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Sonora Diamond Corp. v. Superior Court of Tuolumne County8/30/2000
the state in which the subsidiary does business. Thus, where the nature and extent of the control exercised over the subsidiary by the parent is so pervasive and continual that the subsidiary may be considered nothing more than an agent or instrumentality of the parent, notwithstanding the maintenance of separate corporate formalities, jurisdiction over the parent may be grounded in the acts of the subsidiary/agent. (Clark, supra, 811 F.Supp. at pp. 1061, 1067.) In this instance, the question is not whether there exists justification to disregard the subsidiary's corporate identity, the point of the alter ego analysis, but instead whether the degree of control exerted over the subsidiary by the parent is enough to reasonably deem the subsidiary an agent of the parent under traditional agency principles. (Ibid.) The jurisdiction acquired by the forum state under this rationale is general. (Ibid.)
Control is the key characteristic of the agent/principal relationship. (Cislaw v. Southland Corp. (1992) 4 Cal.App.4th 1284, 1292-1296.) Accordingly, if a parent corporation exercises such a degree of control over its subsidiary corporation that the subsidiary can legitimately be described as only a means through which the parent acts, or nothing more than an incorporated department of the parent, the subsidiary will be deemed to be the agent of the parent in the forum state and jurisdiction will extend to the parent. (See Rollins Burdict Hunter of So. Cal, Inc. v Alexander & Alexander Servs, Inc., supra, 206 Cal.App.3d at p. 9; Kramer Motors Inc. v. British Leyland, Ltd. (9th Cir. 1980) 628 F.2d 1175, 1177; Cruz v. Ortho Pharmaceutical Corp., supra, 619 F.2d at p. 905; Calvert, supra, 875 F.Supp. 674; Clark, supra, 811 F.Supp. at p. 1067; Gallagher v. Mazda Motors (ED Pa 1992) 781 F.Supp. 1079, 1083-1084 (Gallagher); Bellomo v. Penns. Life Co. (SD NY 1980) 488 F.Supp. 744 (Bellomo).)
The nature of the control exercised by the parent over the subsidiary necessary to put the subsidiary in an agency relationship with the parent must be over and above that to be expected as an incident of the parent's ownership of the subsidiary and must reflect the parent's purposeful disregard of the subsidiary's independent corporate existence. (See Rollins Burdict Hunter of So. Cal, Inc. v. Alexander & Alexander Servs, Inc., supra, 206 Cal.App.3d at p. 9.) The parent's general executive control over the subsidiary is not enough; rather there must be a strong showing beyond simply facts evidencing "the broad oversight typically indicated by common ownership and common directorship" present in a normal parent -- subsidiary relationship. (Calvert, supra, 875 F.Supp. at p. 679; see also Wells Fargo & Co. v. Wells Fargo Exp. Co., supra, 556 F.2d at pp. 419-420 and numerous federal cases cited therein.) As a practical matter, the parent must be shown to have moved beyond the establishment of general policy and direction for the subsidiary and in effect taken over performance of the subsidiary's day to day operations in carrying out that policy. (Calvert, supra, 875 F.Supp. at p. 679; see also Rollins Burdict Hunter of So. Cal, Inc. v. Alexander & Alexander Servs, Inc., supra, 206 Cal.App.3d at p. 9; American Intern. Airways v. Kitty Hawk Group (E.D. Mich. 1993) 834 F.Supp. 222, 225; Bellomo, supra, 488 F.Supp. at p. 745.)
2. Analysis
a. Representative Services
In practical effect, the District's agency argument boils down to a claim the trial court's assumption of jurisdiction is warranted because Sonora Mining performed what we will term "`representative services" for Diamond. In the words of the District, jurisdiction over Diamond attaches because Sonora Mining was "
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