Williams, J. v. OAO Severstal v. Tri-State Safety

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
JOHN WILLIAMS, AN : IN THE SUPERIOR COURT OF
INCAPACITATED PERSON, BY : PENNSYLVANIA
BRANDY WILLIAMS, GUARDIAN (AD :
LITEM); JOHN WILLIAMS, BRANDY :
WILLIAMS :
:
:
v. :
: No. 938 WDA 2017
:
OAO SEVERSTAL, SEVERSTAL :
RESOURCES, PBS COALS, INC; MINE :
SAFETY APPLIANCES COMPANY :
:
:
v. :
:
:
TRI-STATE SAFETY TRAINING :
SERVICES :
:
:
APPEAL OF: OAO SEVERSTAL
Appeal from the Order May 31, 2017
In the Court of Common Pleas of Westmoreland County
Civil Division at No(s): 1396 of 2014
BEFORE: BOWES, J., OLSON, J., and KUNSELMAN, J.
CONCURRING AND DISSENTING MEMORANDUM BY OLSON, J.:
FILED OCTOBER 03, 2019
I respectfully concur and dissent from the Learned Majority’s
memorandum. I concur in the Majority’s conclusion that Appellee, John
Williams (Williams), was not required to plead facts in his complaint that
support the exercise of personal jurisdiction over Appellant, OAO Severstal.
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I am unable to agree, however, with the Majority’s conclusion that the trial
court correctly overruled Appellant’s preliminary objections on the basis that
Appellant and its subsidiary, PBS Coals, Inc. (PBS), were so intertwined that
PBS qualified as Appellant’s instrumentality or alter ego and, as such,
Williams’ cause of action arose from Appellant’s forum-related contacts.1
As I shall explain below, even if I were to conclude (as the Majority
does) that PBS served as Appellant’s alter ago, this logically would imply
that Appellant is subject to general jurisdiction in Pennsylvania since an alter
ego finding permits a court to exercise jurisdiction over the parent to the
same extent it may exercise jurisdiction over the subsidiary. The Majority,
however, retreats from the logical and full implication of its determination
and holds, in the face of its alter ego finding, that the trial court possessed
only specific jurisdiction over Appellant. In addition, I believe the record
establishes nothing more than a conventional parent-subsidiary relationship
between Appellant and PBS in the context of a vertically integrated
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1 Of course, I also disagree with the conclusions set forth in the concurring
memorandum in which my learned colleague asserts that the trial court did
not need to examine facts beyond Williams’ complaint and Appellant’s
preliminary objections, including evidence obtained through depositions or
other sources, because Appellant did not raise genuine issues of fact or shift
the burden of proof to Williams since it did not deny that it had agents in
Pennsylvania through which it acted vicariously. In my view, the entire
thrust of Appellant’s preliminary objections was to challenge the conclusion
that PBS qualified as Appellant’s agent or alter ego in Pennsylvania.
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organization2 which does not – and ought not – erect an agency or alter ego
link between the two entities. Hence, I would hold that the record is
insufficient to confer jurisdiction over Appellant.
The Supreme Court of the United States distinguished the concept of
specific personal jurisdiction from general personal jurisdiction:
It has long been established that the Fourteenth Amendment
limits the personal jurisdiction of state courts. Because a state
court’s assertion of jurisdiction exposes defendants to the State’s
coercive power, it is subject to review for compatibility with the
Fourteenth Amendment’s Due Process Clause, which limits the
power of a state court to render a valid personal judgment
against a nonresident defendant. The primary focus of the
Court’s personal jurisdiction inquiry is the defendant’s
relationship to the forum State.
The Court’s decisions have recognized two types of personal
jurisdiction: “general” (sometimes called “all-purpose”)
jurisdiction and “specific” (sometimes called “case-linked”)
jurisdiction. For an individual, the paradigm forum for the
exercise of general jurisdiction is the individual’s domicile; for a
corporation, it is an equivalent place, one in which the
corporation is fairly regarded as at home. A court with general
jurisdiction may hear any claim against that defendant, even if
all the incidents underlying the claim occurred in a different
State. But only a limited set of affiliations with a forum will
render a defendant amenable to general jurisdiction in that
State.
