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Kesselman: Multinational Corporate Jurisdiction & The Agency Test

Kesselman: Multinational Corporate Jurisdiction & The Agency Test

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The modern proliferation of parent-subsidiary relationships has added layers of complexity to the question of whether a particular corporation’s contacts with a forum are “continuous, systematic, and substantial” enough to expose it to general jurisdiction. This Note examines one thorny variation that has split the Federal Circuit Courts: When is a nonresident, parent corporation subject to personal jurisdiction in the forum where its subsidiary sits when the parent is sued for a subsidiary’s acts in a different forum? Two tests have emerged. The Second and Ninth Circuits apply the “agency” test, which asks whether the subsidiary is “sufficiently important” to the parent to justify jurisdiction. Every other circuit reaching this issue has turned to the “alter-ego” test, applying state-law, veil-piercing doctrine to the jurisdictional question. This Note argues that the agency test exceeds the parameters of the Supreme Court’s general jurisdiction jurisprudence. Moreover, the agency test creates needless economic roadblocks to international comity. Such concerns are magnified by the agency test’s application in two of the most prominent American commercial centers: New York and California. The alter-ego test should be uniformly adopted to minimize the negative public policy consequences of broad jurisdictional power, and more fundamentally, to comport with “traditional notions of fair play and substantial justice” by only subjecting a corporation to general jurisdiction where it is truly “at home.”
The modern proliferation of parent-subsidiary relationships has added layers of complexity to the question of whether a particular corporation’s contacts with a forum are “continuous, systematic, and substantial” enough to expose it to general jurisdiction. This Note examines one thorny variation that has split the Federal Circuit Courts: When is a nonresident, parent corporation subject to personal jurisdiction in the forum where its subsidiary sits when the parent is sued for a subsidiary’s acts in a different forum? Two tests have emerged. The Second and Ninth Circuits apply the “agency” test, which asks whether the subsidiary is “sufficiently important” to the parent to justify jurisdiction. Every other circuit reaching this issue has turned to the “alter-ego” test, applying state-law, veil-piercing doctrine to the jurisdictional question. This Note argues that the agency test exceeds the parameters of the Supreme Court’s general jurisdiction jurisprudence. Moreover, the agency test creates needless economic roadblocks to international comity. Such concerns are magnified by the agency test’s application in two of the most prominent American commercial centers: New York and California. The alter-ego test should be uniformly adopted to minimize the negative public policy consequences of broad jurisdictional power, and more fundamentally, to comport with “traditional notions of fair play and substantial justice” by only subjecting a corporation to general jurisdiction where it is truly “at home.”

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Categories:Business/Law
Published by: New England Law Review on Apr 17, 2013
Copyright:Attribution Non-commercial

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11/12/2013

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