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Jurisdiction tied to corporate formalities

Jurisdiction tied to corporate formalities

Hon. Patience Roggensack

Wisconsin courts have no jurisdiction over a parent corporation merely because they have jurisdiction over a subsidiary.

On July 1, the Wisconsin Supreme Court employed substantive corporate law to resolve whether it has personal jurisdiction over a foreign parent corporation, and decided it did not.

In 2003, David Rasmussen filed a class action against numerous automobile companies, including Nissan Japan and its wholly-owned subsidiary, Nissan North America, alleging violations of Wisconsin’s antitrust laws.

Nissan Japan moved to dismiss the case for lack of personal jurisdiction, and the circuit court granted the motion. The Court of Appeals affirmed in an unpublished opinion, and the Supreme Court also affirmed, in an opinion by Justice Patience Drake Roggensack.

The court relied heavily on a federal court opinion interpreting Wisconsin law, Insolia v. Philip Morris Inc., 31 F.Supp.2d 660 (W.D.Wis. 1998), which tied the question of jurisdiction over a parent corporation to whether the corporate veil could be pierced.

The court explained, “Although the concept of piercing the corporate veil generally is associated with attaching liability for corporate actions to someone other than the corporation, the analysis is somewhat similar to the analysis we employ in evaluating whether there is general personal jurisdiction under Wis. Stat. sec. 801.05 over a nonresident defendant for the acts of another.”

When assessing whether corporations are actually separate for liability purposes, the court considers several factors: the amount of control that one corporation exercises or has the right to exercise over the other; whether both corporations employ independent decision-making; whether corporate formalities were observed; whether the corporations operated as one corporation; and whether observing the corporate separateness would facilitate fraud.

Here, the court found all five factors weigh in favor of respecting the separate corporate identities of Nissan Japan and Nissan North America. “(1) Nissan Japan did not have ‘complete control’ or ‘domination’ of Nissan North America; (2) requisite corporate formalities were observed; (3) there was no showing that Nissan North America did not exercise independent decision-making; (4) there was no showing that corporate legal requirements were not followed; and (5) there was no showing of fraud or undercapitalization.”

Accordingly, the court affirmed the dismissal of Nissan Japan from the lawsuit for lack of jurisdiction.

Chief Justice Shirley Abrahamson wrote a separate concurrence, taking issue with the lead opinion’s conflating substantive corporate law with its jurisdictional analysis.

Abrahamson wrote, “Tying the jurisdictional test to a substantive legal test such as piercing the corporate veil seems ‘to allow consideration of a wide and freewheeling variety of veil-piercing factors for jurisdictional purposes, divorced from any meaningful appraisal of the defendant’s conduct in relation to the litigation and the forum.’ (cite omitted).”

What the Court Held

Case: Rasmussen v. General Motors Corp., No. 2007AP35

Issue: Does the court have jurisdiction over the foreign parent corporation of a wholly-owned subsidiary, based on the court’s jurisdiction over the subsidiary?

Holding: No. Where the corporations are separate, jurisdiction over the subsidiary does not confer jurisdiction over the parent.

Attorneys: For Plaintiffs: Owen Thomas Armstrong Jr., Milwaukee; For Defendant: Daniel Goldberg, Boston, MA.

David Ziemer can be reached at [email protected].


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