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2 The purpose of most, if not all, vertically-integrated business organizations
is to facilitate the supply of goods or services from the subsidiary to the
parent. That is all that occurred here. I fail to see why the Majority recasts
this ordinary feature of such institutions into the type of extraordinary
control factor that supports an alter ego finding. I fear that such an
interpretation of the alter ego test will cast too wide a net in sorting through
which subsidiaries function according to conventional business models and
which are subject to such extraordinary control that they should be deemed
mere instrumentalities of their parent corporations.
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Specific jurisdiction is very different. In order for a state court to
exercise specific jurisdiction, the suit must arise out of or relate
to the defendant’s contacts with the forum. In other words,
there must be an affiliation between the forum and the
underlying controversy, principally, an activity or an occurrence
that takes place in the forum State and is therefore subject to
the State’s regulation. For this reason, specific jurisdiction is
confined to adjudication of issues deriving from, or connected
with, the very controversy that establishes jurisdiction.
Bristol-Myers Squibb Co. v. Superior Court of Cal., S.F. Cty., 137 S.Ct.
1773, 1779-1780 (2017) (cleaned up).
If a subsidiary corporation is deemed to be an alter ego of its parent
corporation, then the forum-related activities of the subsidiary relate back to
the parent. In such cases, a forum state’s jurisdiction over the parent
corporation mirrors the jurisdiction the state court possesses over the
subsidiary alter ego.3 Here, PBS is subject to general jurisdiction before our
trial courts because it regularly conducts mining operations in Pennsylvania
and is domiciled in the Commonwealth. See 42 Pa.C.S.A. § 5301(a)(2).
Under the facts of this case, then, if PBS serves as Appellant’s alter ego,
Appellant would be subject to general jurisdiction in this Commonwealth.
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3 The Majority conflates the principles associated with general and specific
jurisdiction. In some cases, an alter ego finding would lead only to
Pennsylvania courts exercising specific jurisdiction over a corporation. For
example, assume a situation where a French subsidiary corporation served
as an alter ego for a German parent corporation. If the French company
were subject to specific jurisdiction in Pennsylvania, the German corporation
would similarly be subject to specific jurisdiction in Pennsylvania.
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Because of the highly significant legal consequences that flow from
finding an alter ego relationship, the test for establishing such a connection
is very stringent. The Majority relies on federal district court cases decided
after our Supreme Court’s decision in Botwinick v. Credit Exch., Inc., 213
A.2d 349 (Pa. 1965). In my view, Botwinick, subsequent Pennsylvania
appellate case law, and the majority of persuasive federal authority indicate
that Pennsylvania courts may not exercise general jurisdiction over
Appellant.
In Botwinick, our Supreme Court held that the trial court could not
exercise general jurisdiction over the defendant under an alter ego theory.
It explained that “to the extent that domination and control by the parent
corporation renders the subsidiary a mere instrumentality of the parent;
under such extreme circumstances the parent corporation may be held to
be doing business within the state under the facade of the subsidiary.” Id.
at 354 (emphasis added).
After Botwinick, this Court reaffirmed the principle that it is difficult
to establish general jurisdiction under an alter ego theory. In Lit v. Storer
Broad. Co., 269 A.2d 393 (Pa. Super. 1970), an employee argued that his
employer’s parent company was subject to general jurisdiction based on an
alter ego theory. Despite the fact that the “parent company wholly own[ed]
the subsidiary,” this Court held that Pennsylvania courts could not exercise
general jurisdiction under an alter ego theory. Id. at 395.
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The Commonwealth Court has, relatively recently, explained why
Pennsylvania courts could not exercise jurisdiction over a parent corporation.
In Commonwealth ex rel. Pappert v. TAP Pharm. Products, Inc., 868
A.2d 624 (Pa. Cmwlth. 2005) (en banc), a parent company appointed the
subsidiary’s executives. These executives were also executives or
employees of the parent. The Commonwealth Court held this was
insufficient for Pennsylvania courts to exercise personal jurisdiction over the
parent under an alter ego theory.4 Id. at 632.
The Majority relies on a single Pennsylvania case, and several federal
district court decisions, in support of the concept that Pennsylvania state
courts have jurisdiction over Appellant. This reliance is misplaced. For the
reasons set forth below, the decisions relied on by the Majority are
distinguishable from the case at bar. Furthermore, there is persuasive
authority indicating that Pennsylvania courts may not exercise general
jurisdiction over Appellant.
