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Taylor v. Waddell & Reed Inc.

August 12, 2010

MICHAEL TAYLOR, ET AL., PLAINTIFFS,
v.
WADDELL & REED INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge

ORDER GRANTING SPECIALLY APPEARING WADDELL & REED FINANCIAL, INC.'S AND WADDELL & REED FINANCIAL SERVICES, INC.'S MOTIONS TO DISMISS [Docs. 24, 29.]

Pending before the Court are Specially Appearing Defendants Waddell & Reed Financial, Inc. ("Financial") and Waddell & Reed Financial Services, Inc.'s ("Financial Services"), motions to dismiss Plaintiffs' First Amended Complaint ("FAC") for lack of personal and subject matter jurisdiction. The matters came on for hearing on July 23, 2010. Michael Grace, Graham Hollis, Diane Richard, and Thomas Rutledge appeared on behalf of Plaintiffs. Orrin Harrison, Raymond Bertrand, and Gregory Knopp appeared on behalf of Defendants. For the reasons set forth below, Defendants' motions are granted.

I. BACKGROUND

This matter is a proposed wage and hour class action brought by former Waddell & Reed ("W&R") financial advisors ("Advisors").*fn1 (FAC ¶ 1.) Plaintiffs allege they were classified as independent contractors, when, in fact, they were employees. (FAC ¶¶ 3, 5.)

W&R is in the business of selling financial products, which are distributed through a sales force of Advisors. (FAC ¶ 2.) When Advisors begin working for W&R, they are required to sign a "Professional Career Agreement" ("PCA"). (FAC ¶ 37.) This agreement provides the basic terms governing the association between Plaintiffs and Waddell & Reed Inc. ("W&R Inc.") and Waddell & Reed Affiliates ("W&R Affiliates"). (Id.; FAC Ex. A.) W&R Inc. is a wholly owned subsidiary of Financial Services, which, in turn, is a wholly owned subsidiary of Financial. (Defs'. Notice of Party with Financial Interest, Doc. 5.) Financial is a holding company incorporated in Delaware, and has its principal place of business in Kansas. (Bloss Decl. to Financial Mot. Dismiss ¶ 5, Doc. 24-2.) Financial Services is a holding company incorporated in Missouri, with its principal place of business in Kansas. (Bloss Decl. to Financial Services Mot. Dismiss ¶ 5, Doc. 29-2.)

Financial filed its motion to dismiss April 30, 2010. (Doc. 24.) Financial Services filed its motion to dismiss on June 1, 2010, following a telephonic conference with the Court. (Doc. 29.) Plaintiffs filed oppositions and Defendants filed a reply. (Docs. 31-32, 41.)*fn2

II. DISCUSSION

A. Personal Jurisdiction

On a Rule 12(b)(2) motion to dismiss, the plaintiff bears the burden to demonstrate the court has personal jurisdiction over the defendant. Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1127 (9th Cir. 2010). In the absence of an evidentiary hearing, the plaintiff need only make a "prima facie showing of jurisdictional facts to withstand the motion to dismiss." Id. (quoting Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).). Any uncontroverted allegations in the plaintiff's complaint are taken as true, and any factual conflicts are resolved in the plaintiff's favor. Id. However, "[t]he mere allegations of a complaint, when contradicted by affidavits, are not enough to confer personal jurisdiction over a non-resident defendant. Chem Lab Products, Inc. v. Stepanek, 554 F.2d 371, 372 (9th Cir. 1977).

Personal jurisdiction can be established over a defendant "who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located." Fed. R. Civ. P. 4(k)(1)(A). Because the California jurisdictional "long-arm" statute permits the exercise of jurisdiction to the full extent permitted by the United States Constitution, the state and federal limits are co-extensive. See Cal. Civ. Proc. Code § 410.10. Thus, the singular issue is whether the Court's exercise of jurisdiction violates our Constitutional principles of due process. Haisten v. Grass Valley Med. Reimb. Fund, Ltd., 784 F.2d 1392, 1396 (9th Cir. 1986).

1. General Jurisdiction

General jurisdiction exists if the defendant has engaged "in 'continuous and systematic general business contacts,' that 'approximate physical presence' in the forum state." Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004) (citations omitted). "This is an exacting standard, as it should be, because a finding of general jurisdiction permits a defendant to be haled into court in the forum state to answer for any of its activities anywhere in the world." Id.

When the jurisdictional inquiry involves a parent-subsidiary relationship, the Court must conduct the fairness inquiry with due respect to the corporate formalities involved. Those formalities generally forbid attribution of a subsidiary's contacts with the forum state to the parent company solely on the basis of the parent-subsidiary relationship. Doe v. Unocal Corp., 248 F.3d 915, 925 (9th Cir. 2001) (citing Transure, Inc. v. Marsh and McLennan, Inc., 766 F.2d 1297, 1299 (9th Cir. 1985)). A subsidiary's contacts with the forum will only be attributed to the parent if there is an alter ego or agency relationship. Id. at 926.

Defendants contend that Financial and Financial Services have insufficient contacts with California for this Court to exercise personal jurisdiction. Both companies are incorporated outside California and have Kansas for their principal places of business. (Bloss Decls. ¶ 5.)*fn3 Neither company has offices, employees, telephone listings or mailing addresses in California. (Id. at ¶ 6.) Neither company has bank accounts or other tangible personal property in California, and they do not have agents for service of process in California. (Id. at ¶¶ 8-9.) Further, Financial ...


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