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Dusseldorp v. Continental Casualty Co.

United States District Court, D. South Dakota, Western Division

September 11, 2017

LEONA VAN DUSSELDORP, Plaintiff,
v.
CONTINENTAL CASUALTY COMPANY, CNA FINANCIAL CORPORATION, and LONG TERM CARE GROUP, INC., Defendants.

          ORDER

          JEFFREY L. VIKEN CHIEF JUDGE

         INTRODUCTION

         Plaintiff Leona Van Dusseldorp filed a multi-count complaint against the defendants. (Docket 1). Defendant CNA Financial Corporation filed a motion seeking its dismissal. (Docket 19). Plaintiff resists the motion. (Docket 28). For the reasons stated below, defendant's motion to dismiss is granted.

         ANALYSIS

         Plaintiff's complaint asserts the following claims against all defendants: count I, breach of contract; count II, bad faith; count III, misrepresentation under SDCL § 58-33-5; and count IV, declaratory judgment. (Docket 1 at pp. 4-6). The complaint alleges defendant Continental Casualty Company (“Continental”) is a corporation and subsidiary of CNA Financial Corporation (“CNA Financial” or “Defendant”). Id. ¶¶ 3 & 4. The complaint alleges Continental and CNA Financial transact the business of insurance and insurance services under the name “CNA, ” which sold a long-term insurance policy to Ms. Van Dusseldorp in 2002. Id. ¶ 6 & 20. It is alleged Long Term Care Group, Inc., (“LTCG”) administers claims for CNA and administered the claim which is the subject of this litigation. Id. ¶ 14 & 15. It is further alleged the defendants denied Ms. Van Dusseldorp's claim for long-term care benefits on grounds not appearing in the policy. Id. ¶ 36. The complaint makes a number of other allegations not directly related to the issue presented by the motion to dismiss. Ms. Dusseldorp seeks an interpretation of the insurance policy which is the subject of the litigation, together with compensatory damages, punitive damages and attorney's fees. Id. at p. 6. The complaint alleges the court has diversity jurisdiction pursuant to 28 U.S.C. § 1332. Id. ¶ 19.

         PERSONAL JURISDICTION

         CNA Financial moves to dismiss the complaint against it pursuant to Fed.R.Civ.P. 12(b)(2). (Docket 19). That section provides “a party may assert the following defenses by motion: . . . lack of personal jurisdiction.” Fed.R.Civ.P. 12(b)(2).

         In a diversity action the court applies the substantive law of the forum state. See Jordan v. NUCOR Corp., 295 F.3d 828, 834 (8th Cir. 2002). “[F]ederal courts sitting in diversity cases, when deciding questions of ‘substantive' law, are bound by state court decisions as well as state statutes.” Hanna v. Plumer, 380 U.S. 460, 465 (1965) (referencing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938)). See also In re Baycol Products Litigation, 616 F.3d 778, 785 (8th Cir. 2010) (“in a suit based on diversity of citizenship jurisdiction the federal courts apply federal law as to matters of procedure but the substantive law of the relevant state.”) (internal citations omitted). In this case, the forum state is South Dakota, so the court will apply South Dakota law.

         South Dakota's long-arm statute provides in relevant part:

         Any person is subject to the jurisdiction of the courts of this state as to any cause of action arising from the doing personally, through any employee, through an agent or through a subsidiary, of any of the following acts:

(1) The transaction of any business within the state;
(2) The commission of any act which results in accrual within this state of a tort action; . . .
(4) Contracting to insure any person, property, or risk located within this state at the time of contracting; . . . [and]
(14) The commission of any act, the basis of which is not inconsistent with the Constitution of this state or with the Constitution of the United States.

SDCL § 15-7-2. CNA Financial acknowledges “South Dakota's long-arm statute confers jurisdiction to the fullest extent permitted by the Constitution.” (Docket 20 at p. 3) (referencing Bell Paper Box, Inc. v. Trans Western Polymers, Inc., 53 F.3d 920, 921 (8th Cir. 1995); Ventling v. Kraft, 161 N.W.2d 29, 30 (S.D. 1968)).

         The crux of defendant's motion is that the court has no personal jurisdiction over CNA Financial. Id. at p. 1. Defendant asserts it does not have the requisite minimum contacts with South Dakota to be subject to its jurisdiction under to the state's long-arm statute. Id. at pp. 3-5. CNA Financial argues it “simply has no contacts with South Dakota.” Id. at p. 5. For this reason, defendant argues the court has neither “general jurisdiction” nor “specific jurisdiction” over it. Id. at pp. 6-9.

         “When personal jurisdiction is challenged by a defendant, the plaintiff bears the burden to show that jurisdiction exists.” Fastpath, Inc. v. Arbela Techs. Corp., 760 F.3d 816, 820 (8th Cir. 2014). “To successfully survive a motion to dismiss challenging personal jurisdiction, a plaintiff must make a prima facie showing of personal jurisdiction over the challenging defendant.” Id. That prima facie showing is accomplished by alleging in the complaint sufficient facts to support “a reasonable inference that defendant[] may be subjected to jurisdiction in the forum state.” Id. (internal citation omitted). Defendant's challenge to jurisdiction must be supported by affidavits and exhibits. Id. If plaintiff's jurisdictional claim is challenged, plaintiff may not rely only on the pleadings but must present affidavits and exhibits opposing the motion. Id. If no hearing is held on defendant's motion, the court “must view the evidence in a light most favorable to the plaintiff and resolve factual conflicts in the plaintiff's favor; however, the party seeking to establish the court's personal jurisdiction carries the burden of proof and that burden does not shift to the party challenging jurisdiction.” Id.