First, the Majority does not cite to any cases holding that a corporation
is subject to general jurisdiction under an alter ego theory since the
Supreme Court of the United States’ decision in BNSF Ry. Co. v. Tyrrell,
137 S.Ct. 1549 (2017). BNSF is the latest in a line of decisions greatly
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4 The Commonwealth Court did not explicitly state whether an alter ego
finding would permit the exercise of specific jurisdiction or general
jurisdiction over the parent.
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limiting states’ ability to hold corporations subject to general jurisdiction.
E.g. Daimler AG v. Bauman, 571 U.S. 117 (2014).
Second, the lone state court decision the Majority relies on is
distinguishable. At the time this Court decided Barber v. Pittsburgh
Corning Corp., 464 A.2d 323 (Pa. Super. 1983), cert. denied, 467 U.S.
1205 (1984), the “trend in judicial thought [] favor[ed] the assertion of
jurisdiction.” Id. at 332. As noted above, BNSF and Daimler show that
the trend in judicial thought now would disfavor such assertion of
jurisdiction. Moreover, although the alter ego analysis in Barber is
perfunctory, there are indications that the parent-subsidiary relationship in
that case was greater than the relationship in the case at bar. Specifically,
the parent “exercised full control over” the subsidiary. Id. at 331. When a
corporation can expend $9,000,000 without authorization from its parent,
the element of overmastering control of the subsidiary by the parent is
indisputably absent. See Majority Memorandum at 22 (“Appellant
maintained financial oversight of its subsidiary but only required formal
approval of expenditures exceeding ten million dollars. … Thus, smaller
projects like the one on which [Williams] worked typically did not
require Appellant’s authorization.”), citing N.T. Deposition of Dmitry
Goryachev, 7/20/16, at 21, 31, and 35.
Third, the federal cases upon which the Majority relies are
distinguishable from the case at bar. In Hooper v. Safety-Kleen Sys.,
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Inc., 2016 WL 7212586 (W.D. Pa. Dec. 13, 2016), the parent and the
subsidiary “share[d] corporate headquarters.” Id. at *7. In this case, PBS’
and Appellant’s headquarters are thousands of miles apart. Hence,
day-to-day control was easy in Hooper while it is difficult in this case.
Moreover, in Hooper the subsidiary served “as the corporate headquarters
staff for” many of the parent’s subsidiaries. Hooper, 2016 WL 7212586 at
*7. In this case, there is no evidence that PBS served as the corporate
headquarters for Appellant’s other subsidiaries.
Seven years earlier, in In re Chocolate Confectionary Antitrust
Litig., 641 F.Supp.2d 367 (M.D. Pa. 2009), the court addressed three
allegations of a subsidiary serving as a parent’s alter ego. With respect to
that parent-subsidiary analysis, Chocolate Confectionary is distinguishable
from this case. The parent “exercised centralized control over the
day-to-day management” of the subsidiary. Id. at 401 (cleaned up). It did
so “to the exclusion of [the subsidiary’s] board[] of directors.” Id. at 402.
As noted above, there is no such day-to-day management of PBS by
Appellant in this case. See Majority Memorandum, at 26, citing N.T.,
9/9/15, at 73, 81. The CEO of the subsidiary in Chocolate Confectionary
“could not identify a single board member” of the subsidiary. Chocolate
Confectionary, 647 F.Supp.2d at 401. There is no evidence that is true in
the case sub judice. See Majority Memorandum, at 26, citing N.T., 9/9/15,
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at 70-71, 81-82. Thus, the level of control in this case is less than that in
Chocolate Confectionary.
In In re Latex Gloves Products Liab. Litig., 2001 WL 964105 (E.D.
Pa. Aug. 22, 2001), the parent and the subsidiary “used the same
employees interchangeably[.]” Id. at *5. In this case, there is no indication
that the employees were interchangeable. Although there was some
cross-over between Appellant’s employees and PBS’ employees, the
employees did not freely float between the two corporations. The court in
Latex Gloves also implicitly found that the parent dictated all facets of the
subsidiary’s business. As noted above, that is not present in this case. I
would conclude that the federal court cases relied on by the Majority are
distinguishable.
Fourth, the Majority does not focus on the key parts of In re Enter.
