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The Franchise Memorandum

Wisconsin Supreme Court Declines to Exercise Personal Jurisdiction Over Foreign Parent of American Subsidiary

The Wisconsin Supreme Court recently held that it could not exercise general personal jurisdiction over a foreign parent corporation in Rasmussen v. General Motors Corp. et al., 2011 Wisc. LEXIS 343 (Wisc. July 1, 2011). The plaintiffs argued the court had general personal jurisdiction over one defendant’s parent corporation, Nissan Japan, based on the acts of its wholly owned subsidiary, Nissan North America. In order to exercise personal jurisdiction over an out-of-state defendant, the plaintiff must show that the defendant comes within the ambit of the state’s long-arm statute and that exercising jurisdiction would comport with due process. Wisconsin’s long-arm statute allows courts to exercise general personal jurisdiction over parties engaged in “substantial and not isolated activities within” the state. Wisconsin courts interpret this statute to authorize jurisdiction to the full extent of the due process clause.

In this case, neither party disputed that the Wisconsin court had jurisdiction over Nissan North America. The plaintiffs argued that the court could exercise jurisdiction over Nissan Japan because of an alleged agency relationship between the two corporations, and because Nissan Japan had sufficient control over Nissan North America to satisfy an alter-ego theory of jurisdiction. The court disagreed. It first noted that in order to exercise general personal jurisdiction over a nonresident based on an agency theory, the nonresident parent corporation must have sufficient control over the subsidiary to allow the court to disregard the separate corporate identities. Assuming arguendo that Nissan North America was an agent acting for Nissan Japan, the court applied Wisconsin’s test for piercing the corporate veil and found that the separate corporate identities should remain intact. The facts demonstrated that the corporate formalities and legal requirements were observed and there was no showing of fraud or undercapitalization. Importantly, although the court noted that parent corporations necessarily control, direct and supervise their subsidiaries to some extent, in this case Nissan Japan did not have complete control or domination over Nissan North America, as Nissan North America exercised some independent decision-making.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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