District Court Grants Canadian Corporation's Motion to Dismiss for Lack of Jurisdiction
In this action for declaratory judgment, Plaintiff sought a ruling that it was not liable to various Defendants for the clean-up costs associated with environmental contamination on a property Plaintiff formerly owned. Plaintiff sold the contaminated property to Defendant 1 pursuant to an acquisition agreement that provided for a 12 year indemnification for certain environmental liabilities. Defendant 1 then sold the property to Defendant 2 with a separate indemnification agreement. Defendant 3 later acquired Defendant 2 and its subsidiary. When Defendant 3 sought to sell the contaminated property, the contamination was detected. Defendant 3 sought indemnification from Defendant 1, which then sought indemnification from Plaintiff. Plaintiff rejected the indemnification demand under the argument that it was outside the scope of the acquisition agreement, and sought declaratory judgment that it was not liable to any of the Defendants. Defendant 3, a Canadian corporation, moved to dismiss for lack of personal jurisdiction.
Plaintiff argued that Defendant 3 derived substantial revenue from and engaged in persistent corporate operations in Delaware. Defendant 3 argued that it was a holding company with no operations , property or employees in Delaware. The Court found that it had jurisdiction over Defendant 2 and its subsidiary, both of which were subsidiaries of Defendant 3, because both were incorporated in Delaware. The Court stated that where the it had jurisdiction over the subsidiaries, it can acquire jurisdiction over the parent corporation under either the “alter ego theory” or the “agency theory”. The Court found that the mere incorporation of the subsidiaries in Delaware does not confer jurisdiction over the parent corporation, and Plaintiff did not allege improprieties in the formation of the subsidiaries that suggested they were mere instrumentalities of Defendant 3. The Court would not therefore exercise jurisdiction over Defendant 3 under the alter ego theory. The Court also found that the Plaintiff did not allege any action supporting a finding that the subsidiaries were agents of Defendant 3. The Court found that further discovery to enable Plaintiff to support its jurisdictional argument under these theories was unwarranted because Plaintiff did not allege facts that support discovery under those theories and did not request jurisdictional discovery at the appropriate time.Share