BENHAM, Justice.
Julie Morris and John Tanner were divorced on April 20, 2004. At that time, the parties had three minor children. In a settlement agreement incorporated into the final divorce decree, the parties made the following provision regarding child support:
The Husband agrees to pay to the Wife as child support for the minor children of the parties the sum of Seven Hundred ($700) Dollars per month, per child. The Husband shall take the children as State and Federal tax deductions and the Wife shall make no claim on her State and Federal tax returns. Said sum shall be payable on the 1st day of each month and shall continue each month thereafter for so long as each child shall remain in high school and while also living at home with Wife prior to beginning college or other secondary education. For so long as each is in college or other secondary education, Husband's child support obligation shall continue until such child reaches the age of twenty-three (23) years, marries, dies, becomes self-supporting, or enters the Armed Services.
The final decree of divorce also provided for shared physical custody, but that Morris had primary physical custody of the three children and ultimate decision-making authority.
The parties do not dispute that Morris has primary physical custody.
In October 2005 the eldest child began living with Tanner. In July 2007, Tanner ceased making child support payments for the eldest child. Then, in May 2008, the middle child began living with Tanner, and Tanner stopped paying support for that child in January 2009. In July 2009, Morris formally requested Tanner to return the middle child to her custody. When the child was not returned, Morris filed an action for contempt.
At the contempt hearing, Tanner testified that Morris agreed to the decrease in child support payments for both children; however, Morris testified that she had not so agreed. Morris admitted, however, that she did not diligently seek the return of the eldest child, who is now eighteen or older, and that she did not seek back child support for the eldest child. Upon hearing argument and considering evidence, the trial court adjudged that the total arrearage amount of $28,700 was due for both children, but, the trial court only held Tanner in contempt for the $8,400 owing in support for the middle child. The trial court also ordered the middle child be returned to the custody of Morris instanter and awarded attorney fees to Morris in the amount of $4,755.98. Tanner filed a discretionary application requesting appeal which this Court granted, posing the following questions to the parties: "Whether the trial court erred in finding that Mr. Tanner was in arrears in his child support payments for the parties' oldest child and their middle child. See Perry v. Perry, 265 Ga. 186, 187-188 ( 454 SE2d 122) (1995). If so, should the award of attorney fees be vacated?"
This Court has held that self-executing child support modification provisions in divorce decrees are lawful. Perry v. Perry, supra, 265 Ga. at 188 (2); Weaver v. Jones, 260 Ga. 493 (3) ( 396 SE2d 890) (1990); Pearce v. Pearce, 244 Ga. 69 ( 257 SE2d 904) (1979). By including the language "while also living at home with Wife," the child support provision in this case was self-executing. Perry v. Perry, supra, 265 Ga. at 187 (provision that provided that husband would pay child support until child "ceases to live with the Wife" was self-executing). Inasmuch as our holding in Perry, supra, allows for the self-executing decrease of child support payments, it was error for the trial court to hold Tanner in contempt for relying on the self-executing provision in the parties' settlement agreement to reduce his support obligation when he had Morris's consent to allow the children to live with him. See also Daniel v. Daniel, 239 Ga. 466 (2) ( 238 SE2d 108) (1977) (father not in contempt for failure to pay child support during the months the children lived with him per consent of the mother). Because Tanner properly relied on the language of the parties' child support agreement as to the eldest child, the trial court erred in holding that Tanner was obligated to pay the arrearage for the eldest child. Therefore, the trial court's judgment is reversed in that respect.
Self-executing change of custody provisions are not lawful in cases where the child is younger than 14 and unable to exercise a statutory right to choose his/her custodial parent. Scott v. Scott, 276 Ga. 372 ( 578 SE2d 876) (2003) ("automatic custody change provision was not . . . permissible . . . and should be stricken from the parties' divorce decree").
