Hector PAZ, Plaintiff,

v.

CASTELLINI COMPANY, L.L.C., Defendant.

 

Nov. 8, 2007.

 

 

OPINION & ORDER

HILDA G. TAGLE, United States District Judge.

BE IT REMEMBERED that on November 8, 2007, the Court considered Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction, Dkt. No. 2, Plaintiffs Response to Defendant’s Motion to Dismiss, Dkt. No. 8, and Plaintiffs Supplemental Response to Defendant’s Motion to Dismiss, Dkt. No. 16.

 

I. Background

 

On May 3, 2006, Hector Paz (“Paz” or “Plaintiff”) was driving on Interstate 71 in the state of Kentucky and became involved in a motor vehicle accident involving a tractor-trailer owned and operated by Castellini Company, L.L.C. (“Castellini” or “Defendant”).Dkt. No. 1, Ex. A at 4; Dkt. No. 2, at 2. Plaintiff maintains that Defendant’s employee operated the tractor-trailer “in a negligent manner [which] resulted in Defendant’s vehicle colliding with the rear of the vehicle that Plaintiff was towing, which in turn was propelled in Plaintiff’s vehicle.”Dkt. No. 1, Ex. A at 4. Plaintiff asserts that Defendant is liable to Plaintiff for its employee’s conduct, under the doctrine of respondeat superior, and Plaintiff also alleges a cause of action for negligent entrustment. Id.

 

Paz is a resident of Brownsville, Texas. Id. at 3-4.Castellini is a Delaware corporation and has its principal place of business in Kentucky.Id. at 3;Dkt. No. 1, at 1-2.Plaintiff originally filed suit in the 197th Judicial District Court of Cameron County, Texas. In his petition,  Paz asserted that “Defendant is subject to jurisdiction in the State of Texas, and in the Southern District, because it consented to jurisdiction by designating an agent under the Federal MotorCarrier Act, 49 U.S.C. § 13304.”Dkt. No. 1, Ex. A at 3. Paz also averred that he believes, through information obtained on Castellini’s website, that Castellini operates its trucks throughout Texas highways, conducts substantial business in Texas, and transports goods to Texas. Id. at 4. Thus, Paz maintained that Castellini is subject to jurisdiction in Texas in this action. Id. Thereafter, Defendant filed a Notice of Removal in this court on the basis of diversity of citizenship. Dkt. No. 1. At the same time it filed for removal, Defendant filed the instant motion to dismiss on the basis of lack of personal jurisdiction. Dkt. No. 2. Plaintiff opposes Defendant’s position and has responded to the motion. Dkt. Nos. 8, 16.

 

Because Plaintiff initially filed this suit in state court, Plaintiff’s active complaint is styled “Plaintiff’s Original Petition.” Dkt. No. 1, Ex. A at 3. Thus, the Court will refer to this pleading as a petition, rather than a complaint.

 

Castellini contends that it does not have any ties to Texas that warrant it being subjected to the jurisdiction of Texas courts. Specifically, it maintains that it is a motorcarrier engaged in interstate commerce, but it only operates in eight states. Dkt. No. 2, Ex. B at 1-2. Castellini declares that it does not engage in any kind of business in Texas, nor does it advertise that it conducts business in Texas. Id. It also maintains that Plaintiff is mistaken in his belief that Castellini engages in business in Texas because the website to which Plaintiff refers in his petition and his response to the instant motion pertains to the Castellini Group of Companies (“Castellini Group”), to which Defendant belongs. Id. at 2;Dkt. No. 16, Ex. 1. Defendant states that the website includes information on the entire Castellini Group, and some companies within the Group “can provide logistics services … for cargo hauls in the 48 contiguous states.”Dkt. No. 2, Ex. B at 3. However, Castellini maintains it does not provide logistics services in Texas, nor does the website represent such information. Id. See Dkt. No. 16, Ex. 1. Furthermore, Castellini avers that its designation of an agent for service of process pursuant to 42 U.S.C. § 13304(a), without more, does not establish personal jurisdiction over the company in Texas. Dkt. No. 2, at 3-9.Specifically, Castellini asserts that the Eighth Circuit Court of Appeals opinion upon which Paz relies in support of personal jurisdiction is distinguishable and should not be applied to the present case.

 

In his response, Paz contends that jurisdiction over Castellini exists in this case because (1) Castellini has consented to jurisdiction in Texas pursuant to 42 U.S.C. § 13304, and (2) Castellini is subject to jurisdiction in Texas under the “alter ego” and “functional whole” doctrines of the minimum contacts inquiry. Dkt. Nos. 8, 16.This Court will address Paz’s asserted bases of jurisdiction separately.

 

In his response, Paz requested that this Court defer ruling on Castellini’s motion to dismiss so that it could conduct discovery and file a supplemental response. Dkt. No. 8, at 1. Accordingly, this Court has deferred ruling on the motion and has considered Paz’s supplemental response. Although the parties have some depositions and discovery pending, see Dkt. Nos. 13, 14, 15, 17, this Court’s ruling is based on legal grounds, as explained below.

 

II. Personal Jurisdiction Standards and the MotorCarrier Act

 

When a defendant seeks dismissal for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b), the plaintiff bears the burden of establishing jurisdiction. See Prod. Promotions, Inc. v. Cousteau, 495 F.2d 483, 490 (5th Cir.1974), overruled on other grounds, Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702-03, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982), as stated inBurstein v. State Bar of California, 693 F.2d 511, 518 n. 12 (5th Cir.1982). Courts usually resolve personal jurisdiction issues “without conducting a hearing,” and “the party seeking to assert jurisdiction is required only to present sufficient facts to make out a prima facie case supporting jurisdiction.”Cent. Freight Lines Inc. v. APA Transp. Corp., 322 F.3d 376, 380 (5th Cir.2003); Ham v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir.1993). Furthermore, the Court must accept the plaintiff’s uncontradicted assertions as true and must resolve all factual conflicts in the plaintiff’s favor. See APA Transp. Corp., 322 F.3d at 380;Stripling v. Jordan Prod. Co., 234 F.3d 863, 869 (5th Cir.2000). After a plaintiff has met its prima facie burden, the burden shifts to the defendant to present a compelling reason why establishing jurisdiction over it would be unreasonable. Verizon Directories Corp. v. Cohen, Jayson & Foster, P.A., Civ. Action No. 3:06-CV-2394-L, 2007 WL 2162105, at(N.D.Tex. July 27, 2007) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).