Rent-A-Car Wage & Hour Employment Practices Litig., 735 F.Supp.2d
277 (W.D. Pa. 2010), aff’d, 683 F.3d 462 (3d Cir. 2012). In that case, the
court held that, in order to find that a subsidiary is the alter ego of a parent,
the parent must have “control over the internal workings or day-to-day
operations of its subsidiar[y].” Id. at 324, quoting Hoffman v. Tyco Int’l,
Ltd., 2006 WL 3759709, *5 (E.D. Pa. Dec. 18, 2006). Because that was
lacking in Enterprise, the parent did not exercise the “extraordinary level of
control” necessary for a finding of alter ego. Id. In this case, the Majority
concedes that Appellant does not control PBS’ internal workings or
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day-to-day operations. Cf Majority Memorandum, at 22 (PBS could spend
up to $10,000,000 without Appellant’s approval). Hence, Enterprise
indicates that PBS is not Appellant’s alter ego.
Fifth, federal decisions issued after BNSF show that general
jurisdiction is not proper in this case. There are very few decisions issued
after BNSF addressing whether a court has personal jurisdiction, either
specific or general, over a parent corporation because of a subsidiary alter
ego. One of those cases is Anwar v. Dow Chem. Co., 876 F.3d 841 (6th
Cir. 2017).5
In Anwar, the Sixth Circuit found that a domestic affiliate was not the
alter ego of a foreign corporation. The court noted that the plaintiff, in
arguing that the affiliate was the foreign corporation’s alter ego, pointed to,
inter alia, shared board membership and common managers, the foreign
corporation being a source of funding for the affiliate, and the common
website used by both companies. Id. at 849-850. In reaching the
conclusion that the domestic affiliate was not the alter ego of the foreign
corporation, the court stated:
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5 Although Anwar did not apply Pennsylvania law, it applied federal law.
Federal law permits the exercise of personal jurisdiction to the extent
permitted by the Due Process Clause of the Fifth Amendment. Similarly,
Pennsylvania’s long-arm statute permits the exercise of jurisdiction to the
extent permitted by the Due Process Clause of the Fourteenth Amendment.
See 42 Pa.C.S.A. § 5322(b).
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[Plaintiff] only alleges facts regarding ownership that partially
satisfy a few different factors [needed to satisfy the alter-ego
test]. She does not allege that there are shared employees
(only managers with shared roles), that the same address and
phone lines are used, that the two entities complete the same
jobs, or that they maintain books, tax returns, and financial
statements across the two entities. Furthermore, she does not
allege that [the foreign corporation], as the alleged parent,
controls [the domestic affiliate] to such a degree that [the
foreign corporation] is the alter ego of [the domestic affiliate].
Id. at 850. Moreover, the court noted that mere macromanagement of a
subsidiary by a parent does not demonstrate that the subsidiary is the
parent’s alter ego. Id. (citation omitted). Instead, the parent must manage
the day-to-day operations of the subsidiary. See id. Again, there is no such
day-to-day management of PBS by Appellant in this case.
Federal district court decisions in light of BNSF show that the
Majority’s reasoning for finding jurisdiction over Appellant is flawed. In
Kellman v. Whole Foods Mkt., Inc., 313 F.Supp.3d 1031 (N.D. Cal.
2018), the court rejected the plaintiffs’ theory that two subsidiary
corporations were alter egos of their parent corporation. 6 The court noted
that “A parent corporation may be directly involved in financing and
macromanagement of its subsidiaries without exposing itself to a charge that
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6 California is one of two states the Supreme Court of the United States has
recently chided for exercising jurisdiction over corporations beyond that
permitted by the Fourteenth Amendment. Cf. Bristol-Myers, 137 S.Ct.
1773 (reversing trial court’s finding that corporation could be subject to
specific jurisdiction in California). Hence, California law is not narrower than
Pennsylvania law with respect to entities over which its courts may exercise
specific jurisdiction.
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each subsidiary is merely its alter ego.” Id. at 1047 (cleaned up). The
Majority focuses on the $200,000,000 loan that Appellant gave PBS, i.e.,
financing. See Majority Memorandum, at 23. Similarly, the Majority uses
Appellant’s macromanagement of PBS to find that PBS is Appellant’s alter
ego. As the court in Kellman noted, however, this is inapposite. A parent
must be allowed to finance and macromanage its subsidiaries without fear of
being subject to general jurisdiction in multiple jurisdictions.
