Opinion ID: 852610
Heading Depth: 2
Heading Rank: 2

Heading: Jurisdiction over a Parent Corporation

Text: The Due Process Clause of the Fourteenth Amendment requires that before a state may exercise jurisdiction over a defendant, the defendant must have certain minimum contacts with [the state] such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.' Int'l Shoe Co. v. Wash., 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). If the defendant's contacts with the state are so continuous and systematic that the defendant should reasonably anticipate being haled into the courts of that state for any matter, then the defendant is subject to general jurisdiction, even in causes of action unrelated to the defendant's contacts with the forum state. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 n. 9, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). If the defendant's contacts with the forum state are not continuous and systematic, specific jurisdiction may be asserted if the controversy is related to or arises out of the defendant's contacts with the forum state. Id. at 414 & n. 8, 104 S.Ct. 1868. Specific jurisdiction requires that the defendant purposefully availed itself of the privilege of conducting activities within the forum state so that the defendant reasonably anticipates being haled into court there. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474-75, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). A single contact with the forum state may be sufficient to establish specific jurisdiction over a defendant, if it creates a substantial connection with the forum state and the suit is related to that connection. McGee v. Int'l Life Ins. Co., 355 U.S. 220, 223, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957). But a defendant cannot be haled into a jurisdiction solely as a result of random, fortuitous, or attenuated contacts or of the unilateral activity of another party or a third person. Burger King, 471 U.S. at 475, 105 S.Ct. 2174 (internal quotation marks omitted) (citing Helicopteros, 466 U.S. at 417, 104 S.Ct. 1868; Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 299, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)). Finally, if the defendant has contacts with the forum state sufficient for general or specific jurisdiction, due process requires that the assertion of personal jurisdiction over the defendant is reasonable. Id. at 477, 105 S.Ct. 2174. The assertion of personal jurisdiction will rarely be found unreasonable if minimum contacts are found. Reasonableness of exercising jurisdiction over a defendant is determined by balancing five factors: (1) the burden on the defendant; (2) the forum State's interest in adjudicating the dispute; (3) the plaintiff's interest in obtaining convenience and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several States in furthering fundamental substantive social policies. Id. at 476-77, 105 S.Ct. 2174. These considerations come into play only if the defendant has sufficient contacts with the forum state to assert personal jurisdiction. Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 116, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987). The plaintiff here is an Indiana resident, and the transaction occurred in Indiana. There is no question that Hi-Cube was subject to personal jurisdiction in Indiana. It was a foreign corporation qualified to do business in this state and maintained a regular place of business in Indiana. The Coxes contend that LinkAmerica, Hi-Cube's ultimate parent, is also subject to suit in Indiana. There is no claim here that LinkAmerica has taken any action in Indiana, had any contacts with the state, or had any contacts with the plaintiff. Rather, the plaintiffs rely solely on LinkAmerica's acts as the parent of its wholly owned subsidiary to establish jurisdiction in Indiana. The issue, therefore, is simply whether LinkAmerica's conduct as a parent of Hi-Cube meets the minimum contacts test of International Shoe and its progeny. We start with the presumption that a parent and a subsidiary are independent entities and a subsidiary's contacts with the forum are not attributed to the parent corporation for jurisdictional purposes. Wesleyan Pension Fund, Inc. v. First Albany Corp., 964 F.Supp. 1255, 1261 (S.D.Ind.1997) (citing Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 336, 45 S.Ct. 250, 69 L.Ed. 634 (1925)). Indeed, the Seventh Circuit has concluded that when corporate formalities are observed, permitting the activities of the subsidiary to be the basis for exercising jurisdiction over the parent violates due process. Central States, Se. & Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir.2000). Overcoming this presumption requires clear evidence that either: (1) the parent utilizes its subsidiary in such a manner that an agency relationship can be perceived; (2) the parent has greater control over the subsidiary than is normally associated with common ownership and directorship; or (3) the subsidiary is merely an empty shell. Wesleyan, 964 F.Supp. at 1261-62. The Court of Appeals recognized this general doctrine but concluded that the Coxes overcame the presumption by establishing that (1) LinkAmerica and all of its subsidiaries had the same address in Oklahoma; (2) the same persons served as the Board of Directors for both LinkAmerica and Hi-Cube; (3) the annual shareholder meetings for LinkAmerica and Hi-Cube were held at the same place and on the same day in 2000, 2001, and 2002 with only the same three people present; (4) LinkAmerica paid Hi-Cube's legal fees in defense of this lawsuit from March 2002 through March 2003; and (5) Hi-Cube's checks carried the legend that Hi-Cube was a LinkAmerica Company. LinkAmerica, 828 N.E.2d at 395. The Court of Appeals relied on Wesleyan, where the district court found that the presumption of separate corporate existences had been overcome. We do not find Wesleyan applicable here. In that case the parent corporation and its several subsidiaries had the same principal place of business and operated their business, including their contacts with the plaintiffs, from that location. The same three individuals were not merely the sole controlling principals, shareholders, officers, and directors of the parent corporation and all its subsidiaries. They also served as the operating personnel who engaged in telephone conversations and corresponded with the plaintiffs on behalf of the various subsidiaries over several years. They ultimately secured the plaintiffs' purchase of $14.2 million in real estate