 

A. MotorCarrier Act

 

In the present case, Plaintiff maintains that Defendant has consented to jurisdiction because it designated an agent for service of process pursuant to the MotorCarrier Act, 42 U.S.C. § 13101 et seq.Dkt. No. 8, at 1-3.Under § 13304(a) of the Act,

[a] motorcarrier or broker providing transportation subject to jurisdiction under chapter 135 … shall designate an agent in each State in which it operates by name and post office address on whom process issued by a court with subject matter jurisdiction may be served in an action brought against that carrier or broker.

 

42 U.S.C. § 13304. Plaintiff primarily relies on Ocepek v. Corporate Transport, Inc. from the Eighth Circuit as support for his contention. 950 F.2d 556 (8th Cir.1991); Dkt. No. 1, Ex. A, at 3; Dkt. No. 8, at 1-3.Defendant argues that such case law is distinguishable from the instant action. Dkt. No. 2, at 3-9.Case law supporting Plaintiff’s contention has arisen outside of this circuit, and this Court has found that the Fifth Circuit Court of Appeals has not directly addressed this issue.

 

B. Eighth Circuit Case Law

 

Although Plaintiff relies on Ocepek, in that case the Eighth Circuit Court of Appeals expanded on dicta expounded in Knowlton v. Allied Van Lines, Inc., 900 F.2d 1196 (8th Cir.1990). In Knowlton, Mary Knowlton, a Minnesota resident, brought suit in Minnesota against Allied Van Lines, an Iowa corporation, for a motor vehicle accident that occurred in Iowa. 900 F.2d at 1197. At the time of the accident, Allied engaged in business in Minnesota and had designated an agent to receive service of process in Minnesota, pursuant to the state’s Foreign Corporation Act, MINN.STAT. § 303 et seq.Knowlton, 900 F.2d at 1197-98. The district court determined that personal jurisdiction did not exist over Allied under the state’s long-arm statute because there was no connection between the cause of action and Allied’s business in Minnesota, and designation of an agent for service of process was not enough to constitute consent to jurisdiction. Id. at 1198.The Eighth Circuit Court reversed and remanded, holding that “appointment of an agent for service of process under § 303.10 [of the state’s Foreign Corporation Act] gives consent to the jurisdiction of Minnesota courts for any cause of action, whether or not arising out of activities within the state.”Id. at 1200.The court stated that although “[a]ppointment of a registered agent for service is not one of the specific types of consent listed by the Supreme Court in the case [relied upon] … it is nevertheless a traditionally recognized and well-accepted species of general consent, possibly omitted from the Supreme Court’s list because it is of such long standing as to be taken for granted.”Id. The court also stated that it “appears that Allied has consented to suit in Minnesota under 49 U.S.C. § 10330,” which is the predecessor statute to 49 U.S.C. § 13304, and the court noted that designation of an agent under that statue would also operate as consent to personal jurisdiction. Id.

 

In Ocepek, decided one year later, the Eighth Circuit revisited its dicta in Knowlton concerning the MotorCarrier Act. Ocepek, 950 F.2d at 556. Frank Ocepek, a citizen of Missouri, filed suit in Missouri against Corporate Transport, Inc., a New York corporation, for a motor vehicle accident that occurred in Ohio. Id. Ocepek served Corporate Transport’s agent for service of process that it had designated pursuant to 49 U.S.C. § 10330. Id. Corporate Transport engaged in business in Missouri. Id. at 560.The district court dismissed the action for lack of personal jurisdiction over Corporate Transport, finding that the corporation did not have minimum contacts sufficient to warrant the suit being filed in Missouri pursuant to the state’s long-arm statute. Id. at 556-57.The court did not address jurisdiction under the MotorCarrier Act. Id. at 557.On appeal, Corporate Transport averred that it had limited its agent’s authority to receive process in Missouri only for causes of action arising in Missouri. Id. at 558.The Eighth Court of Appeals disagreed with Corporate Transport’s argument and held that it was unable to limit its designation of an agent for service of process under the MotorCarrier Act. Id. Before reaching that holding, the court considered its dicta in Knowlton and stated that if the question directly before it were whether an unlimited designation under the Act would equal consent to jurisdiction, the court would answer that question in the affirmative. Id.

 

Since that time, courts within the Eighth Circuit have issued opinions that have relied heavily on the reasoning in Knowlton and Ocepek. E.g., Foster v. Air Wis. Airlines Corp., No. Civ. 05-1391 (PAM/JSM), 2005 WL 2977814 (D.Minn. Nov.7, 2005). Some courts outside the Eighth Circuit are also in accordance with the reasoning of these opinions.See, e.g., McKamey v. Vander Houten, 744 A.2d 529 (Del.Super.Ct.1999).

 

For treatment of the MotorCarrier Act in accordance with Knowlton and Ocepek, but decided approximately fifty years prior, see Wynne v. Queen City Coach Co., 49 F.Supp. 103 (D.N.J.1943) and Sansbury v. Schwartz, 41 F.Supp. 302 (D.D.C.1941).

 

C. Fifth Circuit Cases Regarding Consent to Jurisdiction

 

In contrast to the Eighth Circuit’s precise holding in Knowlton, the Fifth Circuit Court of Appeals has held that designation of an agent for service of process pursuant to the Texas Business Corporation Act, without more, does not constitute consent to the jurisdiction of Texas courts. Wenche Siemer v. Learjet Acquisition Corp., 966 F.2d 179 (5th Cir.1992).See Fielding v. Hubert Burda Media, Inc., 415 F.3d 419, 429 (5th Cir.2005). In Wenche Siemer, residents of Greece and other European countries filed a wrongful death suit against Learjet, a Delaware corporation with its principal place of business in Kansas, concerning an airplane crash in the Egyptian desert. 966 F.2d at 180. Learjet did not engage in business directly in Texas, and it did not hold a certificate allowing it to do business within the state. Id. at 181.Plaintiffs argued that service on a designated agent within the state of Texas, without more, satisfied due process requirements and conferred general personal jurisdiction over the defendant. Id. at 180-81.The court disagreed with the plaintiffs’ position and affirmed the district court’s dismissal of the case for lack of personal jurisdiction. Id. at 180, 184.The court stated that “[n]ot only does the mere act of registering an agent not create Learjet’s general business presence in Texas, it also does not act as consent to be hauled into Texas courts on any dispute with any party anywhere concerning any matter.”Id. at 183.Additionally, the court declared “that the appointment of an agent for process has not been a waiver of [Learjet’s] right to due process protection.”Id. Furthermore, “a foreign corporation that properly complies with the Texas registration statute only consent to personal jurisdiction where such jurisdiction is constitutionally permissible. Due process … is a flexible concept that varies with the particular situation.”Id.