In Ezell v. Medtronic plc, 2018 WL 1100901 (W.D. La. Feb. 6, 2018),
adopted, 2018 WL 1096864 (W.D. La. Feb. 28, 2018), the plaintiffs again
alleged that a subsidiary served as the parent’s alter ego. The court
rejected that argument relying on the fact that (1) the parent and subsidiary
were not located in the same office; (2) the parent did not control the
day-to-day operations of the subsidiary; and (3) the parent’s and
subsidiary’s “finances [were] formally entered in separate ledgers.” Id. at
*6. Based on these factors, the court found that the parent was not subject
to specific jurisdiction under an alter ego theory. Id. at *7. The same three
factors are present in this case. Accordingly, we conclude that Pennsylvania
courts lack general jurisdiction over Appellant.7
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7 If we were to find that PBS was Appellant’s alter ego thereby subjecting
Appellant to general jurisdiction in Pennsylvania, a Ukranian citizen, who has
never been to the continental United States, could sue Appellant in the Court
of Common Pleas of Pike County for a tort committed in Alaska. Cf. Bristol-
Myers, 137 S.Ct. at 1780 (explaining that when a court has general
(Footnote Continued Next Page)
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Because courts in this Commonwealth lack general jurisdiction over
Appellant, courts of this Commonwealth may only exercise personal
jurisdiction over Appellant if the requirements for specific jurisdiction are
satisfied.
Specific jurisdiction is governed by Pennsylvania’s long-arm statute
which provides, in relevant part:
(a) General rule.--A tribunal of this Commonwealth may exercise
personal jurisdiction over a person (or the personal
representative of a deceased individual who would be subject to
jurisdiction under this subsection if not deceased) who acts
directly or by an agent, as to a cause of action or other matter
arising from such person:
(1) Transacting any business in this Commonwealth. Without
excluding other acts which may constitute transacting business
in this Commonwealth, any of the following shall constitute
transacting business for the purpose of this paragraph:
(i) The doing by any person in this Commonwealth of a series of
similar acts for the purpose of thereby realizing pecuniary benefit
or otherwise accomplishing an object.
(ii) The doing of a single act in this Commonwealth for the
purpose of thereby realizing pecuniary benefit or otherwise
accomplishing an object with the intention of initiating a series of
such acts.
(iii) The shipping of merchandise directly or indirectly into or
through this Commonwealth.
(iv) The engaging in any business or profession within this
Commonwealth, whether or not such business requires license or
approval by any government unit of this Commonwealth.
(Footnote Continued) _______________________
jurisdiction it “may hear any claim against the defendant, even if all the
incidents underlying the claim occurred in a different State”).
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(v) The ownership, use or possession of any real property situate
within this Commonwealth.
(2) Contracting to supply services or things in this
Commonwealth.
(3) Causing harm or tortious injury by an act or omission in this
Commonwealth.
(4) Causing harm or tortious injury in this Commonwealth by an
act or omission outside this Commonwealth.
(5) Having an interest in, using, or possessing real property in
this Commonwealth.
(6)(i) Contracting to insure any person, property, or risk located
within this Commonwealth at the time of contracting.
(ii) Being a person who controls, or who is a director, officer,
employee or agent of a person who controls, an insurance
company incorporated in this Commonwealth or an alien insurer
domiciled in this Commonwealth.
(iii) Engaging in conduct described in section 504 of the act of
May 17, 1921 (P.L. 789, No. 285), known as The Insurance
Department Act of 1921.1
(7) Accepting election or appointment or exercising powers
under the authority of this Commonwealth as a:
(i) Personal representative of a decedent.
(ii) Guardian of a minor or incapacitated person.
(iii) Trustee or other fiduciary.
(iv) Director or officer of a corporation.
(8) Executing any bond of any of the persons specified in
paragraph (7).
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(9) Making application to any government unit for any
certificate, license, permit, registration or similar instrument or
authorization or exercising any such instrument or authorization.
(10) Committing any violation within the jurisdiction of this
Commonwealth of any statute, home rule charter, local
ordinance or resolution, or rule or regulation promulgated
thereunder by any government unit or of any order of court or
other government unit.
(b) Exercise of full constitutional power over nonresidents.--In
addition to the provisions of subsection (a) the jurisdiction of the
tribunals of this Commonwealth shall extend to all persons who
are not within the scope of section 5301 (relating to persons) to
the fullest extent allowed under the Constitution of the United
States and may be based on the most minimum contact with this
Commonwealth allowed under the Constitution of the United
States.
