A recent case, Goldthrip v. Johnson & Johnson, provides an excellent roadmap to follow when representing out of state corporate parents who have been dragged into court on an alter ego theory of personal jurisdiction based on the local activities of a subsidiary. On Dec. 8, 2016, U.S. Magistrate Judge Sonja Bivins of the U.S. District Court for the Southern District of Alabama, issued a report and recommendation granting Johnson & Johnson’s motion to dismiss in Goldthrip v. Johnson & Johnson, a product liability case involving a fractured prosthetic hip stem.

In this lawsuit, the plaintiffs sued not only DePuy, the manufacturer of the hip implant, but also Johnson & Johnson, its corporate parent. Johnson & Johnson moved to dismiss the action on jurisdictional grounds, arguing that the Alabama court lacked both general and specific jurisdiction over the New Jersey parent corporation.

The magistrate’s report and recommendation concluded that personal jurisdiction was lacking and the plaintiffs failed to rebut Johnson & Johnson’s evidence showing that DePuy and Johnson & Johnson are separate corporations. The plaintiffs urged the court to find personal jurisdiction over the parent company based on the subsidiary’s forum contacts because the companies “were so intermingled and joined,” i.e., that one was the alter ego of the other. The plaintiffs argued, among other things, that Johnson & Johnson was involved in lawsuits concerning its subsidiary.

The district court observed that federal courts have “consistently acknowledged that it is compatible with due process for a court to exercise personal jurisdiction over [a corporation] that would not ordinarily be subject to personal jurisdiction in that court when the . . . corporation is an alter ego . . . of a corporation that would be subject to personal jurisdiction in that court.” However, “[p]iercing the corporate veil is not a power that is exercised lightly.” Mere “dominion and control” do not suffice, because any wholly owned subsidiary is under the dominion and control of its parent.

Applying Alabama law, the district court held that the plaintiff had to show that (1) the parent had complete control over the subsidiary such that the subsidiary had “no separate mind, will or existence of its own”; (2) the parent “misused” the control; and (3) the misuse of the corporation caused the harm complained of. Here, the court concluded the plaintiffs failed to satisfy any of these requisite elements to justify piercing the corporate veil under an alter ego theory. The court found no basis for imputing the contacts of DePuy to its separate and distinct parent company. The court further found that nothing indicated that Johnson & Johnson had participated in any business activity in Alabama to warrant general jurisdiction. As to specific jurisdiction, the court found that none of the required factors outlined by Alabama Supreme Court precedent existed.

On Dec. 28, 2016, the District Court adopted the magistrate’s report and recommendation and entered judgment on behalf of Johnson & Johnson.

This decision confirms that, when pressed, courts are reluctant to find jurisdiction in such circumstances. So long as the corporate parent gives the court real evidence showing that they maintain some semblance of separation from the subsidiary, this decision sends a strong message that the alter ego theory may not work.