 

Since Wenche Siemer, other federal and state courts within the circuit have adhered to this reasoning. See Norfolk S. Ry. Co. v. The Burlington N. and Santa Fe Ry. Co., No. Civ. A. 2:03-00516, 2005 WL 1363210, at(S.D.Miss. June 2, 2005) (stating that registering and being qualified to do business in Mississippi and appointing an agent for service pursuant to state statute are insufficient factors to establish general personal jurisdiction); Leonard v. USA Petroleum Corp., 829 F.Supp. 882, 887-88 (S.D.Tex.1993) (noting that “courts have long held that a corporation’s consent to jurisdiction by registering and appointing an agent is no more than ‘mere fiction’ ” and criticizing Knowlton by stating that “[a] state-compelled waiver of due-process rights is never taken for granted”); Juarez v. United Parcel Service de Mexico S.A. de C.V., 933 S.W.2d 281, 285 (Tex.App.1996) (“We agree that the designation of an agent for service of process in Texas does not amount to a general consent to jurisdiction, and is merely one of many factors to be considered in determining whether minimum contacts exist.”).

 

There have been very few cases within the Fifth Circuit dealing with the question of consent to jurisdiction directly pursuant to the MotorCarrier Act, and this Court finds no binding precedent regarding this question. However, this Court finds Lyons v. Swift Transportation Co. persuasive, in which a district court for the Eastern District of Louisiana considered an issue similar to that involved in the instant matter. No. 01-0209, 2001 WL 1153001 (E.D.La. Sept.26, 2001). Mable Lyons, a Louisiana resident, filed suit against Norfolk Southern Railway Company, a Virginia corporation, Amtrak, a District of Columbia corporation, Swift Transportation Company, Inc., an Arizona corporation, and the estate of Delbert Bissell for causes of action arising from a collision in Mississippi between an Amtrak train and a tractor trailer owned and operated by Swift. Id. at *1. Swift moved for dismissal based on lack of personal jurisdiction. Id. Swift had designated an agent for service in Louisiana pursuant to the MotorCarrier Act. Id. at *4. Additionally, some of Swift’s trucks occasionally traveled through and delivered goods in Louisiana. Id. However, the plaintiff did not present any evidence of the volume or frequency of Swift’s business contacts with the state. Id. After finding that Swift did not have sufficient contacts with Louisiana to establish general personal jurisdiction, the court considered Lyons’ argument that Swift’s designation of an agent for service in Louisiana pursuant to the MotorCarrier Act constituted Swift’s consent to suit in Louisiana for any and all actions. Id. at *5. Swift maintained that its designation of an agent was only consent to causes of action that arose in Louisiana. Id.

 

The court considered Lyons’ argument in favor of establishing jurisdiction pursuant to Knowlton and Ocepek, but found the argument to be contrary to Fifth Circuit precedent. Id. at *5-7.Based upon the Fifth Circuit’s reasoning in Wenche Siemer, the court was “not persuaded that the Fifth Circuit would depart from Wench[e] Siemer based on the distinction between designating an agent for service of process under the MotorCarrier Act and designating one under a state statute.”Id. at *7. Additionally, because Wenche Siemer had essentially rejected the principle of consent to jurisdiction set forth in Knowlton, and Ocepek had expanded upon Knowlton, the Lyons court reasoned that the Fifth Circuit would also decline to extend the Knowlton principles in the manner that the Eighth Circuit had done in Ocepek. Id. Therefore, the Lyons court held that Swift had not consented “to personal jurisdiction in Louisiana for suits arising outside Louisiana when it designated an agent for service of process pursuant to the MotorCarrier Act.”Id.

 

III. Analysis of Paz’s and Castellini’s Arguments Under the MotorCarrier Act

 

In the present case, Paz contends that Castellini’s designation of an agent for service of process in Texas automatically establishes personal jurisdiction over the company in this action. Dkt. No. 8, at 1-3;Dkt. No. 16.SeeDkt. No. 1, Ex. A at 3. Specifically, Paz relies on the Eighth Circuit Court’s analysis of the MotorCarrier Act in Ocepek.Furthermore, Paz avers that the Interstate Commerce Commission intended for service upon an agent designated pursuant to the MotorCarrier Act to unequivocally constitute consent to jurisdiction. Dkt. No. 16, at 2. In support, Paz provides the 1994 Revision of Licensing Application Forms and Corresponding Regulations, in which the Commission stated that, as the regulations existed at that time,

agent designations will continue to be required for each State in which a carrier is authorized to operate and each State traversed during such operations…. Service of process on a carrier’s Section 10930(b) agent establishes personal jurisdiction over the defendant carrier. We are not prepared to adopt the suggestion in the comments that State long-arm statutes satisfy the requirements of Section 10930(b). Such statutes require a connection between the cause of action and business conducted by a defendant within the State and, thus, may require a specific showing that a defendant carrier has had minimum contacts within the State. We do plan to further explore either using long arm statues or our expanded exemption authority under 49 U.S.C. 10505to eliminate the process agent requirement.We will consider opening a separate proceeding devoted to this subject in the near future.

 

10 I.C.C.2d 386, 394-95 (1994); 1994 WL 693930 (I.C.C.), at *6-7 (1994) (emphasis added) (internal citations omitted). The Commission cites to Knowlton and Ocepek in support of its position. Id.