(c) Scope of jurisdiction.--When jurisdiction over a person is
based solely upon this section, only a cause of action or other
matter arising from acts enumerated in subsection (a), or from
acts forming the basis of jurisdiction under subsection (b), may
be asserted against him.
42 Pa.C.S.A. § 5322. Thus, in order to exercise specific jurisdiction under
Pennsylvania’s long-arm statute, a trial court must find that the defendant
engaged in an act specified under section 5322(a)(1) through (9) or the
defendant had sufficient minimum contacts with Pennsylvania to trigger
specific jurisdiction pursuant to section 5322(b). In addition, the trial court
may exercise specific jurisdiction only if it determines that the injuries
complained of arose from the defendant’s forum-related contacts.
Williams argues, and the trial court determined, that 20 identified
contacts by Appellant satisfied section 5322(a) and/or (b). The contacts
center on Appellant’s acquisition of PBS as a mining asset that supports
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Appellant’s steel manufacturing operations. As we shall explain, however,
Williams’ injury did not arise out of these identified activities. Hence, the
trial court erred in concluding it had specific jurisdiction. See 42 Pa.C.S.A.
§ 5322(c); McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 881 (2011).
Williams first contends that PBS’ status as Appellant’s subsidiary and
PBS’ use of Appellant’s logo on its stationary and website evidenced the
necessary contacts under section 5322(a) and/or (b). Both of these
arguments are premised on Appellant’s and PBS’ parent-subsidiary
relationship. A parent-subsidiary relationship, however, does not ipso facto
demonstrate that injury arises out of the parent’s management of the
subsidiary. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
U.S. 915, 930 (2011), citing Brilmayer & Paisley, Personal Jurisdiction and
Substantive Legal Relations: Corporations, Conspiracies, and Agency, 74 Cal.
L. Rev. 1, 14 and 29–30 (1986); see also Karaa v. Aramoonie, 2018 WL
1373958, *5 (Tex. App. Mar. 19, 2018) (cleaned up) (“the degree of control
exercised by the parent must be greater than that normally associated with
common ownership and directorship”); Stonepeak Partners, LP v. Tall
Tower Capital, LLC, 231 So.3d 548, 556 (Fla. App. 2017) (no specific
jurisdiction over a parent unless the corporate veil is pierced); Hard Candy,
LLC v. Hard Candy Fitness, LLC, 106 F.Supp.3d 1231, 1240 (S.D. Fla.
2015) (citation omitted) (“a foreign parent corporation is not subject to the
jurisdiction of a forum state merely because a subsidiary is doing business
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there”); Kehm Oil Co. v. Texaco, Inc., 537 F.3d 290, 301 (3d Cir. 2008)
(citation omitted) (even when parent is sole owner of subsidiary the parent
is not ipso facto subject to general jurisdiction in the subsidiary’s home
state); Ismail v. Volvo Group N. Am., Inc., 2017 WL 5652562, *3 (C.C.P.
Philadelphia), aff’d, 2018 WL 1126249 (Pa. Super. Mar. 2, 2018)
(unpublished judgment order).
Williams relies on Harris v. NGK N. Am., Inc., 19 A.3d 1053 (Pa.
Super. 2011) in support of his argument that this parent-subsidiary
relationship was sufficient under section 5322(a) and/or (b). Harris,
however, is factually distinguishable from the case at bar. In Harris, an
estate argued that a decedent suffered from chronic beryllium disease
caused by living in close proximity to a beryllium plant. That beryllium plant
was operated by a subsidiary of a foreign corporation. On appeal, the
foreign corporation argued that the trial court lacked specific jurisdiction.
This Court rejected that argument for two reasons not present in the case at
bar. First, the parent (foreign) corporation supplied the beryllium to the
subsidiary (domestic) corporation. It was this beryllium that allegedly
caused the decedent’s injuries. In this case, by contrast, Williams does not
argue that Appellant had direct involvement in the design, construction,
inspection, or material supply for the coal bin where Williams was injured.
More importantly, in Harris the evidence showed that the parent
substantially controlled the day-to-day operations of the subsidiary. See id.- 17 -
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at 1061-1062. In this case, the evidence indicates that PBS fully controlled
its day-to-day operations. See N.T., 7/20/16, at 46. Hence, the two factors
that led this Court to find specific jurisdiction in Harris are not present in
the case sub judice. Instead, Williams and the trial court rely on the mere
parent-subsidiary relationship between Appellant and PBS. The generalized
and ever-present features of a parent-subsidiary relationship, particularly
within the context of vertically-integrated organizations, are insufficient to
subject Appellant to specific jurisdiction in the Commonwealth of
Pennsylvania.
