Sonora Diamond Corp. v. Superior Court

In Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, the court discussed at length those circumstances--the "more" needed to subject a parent corporation to general jurisdiction based upon the contacts of the subsidiary. There were two defendants in Sonora. The first was Sonora Mining Corp., a Nevada corporation. (Id. at p. 530.) It did extensive business in California and did not contest jurisdiction. The second was Sonora Diamond Corp., a Canadian corporation. (Id. at pp. 532-533.) Sonora Diamond's primary business was ownership of Sonora Mining's stock. Sonora Diamond prepared consolidated financial reports for itself and its subsidiaries, including Sonora Mining, guaranteed Sonora Mining's obligations, and made significant unsecured (and not repaid) loans to it. (Id. at p. 533.) The trial court denied Sonora Diamond's motion to quash. (Id. at p. 530.) The Court of Appeal concluded Sonora Diamond lacked sufficient minimum contacts with California and issued a writ of mandate. (Id. at p. 555.) The Sonora court identified three circumstances in which general jurisdiction may exist over the parent corporation based upon its subsidiaries' contacts with the forum. First, general jurisdiction may exist when evidence establishes the parent and the subsidiary are alter egos. (Sonora, supra, 83 Cal.App.4th at p. 538.) The party asserting alter ego liability must establish (1) "such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist" and (2) "an inequitable result if the acts in question are treated as those of the corporation alone." (Ibid.) The court concluded the plaintiff failed to establish wrongdoing or an unfair result. (Id. at p. 539.) Second, the Sonora court explained the " 'representative services' " doctrine (a species of agency) "supports the exercise of jurisdiction when the local subsidiary performs a function that is compatible with, and assists the parent in the pursuit of, the parent's own business." (Sonora, supra, 83 Cal.App.4th at p. 543.) But the court concluded the representative services theory is inapplicable to a holding company because "to find the holding company subject to jurisdiction simply because the holding company chose to invest rather than operate would swallow the distinction, made in the case law . . . between holding companies and operating companies . . . ." (Id. at p. 545.) Third, the Sonora court recognized "agency may confer general jurisdiction in the forum state over a foreign corporation," but only where "the nature and extent of the control exercised over the subsidiary by the parent is so pervasive and continual that the subsidiary may be considered nothing more than an agent or instrumentality of the parent, notwithstanding the maintenance of separate corporate formalities . . . ." (Sonora, supra, 83 Cal. App. 4th at pp. 540-541.) The nature of the parent's control over the subsidiary must "be over and above that to be expected as an incident of the parent's ownership of the subsidiary," but must "reflect the parent's purposeful disregard of the subsidiary's independent corporate existence." (Id. at p. 542.) "Accordingly, if a parent corporation exercises such a degree of control over its subsidiary corporation that the subsidiary can legitimately be described as only a means through which the parent acts, or nothing more than an incorporated department of the parent, the subsidiary will be deemed to be the agent of the parent in the forum state and jurisdiction will extend to the parent." (Id. at p. 541.)