Tanner's failure to return the middle child when asked by Morris, who had the ultimate decision-making authority, warranted a ruling of contempt. Thus, the trial court did not err when it ordered the return of the middle child to Morris; however, the arrearage amount should be from the time Tanner lost Morris's consent to keep the middle child. Therefore, to affect the contempt for the non-return of the child, the portion of the order requiring appellant to pay $8,400 is vacated and the case is remanded to determine the amount in arrears from the time Tanner no longer had Morris's consent to keep the child until the date the child was returned to Morris. In addition, the attorney fee award should be vacated and the amount reconsidered consistent with this opinion.
Tanner's last allegation concerning the propriety of the trial court's order on due process grounds is moot.
Judgment affirmed in part, reversed in part, vacated in part, and case remanded with direction. All the Justices concur.
BENHAM, Justice.
DECIDED NOVEMBER 1, 2010.
d neither Vedanta nor Sterlite India as a defendant.
However, Balco submitted a declaration by Ravi Rajagopal, Vice President of Balco, which contained financial information for both Vedanta and Balco for the purpose of demonstrating Balco's financial stability.
That suit was ultimately dismissed because the contract was not a maritime contract.
See Rajagopal Decl. ¶ 26.
See id.
See Floyd Decl. ¶ 17.
See Glencore AG v. Bharat Aluminum Co., No. 08 Civ. 9765, 2008 WL 5274569, at * 1 (S.D.N.Y Dec. 15, 2008).
C. The Arbitral Award
Glencore commenced arbitration against Balco in England pursuant to the Contract. Neither Vedanta nor Sterlite India were parties in the arbitration proceeding. The arbitrator found in favor of Glencore and issued an award on June 17, 2010. The award amounts to $5,731,793, plus interest, for damages arising from freight-related losses on the sale of alumina, damages arising from demurrage, arbitration costs and legal costs. Glencore demanded, in writing, that Balco pay the arbitration award. Balco did not pay the award, nor did Balco respond to Glencore's demand. Glencore now asks this Court to confirm the award and enter judgment against Balco. Glencore also requests this Court to hold Vedanta and Sterlite India liable as Balco's alter egos and for tortiously interfering with Balco's maritime obligations. Lastly, Glencore asks this Court for pre-judgment attachment of defendants' property. For the reasons that follow, Glencore's Petition is dismissed.
See Pet. ¶ 24
See Reasoned Final Award between Glencore and Balco ("Arbitration Award"), Ex. 2 to Pet. at 3.
See id.
See id.
See Pet. ¶ 28.
See id.
III. LEGAL STANDARD
A. Personal Jurisdiction
On a motion under Rule 12(b)(2), when the issue of personal jurisdiction "is decided initially on the pleadings and without discovery, the plaintiff need show only a prima facie case." "The burden of proving jurisdiction is on the party asserting it." Plaintiffs "can make this showing through [their] own affidavits and supporting materials containing an averment of facts that, if credited . . . would suffice to establish jurisdiction over the defendant." Thus, a court may consider materials outside the pleadings, but must credit plaintiffs' averments of jurisdictional facts as true. "[A]ll allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiff's favor, notwithstanding a controverting presentation by the moving party." Nonetheless, where a defendant "rebuts [plaintiffs'] unsupported allegations with direct, highly specific, testimonial evidence regarding a fact essential to jurisdiction — and plaintiffs do not counter that evidence — the allegation may be deemed refuted."
Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984). Accord Tamam v. Fransabank Sal, 677 F. Supp. 2d 720, 724 (S.D.N.Y. 2010) ("As no discovery has yet taken place, to survive a motion to dismiss the plaintiff must plead factual allegations [that] constitute a prima facie showing of jurisdiction.") (quotation marks omitted).
Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994).
Whitaker v. American Telecasting Inc., 261 F.3d 196, 208 (2d Cir. 2001) (quotation marks and citations omitted).
See Hsin Ten Enter. USA, Inc. v. Clark Enters., 138 F. Supp. 2d 449, 452 (S.D.N.Y. 2000).
See Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996).
A.I. Trade Fin., Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993). Accord Whitaker, 261 F.3d at 208.
Schenker v. Assicurazioni Generali S.p.A., Consol., No. 98 Civ. 9186, 2002 WL 1560788, at *2 (S.D.N.Y. July 15, 2002).
