the assumption that Plaintiff will wish to assert diversity jurisdiction.
2. Personal Jurisdiction-New York's Long-Arm Statute
Plaintiff advances a claim against IBM Japan for breach of contract under Japanese contract law and for violation of Japanese Labor Standards Law.*fn9 (Id. at 15, 18.) Before considering the merits of these claims, I must consider whether jurisdiction exists over IBM Japan. See Mende v. Milestone Tech., Inc., 269 F. Supp. 2d 246, 251 (S.D.N.Y. 2003). At the motion to dismiss stage, the plaintiff generally must make a prima facie showing by his pleadings and affidavits that the court has jurisdiction over each of the defendants. See CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 364--65 (2d Cir. 1986) (at evidentiary hearing or trial, plaintiff must demonstrate personal jurisdiction by preponderance of the evidence). A federal court sitting in diversity looks to the law of the state in which it sits to ascertain whether it may exercise personal jurisdiction over a foreign defendant. See Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002). In such cases, the court must first determine if the forum's law would confer jurisdiction through its long-arm statute and then decide if the exercise of such jurisdiction is permissible under the Due Process Clause of the Fourteenth Amendment. Id.
Plaintiff asserts that this Court has jurisdiction over IBM Japan under New York Civil Practice Law and Rules ("CPLR") section 301.*fn10 (FAC at 1; P's IBM Japan Opp'n Mem. 7.)
"Under the New York long-arm statute, general jurisdiction exists over non-residents 'doing business' in New York." Arquest, Inc. v. Kimberly-Clark Worldwide, Inc., No. 07-CV-11202, 2008 WL 2971775, at *5 (S.D.N.Y. July 31, 2008) (citing N.Y. C.P.L.R. § 301). The Court may exercise jurisdiction over an "out-of-state defendant if the defendant engages in continuous and systematic business activities within New York," or in other words, does business "with a fair measure of permanence and continuity." Id. (internal quotation marks omitted). This standard is "stringent" and, "[a]t its core, . . . boils down to 'presence.'" Id. (quoting Overseas Media, Inc. v. Skvortsov, 407 F. Supp. 2d 563, 567 (S.D.N.Y. 2006)). Factors that courts consider in determining a defendant's presence in the state include: "the existence of an office in New York; the solicitation of business in the state; the presence of bank accounts and other property in the state; and the presence of employees of the foreign defendant in the state." Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir. 1985).
Plaintiff has not alleged that IBM Japan has an office, bank accounts, property, or employees in New York, or that it solicits business here, and has therefore failed to make a prima facie showing of personal jurisdiction by this measure. Plaintiff instead attempts to demonstrate this Court's jurisdiction over IBM Japan through the "'mere department' and 'agency' doctrines of doing business in New York." (FAC at 1.) See Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998) (Where a plaintiff alleges that a "foreign corporation is present in New York state because of the activities there of its subsidiary, the presence of the subsidiary alone does not establish the parent's presence in the state. For New York courts to have personal jurisdiction in that situation, the subsidiary must be either an 'agent' or a 'mere department' of the foreign parent.") (internal citation omitted).
Plaintiff argues the reverse of the situation described in Jazini, attempting to show that Defendant IBM Japan is subject to jurisdiction here because it is a mere department or agent of its New York-based parent corporation. Courts have, under certain circumstances, found this reverse jurisdictional theory plausible. See, e.g., Sayles v. Pac. Eng'g & Constructors, Ltd. (PECL), No. 08-CV-676, 2010 WL 5334272, at *5 (W.D.N.Y. Dec. 20, 2010) (jurisdictional discovery issue relates to whether foreign defendants are mere departments of parent corporations with contacts in New York); Freeman v. Gordon & Breach, Science Publishers, Inc., 398 F. Supp. 519, 521--22 (S.D.N.Y. 1975) (subsidiary subject to personal jurisdiction in New York because while "not 'physically' present in New York," it was "doing business in this State" due to relationship with parent).
a. Agency "To establish that a subsidiary is an agent of the parent, the plaintiff must show that the subsidiary does all the business which [the parent corporation] could do were it here by its own officials." Jazini, 148 F.3d at 184 (alteration in original) (internal quotation marks omitted). An "alternative" approach looks to "whether the subsidiary is carrying out its own business, or the business of the parent." Gallelli v. Crown Imports, LLC, 701 F. Supp. 2d 263, 272 (E.D.N.Y. 2010).