securities from eight subsidiaries in seven similar transactions. Wesleyan, 964 F.Supp. at 1263. In sum, not only the directors and some corporate officers, but also the operating personnel were common to both parent and subsidiaries and acted indiscriminately for both. They failed to observe any differentiation between the parent and its subsidiaries at the operating level. Thus, it was entirely reasonable to attribute the subsidiaries' contacts with the forum state to the parent corporation based on the failure to observe corporate formalities and the lack of differentiation between the parent and subsidiaries. The case before us is markedly different. First, and most importantly, although Link-America and Hi-Cube maintained their home office at the same address in Oklahoma, Hi-Cube conducted its daily business operations, including the transaction with Cox, through its separate employees from its separate business location in Indiana. Hi-Cube's president and his subordinates made all daily business and operating decisions for Hi-Cube. None of these persons was a LinkAmerica employee. Although two of the three directors common to LinkAmerica and Hi-Cube were also officers of both corporations, the president of Hi-Cube never served as a director, officer, or employee of LinkAmerica. LinkAmerica and Hi-Cube shared the same board of directors, but this is not unusual in a corporate family. It does not suggest the operating personnel are common or indicate a failure to make clear in what capacity a person is acting. See U.S. v. Bestfoods, 524 U.S. 51, 69, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998) (noting that it is entirely appropriate for directors of a parent corporation to serve as directors of its subsidiary (internal quotation marks omitted) (quoting American Protein Corp. v. AB Volvo, 844 F.2d 56, 57 (2d Cir.1988))). Similarly, the fact that shareholder meetings for LinkAmerica and Hi-Cube occurred in the same location and on the same day does not support a conclusion that LinkAmerica exerts greater than normal control over Hi-Cube as its subsidiary. As the Seventh Circuit recently explained: [p]arents of wholly owned subsidiaries necessarily control, direct, and supervise the subsidiaries to some extent. Purdue Research Found. v. Sanofi-Synthelabo, 338 F.3d 773, 778 n. 17 (7th Cir.2003) (internal quotation marks omitted) (quoting IDS Life Ins. Co. v. SunAmerica Life Ins. Co., 136 F.3d 537, 540 (7th Cir.1998)). Every parent of a wholly owned subsidiary has absolute control in that the parent has the power to direct the subsidiary to take any act the parent desires. Control in the Wesleyan context refers to the management of the subsidiary's operational activities, not passive ownership or policy direction. The imprint a LinkAmerica company on the check that Hi-Cube gave to Cox does not support any inference that Hi-Cube is an agent of LinkAmerica or a mere empty shell. The checks in this record were written by Hi-Cube to pay Cox, who contracted only with Hi-Cube's president and other employees of Hi-Cube. The checks were drawn on Hi-Cube's separate owner-operator account and the imprint did nothing more than note that Hi-Cube was a LinkAmerica company, i.e. a member of the same corporate family. This designation does not suggest that Hi-Cube was the same entity as LinkAmerica or acting as an agent for LinkAmerica. The payment of Hi-Cube's legal fees from March 2002 through May 2003 by Link-America amounts to no more than an intercompany loan. The Seventh Circuit has recently observed that a corporate parent may provide administrative services for its subsidiary in the ordinary course of business without calling into question the separateness of the two entities for purposes of personal jurisdiction. Cent. States, 230 F.3d at 945. Thus, common corporate infrastructure such as information technology and accounting services do not place the parent in the subsidiary's shoes whenever the subsidiary conducts business. Supplying necessary financing to the subsidiary is in the same category. Finally, LinkAmerica did nothing to erode the presumption of separateness from its subsidiaries. Hi-Cube and LinkAmerica each maintained separate books, records, accounts, and corporate minutes, thus, observing corporate formalities. LinkAmerica does not maintain an office or other place of business in Indiana; has no registered agent in Indiana; has no employees in Indiana; does not pay taxes in Indiana; does not advertise in Indiana; and has no telephone facilities, bank accounts, or other real or personal property in Indiana. LinkAmerica and Hi-Cube have separate employee payroll accounts, and LinkAmerica has never represented Hi-Cube as a department or division of LinkAmerica. For the foregoing reasons, we conclude that the Coxes have not provided anything to overcome the presumption that LinkAmerica and Hi-Cube are institutionally independent. As a result, Hi-Cube's contacts with the state cannot be attributed to LinkAmerica. Allowing the exercise of personal jurisdiction over a parent corporation solely based on the fact of ownership of a subsidiary is not permitted by due process. Cf. Keeton, 465 U.S. at 781 n. 13, 104 S.Ct. 1473 ([N]or does jurisdiction over a parent corporation automatically establish jurisdiction over a wholly owned subsidiary.). Because LinkAmerica does not have sufficient minimum contacts with the state, it is unnecessary to engage in a reasonableness analysis. LinkAmerica argues that the Court of Appeals incorrectly held that LinkAmerica's corporate veil should be pierced to exercise personal jurisdiction over LinkAmerica. We do not see the issue as one of piercing the corporate veil, and the Court of Appeals appropriately made no reference to piercing the corporate veil in its personal jurisdiction analysis. Piercing the veil is a doctrine of liability, and minimum contacts is a jurisdictional concept. See Cent. States, 230 F.3d at 944. Piercing may, in some instances, be based on facts that also support the assertion of jurisdiction over the parent of a subsidiary. Otherwise stated, the same conduct of a foreign corporate defendant may in some cases expose it to both personal jurisdiction and liability under the laws of a particular forum. Wesleyan appears to be such a case because the same operating personnel were acting simultaneously for the parent and its subsidiaries. But personal jurisdiction raised by a motion to dismiss is a preliminary question that must be resolved before addressing the issue of piercing the veil. Cent. States, 230 F.3d at 944.