 

Castellini maintains that mere designation of an agent for service does not satisfy consent to jurisdiction. Dkt. No. 2. In an affidavit provided by Castellini’s Corporate Safety Director, Castellini states that it employs Service of Process Agents, Inc. (“SPA”), a national service agency, as its designated agent for service of process in all states in which it operates. Dkt. No. 2, Ex. 1 at 1. Because SPA is a national agency, “Castellini can make a blanket designation with the Federal MotorCarrier Safety Administration in filing the BOC-3 form that designates a service of process agent for each state in which the motorcarrier operates…. [U]sing a natio[n]al process agent and making a blanket filing under Form BOC-3 assures Castellini of receiving lawsuit papers regardless of the state in which [it is] sued”Id. at 1-2.Essentially, Castellini maintains that the only reason it designated an agent for service in Texas was to utilize the benefit of hiring a national service agency and be able to be provided with prompt notice of any suit that may have been filed against it within the state, despite that it does not operate in Texas.

 

In his response, Paz objects to this affidavit on the bases that the affidavit does not contain a “true and correct” statement and the affiant does not explain how he attained the knowledge recited. Dkt. No. 8, at 5. This Court overrules Paz’s objections. Furthermore, even if this Court were to sustain Paz’s objection, he has still failed to meet his prima facie burden, as discussed infra.

 

Section 13304 of the MotorCarrier Act requires a carrier to designate an agent for service “in each State in which it operates.”42 U.S.C. § 13304(a) (emphasis added). Cases that have examined consent to jurisdiction under the Act have dealt with fact scenarios where the defendant carrier engaged in operations in the forum state. See Lyons, 2001 WL 1153001 at *4;Ocepek, 950 F.2d at 560;Knowlton, 900 F.2d at 1197-98. Additionally, the defendants’ arguments against jurisdiction focused on limitations to designated agents’ abilities to receive service for actions arising outside of the forum state. See Lyons, 2001 WL 1153001 at *5;Ocepek, 950 F.2d at 558. In contrast, the instant action involves a carrier engaged in interstate commerce in only eight states, none of which is Texas. No evidence has been presented by Paz that Castellini engages in any kind of operations in Texas.Castellini utilized a national service agency to designate agents in the states in which it operates. Dkt. No. 2, Ex. 1 at 1-2. As a result of using a national service agency, Castellini was also able to make a blanket designation of this agency as its agent for service in all states. Id. See Dkt. No. 1, at 9;Dkt. No. 16, Ex. 2. Although Castellini does not operate in all of the 48 contiguous states, it utilized a blanket designation in order to receive prompt notice of any suits filed against it. Id.

 

Indeed, as discussed infra, Paz has asserted that the actions of Castellini’s parent company be used to impute jurisdiction to Castellini.

 

This Court declines to adopt Paz’s argument that Castellini’s designation described supra, without more, is enough to confer personal jurisdiction in this matter. The MotorCarrier Act requires carriers who operate in particular states to designate an agent for service in those states. 49 U.S.C. § 13304(a). This Court recognizes the rationale behind the statute: Congress intended to make service of process upon interstate motorcarriers relatively easy for individuals who become involved in motor vehicle accidents involving the carriers. See Ocepek, 950 F.2d at 559. This rationale makes jurisdictional sense when, as the statue states, a carrier actually operates in the forum state. However, interpreting the statue so as to mean that a designation of an agent automatically confers personal jurisdiction in any and all states-even those in which the carrier does not enter or operate-does not. To hold that a designation such as Castellini’s would be sufficient for it to be dragged into Texas courts grates against notions of fair play and substantial justice inherent in the concept of personal jurisdiction.

 

Moreover, this Court is in accordance with the district court in Lyons regarding how the Fifth Circuit Court might approach the instant question, considering Ocepek’s origins in Knowlton and the Fifth Circuit Court’s rejection of the principles of the Knowlton holding. See Lyons, 2001 WL 1153001 at *6-7. Therefore, based on the foregoing analysis, this Court concludes that the principles of Knowlton and Ocepek should not be extended to Castellini in the instant action. Lyons, 2001 WL 1153001 at *7.

 

IV. Personal Jurisdiction Pursuant to the Texas Long-Arm Statute

 

Castellini’s ability to be subjected to jurisdiction of Texas courts may also be analyzed under the Texas long-arm statute. Because the Texas long-arm statute extends personal jurisdiction to the constitutionally permissible limits of due process, this Court must determine whether the exercise of personal jurisdiction over Castellini would comport with due process. See APA Transp. Corp., 322 F.3d at 380;Ham, 4 F.3d at 415. Due Process has two requirements: (1) the defendant must have sufficient “minimum contacts” with the forum state, “established when a nonresident defendant ‘purposefully avails himself of the benefits and protections of the forum state;’ ” and (2) the exercise of personal jurisdiction over the nonresident defendant must not offend “traditional notions of fair play and substantial justice.”Sarmiento v. Producer’s Gin of Waterproof, Inc., 439 F.Supp.2d 725, 728 (S.D.Tex.2006) (quoting Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291, 294-95 (5th Cir.1999)); Ham, 4 F.3d at 415 (citing Asahi Metal Indus. v. Superior Court, 480 U.S. 102, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987)); Burger King Corp., 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985).See also APA Transp. Corp., 322 F.3d at 380-81;Ham, 4 F.3d at 415. “Minimum contacts” can be established by either of two methods, specific jurisdiction or general jurisdiction. See APA Transp. Corp., 322 F.3d at 381;Sarmiento, 439 F.Supp.2d at 728. Additionally, under the second prong of the due process analysis, a court should consider the following factors in determining whether the exercise of personal jurisdiction would offend notions of fair play and substantial justice: “(1) the defendant’s burden; (2) the forum state’s interest; (3) the plaintiff’s interest in convenient and effective relief; (4) the judicial system’s interest in efficient resolution of controversies; and (5) the state’s shared interest in furthering social policies.”Verizon Directories Corp., 2007 WL 2162105, at(citing Asahi Metals Indus. Co., 480 U.S. at 112).