Plaintiff's construction of agency jurisdiction is insufficient to establish personal jurisdiction over IBM Japan. First, it casts the net too broadly. Plaintiff argues that "[i]f the Japanese unit of IBM USA does things in Japan that IBM USA would have to do itself in Japan, if it [sic] not for the existence of IBM Japan," then the entities are thereby "undertaking a common activity" and "separate corporate existences are merely a formality." (P's IBM Japan Opp'n Mem. 10 (emphasis in original).) This logic, without other indications of a principal- agent relationship, is problematic because it would seem to apply to nearly every parent-subsidiary relationship; a parent company creating a subsidiary to operate in a foreign country clearly intends that subsidiary to perform work in the foreign country that the parent might otherwise perform. Yet it is not the case that every foreign subsidiary can be sued in New York-for any action occurring anywhere in the world-simply because its parent company is based in New York. See Jazini, 148 F.3d at 184 (presence of New York entity alone not enough to establish related foreign entity's presence in state); Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984) ("presence of a local corporation does not create jurisdiction over a related, but independently managed, foreign corporation"). Second, Plaintiff's argument flouts the general purpose behind personal jurisdiction. New York's long-arm statute operates to establish jurisdiction over those out-of-state defendants who continually do business in New York to such a degree that they essentially maintain a presence in the state. See Beacon Enters., Inc. v. Menzies, 715 F.2d 757, 762 (2d Cir. 1983). It was not intended as a tool to drag into court in New York all foreign subsidiaries of New York companies who otherwise lack any connection to New York, just because the foreign subsidiary's activities may benefit the New York parent. Plaintiff certainly has not cited to cases upholding such a theory.*fn11
Accordingly, Plaintiff has not met his burden of establishing jurisdiction under this theory.
b. Mere Department "A subsidiary will be considered a mere department of [a parent corporation] where the [parent's] control over the subsidiary is pervasive enough that the corporate separation is more formal than real." Gallelli, 701 F. Supp. 2d at 271--72 (internal quotation marks omitted). In deciding whether a foreign entity is a "mere department" of a New York corporation, courts look to four factors: (1) common ownership; (2) "financial dependency of the subsidiary on the parent"; (3) "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"; and (4) "the degree of control over the marketing and operational policies of the subsidiary exercised by the parent." Volkswagenwerk, 751 F.2d at 120--22. While the first factor is "essential," id. at 120, "[e]ach of the [other factors] need not weigh entirely in plaintiffs' favor"; rather, "Volkswagenwerk necessitates a balancing process," Advance Coating Tech., Inc. v. LEP Chem. Ltd., 142 F.R.D. 91, 95 (S.D.N.Y. 1992).
The parties do not dispute that the first factor is met.*fn12
(P's IBM Japan Opp'n Mem. 11; IBM Japan's Reply Mem.
1--2.*fn13 ) Plaintiff has not made a plausible showing
with regard to the second factor. He has alleged only that IBM US lent
money to IBM Japan's parent so that IBM Japan could gain a tax benefit
through a transaction with its parent. (FAC ¶ 5 at 4; id. Ex. M.)
While only "some measure of financial dependence" is required, Advance
Coating, 142 F.R.D. at 95; but see Gallelli, 701 F. Supp. 2d at
273--74 ("Courts considering [financial dependency]
factor have held that a finding of financial dependency requires a
showing that the subsidiary would be unable to function without the
financial support of the parent."), a simple transaction or even a
series of transactions that confers a benefit but is not necessary to
the subsidiary's functioning would not suffice to demonstrate
dependence. See Reers v. Deutsche Bahn AG, 320
F. Supp. 2d 140, 157 (S.D.N.Y. 2004) (financial dependency showing
lacking where plaintiffs alleged facts indicating "some measure of
control over the broad financial policies of its subsidiaries," but
"have not clearly alleged dependency"); Jerge v. Potter, No.