1. Traditional Jurisdiction
To determine whether it has personal jurisdiction over a party, a court engages in a two-part analysis. First, the court must determine whether there is jurisdiction over the defendant under the relevant forum state's laws. Second, the court must determine whether an exercise of jurisdiction under these laws is consistent with federal due process requirements.
See Best Van Lines, Inc. v. Walker, 490 F.3d 239, 242 (2d Cir. 2007).
See id. (citing International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).
New York subjects a foreign corporation to general personal jurisdiction if it is "doing business" in the state. Under this test, "a foreign corporation is amenable to suit in New York if it is `engaged in such a continuous and systematic course' of `doing business' here as to warrant a finding of its `presence' in this jurisdiction." "[T]he term `doing business' is used in reference to foreign corporations to relate to `the ordinary business which the corporation was organized to do'. . . . It is not the occasional contact or simple collateral activity which is included." "The doing business standard is a stringent one because a corporation which is amenable to the [c]ourt's general jurisdiction `may be sued in New York on causes of action wholly unrelated to acts done in New York.'"
See New York Civil Practice Law and Rules § 301 (codifying caselaw utilizing the "doing business" standard).
Aerotel Ltd. v. Sprint Corp., 100 F. Supp. 2d 189, 191-92 (S.D.N.Y 2000) (quoting Frummer v. Hilton Hotels Int'l Inc., 281 N.Y.S.2d 41, 43 (1967)).
Bryant v. Finnish Nat'l Airline, 253 N.Y.S.2d 215, 219-20 (1st Dep't 1964) (citation omitted).
Jacobs v. Felix Bloch Erben Verlag Fur Buhne Film Und Funk KG, 160 F. Supp. 2d 722, 731 (S.D.N.Y. 2001) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 198 (2d Cir. 2001)).
To determine whether a foreign corporation is doing business in New York, courts focus on criteria including: (1) whether the foreign corporation has an office in the state; (2) whether it has any bank accounts or other property in the state; (3) whether it has a phone listing in the state; (4) whether it does any public relations work in the state; and (5) whether it has employees who permanently work in the state. No single criterion is determinative. The general jurisdiction inquiry thus looks to the totality of the defendant's contacts and "permits a court to exercise its power in a case where the subject matter of the suit is unrelated to those contacts."
See Wiwa v. Royal Dutch Petrol. Co., 226 F.3d 88, 98 (2d Cir. 2000).
See Metropolitan Life Ins. Co., 84 F.3d at 570 ("Contacts with the forum state should not be examined separately or in isolation. There is no talismanic significance to any one contact or set of contacts that a defendant may have with a forum state; courts should assess the defendant's contacts as a whole."); Landoil Res. Corp. v. Alexander Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1990) ("The Court must therefore analyze a defendant's connections to the forum state `not for the sake of contact-counting, but rather for whether such contacts show a continuous, permanent and substantial activity in New York.'") (quoting Weinstein, Korn Miller, New York Civil Practice ¶ 301.16, at 3-32).
Metropolitan Life Ins. Co., 84 F.3d at 567-68 (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984)).
2. Alter Ego Personal Jurisdiction
Courts will find that an alleged alter ego is doing business in New York "when the subsidiary is acting as an agent for the parent, or when the parent's control is so complete that the subsidiary is a `mere department' of the parent." Determining whether an entity is a "mere department" requires "a fact-specific inquiry into the realities of the actual relationship between the parent and subsidiary." In particular, a court must consider
ESI, Inc. v. Coastal Corp., 61 F. Supp. 2d 35, 51 (S.D.N.Y. 1999) (citing Koehler v. Bank of Bermuda Ltd., 101 F.3d 863, 865 (2d Cir. 1996)).
Koehler, 101 F.3d at 865.
(1) common ownership, (2) financial dependency of the subsidiary on the parent corporation, (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 exercised by the parent.