In my view, the record does not support a finding that Williams’
injuries arose out of the parent-subsidiary relationship between PBS and
Appellant. As noted above, PBS was not Appellant’s alter ego. Moreover,
the parent-subsidiary relationship between Appellant and PBS was irrelevant
with respect to the construction of the coal bin and the hiring of a contractor
to construct the coal bin. Hence, the trial court erroneously relied on the
parent-subsidiary relationship when finding it could exercise specific
jurisdiction over Appellant.
Next, the trial court relied on PBS’ use of Appellant’s logo on its
stationary and website in support of exercising specific jurisdiction over
Appellant. Again, use of a logo does not ipso facto indicate that injuries
caused by a subsidiary’s actions arose from the subsidiary’s use of the
parent’s logo. E.g., Horowitz v. AT&T Inc., 2018 WL 1942525, *9 (D.N.J.
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Apr. 25, 2018) (“common marketing image and joint use of trademark
logos” insufficient to subject the parent to general jurisdiction); Barry v.
Talpa Holding, N.V., 2015 WL 6001032, *7 (Cal. App. Oct. 15, 2015) (use
of a single website by both parent and subsidiary insufficient to subject the
parent to general jurisdiction); Enterprise, 735 F.Supp.2d at 323 (“common
marketing image and joint use of trademarked logos fail to render” parent
subject to general jurisdiction); Von Grabe v. Sprint PCS, 312 F.Supp.2d
1285, 1301 (S.D. Cal. 2003). Hence, the trial court erred in concluding this
was sufficient to exercise specific jurisdiction over Appellant pursuant to
Pennsylvania’s long-arm statute.
Ancillary to this argument, Williams contends that an insurance
contract covering the PBS plant indicates the requisite minimum contacts to
permit the trial court’s exercise of specific jurisdiction over Appellant. A
careful review of Williams’ argument, however, indicates that this is just
another generalized feature of the parent-subsidiary relationship between
Appellant and PBS. Specifically, Appellant was covered by the insurance
contract because of form language providing that the insurance policy covers
PBS’ parent and affiliated entities. See Williams’ Brief at 26 n.6 and 27 n.7.
Williams does not argue that the insurance policy specifically named
Appellant. Instead, it merely referenced any parent or related entity.
I find instructive the reasoning of the United States District Court for
the Eastern District of North Carolina in KCHM, Inc. v. Mid-Continent Cas.
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Co., 264 F.Supp.3d 697 (E.D.N.C. 2017). In that case, a subsidiary in
Oklahoma had an insurance policy which covered an accident that occurred
in West Virginia. The policy listed the Oklahoma corporation’s parent as a
conditional insured. There was, however, no negotiation between the parent
and the insurance company regarding the policy. Instead, like the case at
bar, boilerplate policy language was employed to cover the subsidiary’s
parent corporation. The court concluded that the insurance contract was
insufficient to create specific jurisdiction. See id. at 701-702. The court
distinguished the scenario in KCHM from cases where a parent company
negotiated the insurance contract to cover activities in a specific state. See
id. In this case, there was no evidence of negotiations between Appellant
and the insurer and/or Merit Contracting.
Williams’ construction of Pennsylvania’s long-arm statute would violate
the Due Process Clause of the Fourteenth Amendment. Permitting the trial
court to assert compulsory process over a parent corporation based solely on
a subsidiary’s additional insured designation would defeat the requirement of
purposeful ailment which has long been part of the law of specific
jurisdiction. Hence, I would reject Williams’ argument, adopted by the trial
court, that Appellant is subject to specific jurisdiction in Pennsylvania based
on insurance coverage it did not purchase.
In addition to these factors, the trial court cited, without analyzing, 18
factors Williams listed in support of finding specific jurisdiction over
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Appellant. Cf. Williams’ Brief at 10-17 (listing the factors). None of these
factors permits the exercise of specific jurisdiction over Appellant.
