BMC Software Belgium, N.V. v. Marchand

In BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 45 Tex. Sup. Ct. J. 930 (Tex. 2002), the court considered the application of the alter ego doctrine in the context of long-arm jurisdiction. "To 'fuse' the parent company and its subsidiary for jurisdictional purposes, the plaintiffs must prove the parent controls the internal business operations and affairs of the subsidiary." BMC Software, 83 S.W.3d at 799. "But the degree of control the parent exercises must be greater than that normally associated with common ownership and directorship; the evidence must show that the two entities cease to be separate so that the corporate fiction should be disregarded to prevent fraud or injustice." Id. Because Texas law presumes that two separate corporations are distinct entities, the courts will not disregard the separate legal identities of corporations unless that relationship is used to defeat public convenience, to justify wrongs such as violation of the anti-trust laws, to protect fraud, or to defend crime. Id. at 798. In BMC Software, the court found no evidence to support the trial court's alter ego finding, where the corporations not only shared officers, but also incorporated the other corporation's financial performance in SEC filings, offered a stock option plan to the subsidiary's employees, and had the same letterhead. Id. at 799-800. The trial court could not infer control from testimony that the parent company from time to time had employees in the offices of a variety of its subsidiaries. Id. at 800. The Court held that "the party seeking to ascribe one corporation's actions to another by disregarding their distinct corporate entities must prove this allegation." 83 S.W.3d at 798. The court explained that this rule exists because "Texas law presumes that two separate corporations are indeed distinct entities." Id. Thus, in this context, the burden of pleading and proof never shifts to the nonresident defendant, but always remains on the plaintiff seeking to establish jurisdiction by this method. Id. at 796 ("The court of appeals determined that the trial court could have reasonably concluded that BMCB failed to negate all possible bases for establishing specific jurisdiction."); id. at 798-800.