Litigation

Parent-Subsidiary Relationship Not Enough To Create Personal Jurisdicition -- And Neither Is "Alter-Ego" Relationship

By Bruce Nye

    From time to time I have occasion to re-state the purpose and target audience for CalBizLit:  while all are welcome, this blawg is aimed at companies within and without California who are only infrequent (and usually involuntary) visitors to the strange world of California litigation and want to know more about what they have got themselves into.

    And for such companies, there is no more pertinent question than this:  How did the California courts get jurisdiction over our company in the first place?

    California takes a very broad view of "long-arm" personal jurisdiction.  Under Code Civ. Proc. sec. 410.10, the California courts have personal jurisdiction over non-resident defendants to the full extent allowed under the state and federal Constitutions.  This means that the California courts can assert jurisdiction if the defendant has sufficient ?minimum contacts? with the forum state so that the exercise of jurisdiction ?does not offend traditional notions of fair play and substantial justice.? (Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316 [90 L.Ed. 95] ; accord, Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268.) 

    Personal jurisdiction may be "general" -- based on the defendant's "substantial, continuous, and systematic" contacts.  (Perkins v. Benguet Mining Co. (1952) 342 U.S. 437, 445-446 [96 L.Ed. 485]; see Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 445).  Or, it can be specific, with the cause of action arising out of the defendant's contacts.  (Helicopteros Nacionales de Columbia v. Hall (1984) 466 U.S. 408, 414, fn. 8 [80 L.Ed.2d 404]; Vons, supra, 14 Cal.4th at p. 446.)

    Now, however, thanks to Health Markets, Inc. v. Superior Court of Los Angeles County (March 9, 2009) ___Cal.App.4th___ (B211881) we know that specific jurisdiction cannot arise out of a parent-subsidiary relationship unless the parent "purposefully directed the activities" of the subsidiary giving rise to the cause of action.  Moreover, whether or not there is an "alter ego" relationship, of the type that could be used to pierce the corporate veil and hold the parent liable for the actions of the subsidiary, is not relevant for purposes of establishing jurisdiction.

Full post as published by CalBizLit on March 10, 2009 (boomark / email).