         Plaintiff acknowledges the court does not have general jurisdiction over CNA Financial. (Docket 28 at p. 34). She alleges the court has specific jurisdiction over this defendant because of CNA Financial's “involvement in this dispute.” Id. at p. 33.

         “Specific jurisdiction refers to jurisdiction over causes of action arising from or related to a defendant's actions within the forum state . . . .” Fastpath, Inc., 760 F.3d at 820 (internal citations omitted). “Specific personal jurisdiction can be exercised by a federal court in a diversity suit only if authorized by the forum state's long-arm statute and permitted by the Due Process Clause of the Fourteenth Amendment.” Id. (internal citations omitted). Because South Dakota's long-arm statute expands the state's jurisdiction “to the widest due process parameters allowed by the United States Constitution, [the court's] inquiry is limited to whether the exercise of personal jurisdiction comports with due process.” Id. (internal quotation marks and citations omitted).

         “Due process requires that a non-resident have minimum contacts with the forum state such that the maintenance of the lawsuit does not offend traditional notions of fair play and substantial justice.” Id. (internal references omitted). “Minimum contacts is based on the notion that those who live or operate primarily outside a State have a due process right not to be subjected to judgment in its courts as a general matter.” Id. (internal quotation marks and citation omitted). “Sufficient minimum contacts requires some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.” Id. at 821 (internal quotation marks and citations omitted). “A defendant's contacts with the forum state must be sufficient so that a non-resident defendant should reasonably anticipate being haled into court there.” Id. at 820-21.

         The United States Court of Appeals for the Eighth Circuit “established a five-factor test to determine the sufficiency of a non-resident defendant's contacts with the forum state.” Id. at 821. Those factors are: “1) the nature and quality of contacts with the forum state; 2) the quantity of the contacts; 3) the relation of the cause of action to the contacts; 4) the interest of the forum state in providing a forum for its residents; and 5) convenience of the parties.” Id. The district court is directed to “give significant weight to the first three factors.” Id.

         CNA Financial contends plaintiff does not satisfy any of the Eighth Circuit factors because the defendant:

1. Does not engage in any business in South Dakota;

2. Is not incorporated in South Dakota;

3. Owns no property, has no offices or employees in South Dakota;

4. Is not an insurer or issued an insurance policy in South Dakota or elsewhere;

5. Has never received insurance premiums in any state;

6. Has never hired claims adjusters or adjusted an insurance claim in any state;

7. Is incorporated in Delaware as a publically-traded holding company; and

8. Has its principal place of business in Illinois.

(Docket 20 at pp. 4-5) (internal affidavit and exhibits omitted).

         Plaintiff counters defendant's position on three theories. (Docket 28 at pp. 4-7). She asserts the evidence supports a claim of specific jurisdiction for the following reasons: (1) joint venture; (2) alter ego or veil piercing; or (3) direct involvement by CNA Financial in Ms. Van Dusseldorp's case. Id. The court will separately address each of these potential grounds for asserting personal jurisdiction.

         A. JOINT VENTURE

         Plaintiff argues CNA Financial acted with Continental to transact business under the name “CNA” to market long-term care policies. Id. at p. 4. Applying South Dakota law, plaintiff asserts that because CNA Financial and Continental are doing business under the CNA umbrella, they are an unincorporated association which may be sued. Id. at 5. Plaintiff's reference is to SDCL § 15-6-17(b) which provides:

When two or more persons associated in any business, transact such business under a common name, whether it comprises the names of such persons or not, the associates may sue or be sued by such common name, the summons in such cases being served on one or more of the associates. The judgment in the action shall bind the joint property of all the associates, and the individual property of the party or parties served with process, in the same manner as if all had been named defendants and had been sued upon their joint liability.

         CNA Financial acknowledges it is the parent company of The Continental Corporation, which is the parent company of Continental. (Docket 20-1 ¶ 3). Defendant admits that CNA is not a company, but rather is a service mark registered by CNA Financial with the United States Patent and Trademark Office.[1] Id. ¶ 4. Along with other CNA Financial subsidiaries, Continental is “permitted to use this service mark and do so in their insurance underwriting and claims activities.” Id.

         Plaintiff submits that the December 4, 2015, letter denying her claim for benefits was on CNA letterhead and “signed by Patricia Cephus, Assistant Vice President of Long Term Care Operations for CNA.” (Docket 28 at p. 5) (referencing Docket 28-5). While the letter specifically indicates it was issued on behalf of Continental, plaintiff claims Ms. Cephus was never an employee of Continental. Id. (comparing Docket 28-5 to Docket 28-1). Plaintiff argues that while Ms. Cephus' letter and resume indicate she is employed by CNA, there is no reference in either document to her being employed by Continental, the only entity CNA Financial claims had “any connection” to plaintiff's long-term care policy. (Docket 28 at p. 5). Because of this lack of separation, plaintiff contends “the law imputes Continental's contacts with Leona Van Dusseldorp to [CNA Financial].” Id. at p. 4.

         Defendant counters that plaintiff has not presented any evidence which would allow a jury to find that CNA Financial and Continental operate as a joint venture. (Docket 31 at p. 14). Defendant contends it “has submitted evidence showing that it indirectly owns Continental, and that it has no voice in the operation of Continental's insurance business beyond that of any indirect shareholder.” Id. (italics in original) (referencing Docket 20-1 ¶ 3). CNA Financial argues “no reasonable jury could conclude that CNAF and Continental have a ‘right to share in the profits and a duty to share in any losses' of their alleged joint venture.” Id. (citing Harriman v. United Dominion Industries, Inc., 693 N.W.2d 44, 50 ...


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