Warad West LLC v. Sorin CRM USA, No. 14-cv-3242 (D. Colo. Aug. 11, 2015) [click for opinion]

Plaintiffs Warad West LLC and Anthony Caforio alleged breach of contract and related causes of action against Sorin CRM USA (“CRM”), Sorin Group USA, Inc. (“Group”), Sorin Group Italia SrL (“Italia”), and Sorin SpA.  Caforio worked for many years as an independent salesman for CRM. 

CRM is a Delaware corporation and the wholly-owned subsidiary of Sorin USA, Inc., which is also a Delaware corporation.  Sorin USA, Inc. is the wholly owned subsidiary of Italia, an Italian limited liability company, which is majority owned by Sorin SpA, an Italian corporation.  Italia and Sorin SpA moved to dismiss for, among other things, lack of personal jurisdiction. 

Because Colorado’s long-arm statute confers the maximum jurisdiction permissible consistent with the federal Due Process Clause, the part of the motion challenging personal jurisdiction turned on whether the exercise of personal jurisdiction over Italia and Sorin SpA comported with due process.  The court found that it did not.

Plaintiffs did not argue that either Italia or Sorin SpA had meaningful individual contacts with Colorado.  Instead, Plaintiffs attempted to attribute CRM’s and Group’s contacts to Italia and Sorin SpA pursuant to an alter ego theory.  The court did not require Plaintiffs to present a prima facie case of all elements of an alter ego or veil piercing claim; rather, the court determined that the ultimate jurisdictional question was whether the subsidiary was “doing the business of the parent.”  Therefore, the relevant inquiry for the court was into facts concerning the amount of control exercised by the corporate parent over the subsidiary. 

It was undisputed that Italia and SpA wholly owned Group and CRM, either directly or indirectly.  Yet there were conflicting allegations regarding whether all Defendants had common directors and officers.  And CRM disputed that it did not observe corporate formalities, arguing that (i) it maintains its own bylaws; (ii) its board of directors holds annual meetings; (iii) it files appropriate tax returns as part of consolidated returns with Group; and (iv) has its own management team, its own expenses, budget, revenues and assets.  CRM did not, however, contest Plaintiffs’ assertion that it was grossly undercapitalized and relied on companies above it in the corporate chain for financing. 

Plaintiffs also submitted an affidavit from a former CRM sales manager.  The court held that this actually undermined Plaintiffs’ argument, because the affidavit portrayed CRM “as the neglected stepchild of the Sorin family.”  The affidavit showed that there were disagreements between Defendants and supported Defendants’ claim that CRM’s management team—and not the parent companies—made decisions for CRM.  Considering all of these facts, the court found that Plaintiffs had failed to state a prima facie case sufficient for personal jurisdiction over Italia and SpA. 

Eileen Flynn of the Chicago office contributed to this summary.