99-CV-0312, 2000 WL 1160459, at *3 (W.D.N.Y. Aug. 11, 2000) ("Examples
of situations in which financial dependency has been found are
no-interest loans, control of finances of subsidiary by parent and
financing of inventory by parent.") (footnotes omitted); id. (parent
providing initial financing for subsidiary insufficient to render
subsidiary a "mere department"); Advance Coating, 142 F.R.D. at 95
(financial dependency standard met where there were "guarantees to a
prospective high level employee of salary protection; . . . assurances
to him that the company would be fully funded by the parent; . . .
grant of a below market value lease to the subsidiary . . . ; and
the provision of interest-free loans") (internal quotation marks
The third and fourth factors are unclear. As to factor three, Plaintiff alleges that IBM US and Japan "share corporate officials and managers," (P's IBM Japan Opp'n Mem. 12), "IBM USA officials authorize changes in the subsidiary's executive personnel," (FAC ¶ 6 at 4), personnel decisions are made in "'global' committees, which are set up and controlled by IBM USA," (id.), and that "some of the senior management of [IBM Japan] were seconded there from . . . the IBM parent in America," (P's IBM US Opp'n Mem. Attachment 2). As to the fourth factor, Plaintiff asserts that IBM US "controls the marketing and operating policies" of IBM Japan, and that the companies have "standardized marketing and operational policies to the extent possible, as part of a . . . 'globally integrated enterprise' policy." (FAC ¶ 7 at 4.)
IBM Japan contests that Plaintiff has sufficiently demonstrated these
factors, and while Plaintiff's arguments are fairly conclusory, IBM
Japan has not actually provided any information about the company that
would show why IBM US and Japan are distinct entities;*fn14
instead, it simply states that Plaintiff is incorrect and
distinguishes the case law relied on by Plaintiff.*fn15
To be sure, Plaintiff bears the burden of making out a prima
facie case of personal jurisdiction. But given that (1) Plaintiff has
made a "sufficient start" at showing that the exercise of personal
jurisdiction over IBM Japan might be proper, Pandeosingh v. Am. Med.
Response, Inc., No. 09-CV-5143, 2012 WL 511815, at *5 (E.D.N.Y. Feb.
15, 2012) (internal quotation marks omitted), which IBM has not
refuted; and (2) jurisdictional allegations should be construed
liberally, see Mende, 269 F. Supp. 2d at 251 (court should "construe
jurisdictional allegations liberally and take as true uncontroverted
factual allegations") (internal quotation marks omitted), and in light
of Plaintiff's indirect requests for limited discovery, (see P's IBM
Japan Opp'n Mem. 11, 13), I find that Plaintiff has made a showing
sufficient to at least warrant limited discovery in order to determine
whether personal jurisdiction over IBM Japan is proper. See
511815, at *5 ("Where a plaintiff has failed to make a prima facie
showing, but has made a sufficient start toward establishing personal
jurisdiction, limited discovery may be appropriate.") (internal
quotation marks omitted); Ayyash v. Bank Al-Madina, No. 04-CV-9201,
2006 WL 587342, at *6 (S.D.N.Y. Mar. 9, 2006) (limited discovery
ordered before ruling on subject matter and personal jurisdiction
where plaintiff had not made prima facie showing of jurisdiction, but
had at least made a "sufficient start at making such a showing")
(internal quotation marks omitted); Uebler v. Boss Media, AB, 363 F.
Supp. 2d 499, 506 (E.D.N.Y. 2005) (balance of the Volkswagenwerk
factors not clear, so, while plaintiff had not made prima facie
showing of personal jurisdiction, discovery was appropriate); cf.