While the first factor — common ownership — is "essential" for an assertion of jurisdiction, "[t]he other three are important, but not essential." As such, "[t]he overall weighing of the various factors thus necessitates a balancing process, and not every factor need weigh entirely in the plaintiffs' favor." When applying the Beech test, "[e]stablishing the exercise of personal jurisdiction over an alleged alter ego requires application of a less stringent standard than that necessary to pierce the corporate veil for purposes of liability." "[T]he exercise of personal jurisdiction over an alter ego corporation does not offend due process."
Tese Milner v. De Beers Centenary A. G., 613 F. Supp. 2d 404, 416 (S.D.N.Y. 2009). Accord ESI, 61 F. Supp. 2d at 52.
Reers v. Deutsche Bahn AG, 320 F. Supp. 2d 140, 156 (S.D.N.Y. 2004) (quotation marks omitted).
GEM Advisors, Inc. v. Corporacion Sidenor, S.A., 667 F. Supp. 2d 308, 319 (S.D.N.Y. 2009) (quotation marks omitted).
Southern New England Telephone Co. v. Global NAPs Inc., ___ F.3d ___, 2010 WL 3325962, at *10 (2d Cir. Aug. 25, 2010) (citing Transfield ER Cape Ltd. v. Industrial Carriers, Inc., 571 F.3d 221 (2d Cir. 1991)).
B. Quasi in Rem Jurisdiction
Where a court lacks personal jurisdiction over a party, jurisdiction may be established "based on the court's power over property within its territory." "A judgment quasi in rem affects the interests of particular persons in designated property." "The effect of a judgment in such a case is limited to the property that supports jurisdiction." Where that property which serves as the basis for jurisdiction "is completely unrelated to the plaintiff's cause of action . . . the presence of the property alone" does not support jurisdiction. "[T]he only role played by the property is to provide the basis for bringing the defendant into court."
Shaffer v. Heitner, 433 U.S. 186, 199 (1977). Accord Allied Maritime Inc.v. Descatrade SA, ___ F.3d ___, 2010 WL 3447882, at *2 (2d Cir. Sept. 3, 2010).
Shaffer, 433 U.S. at 199 n. 17.
Id. at 199.
Id. at 208-09.
Id.
If a defendant has property in the state, the court must then consider whether the exercise of jurisdiction will offend the Due Process clause under the Fourteenth Amendment, which permits a state to exercise personal jurisdiction over a non-resident defendant with whom it has minimum contacts so long as the exercise of jurisdiction "does not offend traditional notions of fair play and substantial justice." To establish the necessary minimum contacts, the plaintiff must show that the defendant "purposefully availed" itself of the privilege of doing business in the state and thus could foresee being haled into court.
See Intermeat, Inc. v. American Poultry, Inc., 575 F.2d 1017, 1022 (2d Cir. 1978).
International Shoe Co., 326 U.S. at 316.
Chew v. Dietrich, 143 F.3d 24, 28 (2d Cir. 1998).
IV. APPLICABLE LAW
An action to confirm a foreign arbitral award is not the proper occasion to assert an alter ego theory for liability. A confirmation action is a "summary proceeding" where a judge's powers are "narrowly circumscribed" to "determin[ing] whether the arbitrator's award falls within the four corners of the dispute as submitted to him." "A district court confirming an arbitration award does little more than give the award the force of a court order." To consider "a potentially voluminous record" detailing the relationship between a party bound by an arbitration award and its alleged alter ego "would unduly complicate and protract the proceeding."
See Orion Shipping Trading Co. v. Eastern States Petroleum Corp. of Panama, 312 F.2d 299, 301 (2d Cir. 1963).
Encyclopedia Universalis S.A. v. Encyclopedia Britannica, Inc., 403 F.3d 85, 92 (2d Cir. 2005) (quotation and citation omitted).
Orion, 312 F.2d at 301.
Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir. 2007).
Orion, 312 F.2d at 301.
V. DISCUSSION
A. Claims Against Vedanta and Sterlite India
Vedanta and Sterlite India are not proper parties to this action. Glencore's basis for naming Sterlite India and Vedanta as defendants is its assertion that Vedanta and Sterlite India are alter egos of Balco. However, requesting that the Court pierce the corporate veil for purposes of liability during the confirmation proceeding contravenes clear Second Circuit precedent that an arbitration award may not be enforced under an alter ego theory against the parent corporation of the party subject to the award.