 

A. Specific Jurisdiction

 

Specific jurisdiction requires only that the nonresident defendant have purposeful contacts with the forum state which “arise from or are directly related to the cause of action.”APA Transp. Corp., 322 F.3d at 381;Sarmiento, 439 F.Supp.2d at 728-29. A “defendant’s connection with the forum state must be such that he ‘should reasonably anticipate being haled into court’ there.”Lyons, 2001 WL 1153001 at(quoting Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir.1999)). In the present case, the causes of action alleged arise out of a motor vehicle accident that occurred in Kentucky, not Texas. No part of Paz’s claim arose out of any actions taken in Texas. Thus, specific jurisdiction does not exist in this action. See Lyons, 2001 WL 1153001 at(finding that specific jurisdiction did not exist in Louisiana when the accident giving rise to the claim occurred in Mississippi and none of the defendants’ actions in Louisiana gave rise to the plaintiff’s cause of action).

 

B. General Jurisdiction

 

General jurisdiction is established when the nonresident defendant has substantial contacts with the forum state, which are continuous and systematic, but which are not related to the pending litigation. See APA Transp. Corp., 322 F.3d at 381;Sarmiento, 439 F.Supp.2d at 729. “Due process requires that ‘continuous and systematic’ contacts exist between the state and the foreign corporation to exercise general personal jurisdiction because the forum state does not have an interest in the cause of action.”Lyons, 2001 WL 1153001 at(citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984)).

 

In the present case, Paz has presented no evidence that Castellini has engaged in continuous and systematic contacts with Texas. Although Paz originally stated in his petition that he believed Castellini conducted business in Texas based on information gathered from the company’s website, Castellini responded by declaring that the website observed by Paz was the website for the Castellini Group of Companies, and not Castellini itself. Dkt. No. 2, Ex. B at 3. Castellini states that the website offers information on the entire Castellini Group of Companies, and the website does not represent that Castellini does business in Texas. Id. See Dkt. No. 16, Exs. 1, 2. In response to these statements, Paz only asserts jurisdiction based upon the alter ego and/or functional whole theories of jurisdiction. Dkt. No. 8, at 4.

 

i. Alter Ego and/or Functional Whole Theories

 

Under the alter ego or functional whole theories of jurisdiction, jurisdiction may exist over a foreign parent corporation if one of its subsidiaries is present or conducts business in the forum state and the parent corporation exerts such control over its subsidiary that the parent itself may be considered to actually be conducting business via the subsidiary’s actions.Bellorin v. Bridgestone/Firestone, Inc., 236 F.Supp.2d 670, 679 (W.D.Tex.2001); Daimler-Benz Aktiengesellschaft v. Olson, 21 S.W.3d 707, 720 (Tex.App.2000). However, a subsidiary’s mere presence or business operations are not enough to automatically impute jurisdiction to the parent corporation. Bellorin, 236 F.Supp.2d at 679. Instead, the “degree of control exercised by the parent must be greater than normally associated with common ownership and directorship” in order for imputation to apply. Id. A court should consider several factors, such as whether daily operations between the two companies are separate, whether the companies are distinct financial units, stock ownership, and whether the companies share corporate officers. Id. Other factors are also instructive on the issue. Id.

 

Paz avers that the contacts of Castellini’s parent company, the Castellini Group of Companies, should be attributed to Castellini itself in order to create jurisdiction over it in the present action. Dkt. No. 8, at 4-5.Paz relies on Bellorin, Olson, and Jones v. Beech Aircraft, 995 S.W.2d 767, 771 (Tex.App.1999) as support for his position. Id.

 

This Court determines that Paz’s reliance on the alter ego or functional whole doctrines is misplaced. As discussed in Bellorin, Olson, and Jones, the theories involve imputing jurisdiction upon a parent corporation based upon the contacts of a subsidiary and the amount of control the parent exerts over the subsidiary. Bellorin, 236 F.Supp.2d at 679-80 (discussing the contacts and operations of Bridgestone’s subsidiaries in order to determine whether personal jurisdiction over Bridgestone existed); Olson, 21 S.W.3d at 720-23 (examining whether Daimler-Benz conducted business through a subsidiary to such an extensive level that Daimler-Benz and its subsidiary were a functional whole sufficient to create jurisdiction over Daimler-Benz); Jones, 995 S.W.2d at 771-73 (analyzing whether jurisdiction over Beech existed as a result of its relationship with its subsidiaries). Thus, jurisdiction is imputed from the bottom to the top of the corporate chain. However, Paz is attempting to do the opposite in this action: he asserts that the activities of the parent corporation, Castellini Group of Companies, should be imputed to its subsidiary, Castellini Company, L.L.C. Dkt. No. 8, at 4-5.Furthermore, the parent corporation is not a party to this action, and Paz has not attempted to add it to this suit. Paz has not cited any authority in support of his altered version of the alter ego and functional whole doctrines. Therefore, this Court finds that Paz has not alleged a legally viable method of establishing jurisdiction over Castellini based upon the actions of its parent corporation.

 

Because this Court has determined that Paz has failed to allege or establish that Castellini has sufficient minimum contacts with Texas to warra nt general jurisdiction, this Court need not consider the second prong of the due process analysis.

 

V. Request to Transfer

 

Castellini requests that this Court transfer the instant action to the United States District Court for the Eastern District of Kentucky, instead of dismissing the case as a result of lack of personal jurisdiction. Dkt. No. 2, at 9. The accident giving rise to this suit occurred in Trimble County, Kentucky and Castellini has its principal place of business in Kentucky.Dkt. No. 1, at 9;Dkt. No. 2, at 9. Trimble County, Kentucky is located in the Frankfort Division of the Eastern District of Kentucky. E.D. Ky., JOINT LOCAL RULES OF CIVIL PRACTICE, LR 3.1(a)(3).

