EDVA Judge dismisses case against parent company after finding parent was not “Alter Ego” of Virginia subsidiary

Posted on January 28, 2016
Posted in Cases, Updates

Piercing corporate structures remains tough in Virginia, even if only to show jurisdiction. In a discrimination case brought by an employee of a Virginia-based subsidiary against his employer, its controlling mid-level subsidiary, and the Indiana parent company of both, Judge Conrad of the Western District of Virginia granted the parent company’s motion to dismiss for lack of personal jurisdiction, finding that (1) the nonresident parent had no direct contacts with Virginia and (2) the jurisdictional contacts of the subsidiaries could not be imputed to the parent. Bennett v. OmniSource Corp., No. 7:14-cv-309 (W.D. Va. Nov. 4, 2015).

The Court specifically found that plaintiff failed to satisfy the standard in the Fourth Circuit to show that either the lower-level or mid-level subsidiary was the parent’s “alter ego.” Plaintiff, a sorter in a metal processing facility, did not offer any evidence to rebut affidavits from the parent company indicating that it has no direct contacts with Virginia. Instead, plaintiff argued that the mid-level subsidiary’s contacts with Virginia could be imputed to the parent because the companies share corporate officers and work facilities in Indiana, and because the parent provided guarantees to certain vendors. Under Virginia case law, the Court found such evidence insufficient to show that the parent exercised extraordinary control over the subsidiary, or that the parent was a separate entity in name only.

The lesson? Proving alter ego status is fact intensive in Virginia, and merely sharing corporate officers and work facilities may not be enough without other indicators of control.

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