This International Shoe Doesn’t Fit: Subsidiary May Not Be Parent’s Agent

Is a wholly-owned subsidiary per se an agent of the parent?  In an opinion issued yesterday, the Nevada Supreme Court answered “not necessarily”.  The legal issue was whether the German parent of a Delaware corporation doing business in Nevada was subject to the jurisdiction of the Nevada courts.  Viega GMBH v. Eighth Judicial Dist. Court, 130 Nev. Adv. Op. 40 (May 29, 2014).

According to the Supreme Court, Nevada’s long-arm statute, NRS 14.065, “reaches the constitutional limits of due process under the Fourteenth Amendment, which requires that the defendant have such minimum contacts with the state that the defendant could reasonably anticipate being haled into court here, thereby complying with ‘traditional notions of fair play and substantial justice’.”  Jurisdiction may either be general or specific.  General jurisdiction is established when a person’s contacts with the state are so continuous and systematic as to render the person at home in the state.  A defendant establishes specific jurisdiction when it purposefully enters the state’s market or establishes contacts in the state and affirmatively directs conduct there, and the claims arise from that purposeful contact or conduct.

In Viega GMBH, the Nevada Supreme Court found that general jurisdiction did not exist because the plaintiffs had not alleged that the German parent was incorporated in Nevada or that it had its principal place of business in the Silver State.  Moreover, the Court found that general jurisdiction did not lie even though the U.S. subsidiaries might be considered agents of their foreign parent because they existed solely to serve at the parent’s direction.

The Court dealt much more time dealing with the question of whether specific jurisdiction existed.  It found that the fact that the German parent created the U.S. subsidiaries to conduct business in the Silver State did not by itself demonstrate agency.  The Court further noted that the degree of control that exists in the typical parent-subsidiary relationship do not necessarily demonstrate agency.

 

Topics:  Foreign Corporations, Foreign Subsidiaries, Fourteenth Amendment, Long Arm Statute, Subsidiaries

Published In: Business Organization Updates, Civil Procedure Updates, General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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