 

Under 28 U.S.C. § 1631, after a court determines that it does not have jurisdiction over an action, it may, in the interests of justice, transfer the action to another court in which the action could have been brought at the time it was filed. Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 818, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988); Patterson v. Spellings, No. 07-10273, 2007 WL 2948663, at(5th Cir. Oct.10, 2007).“Section 1631 is an efficiency-oriented provision that governs the transfers of cases between federal courts.”Exton v. Our Farm, Inc., 943 F.Supp. 432, 441 (D.N.J.1996) (quoting Moravian Sch. Advisory Bd. of St. Thomas v. Rawlins, 70 F.3d 270, 277 (3d Cir.1985) (Becker, J., concurring and dissenting) (internal quotations omitted)). In the interests of justice and judicial economy, this Court finds it appropriate to transfer the instant action to a court of proper jurisdiction and venue, the Eastern District of Kentucky, rather than dismiss the suit entirely for lack of personal jurisdiction. See, e.g., Verizon Directories Corp., 2007 WL 2162105, at(determining that transfer, rather than dismissal, of an action was appropriate and transferring the case to the court in the state in which the defendant has its principal place of business); Exton, 943 F.Supp. at 441 (transferring an action to the district in which the defendant resided and in which the events giving rise to the action occurred).

 

VI. Conclusion

 

Based on the foregoing, this Court concludes that Plaintiff Hector Paz has failed to meet his prima facie burden of establishing personal jurisdiction over Defendant Castellini Company, LLC. Therefore, this Court GRANTS IN PART Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction, Dkt. No. 2. This Court GRANTS Defendant’s motion to the extent it requests a finding of lack of personal jurisdiction and a transfer of the instant action.

 

Accordingly, this Court TRANSFERS this action to the United States District Court for the Eastern District of Kentucky, Frankfort Division. This Court ORDERS the Clerk of the Court to effect the transfer of this action in accordance with the customary procedure.

ADMIRALTY ISLAND FISHERIES, INC., a Washington Corporation, d/b/a Aqua Star, Plaintiff,

v.

MILLARD REFRIGERATED SERVICES, INC., a Georgia Corporation, and Does 1 to 50 Inclusive, Defendants.

National Fire Insurance of Hartford as subrogee of Suram Trading Corporation, Plaintiff,

Certain Underwriters at Lloyd’s of London as subrogee of Icicle Seafoods, Inc., and Hartford Casualty Insurance Company, as subrogee of Global Fishing, Inc., Intervening Plaintiffs,

v.

Millard Refrigerated Services, Inc., Defendant.

 

Nov. 14, 2007.

 

MEMORANDUM AND ORDER

LAURIE SMITH CAMP, District Judge.

This matter is before the Court on cross-motions for partial summary judgment. The Plaintiff National Fire Insurance of Hartford as subrogee of Suram Trading Corporation filed a motion for partial summary judgment (Filing No. 67 reviving Filing No. 35), in which Admiralty Island Fisheries has joined. (Filing No. 68). The Defendant, Millard Refrigerated Services, Inc. (“Millard”) has filed a motion for partial summary judgment against those Plaintiffs (Filing No. 70 and 72), and Plaintiffs Certain Underwriters at Lloyd’s of London as subrogee of Icicle Seafoods, Inc., and Hartford Casualty Insurance Company, as subrogee of Global Fishing, Inc. (Filing Nos. 69 and 71) (hereafter the subrogees and subrogors will be referred to collectively as the “Plaintffs”). The cross-motions ask the Court to determine the legal effect of relevant limitation of liability clauses.

 

Factual Background

 

The factual background is taken from the statement of undisputed facts that are supported with pinpoint references to the record and the admitted facts as set forth in the parties’ briefs. (8:05cv541; Filing Nos. 36, 72, and 82). Michael McTier’s complete deposition is at Filing No. 37.

 

Millard operates cold storage warehouses throughout the country. Suram, Icicle, Global, and Admiralty have all stored seafood products in a Millard warehouse. It is undisputed that, as each truckload of seafood was delivered by the Plaintiffs to Millard warehouse, Millard issued a warehouse receipt. The warehouse receipts contain the parties’ agreement regarding the storage of the seafood product.

 

Sometime in March 2006, Millard discovered that several pounds of seafood that were owned by the various Plaintiffs were missing. Millard conducted an internal investigation into the loss and determined that at least some of the seafood had been stolen by some of its employees. Millard ultimately terminated five of its employees for theft of seafood that was supposed be stored in the warehouse. The five employees admitted to stealing only small quantities of the seafood, which was a sufficient basis for terminating their employment. National Fire contends that Millard’s former employees stole more than 94,000 pounds of seafood with a fair market value of $455,000. Millard contends that its liability for the loss is limited to 50 cents per pound, or $47,000. The issue presented on these cross-motions for partial summary judgment is whether the limitation of liability clause is enforceable, assuming that the former employees were responsible for the theft.

 

Analysis

 

Consistent with the UCC, warehouse receipts may contain a limitation of liability provision that limits the warehouse operator’s liability for the stored products in the case of loss or damage. Millard’s warehouse receipts include a limitation of liability clause. The Plaintiffs seek a declaration from the Court that the limitation of liability clause contained on the back of the warehouse receipt is of no effect if the Plaintiffs succeed in demonstrating that Millard employees stole the seafood. The Defendant, on the other hand, asks the Court to conclude as a matter of law that the parties’ contract permits Millard to limit its liability for the loss of the seafood to 50 cents per pound, regardless of whether the disappearance of the seafood is attributable to theft by the Millard employees.

 

The Warehouse Receipt

 

The front of the warehouse receipts in question contain the following provision, in all capital lettering:

Limitation of liablity: Unless the depositor declares a valuation higher than $.50 per pound or $12.00 per cubic foot for stored goods and such declared higher value is agreed to in writing by the warehouseman, the warehouseman’s liability for loss or damage thereto shall be expressly limited as specifically set forth in Section 10(e) of the standard contract terms on the reverse side hereof.

 

The front of the warehouse receipt also provides:

The goods listed hereon in apparent good order [sic], except as noted hereon (contents, condition and quality unknown) subject to all terms and conditions herein and on the reverse hereof. Such property to be delivered to the Depositor upon the payment of all storage, handling and other charges.

