Opinion
Charles Engen sued his former employer, Ontic Engineering and Manufacturing, Inc. (Ontic), and its parent corporation, BBA Aviation PLC (BBA), for wrongful termination. Petitioner, BBA, moved to quash service of the summons and complaint for lack of personal jurisdiction and ineffective service of process. Respondent, the Superior Court of Los Angeles County (trial court), denied the motion and found jurisdiction over BBA proper under the representative services doctrine. BBA seeks a writ of
FACTUAL AND PROCEDURAL SUMMARY
In 2005, plaintiff and real party in interest, Charles Engen, was hired by Ontic as a computer programmer analyst. He was terminated in 2008. Following his termination, Engen filed a wrongful termination suit against Ontic and its English parent company, BBA. The complaint alleged BBA was an agent of Ontic, but all the allegations were directed at Ontic.
Ontic was acquired by BBA in 2006 and is a wholly owned subsidiary. Ontic’s executive office and sole facility are located in Chatsworth, California. Ontic manufactures licensed products for the aviation industry. Ontic has its own corporate officers, human resources staff and financial personnel. Ontic’s president, James Gerwien, who was president prior to 2006, is also president of BBA’s component, repair and overhaul group, and a member of BBA’s executive management committee.
BBA is an English company headquartered in London, England. BBA stock is traded on the London Stock Exchange but not on any stock exchange in the United States. BBA’s branding appears on Ontic’s signage, building front, employee uniforms, badges, and stationery. But BBA is not registered to do business in California and does not have any office, place of business, or employees in California.
BBA filed a motion to quash service of the summons and complaint for lack of personal jurisdiction and ineffective service of process. In response to the motion, Engen argued that the court has general and specific personal jurisdiction over BBA. The general jurisdiction claim was based on BBA’s direct contacts with the state and the representative services doctrine, which imputes the court’s jurisdiction over a subsidiary to its parent corporation when the subsidiary only operates in support of the parent’s own business.
BBA contended that the trial court lacks both specific and general jurisdiction. Specifically, BBA argued the representative services doctrine does not apply because BBA is a holding company whose sole business is investing in
The trial court denied the motion to quash, finding the representative services doctrine applicable. The trial court was “persuaded by the plaintiff’s submission that there was involvement in Ontic’s businesses . . . and that had Ontic not been doing it, [BBA] would have been doing it themselves.” The trial court rejected BBA’s claim that it was a holding company, despite Stone’s affidavit. The trial court emphasized that BBA did not identify itself as a holding company in its consolidated annual reports or any other documents and publications. Instead, the annual reports described BBA as a business providing services to the aviation industry. The court stated that if BBA was truly a holding company, it would support that claim by documentation, and that Stone’s “bald assertion” was unconvincing in the absence of such documentation. The trial court did not rule on specific jurisdiction or any of the alternative bases for general jurisdiction. The trial court found the service of process proper.
BBA petitioned our court for writ of mandate vacating the trial court’s order and directing the court to grant the motion to quash. We denied the petition. BBA then sought review of our order by the California Supreme Court. The Supreme Court granted review and directed us to vacate our order denying the petition and to issue an order directing the trial court to show cause why the relief sought in the petition should not be granted. We issued an order to show cause pursuant to the Supreme Court’s direction. Because we now grant the requested relief based on the jurisdictional issue, we do not reach BBA’s claim of ineffective service of process.