The Majority argues that a line of credit from Appellant to PBS
constituted sufficient contact with Pennsylvania to enable the trial court to
exercise specific jurisdiction over Appellant. Similarly, the Majority contends
that Appellant’s favorable credit treatment towards PBS permitted the trial
court to exercise specific jurisdiction over Appellant. There is nothing,
however, in the record to support a finding that Williams’ injuries arose from
this line of credit or the favorable credit treatment, and the Majority points
to no facts supporting such a contention. In other words, it was not shown
that the line of credit and favorable credit treatment facilitated constructing
the coal bin or permitted PBS to hire Merit Contracting.
The Majority reasons that the money freed PBS to use funds to build
the coal bin in question. This argument is unbounded. Taken to its logical
conclusion, an individual living in Alaska who loaned money to PBS for a
project in Montana could be haled into a Pennsylvania court. This is not
permitted by Pennsylvania’s long-arm statute. Hence, I would reject the
fungibility argument as meritless.
I would also reject the argument that Appellant’s management of PBS,
and statements related thereto, enabled the trial court to exercise specific
jurisdiction. Again, there is no evidence that Appellant managed the
construction of the coal bin and/or the hiring of Merit Contracting. There is
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no evidence of statements by Appellant related to the coal bin and/or the
hiring of Merit Contracting. Instead, Williams relies on general statements
regarding Appellant’s corporate governance of PBS. See Williams’ Brief at
12-13. This is insufficient for specific jurisdiction. Cf. Andresen v. Diorio,
349 F.3d 8, 12 (1st Cir.2003) (parent corporation’s financial and policy
control over subsidiary was not sufficient to support general jurisdiction
absent showing that subsidiary was parent’s alter ego). The only evidence
presented indicates that Appellant did not control PBS’ day-to-day
operations. This case falls far short of the management and control criteria
needed to demonstrate specific jurisdiction.
Williams’ injuries did not arise from PBS’ submission of reports to, and
monthly meetings with, Appellant. Williams does not aver that Appellant
required PBS to submit reports regarding the construction of the Shade
Creek coal bin or the hiring of Merit Contracting to perform that work.
Instead, the reports were overall performance reports and forecasts, i.e.,
company-wide reports. There is nothing to suggest that the meetings
between Appellant and PBS addressed the coal bin and/or the hiring of Merit
Contracting. The same rationale applies to PBS submitting a proposed
budget to Appellant. Williams does not aver, nor is there support in the
record for a finding, that Appellant required PBS to submit a detailed budget
relating to the construction of the coal bin. Williams’ injuries, therefore, did
not arise from the budgetary submissions.
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This is no factual support for finding that Williams’ injuries arose from
PBS’ chief financial officer’s presentations to Appellant or Appellant’s
accounting and auditing practices. These presentations and audits did not
discuss the construction of the subject coal bin, nor did the accounting
reports examine the financial ramifications of construction of this coal bin.
Williams’ argument that his injuries arose from PBS’ executives being
paid by a third-party corporation is without merit. No evidence supports a
finding that this executive pay was tied to the construction of the coal bin or
the hiring of Merit Contracting. Likewise, Williams’ injuries did not arise
from talks between executives of the two companies and/or executives
leaving Appellant to work for PBS. There is no evidence that the coal bin or
the hiring of Merit Contracting was ever discussed during these meetings.
Williams’ passing argument that his injuries arose from a single employee’s
LinkedIn profile is meritless. There is nothing to link Lori Mason’s profile
with the injuries sustained by Williams, the construction of the coal bin,
and/or the hiring of Merit Contracting.
Finally, Williams’ injuries did not arise from any prior litigation with
which PBS and/or Appellant were involved. Williams’ injuries ipso facto
could not have arisen from this litigation. Hence, Williams’ arguments that
the trial court had specific jurisdiction over Appellant because of its control
of PBS’ litigation is frivolous.
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All 20 factors relied on by Williams and the trial court are “factors
merely showing the amount of control typical in a parent-subsidiary
relationship.” Viega GmbH v. Eighth Jud. Dist. Ct., 328 P.3d 1152, 1160
(Nev. 2014) (cleaned up). Williams admits this in his brief before this Court.
See Williams’ Brief at 8, quoting Trial Court Opinion, 4/6/17, at 6 (The 20
factors he argues prove that Appellant was subject to specific jurisdiction in
Pennsylvania dealt with “owning and managing PBS[.]”). In other words,
these 20 factors did not give rise to Williams’ injuries. Hence, they are
insufficient to confer specific jurisdiction over Appellant under section 5322.
For each of the foregoing reasons, I would reverse the trial court’s
order overruling Appellant’s preliminary objections.
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