 

On the back of the receipt is Section 10(e), copied below in the same manner that it appears in the receipt, states:

IN THE EVENT OF LOSS, DAMAGE OR DESTRUCTION TO STORED GOODS FOR WHICH COMPANY IS LEGALLY LIABLE, STORER DECLARES THAT COMPANY’S LIABILITY FOR DAMAGES SHALL BE LIMITED TO THE LESSER OF THE FOLLOWING AMOUNTS: (1) THE ACTUAL COST TO DEPOSITOR OF REPLACING OR REPRODUCING THE DAMAGED GOOD TOGETHER WITH TRANSPORTATION COSTS TO THE WAREHOUSE, (2) THE FAIR MARKET VALUE OF THE GOODS ON THE DATE DEPOSITOR IS NOTIFIED OF LOSS, DAMAGE OR DESTRUCTION, (3) 50 TIMES THE MONTHLY STORAGE CHARGE APPLICABLE TO SUCH LOST, DAMAGED, OR DESTROYED GOODS OR (4) THE GREATER OF (I) $.50 PER POUND NET WEIGHT OF THE GOODS, EXCLUSIVE OF TARE, OR (II) $12.00 PER CUBIC FOOT, PROVIDED, HOWEVER, THAT WITHIN A REASONABLE TIME AFTER RECEIPT OF THIS WAREHOUSE RECEIPT, DEPOSITOR MAY, UPON WRITTEN REQUEST, INCREASE WAREHOUSEMAN’S LIABILITY ON PART OR ALL OF THE GOODS STORED UNDER THE WAREHOUSE RECEIPT, IN WHICH CASE AN INCREASED CHARGE WILL BE MADE BASED UPON SUCH INCREASED VALUATION; FURTHER PROVIDED THAT NO SUCH REQUEST SHALL BE VALID UNLESS MADE BEFORE LOSS, DAMAGE OR DESTRUCTION TO ANY PORTION OF THE GOODS STORED UNDER THIS WAREHOUSE RECEIPT HAS OCCURRED.

 

Section 10(f) states:

The limitation of liability referred to in paragraph (e) above shall be Depositor’s exclusive remedy against Warehouseman for any claim or cause of action whatsoever relating to loss, damage and/or destruction of the stored goods and shall apply to all claims including inventory shortage and mysterious disappearance claims unless Depositor proves by affirmative evidence that Warehouseman converted the good to its own use. Depositor waives any right to rely upon any presumption of conversion imposed by law. In no event shall Depositor be entitled to incidental, special, punitive or consequential damages.

 

(See e.g., Filing No. 69, Ex. 5).

 

Applicable Provisions of the Uniform Commercial Code

 

The Court finds that Uniform Commercial Code § 7-204 applies to the facts presented. Section 7-204, captioned Duty of Care; Contractual Limitation of Warehouse’s Liability, states:

(a) A warehouse is liable for damages for loss of or injury to the goods caused by its failure to exercise care with regard to the goods that a reasonably careful person would exercise under similar circumstances. Unless otherwise agreed, the warehouse is not liable for damages that could not have been avoided by the exercise of that care.

(b) Damages may be limited by a term in the warehouse receipt or storage agreement limiting the amount of liability in case of loss or damage beyond which the warehouse is not liable. Such a limitation is not effective with respect to the warehouse’s liability for conversion to its own use.On request of the bailor in a record at the time of signing the storage agreement or within a reasonable time after receipt of the warehouse receipt, the warehouse’s liability may be increased on part or all of the goods covered by the storage agreement or the warehouse receipt. In this event, increased rates may be charged based on an increased valuation of the goods.

 

Plaintiffs’ Motion for Partial Summary Judgment

 

Because a warehouse operator would not be liable at all absent a failure of due care, a failure of due care by Millard must be established before the enforcement of the limitation of liability clause even becomes an issue. The Plaintiffs ask the Court to assume that they can prove their seafood disappeared due to employee theft. The Court might assume, for purposes of this motion, that Millard was negligent in hiring the former employees without checking their backgrounds for criminal history or in failing to maintain security over the seafood after it was deposited at the warehouse. These assumptions relate to the threshold issue of Millard’s lack of due care. For purposes of this motion only, the Court will assume that Millard was negligent in failing to prevent the former employees’ theft of the Plaintiffs’ property.

 

The limitation of liability provision does not become material unless there has been liability established on the part of the warehouse operator. There is no dispute the Millard Refrigerated was in possession of the seafood, and that the seafood is not available to return to the bailors. A presumption of negligence by Millard Refrigerated, the bailee, arises. Therefore, under U.C.C. section 7-204(1), Millard must be held liable for the loss unless it can rebut the presumption that it was negligent. If unable to rebut the presumption, then Millard’s liability can be limited assuming the limitation of liability provision is effective. For purposes of this motion only, the Court will assume that Millard failed to act with due care in permitting the Plaintiffs’ seafood to be stolen from its cold storage facility.

 

Under Nebraska law, conversion is “any unauthorized or wrongful act of dominion exerted over another’s personal property which deprives the owner of his property permanently or for an indefinite period of time.”Roth v. Farmers Mutual Insurance Company of Nebraska, 371 N.W.2d 289, 291 (Neb.1985). Under this definition, there is no dispute that the former Millard employees committed an intentional conversion of the Plaintiffs’ property. Assuming Millard’s liability arising out ordinary negligence under Section 7-204(a), the limitation of liability provision applies according to Section 7-204(b), unless the warehouse operator’s liability arises out of a conversion “for its own use.” The Court agrees with the observation of the commentators that “conversion for it own use” as used in Section 7-204(a) must mean something more and different than simple conversion. See Comment Note No. 4, UCC § 7-204 (2005)(explaining that “[c]onversion to its own use” is narrower than the idea of conversion generally” and disapproving “[c]ases such as Lipman v. Peterson, 575 P.2d 19 (Kan.1978) holding to the contrary….”)

 

The limitation of liability provision applies in the presence of ordinary negligence unless there is proof that the former employees’ theft, the conversion, was for the purpose of advancing Millard’s interests. Enforcement of a limitation of liability clause is not a complete defense to liability, but it must be raised as would an affirmative defense because it benefits the defendant. For that reason, the Court concludes that the burden of proof should be on the warehouse operator to demonstrate that the conversion of the bailor’s property was not for its own use. In reaching this legal conclusion, the Court acknowledges its rejection of Millard’s attempt to place the burden on the Plaintiffs as stated in the warehouse receipts’ paragraph 10(f). To place the burden of proof on the Plaintiffs, as bailors, would ignore the policy arguments that support the enforcement of limitation of liability provisions in commercial contracts.