DISCUSSION
I
When a nonresident defendant challenges personal jurisdiction, the plaintiff must prove, by a preponderance of the evidence, the factual basis justifying the exercise of jurisdiction. (Pavlovich v. Superior Court (2002)
When the jurisdictional facts are not in dispute, personal jurisdiction is a legal question for de novo review. (Snowney v. Harrah’s Entertainment, Inc. (2005)
California courts may exercise jurisdiction on any basis that is not inconsistent with the state and federal Constitutions. (Code Civ. Proc., § 410.10; see also Snowney, supra,
A nonresident defendant is subject to general jurisdiction if its contacts with California are substantial, continuous, and systematic. (Snowney, supra,
The representative services doctrine is a variation of agency, but does not depend on whether the parent enjoys pervasive and continuous control over the subsidiary as to establish a general agency relationship. (See F. Hoffman-La Roche, supra,
The trial court based its assertion of personal jurisdiction solely on the representative services doctrine, and we treat this issue first. BBA contends it is a holding company and the representative services doctrine does not apply. The burden was on Engen to prove BBA was not a holding company. For purposes of appellate review, we consider whether there is
A holding company is a “company formed to control other companies, [usually] confining its role to owning stock and supervising management. ... It does not participate in making day-to-day business decisions in those companies.” (Black’s Law Dict. (9th ed. 2009) p. 319, col. 1.) A true holding company does not engage in operational control of the businesses that it owns. (Sonora, supra, 83 Cal.App.4th at pp. 543-545.) A finding that corporation is not a legitimate holding company requires a showing that the corporation conducted its own operations or transactions. (See Golden State T. & R. Corp. v. Johnson (1943)
Engen and the trial court relied heavily on Dorel. In that case, the plaintiff was injured by a defective child car seat. He sued, among others, the manufacturer and distributor of the child car seat, Dorel Juvenile Group, and its grandparent corporation, Dorel Industries. (Dorel, supra,
By contrast, Engen has presented no substantial evidence to show BBA is actually involved in its own operation of aviation products. There is no evidence of a business license or any facilities held in the BBA name. Nor is there evidence that BBA’s board of directors authorized transactions, outside of acquiring subsidiaries. Instead, Engen points to BBA’s branding on Ontic’s signage, uniforms, and stationery, and relies on statements BBA made in its consolidated annual reports and Web site, referring to its subsidiaries as “we,” and describing itself as a business in the aviation services industry. The court cited BBA’s annual consolidated reports as the principal reason for its finding that BBA is more than a mere holding company. It stated that if BBA was truly a holding company, there would be some documentation showing that to be the case. In addition, while the trial court held that the presence of BBA’s branding on Ontic property would not, standing alone, support jurisdiction, it concluded that the reports and branding together demonstrate Ontic was not a holding company.
The trial court was aware of this case law but rejected the underlying claim that BBA was a holding company, and cited the reports as evidence that BBA did not call itself a holding company. We are not persuaded. It makes little sense to recognize consolidated reports are insufficient to convert a holding company into an operating company, but conclude that failing to identity oneself as a holding company in consolidated reports proves the entity is not a holding company.
Given Engen’s limited evidence, greater weight should be placed on the sworn declarations of Gerwien and Stone. Gerwien stated that Ontic is a wholly owned subsidiary of BBA US Holdings, a subsidiary of BBA. Stone confirmed this and added that several layers of subsidiaries separate BBA from BBA US Holdings. Stone produced an organizational chart to demonstrate the corporate structure. Stone explicitly stated that BBA is a holding company with no operations of its own and that Ontic is its only subsidiary with day-to-day operations to sell products and services. The trial court dismissed Stone’s statements as “bald assertion[s],” but California courts have relied on similar statements made by people in similar positions. (See DVI, Inc. v. Superior Court, supra,
Even if BBA is not a holding company, in order for the representative services doctrine to apply, Engen must also prove that Ontic did not pursue its own business and only operated for the benefit of BBA. In F. Hoffinan-La Roche, the plaintiff sued a Swiss pharmaceutical company and its United States subsidiaries for the suicidal effects of the acne drug, Accutane. (F. Hoffman-La Roche, supra,
n
Engen also claims that jurisdiction over BBA is proper under general agency principles. The trial court did not address a general agency theory of jurisdiction. Therefore, we make an independent determination of whether or not Ontic was an agent of BBA. “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.” (Sonora, supra,