See Pet. ¶¶ 31-46.
See Orion, 312 F.2d at 301.
Vedanta and Sterlite India were not parties to the underlying arbitration proceeding. The arbitration award was issued only against Balco. Adjudicating whether Vedanta and Sterlite India are alter egos of Balco to hold them liable for the arbitration award would require new fact-finding not contemplated in the arbitration proceeding. Additionally, determining whether Vedanta and Sterlite India tortiously interfered with Balco's performance of its obligation falls outside "the four corners of the dispute as submitted." This Court therefore lacks the authority to determine liability against Vedanta and Sterlite India in this action. Vedanta and Sterlite India's motion to dismiss is therefore granted.
See Arbitration Award at 3.
See id.
Orion, 312 F.2d at 301.
B. Personal Jurisdiction
1. Personal Jurisdiction over Balco
Balco is not subject to personal jurisdiction in this Court. Glencore's only assertions of jurisdiction over Balco are that Balco entered into a contract with a Florida corporation and that Balco is the assignee of a patent in the United States. Glencore points to no Balco operations in or contacts with New York, and Balco maintains that it does not conduct any business, own any property or have any presence in New York. Under these facts Balco is not doing business in New York. Glencore therefore fails to establish a prima facie case that this Court has personal jurisdiction over Balco.
See Pet. ¶¶ 24-25.
See Rajagopal Decl. ¶ 8.
I therefore do not reach the constitutional question of whether exercising jurisdiction over Balco would be consistent with due process.
2. Personal Jurisdiction over Balco as Sterlite India and/or Vedanta's Alter Ego
Glencore's other argument for establishing personal jurisdiction over Balco is based on its assertion that Balco is an alter ego of Sterlite India and Vedanta. To find that this Court has personal jurisdiction over Balco as the alter ego of Sterlite India and/or Vedanta, I must find both (1) that this Court has personal jurisdiction over Sterlite India and Vedanta and (2) that Balco is their alter ego.
See Pl. Opp. Mem. at 15.
a. Personal Jurisdiction Over Vedanta and Sterlite India
Sterlite India and Vedanta are not subject to personal jurisdiction in this Court because they are not "doing business" in New York. Glencore's allegations of personal jurisdiction over Sterlite India and Vedanta do not meet the five traditional criteria that a court evaluates when analyzing whether it may exercise personal jurisdiction over a foreign entity.
See Wiwa, 226 F.3d at 98.
Glencore relies on the following facts to support the exercise of personal jurisdiction over Sterlite India and Vedanta: Sterlite India's listing of ADSs on the NYSE; Sterlite India's issuing notes convertible to ADSs; Sterlite India's appointing CT Corporation System as its agent for service of process for actions brought in connection with its listed securities; Sterlite India's entering into a contract in Texas with a New York choice of law clause; Sterlite India and Vedanta's using a New York-based law firm for an adversarial proceeding and transactional matters; Sterlite India's filing an action for affirmative relief in the Southern District of New York; and Vedanta's purchasing ADSs on the NYSE which are held at a depositary institution in New York. These facts are insufficient to find that defendants are doing business in New York under the five-factor test.
See Floyd Decl. ¶ 11.
See id. ¶ 12.
See id. ¶ 15.
See Pet. ¶ 49.
See Floyd Sec. Decl. ¶ 4.
See id. ¶ 15.
See id. ¶ 11. Glencore also alleges that Sterlite India ships materials into United States' ports, none of which include New York, and that Vedanta issued bonds in the United States to QIBs and certain foreign entities. Because these facts are irrelevant to the question of whether defendants are "doing business" in New York, I do not consider them.
