Thursday, September 8, 2011

Personal jurisdiction for patent infringement on an out-of-state subsidiary with its own operational control? Nope.

Digitech Information Systems sued Ally Financial and Capital Auto Receivables, Inc. ("CARI") for infringement of U.S. Patent No. 7,739,180.  The '180 Patent relates to a method of selecting leases to optimize an investment portfolio.  Ally leases new and used vehicles from GM and non-GM franchised dealers.  CARI, a wholly-owned subsidiary of Ally, acts as a depositor and initial certificate holder for various asset-backed securities.  CARI is not registered in Florida, and does not do business here.  On this basis, CARI moved for dismissal for lack of personal jurisdiction.

Digitech opposed that motion, arguing that Ally's actions should be imputed to CARI for purposes of establishing personal jurisdiction.  The Court was not convinced.

General Jurisdiction

Digitech argued the Court could exercise general jurisdiction over CARI because "it is reasonable to assume that the creation and operation of CARI is a mere corporate formality."  This wasn't enough -- just being a subsidiary of a company subjected to personal jurisdiction in Florida does not necessarily extend personal jurisdiction to the sub:

“It is well settled in Florida that the mere presence of a subsidiary in Florida, without more, does not subject a non-Florida corporate parent to long-arm jurisdiction.”  Enic, PLC v. F.F. South & Co., 870 So. 2d 888, 891 (Fla. 5th DCA 2004) (citations omitted); Meier v. Sun Int’l Hotels, Ltd., 288 F.3d 1264, 1272 (11th Cir. 2002) (“Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because a subsidiary is doing business there.”).  However, a corporation that engages in substantial activity in Florida through a subsidiary may be subject to personal jurisdiction in FloridaUniversal Caribbean Establishment v. Bard, 543 So. 2d 447, 448 (Fla. 4th DCA 1989).  In order “[t]o determine whether a foreign corporation is liable based on a subsidiary’s substantial activity, [courts] consider the ownership of the subsidiary, the business activities of the subsidiary, and the financial relationship between the corporation and the subsidiary.” Abramson v. Walt Disney Co., 132 F. App’x 273, 275-76 (11th Cir. 2005) (citing Meier, 288 F.3d at1272-73).  
What is required for jurisdiction based on the relationship between a parent corporation and a subsidiary “is not some control but ‘operational control’ by the parent over the subsidiary.”  Gen. Cigar Holdings, Inc. v. Altadis, S.A., 205 F. Supp. 2d 1335, 1344 (S.D. Fla. 2002) (quoting State v. Am. Tobacco Co., 707 So. 2d 851, 856 (Fla. 4th DCA 1998); see also Dev. Corp. of Palm Beach v. WBC Constr., L.L.C., 925 So. 2d 1156, 1161-62 (Fla. 4th DCA 2006) (“The amount of control exercised by the parent must be high and very significant.”). 

Here, Digitech did not establish operational control by Ally over CARI.  Thus, no personal jurisdiction.

The Court next rejected Digitech's argument that CARI should be subjected to specific jurisdiction because there was not sufficient evidence to support such jurisdiction.

Motion to dismiss granted.

Digitech Information Systems, Inc. v. Ally Financial, Inc., slip op., Case No. 6:10-cv-1398 (M.D. Fla. Sept. 1, 2011)(J. Antoon)

[Note.  GrayRobinson, PA. was involved in the above-captioned matter]

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