Statements made by Gerwien demonstrate that Ontic has its own corporate officers, human resources staff, and financial personnel. In response, Engen argues that the existence of common officers and directors between the two corporations supports a finding of agency. Gerwien is also president of BBA’s component, repair, and overhaul group, and a member of BBA’s executive management committee. The committee is responsible for operational management of BBA and for implementing the BBA board’s decisions. Stone stated that the terms “Component Repair and Overhaul” group were used to identify subgroups of BBA subsidiaries that carried out similar operations and that individuals within these subgroups would be given titles such as president or vice-president. However, Stone stated that these subgroups are not formal legal entities and the titles do not establish any formal
Similarly, Engen argues that the executive management committee participated in a two-day planning workshop with Ontic in California, and that BBA’s chief executive officer, Simon Pryce, visited Ontic’s facility on several occasions. Engen alleges that on Pryce’s first visit, he noticed problems with Ontic’s facility and directed changes be made. Upon noticing the same problem on his second visit, Pryce became upset and demanded the problem be addressed. Pryce visited a third time to see that the changes were made. BBA’s objection to Engen’s declaration for lack of foundation was overruled. The trial court erred in overruling BBA’s objection because Engen provided no proof that he had personal knowledge of the events. We are then left with Gerwien’s statements that Pryce, who joined BBA in 2007, only visited Ontic twice during Engen’s employment. According to Gerwien, in his two visits, Pryce’s only comment concerning the facility was an observation that an exposed chain-link fence presented a safety hazard. Pryce did not direct anyone at Ontic to fix the fence or make any other changes to the facility.
Beyond that, such interactions between BBA and Ontic do not exceed the normal parent-subsidiary relationship. (See Dorel, supra,
Next, Engen asserts Ontic is an agent of BBA because BBA’s name and logo appeared on Ontic’s signage, employee uniforms, badges, business cards, and employment documents. Engen does not present any authority for the claim that the mere appearance of a parent’s logo on its subsidiary’s documents constitutes pervasive control over day-to-day operations, and we find such branding insufficient to prove the existence of a single entity. (See Kaplan v. Coldwell Banker Residential Affiliates, Inc. (1997)
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Engen also claims that the court has direct general jurisdiction over BBA. A nonresident defendant may be subject to the general jurisdiction of our courts if its contacts with California are substantial, continuous, and systematic. (Snowney, supra,
It is undisputed that BBA is not registered to do business in California and does not have any office, place of business or employees in California. Nor does Engen offer any evidence that BBA marketed or sold products independently of Ontic. In response, Engen advances many of the same facts used to support his argument that Ontic was an agent of BBA, including interlocking directors and officers, and BBA’s branding on Ontic property. Just as with his claim of an agency relationship, Engen offers no support that such action constitutes substantial, continuous and systematic contacts.
IV
Finally, Engen claims there is a sufficient basis to impose specific jurisdiction over BBA. A nonresident defendant who lacks sufficient contacts in California to establish general jurisdiction may still be subject to the specific jurisdiction of our courts if there is a sufficient nexus among the
Mere ownership of a subsidiary in the forum state does not constitute purposeful availment. (HealthMarkets, Inc. v. Superior Court (2009)
It is not enough for Engen to show that BBA had general involvement in his employment. Rather, he must show that BBA’s activities establishing jurisdiction related specifically to his termination. (Sammons Enterprises, Inc. v. Superior Court (1988)
Here, Engen presents even less evidence that BBA was involved in his employment, let alone his termination. The separation agreement and release form given to Engen upon his termination named only Ontic as Engen’s employer and made no mention of BBA. And, as in Sammons Enterprises, Engen’s wrongful termination claim did not arise out of BBA’s employment benefits, especially since the BBA benefits plans were in addition to Ontic’s independent benefit options.
DISPOSITION
BBA’s petition is granted. Let a writ of mandate issue directing the trial court to vacate its order denying BBA’s motion to quash service of summons and to enter a new order granting the motion. BBA is to recover its costs in this proceeding.
Willhite, J., and Suzukawa, J., concurred.
Notes
Although Engen did not explicitly advance an agency theory as a basis for general jurisdiction, his statement of facts includes a claim that Ontic was an agent of BBA. We treat this factual allegation as an argument that the court’s jurisdiction over Ontic should be imputed to BBA.