First, Glencore does not allege that either Sterlite India or Vedanta has an office in New York and both maintain that they do not. Second, Glencore contends that Vedanta owns property in New York because it purchased Sterlite India's ADSs listed on the NYSE and maintains a bank account in New York where these ADSs are held (Citibank, N.A., a depositary institution in New York). The defendants, though, assert that they do not "own[] or lease[] any real, tangible, intangible or personal property in New York." However, drawing all inferences in the light most favorable to Glencore, I conclude that the second factor weighs in its favor. Yet Glencore does not allege any additional facts that satisfy the remaining three criteria. There is no evidence that Sterlite India or Vedanta maintain a phone listing, perform public relations work, or permanently employ personnel in New York.
See Def. Mem. at 9.
See Floyd Sec. Decl. ¶ 11.
Def. Mem. at 9.
Glencore's remaining allegations do not indicate that defendants are doing business in New York. Defendants' activities relating to their NYSE-listed securities are "insufficient to confer jurisdiction." "[T]he prevailing caselaw accords foreign corporations substantial latitude to list their securities on New York-based stock exchanges and to take the steps necessary to facilitate those listings (such as making SEC filings and designating a depositary for their shares) without thereby subjecting themselves to New York jurisdiction for unrelated occurrences." Therefore, the fact that Sterlite India listed ADSs on the NYSE, employed CT Corporation Systems as its agent for service of process and employed Shearman Sterling LLP in connection with issuing securities does not subject it to jurisdiction in New York. Defendants' additional contacts with New York — utilizing the services of a New York-based law firm in an adversarial proceeding in the Southern District of Texas, entering into a contract with a New York choice of law clause and suing once in New York — are insufficient to constitute "doing business" in New York.
In re Ski Train Fire, 230 F. Supp. 2d at 383 (holding that listing securities on the NYSE and employing individuals to "conduct the tasks necessary to facilitate [the] listing" do not confer jurisdiction over a defendant.)
Wiwa, 226 F.2d at 97.
Glencore compares this case to In re Ski Train Fire in Kaprun, Austria on November 11, 2000. In Ski Train Fire, not only did the defendant issue securities in New York and employ New York-based companies to facilitate their listing, it also utilized a New York-based law firm to register over seven thousand patents, operated a website which proclaimed the United States' integral role in its business, transacted significant sales in the New York region, employed a press contact in New York and repeatedly filed suit in New York. Considering all of those facts together, the court held there were enough continuous and systematic contacts with New York to conclude that the defendant was doing business here. Those additional contacts are absent in this case.
230 F. Supp. 2d 376 (S.D.N.Y 2002).
See id. at 382-83.
See id. at 384.
Because the facts alleged by Glencore satisfy only the second factor of the five-factor inquiry, Glencore fails to plead a prima facie case that defendants are doing business in New York. This Court may not, therefore, exercise personal jurisdiction over Sterlite India or Vedanta in accordance with New York law. b. Alter Ego Determination
I therefore do not reach the constitutional question of whether exercising jurisdiction over defendants would be consistent with due process.
Determining alter ego status for the purpose of establishing jurisdiction requires application of the Beech factors — a less stringent standard than that necessary to pierce the corporate veil for purposes of liability. First, no party disputes the existence of common ownership. Balco is fifty-one percent owned by Sterlite India, which in turn is fifty-four percent owned by Vedanta. Vedanta is thus the common owner.
See Marine Midland Bank, N.A. v. Miller, 664 F.2d 899 (2d Cir. 1981).
See Vedanta Report at 5.
Second, Glencore asserts that because a Vedanta director, who is also a Balco director, stated that he would not provide further cash for Balco to perform the Contract, Balco is financially reliant upon Vedanta. Glencore also points to the prior proceeding between these parties in which Ravi Rajagopal, Vice President of Balco, provided Balco and Vedanta's financial information in a declaration. Glencore argues that by including Vedanta's financial information in an action where Vedanta was not a party, Balco and Vedanta admitted that Balco relies on Vedanta financially and that they are alter egos. Additionally, Sterlite India reports consolidated financial statements that include Balco's financial results. This suggests, but does not establish, that Balco is financially dependent on Sterlite India. Third, Glencore alleges that defendants have overlapping employees and disregard corporate formalities. Three out of eight of Balco's board members are also directors or officers of Vedanta or Sterlite India. Vedanta or Sterlite India nominated an additional two directors. Glencore also points to Vedanta logos appearing on Balco business cards and Balco executives' using Vedanta e-mail addresses. Additionally, Glencore asserts that because Balco's financial results are consolidated with Sterlite India's, because Balco's Code of Business Conduct and Ethics refers to the "Company" as including the entire conglomerate and because Sterlite India loaned money to Balco, the defendants fail to observe corporate formalities and are alter egos. Lastly, Glencore alleges that Vedanta or Sterlite India control Balco's marketing and operational policies. Glencore cites the involvement of Vedanta and Sterlite India executives in the dispute over the Contract. Glencore also cites Vedanta's website, which states that Vedanta has "management control" over Sterlite India and Balco.
