Translation Systems, Inc. v. Applied Technology Ventures
559 F. Supp. 566, 1983 U.S. Dist. LEXIS 18123 (1983)
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Rule of Law:
A federal court in Maryland may not exercise personal jurisdiction over out-of-state defendants under Maryland's long-arm statute unless the plaintiff can demonstrate sufficient control by a parent corporation over a subsidiary to pierce the corporate veil under an agency theory, or prove that alleged tortious conduct occurred within the state, or that business solicitation was regular and persistent.
Facts:
- Plaintiff alleged that the defendants violated provisions of the Maryland Bulk Transfer Act and the Maryland Fraudulent Conveyances Act.
- Defendants are out-of-state entities, potentially from California.
- Defendants own, control, and operate a subsidiary named Jacquard, which transacts business in Maryland.
- Defendants sent a single letter of solicitation in April 1982, potentially to many businesses and individuals in Maryland.
- Defendants allegedly failed to send the notice required by Maryland Commercial Law Code § 6-107.
Procedural Posture:
- Plaintiff brought a lawsuit in the United States District Court for the District of Maryland, alleging that defendants violated provisions of the Maryland Bulk Transfer Act and the Maryland Fraudulent Conveyances Act.
- Defendants filed a motion to dismiss the lawsuit under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction.
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Issue:
Does a federal court in Maryland have personal jurisdiction over out-of-state defendants under the Maryland long-arm statute based on a subsidiary's business in the state, an alleged tortious omission, or a single letter of solicitation?
Opinions:
Majority - Joseph H. Young
No, the court does not have personal jurisdiction over the out-of-state defendants because the plaintiff failed to establish sufficient ties under Maryland's long-arm statute. The court found that for personal jurisdiction based on a subsidiary's activities, the plaintiff must prove that the parent (defendants) exercises significant control over the subsidiary (Jacquard) such that the subsidiary's significant decisions require the parent's approval. Here, the plaintiff provided no evidence of such control, thus preventing the corporate veil from being pierced. Regarding the claim of tortious injury from an omission to send notice, the court concluded that the omission (failure to send a letter) could have occurred outside Maryland and, even if it occurred in Maryland, it did not satisfy the minimum contacts required by due process. Finally, concerning the claim that defendants regularly solicited business or derived substantial revenue from Maryland, the court found that a single solicitation letter in April 1982 did not constitute 'regular' solicitation, and again, the lack of evidence for piercing the corporate veil prevented attributing Jacquard’s revenue to the defendants.
Analysis:
This case clarifies the stringent requirements for establishing personal jurisdiction over out-of-state defendants, particularly parent corporations, under Maryland's long-arm statute. It reinforces the principle that merely owning a subsidiary operating in a state is insufficient; plaintiffs must demonstrate actual control over significant decisions to pierce the corporate veil for jurisdictional purposes. Furthermore, the ruling emphasizes that 'tortious injury in the state by an act or omission in the state' requires the act or omission itself to physically occur within the state, and even then, due process minimum contacts must be satisfied. A single act of solicitation, no matter how widespread, will not typically meet the 'regularly solicits business' prong, setting a high bar for demonstrating continuous and systematic contacts.
