Court respects corporate boundaries between parent and subsidiary

Anthoula Pomrening Apr. 10, 2012, 3:52am

In Secure Axcess LLC v. Bank of America Corp., et al., after a consideration of the totality of the circumstances, Judge Davis found that defendant ING Bank was not the alter ego of Defendant ING Direct Bancorp.

The court concluded that plaintiff Secure Axcess LLC had not established that ING Direct was subject to the jurisdiction of the Eastern District of Texas and as a result granted ING Direct's motion to dismiss for lack of personal jurisdiction.

This decision is helpful in determining what steps should be taken for a parent and a subsidiary to be treated as separate entities for purposes of personal jurisdiction.

By way of background, Secure brought suit against a number of defendants, including ING Direct and ING Bank, alleging infringement of U.S. Patent No. 7,631,191, titled "System and Method for Authenticating a Web Page."

ING Bank answered Secure's complaint, but ING Direct moved to dismiss for lack of personal jurisdiction.

While Secure argued three separate bases in its attempt to establish that ING Direct had purposefully directed its activities toward Texas residents, the notable discussion in the decision involved Secure's argument that the Texas contacts of ING Bank should be imputed to ING Direct because ING Bank was an alter ego of ING Direct.

As support for its position, Secure pointed to the common officers between ING Direct and ING Bank, the filing of consolidated financial statements and tax returns, ING Direct's use of the property of ING Bank as a principal place of business, and the commingling of daily operations of the two entities.

But the court was not persuaded by Secure's argument, finding that "[c]ommon ownership, shared directors, and cross-company financing are typical characteristics of the parent-subsidiary relationship."

Further, the court considered the existence of a formal Administrative Services Agreement between ING Direct and ING Bank that sets forth the responsibilities of each entity.

The court found that this agreement as well as other formal documentation such as board meeting minutes and resolutions by ING Direct's board of directors evidenced the respect for corporate boundaries between parent and subsidiary.

"Thus, the parent and subsidiary have respected their corporate boundaries, and this Court shall also. The jurisdictional contacts of ING Bank may not be imputed to ING Direct."

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