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In re Griffith

Supreme Court of Colorado, En Banc

September 26, 2016

In Re Christine Griffith, individually and as personal representative of the Estate of Antonio Jimenez, Jr., Plaintiff
v.
SSC Pueblo Belmont Operation Company LLC d/b/a Belmont Lodge Health Care Center; SavaSeniorCare Administrative Services; SavaSeniorCare Consulting LLC; SSC Disbursement Company LLC; SSC Special Holdings LLC; SavaSeniorCare LLC; SVCare Holdings LLC; Canyon Sudar Partners LLC; Special Holdings Parent Holdco LLC; Proto Equity Holdings LLC; Terpax Inc.; Michael Dunn, in his capacity as Administrator of Belmont Lodge Health Care Center; and Cynthia Kovalcik, in her capacity as Administrator of Belmont Lodge Health Care Center, Defendants

          Opinion modified, and as modified, petition for rehearing DENIED. EN BANC. October 17, 2016.

         Original Proceeding Pursuant to C.A.R. 21 Pueblo County District Court Case No. 15CV30317 Honorable Jill Mattoon, Judge

          Attorneys for Plaintiff: Reddick Moss, PLLC Brent L. Moss Brian D. Reddick Robert W. Francis Joshua K. Smith Little Rock, Arkansas

          Attorneys for Defendants: Gordon & Rees LLP Thomas B. Quinn Joshua G. Urquhart David M. Clarke Denver, Colorado

          Attorneys for Amicus Curiae Colorado Health Care Association: Kittredge LLC Daniel D. Domenico Denver, Colorado MRD Law Michael Francisco Denver, Colorado

          OPINION

          RICE, CHIEF JUSTICE

         ¶1 This case raises the following question: When may a nonresident parent company be haled into a Colorado court based on the activities of its resident subsidiary? We hold that, to exercise personal jurisdiction over a nonresident parent company, a trial court shall perform the following analysis: First, the trial court shall determine whether it may pierce the corporate veil and impute the resident subsidiary's contacts to the nonresident parent company. If the resident subsidiary's contacts may be imputed to the nonresident parent company, the court shall analyze all of the nonresident company's contacts with Colorado - including the resident subsidiary's contacts -to determine whether exercising either general or specific personal jurisdiction over the company comports with due process. However, if the trial court concludes that it may not pierce the corporate veil, it shall treat each entity separately and analyze only the contacts that each parent company has with the state when performing the personal jurisdiction analysis. Because the trial court did not perform this two-step analysis when it determined that the petitioners were subject to personal jurisdiction in Colorado, we make our rule to show cause absolute and remand the case for further proceedings consistent with this opinion.

         I. Facts and Procedural History

         ¶2 The plaintiff, Christine Griffith, filed a complaint against eleven entities and two individuals alleging that they injured her father, who was a resident of a nursing home operated by defendant SSC Pueblo Belmont Operating Company d/b/a Belmont Lodge Health Care Center ("Belmont Lodge"). She alleges that her father's injuries eventually caused his death, and she seeks relief based on three causes of action: negligence, wrongful death, and violations of the Colorado Consumer Protection Act, sections 6-1-101 to -1121, C.R.S. (2016). The individuals and four of the nine entities conceded jurisdiction and answered the complaint. Five of the entities, however, contested jurisdiction, arguing that they are nonresident companies who are not subject to personal jurisdiction in Colorado.

         ¶3 The parties agree that Belmont Lodge is one piece of a complex organizational structure. Belmont Lodge operates a nursing home in Pueblo, Colorado. It is a limited liability company ("LLC") whose sole member is SSC Special Holdings, LLC. SSC Special Holdings is a wholly owned subsidiary of Special Holdings Parent Holdco, LLC. Special Holdings Parent Holdco is, in turn, a wholly owned subsidiary of SavaSenior Care, LLC.[1] Proto Equity Holdings, LLC, is the sole member of SavaSenior Care. Finally, Terpax, Inc., sits at the top of this organization as the parent corporation for all of these entities. SSC Special Holdings, Special Holdings Parent Holdco, SavaSenior Care, Proto Equity Holdings, and Terpax (collectively, the "Nonresident Defendants") filed a C.R.C.P. 12(b)(2) motion to dismiss for lack of personal jurisdiction.

         ¶4. After holding an evidentiary hearing, the trial court found that the Nonresident Defendants are all "Delaware limited liability companies with their principal place of business in Georgia (and Tennessee with respect to Terpax)." It also found that the Nonresident Defendants "(i) have never registered to do business in the State of Colorado, (ii) have never had a registered agent or other authorized representative in the State of Colorado, and (iii) have never transacted business in the State of Colorado." None of the Nonresident Defendants ever maintained a bank account, had any employees, solicited business, or held themselves out as doing business in Colorado. Only Terpax incurred or filed a tax return with Colorado. The Nonresident Defendants did not do business as Belmont Lodge and did not hold the operating license for Belmont Lodge. The trial court also acknowledged that the Nonresident Defendants are all separate legal entities from Belmont Lodge.

         ¶5 Despite these findings, the trial court stated that it "must consider the totality of the circumstances, including whether the [Nonresident] Defendants operated as separate entities from the nursing home." The trial court then found that the Nonresident Defendants operate out of the same office in Atlanta, Georgia, which is the same office as the entities that did not contest jurisdiction. It also found that the Nonresident Defendants all received "direct or indirect financial benefit from the Colorado nursing home operation" based on the "pyramid of ownership" running upstream from Belmont Lodge to Terpax.

         ¶6 The trial court then cited Bolger v. Dial-A-Style Leasing Corp., 409 P.2d 517, 519 (Colo. 1966) for the proposition that a "wholly owned subsidiary can shield its out-of-state parent company from jurisdiction in Colorado only 'where the two companies are operated as distinct entities/" Relying on this rule, the trial court concluded that the entities all "operated the Colorado nursing home as one business in which they collectively controlled the operations, planning, management, and budget of [Belmont Lodge] in Colorado." Finally, the trial court concluded that jurisdiction over all the entities was proper because "a tort has been alleged in Colorado" and "the process which contributed to that tort is sufficient to invoke the jurisdiction of this court." See First Horizon v. Wellspring Capital Mgmt., 166 P.3d 166, 174 (Colo.App. 2007). Thus, the trial court denied the Nonresident Defendants' motion to dismiss for lack of personal jurisdiction.

         ¶7 The Nonresident Defendants petitioned this court for relief under C.A.R. 21, arguing that the trial court failed to apply an agency or alter-ego test to determine whether they were subject to personal jurisdiction. Instead, they argue, the trial court misapplied language from a fifty-year-old case to conclude that the parties were not "distinct entities" and, therefore, are subject to personal ...


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