See Pet. ¶ 35.
See Floyd Decl. ¶ 17.
See id.
See Pet. ¶ 42.
See King County, Wash. v. IKB Deustche Industriebank AG, ___ F. Supp. 2d ___, Nos. 09 Civ. 8387, 09 Civ. 8822, 2010 WL 1790051, at *5 (S.D.N.Y May 4, 2010) (holding that consolidated financial statements including a subsidiary's financial information with its parent's suggests a subsidiary's financial reliance on its parent); Compare ESI, 61 F. Supp. 2d at 53 ("[When reviewing the financial dependency factor,] [c]ourts also inquire whether the subsidiary retains its own profits or whether they are received by and reported on the financial statements of the parent.") with Gallelli v. Crown Imports, LLC, 701 F. Supp. 2d 263, 273-74 (E.D.N.Y. 2010) ("Courts considering [the second Beech 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.") (citing Reers, 320 F. Supp. 2d at 157).
See Rajagopal Decl. ¶ 21.
See id. ¶ 22.
See Floyd Decl. ¶ 21.
See Pet. ¶ 42.
See Floyd Decl. ¶ 9
See Pet. ¶ 37.
See Rajagopal Decl. ¶ 14.
See Pet. ¶¶ 18-21.
See Floyd Decl. ¶ 7; Vedanta Company Website, Ex. 1 to Floyd Decl.
Balco, however, presents evidence to undermine Glencore's allegations that Balco is its parents' alter ego. Balco provides financial information indicating that it is separately and adequately capitalized and does not need financial assistance from Vedanta. With $1.086 billion in assets, $707.69 million in revenues, a $113.91 million net profit and a $711.93 million surplus, it is difficult to conclude that Balco is financially dependent on Vedanta or Sterlite India. Balco also asserts that the Government of India nominated three of its board members, that it is routine in parent/subsidiary relationships for a parent company to nominate its subsidiary's board members, that it has 4,868 of its own employees, that any Balco employees who come from Sterlite India are paid for by Balco and that Balco's senior executives are all independent of Vedanta and Sterlite India. Balco also argues that the fact that it paid dividends to Sterlite India fails to support Glencore's arguments: Balco paid dividends to Sterlite India and the Government of India on the same terms, because both are Balco's shareholders. Balco also lists several constraints that its shareholders agreement places on Sterlite India as a majority shareholder, including certain actions that may only be taken with approval from the Government of India.
See Rajagopal Decl. ¶ 12.
See id. ¶ 21.
See In re Ski Train Fire, 342 F. Supp. 2d 207, 216 (S.D.N.Y. 2004) ("[Defendants'] ownership of all the stock of [subsidiary] . . . the overlap of directors and the use of consolidated financial statements cannot be considered in any way inconsistent with the normal stockholder-corporation relationship.") (citations omitted).
See Rajagopal Decl. ¶ 13.
See id.
See id. ¶ 20.
See id. ¶ 14.
See id.
See id. ¶ 16. These actions include changing its registered office, starting a new line of business, reducing share capital and making loans or guarantees to other companies. See id.