Hunter, 2012 WL 1059417, at *4 ("In deciding a pre-trial motion to
dismiss for lack of personal jurisdiction . . ., a district court has
considerable procedural leeway, and may make its determination on the
basis of affidavits alone; or it may permit discovery in aid of the
motion; or it may conduct an evidentiary hearing on the merits of the
motion.") (internal quotation marks omitted); Linde v. Arab Bank, PLC,
262 F.R.D. 136, 145 (E.D.N.Y. 2009) ("The Second Circuit has made
clear . . . that a prima facie case is not absolutely necessary for a
court to grant jurisdictional discovery. Rather the showing necessary
. . . is committed to the sound discretion of the district court on a
case-by-case basis without bright-line limits.") (internal quotation
marks and citation omitted). Furthermore, limited discovery is
particularly appropriate where, as here, the bulk of the relevant
information is within the defendants' knowledge or possession. See
Uebler, 363 F. Supp. 2d at 506 (decision to permit discovery
"bolstered by the fact that the facts necessary to establish personal
jurisdiction lie within [Defendant's] exclusive knowledge").
3. Personal Jurisdiction-Federal Rule of Civil Procedure 4(k)(2)
Plaintiff also asserts that this Court has jurisdiction over IBM Japan pursuant to Federal Rule of Civil Procedure 4(k)(2). (P's IBM Japan Opp'n Mem. 15.) Rule 4(k)(2) confers personal jurisdiction over a defendant in certain circumstances for a "claim that arises under federal law." Fed. R. Civ. P. 4(k)(2). Because both of Plaintiff's federal causes of action fail to state a claim on which relief can be granted, and in any event are not advanced against IBM Japan, jurisdiction over IBM Japan under Rule 4(k)(2) is inappropriate.
4. Forum Non Conveniens
IBM Japan asserts that the FAC should be dismissed on forum non conveniens grounds. (IBM Japan Mem. 21.) The decision to dismiss a case on forum non conveniens grounds lies wholly within the broad discretion of the district court. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 258 (1981); Iragorri v. United Techs. Corp., 274 F.3d 65, 72 (2d Cir. 2001) (en banc). There are three steps to the forum non conveniens inquiry:
[T]he first level of inquiry pertains to determining whether the plaintiff's choice [of forum] is entitled to more or less deference. A determination of what degree of deference is owed a plaintiff's choice of forum does not dispose of a forum non conveniens motion . . . . [T]he next level of inquiry requires a court . . . to determine whether an adequate alternative forum exists. When such is the case the court must go to the third step and balance factors of private and public interest to decide, based on weighing the relative hardships involved, whether the case should be adjudicated in the plaintiff's chosen forum or in the alternative forum suggested by the defendant.
Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 70 (2d Cir. 2003) (second alteration in original) (internal quotation marks and citations omitted); accord Tel. Sys. Int'l, Inc. v. Network Telecom PLC, 303 F. Supp. 2d 377, 380 (S.D.N.Y. 2003). The party seeking dismissal bears the burden of proof on all elements of its motion. Id.
Although the arguments suggesting that this case ought to be adjudicated in Japan are quite compelling, IBM Japan has failed to show that an adequate alternative forum exists. Nowhere in its Memorandum of Law does IBM Japan fully grapple with this issue. In its reply to Plaintiff's assertion that the statute of limitations has run in Japan for bringing a Japanese Labor Law claim, (P's IBM Japan Opp'n Mem. 25), IBM Japan merely asserts that "Japan provides a forum for these claims (including the Prefectural Labor Bureau, the Perfectural [sic] Labor Committee, and the court system in Japan)," (IBM Japan's Reply Mem. 9), without any nod to Plaintiff's statute of limitations argument or assurance that Plaintiff's claims can actually be brought in those forums. See Paisola v. GAP Adventures, Inc., No. 10-CV-8920, 2012 WL 1019585, at *2--4 (S.D.N.Y. Mar. 26, 2012) (adopting report and recommendation finding that no adequate alternative forum existed because claim would be time-barred under Canadian law); Airflow Catalyst Sys., Inc. v. Huss Techs. GmbH, No. 11-CV-6012, 2011 WL 5326535, at *3 (W.D.N.Y. Nov. 3, 2011) ("[P]roposed alternative fora have been ruled inadequate where . . . a statute of limitations bars the bringing of a case in a foreign forum that would be timely in the United States."); In re Rezulin Prods. Liab. Litig., 214 F. Supp. 2d 396, 401 (S.D.N.Y. 2002) (conditioning grant of dismissal on forum non conveniens grounds on, among other things, defendants' waiver of right to assert statute of limitations defense in alternative forum). Therefore, IBM Japan has failed to fulfill its burden at this stage, although this does not foreclose the possibility of a successful forum non conveniens argument at a later stage.*fn16