 

According to at least one commentator, there are good reasons to place the burden of proof on the warehouse operator. First, the warehouse operator is in the best position to explain the loss because the operator has taken control of the goods and has determined the manner in which they are stored. Second, placing the burden on the warehouse operator to show that it acted with due care will encourage warehouse operators to act with care and caution in the handling and storage of bailed goods and to maintain adequate tracking systems that will withstand judicial scrutiny. Third, placing the burden on operators will also have a beneficial effect on the industry because those warehouses that are unable to establish that their storage practices are reasonable will incur increased operating costs, eventually forcing poorly-run facilities out of business. Last, placing the burden on the warehouses will give the operators incentive to procure insurance on all bailed goods entrusted to them which the operators can procure, presumably at a lower cost than would be incurred if each bailor had to procure its own insurance. “A Warehouse’s Burden of Proof,” Ralph Anzivino, UCC Law Journal (Spring 2004).

 

Millard has come forward with evidence that the conversion was not for its own use. Millard’s general manager, Michael McTier, conducted an investigation into the Plaintiffs’ losses. As a result of the investigation, five employees were fired for theft. McTier believes, based on the investigation, that all losses were caused by the former employees’ theft. (Filing No. 79, McTier Dep. 159). At least one of the former employees has stated that the seafood was sold to a third-party. McTier has testified that Millard did not benefit in any way from the theft.

 

The Plaintiffs have not come forward with any evidence to create a genuine issue of material fact regarding whether the conversion-the theft-was for Millard’s own use. Plaintiffs argue that the conversion was for Millard’s own purposes because it 1) was committed within the authorized space and time of the employees’ employment, 2) was committed while they were performing duties for which they were hired, and 3) “was actuated, at least in part, by a purpose to serve the master [Millard].” (Filing No. 82, p. 12). The crux of Plaintiffs’ argument is that Millard’s interests were furthered by the conversion because Millard was paying the former employees to work while they were also stealing; the former employees used Millard’s equipment, including pallets, forklifts, and trucks, to accomplish the theft; and the former employees conducted the theft during hours when they were “also” working. I do not agree that these facts are evidence that the conversion was to Millard’s own use. The former employees’ abuse of their employment position does not automatically transform their conversion to a conversion for Millard’s own use. Absent undisputed facts that the conversion was for Millard’s own use, the Court concludes that the Plaintiff’s motion for partial summary judgment is denied.

 

Millard’s Motion for Partial Summary Judgment

 

Millard also moves for partial summary judgment asking the Court to confirm the enforceability of the limitation of liability clauses in its warehouse receipts. Because there are genuine issues related to the degree of Millard’s negligence, Millard’s motion will be denied. The Court, assuming ordinary negligence on the part of Millard, has found that the Plaintiffs have failed to come forward with evidence to create a genuine issue regarding whether the former employees stole the seafood to further Millard’s own interests. There is no evidence that the conversion was to Millard’s own use. It would seem to follow that the limitation of liability clause is enforceable to limit the damages that Millard may owe to the Plaintiffs.

 

This case does not present a relationship involving a monopoly or parties of unequal bargaining power that might make the contract unenforceable. Where ordinary commercial relationships exist, the Eighth Circuit Court has upheld “the strong public policies of recognizing parties’ liberty to contract and enforcing contracts as written.”Sander v. Alexander Richardson Investments, 334 F.3d 712, 719 (8th Cir.2003). The Plaintiffs had an opportunity to negotiate for a higher price per pound to be paid under the limitation of liability clause in the event of loss, but Plaintiffs did not. As a result, they were not obligated to pay the higher storage costs that likely would have come with a limitation of liability clause that was more advantageous to them. Rather, the parties agreed that the risk of loss greater than 50 cents per pound would be borne by the Plaintiffs.

 

However, in opposition to Millard’s motion, the Plaintiffs argue that the limitation of liability clause should not be enforced as against public policy. The Plaintiffs contend that it will show at trial that Millard acted with gross negligence in failing to prevent the theft. If the Plaintiffs are able to demonstrate at trial that the failure of due care on the part of Millard constitutes gross negligence, not just ordinary negligence, then enforcement of the limitation of liability clause may be contrary to public policy. See New Light Company, Inc. v. Wells Fargo Alarm Services, 525 N.W.2d 25, (Neb.1994)(holding that exculpatory clause in parties’ agreement was void as against public policy to the extent that it purported to relieve fire alarm company from liability for its own gross negligence or willful and wanton misconduct).“Whether a particular exculpatory clause in a contractual agreement violates public policy depends upon the facts and circumstances of the agreement and the parties involved.”Id. (noting that the greater the risk to human life and property, the stronger the argument in favor of voiding attempts by a party to insulate itself from damages caused by that party’s gross negligence or willful and wanton misconduct.) “Gross negligence” has been defined as:

[G]reat and excessive negligence; that is, negligence in a very high degree. It indicates the absence of slight care in the performance of a duty…. Willful and wanton misconduct exists where a defendant had actual knowledge that because of its actions, a danger existed to the plaintiff and the defendant intentionally failed to act to prevent a harm that was reasonably likely to result.

 

Id. at 30.Both the Plaintiffs and Millard have offered evidence relative to the degree of care exercised by Millard in connection with the seafood. There is some evidence that Millard knew of the thefts or should have known of them several months before Millard did anything about it. Because there are genuine issues of fact regarding the reasonableness of the security steps Millard took and did not take, whether Millard’s conduct rises to the level of gross negligence is an issue for the jury. Accordingly, Millard’s motion for partial summary judgment will also be denied.

 

IT IS ORDERED:

 

1. The Plaintiffs’ Motions for Partial Summary Judgment (Filing Nos. 35 and 44 in Case No. 8:05cv541; and Filing Nos. 70 and 100 in 8:06cv421) are denied; and

 

2. The Defendant’s Motions for Partial Summary Judgment as to the Plaintiffs (Filing Nos. 69, 70, 71, and 72 in Case No. 8:05cv541; and Filing Nos. 101, 102, 103, and 104 in Case No. 8:06cv421) are denied.