Glencore claims that this case is similar to Telenor Mobile Communications AS v. Storm LLC. However, in Telenor, the alleged alter ego parent corporation "negotiated the entire transaction giving rise to [the] dispute, [] paid [its subsidiary's] legal fees during the course of [the] dispute, employ[ed] the subsidiary's sole officer and [] initiated collusive litigation aimed to derail the arbitration proceedings. . . ." Vedanta and Sterlite India's involvement in the Contract at issue here do not rise to the level of the parent corporation's involvement with its subsidiary in Telenor. There is no evidence that either Vedanta negotiated the entire Contract or that it managed the dispute over the Contract. There are no allegations that Vedanta is paying Balco's legal fees, nor that it engaged in collusive behavior to "derail" Glencore's recovery under the arbitration award.
351 Fed. Appx. 467 (2d Cir. 2009).
Id. at 469 (emphasis added).
Nevertheless, construing the allegations in the light most favorable to Glencore and drawing all inferences in Glencore's favor, I conclude that Glencore has provided sufficient evidence to make out a prima facie case that Balco is an alter ego of Vedanta and Sterlite India. But because Balco's counter-evidence specifically contradicts plaintiffs' allegations, it would be premature to determine conclusively that, in fact, Balco is the alter ego of defendants. However, even if jurisdictional discovery were to establish that Balco is Vedanta and/or Sterlite India's alter ego, the Court would not have personal jurisdiction over it because, as I concluded above, this Court does not have personal jurisdiction over Vedanta or Sterlite India. Nor does this Court have quasi in rem jurisdiction over defendants, for that matter. Therefore, there is no purpose in permitting discovery as to whether Balco is its parents' alter ego.
See supra Part V.B.2.a.
See infra Part V.C.
C. Quasi in Rem Jurisdiction
Glencore asserts that even if this Court lacks personal jurisdiction over defendants, they are still amenable to suit because this Court has quasi in rem jurisdiction over them. To exercise quasi in rem jurisdiction over Balco based on the presence of Vedanta or Sterlite India's property in New York, this Court must find that Balco is their alter ego. Glencore must also identify defendants' specific property in New York and defendants must have minimum contacts with New York such that exercising jurisdiction over Balco does not offend due process.
See Floyd Sec. Decl. ¶ 11.
This issue cannot be determined without jurisdictional discovery. See supra Part IV.B.2.b.
See Shaffer, 433 U.S. at 212.
Glencore alleges that defendants' "property is, or will be during the pendency of this action, located within the jurisdiction," and that the property is "in connection with the Respondents/Defendants' financial activities in New York." Glencore further specifies that Vedanta has property in New York in the form of ADSs held at Citibank, N.A., a depositary, and has the right to receive dividends on those ADSs. Glencore does not cite any legal authority supporting the proposition that ADSs and the right to receive dividends constitute property. However, assuming arguendo that ADSs and dividend rights are property, this Court still lacks quasi in rem jurisdiction over Balco because Vedanta lacks minimum contacts with New York.
Pet. ¶ 4.
7/12/10 Plaintiff's Memorandum of Law in Support of Application for Ex Parte Order of Attachment at 3.
See Floyd Sec. Decl. ¶ 11.
Glencore alleges few links between Vedanta and New York — ownership of ADSs traded on the NYSE, held at a depositary in New York, and utilizing a New York law firm to issue debt and securities. These contacts do not suggest that Vedanta has purposefully availed itself of the privilege of doing business in New York. These contacts would not allow Vedanta to foresee itself being haled into court over a dispute unrelated to the ADSs. To exercise jurisdiction over Vedanta, and therefore its alleged alter ego Balco, would offend "traditional notions of fair play and substantial justice." Thus, although Vedanta may have property within this Court's jurisdiction, this Court cannot exercise quasi in rem jurisdiction over Vedanta — and therefore Balco, on an alter ego theory — consistent with the Due Process Clause of the Fourteenth Amendment.
See id. ¶¶ 11, 14.
International Shoe Co., 326 U.S. at 316.
VI. CONCLUSION
For the foregoing reasons, defendants' motion is granted and Glencore's Petition is dismissed.
The Clerk of the Court is directed to close the pending motions (Docket nos. 1 and 8) and this case (10 Civ. 5251).
SO ORDERED:
Dated: New York, New York
November 1, 2010