5. Service of Process
Defendants' argument for dismissal based on improper service is unavailing. Service of process must comport both with the statute under which service is effectuated as well as due process requirements. In this case, the statutory prong concerns the Hague Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil or Commercial Matters ("Hague Convention"). See Ackermann v. Levine, 788 F.2d 830, 838 (2d Cir. 1986). "As a ratified treaty, the [Hague] Convention is of course 'the supreme law of the land.'" Id. (quoting U.S. Const. art. VI, cl. 2). Under the Hague Convention, service is permitted in a number of ways-specifically, under Articles 5, 8, and 10. See id. at 838--39. Article 10 states that "[p]rovided the State of destination does not object, the present Convention shall not interfere with (a) the freedom to send judicial documents, by postal channels, directly to persons abroad." Id. at 839. The Second Circuit has interpreted this to mean that where a country "has made no objection to the use of 'postal channels' under Article 10(a), service of process by registered mail remains an appropriate method of service . . . under the [Hague] Convention." Id.; see Rogers v. Kasahara, No. 06-CV-2033, 2006 WL 6312904, at *3 (D.N.J. Oct. 16, 2006) ("The Second Circuit represents the other side of a lengthy debate" on the meaning of Article 10(a) and holds that "service of process by registered mail is valid in a country that has not opposed Article 10(a)," so long as litigants are provided with sufficient notice of the pending action).
As Plaintiff aptly points out, (see P's IBM Japan Opp'n Mem. 30), Japan, a signatory to the Hague Convention, clarified its position on Article 10(a) in 2003, specifying that it does not formally object to Article 10(a). Courts in the U.S. have construed this to mean that "service of process by international mail to Japan is allowed under the Hague Convention." Levi Strauss & Co. v. Toyo Enter. Co., 665 F. Supp. 2d 1084, 1094 (N.D. Cal. 2009); see Rogers, 2006 WL 6312904, at * 5 ("[S]ervice of process by registered mail on the Japanese defendants was proper."). Thus, because Plaintiff served his Summons and Complaint on IBM Japan via registered mail, (see Proof of Service, (Doc. 15); IBM Japan's Mem. 23--24), under the Hague Convention and Federal Rule of Civil Procedure 4(f), IBM Japan was properly served, and the FAC will not be dismissed on this ground.
6. Failure to State a Claim
I may not consider a party's motion under Fed. R. Civ. P. 12(b)(6) without first determining whether jurisdiction exists. See Arrowsmith v. United Press Int'l, 320 F.2d 219, 221 (2d Cir. 1963) (finding district court erred by ruling on question of failure to state a claim before determining whether personal jurisdiction existed); Mende, 269 F. Supp. 2d at 251 ("Before addressing Defendants' Rule 12(b)(6) motion to dismiss, the Court must first address the preliminary questions of service and personal jurisdiction."). Accordingly, I defer consideration of the adequacy of the pleading of Plaintiff's Japanese breach of contract and Labor Law claims. As Plaintiff has the opportunity to amend his FAC as to IBM Japan, however, he is advised that he may wish to clarify exactly what breaches he is alleging, as well as the theory of his Labor Law claim.
For the reasons stated above, Defendant IBM US's Motion is granted, and Defendant IBM Japan's Motion is denied without prejudice to possible renewal after jurisdictional discovery. The Clerk of Court is respectfully directed to terminated the pending Motions, (Docs. 31, 33). As stated above, Plaintiff shall have 14 days from the date of this Order to advise whether he wished to assert diversity jurisdiction. If he does, he shall file a second amended complaint conforming to this Opinion and Order within 21 days thereafter.
In addition, the parties have recently submitted a series of letters to the Court raising a discovery dispute. If Plaintiff advises that he wishes to pursue the case by asserting diversity jurisdiction, the case will be referred to Magistrate Judge Paul E. Davison to address that issue, and to supervise the limited jurisdictional discovery authorized by this Opinion and Order.