Opposition Brief — Dorel Industries, Inc. v. Superior Court of California, Santa Clara County (No. 06-5)

a | FILED

U AUG 2 - 2006

No. 06-05 OFFICE OF THE cos

IN THE

Supreme Court of the United States

DOREL INDUSTRIES, INC.,

Petitioner,

v.

SUPERIOR COURT OF SANTA CLARA COUNTY,

CALIFORNIA,

Respondent.

(Jonathan Jackson III, by and through his Guardian ad Litem,

Jocelyn Sullivan, and Jocelyn Sullivan, Real Parties in Interest)

ON PETITION FOR A WRIT OF CERTIORARI TO THE

CourT OF APPEAL OF CALIFORNIA, SIXTH DISTRICT

BRIEF IN OPPOSITION

Rosert H. BOHN DANIEL U. SMITH

Boun & Bonn LLP Counsel of Record

152 North Third Street Law OFFICE OF DANIEL U. SMITH

Suite 200 21 Rancheria Road

San Jose CA 95112 Kentfield, CA 94904

(408) 279-4222 x 302 (415) 461-5630

Attorneys for Real Parties in Interest

202540 ce

COUNSEL PRESS

(800) 274-3321 * (800) 359-6859

TABLE OF CONTENTS

Page

TABLE OF CITED AUTHORITIES ......cccee: ill

BRIEF FOR REAL PARTIES IN INTEREST

ase 5 6 6b dees 6 vb e0e4e es l

DEAlemens OF THE CASE .....cccccccveecs 4

A. Petitioner’s business is child restraints.

Petitioner delegated design and manufacture

| 4

B. Petitioner is not a mere passive investor. ... 6

1. Petitioner and DJG work “closely” on

design of child restraints and other

a 6

2. Petitioner conducts activities in

DR I EE, occ eevee vesvece 7

3. Petitioner sells child restraints. ....... 7

C. Petitioner regards its subsidiaries’ activities

SS Cee re 7

D. The trish Court rilimg. .... 2... ccc cee eee. 9

E. The court of appeal ruling ............... 9

il

Contents

Page

REASONS FOR DENYING THE PETITION ..... 10

A. No conflict: California and federal courts

apply the same rule, asserting jurisdiction

where the subsidiary conducts the parent’s

| RA ee ee OEP E wT ro rer 10

ee I ee ee il

ie: SL ab wins save Weced omen 13

3. Petitioner’s cases create no conflict. ... 15

B. The decision below raises no “vitally

SIE I. bs 5 n.d ence ses onc uQeRehs 19

IS cue ccktascvscancwsdekeatnn’s 22

AONE S55 So sey ox a ckss eee, la

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TABLE OF CITED AUTHORITIES

CASES

Page

Asahi Metal Industry Co., Ltd. v. Superior Court,

OU PIRI oon iio oo vce occas

Bulova Watch Co., Inc. v. K. Hattori & Co., Ltd.,

508 F. Supp. 1322 (E.D.N.Y. 1981) ......

Burstein v. State Bar of California,

693 F.2d 511 (Sth Cir. 1982) ...........

Chan v. Society Expeditions, Inc.,

“ 39 F.3d 1398 (9th Cir. 1994)

Curtis Publishing Co. v. Cassel,

302 F.2d 132 (10th Cir. 1962) ..........

Digi-Tel Holdings, Inc.

v. Proteq Telecommunications (PTE), Ltd.,

89 F.3d 519 (8th Cir. 1996) ............

DVI v. Superior Court,

128 Cal. Rptr. 2d 683 (Cal. Ct. App. 2002)

Empire Steel Corp. v. Superior Court,

ee Be i) Pet Sere err

F. Hoffman-La Roche v. Superior Court,

cope Be ge. nD

oe ew were eeeee

iv

Cited Authorities

Page

Freeman v. Gordon & Breach, Science Publishers, Inc.,

390 ¥. Supp. SUISAS.DON.Y. F973) occ ddccess 14

Gallagher v. Mazda Motors of America, Inc.,

781 F. Supp. 1079 (E.D. Pa. 1992) .......... a, a 45

Gelfand v. Tanner Motor Tours, Ltd..

Dee Wee FEO Ge CH, TOOEP oo iis pc he ed cavnes 14

International Shoe Co. v. Washington,

Pee UA OED 5 8 aR hee awd RS 20

K.J. Schwartzbaum, Inc. v. Evans, Inc.,

44 F.R.D. 589 (S.D.N.Y. 1968) ........cceee 11, 20

McGee v. International Life Ins. Co.,

SAI, AAAI TS 63 4b Ks a eee 21

Meier v. Sun Int'l Hotels, Inc.,

Zee 0.56 3208 CTC. ZOU) sec eccsiseves 14

Mirrow v. Club Med. Inc.,

oi Re oe Ste aes Oe | ere 15

Mylan Laboratories, Inc. v. Akzo, N.V.,

Se EG SEE kh odin S eb aa oe eer aes 15

Paneno v. Centres for Academic

Programmes Abroad Lid.,

13 Cal. Rptr. 3d 759 (Cal. Ct. App. 2004) ...... 12

Cited Authorities

Page

Project Promotions, Inc. v. Cousteau,

Gee 0.26 Fes CG. TGTS) cccccccvcvcvesss 18

Religious Technology Center v. Liebreich,

poe & Ge Le ee re 17, 18

Sonora Diamond Corp. v. Superior Court,

99 Cal. Rptr. 2d 824 (Cal. Ct. App. 2000) ...... 12

Spectacular Promotions, Inc. v. Radio Station WING,

232 F. Supp. 734 (E.D.N.Y. 1967) ...ccccveves 14

Sunrise Toyota, Ltd. v. Toyota Motor Co.,

Fo Pee. OEP Ce Me ADTE) ccc cc ccvesce 14

Tokyo Boeki (U.S.A.), Inc. v. S.S. Navarino,

324 F. Supp. 361 (S.D.N.Y. 1971) ............ 14

Wells Fargo & Co. v. Wells Fargo Express Co.,

se we Te A og) 14

Wiwa v. Royal Dutch Petroleum Co.,

pep ee ee ee 14

RULES

CG SS RE i Sig 8 We ke wd eit ee see baa Oo 3

l

BRIEF FOR REAL PARTIES IN INTEREST

IN OPPOSITION

Petitioner Dorel Industries, Inc.—whose business

includes the design, manufacture, and sale of child

restraints—was sued because on December 11, 2003,

Jonathan Jackson III was severely injured in an automobile

accident while riding in one of Petitioner’s defective child

booster seats. The defendants included Dorel Juvenile Group,

Inc. (DJG), and Petitioner, the parent of DJG through an

intermediary corporation. Pet. App. A la.

The Petition for Certiorari challenges a California court

of appeal ruling exercising general personal jurisdiction over

Petitioner.

That ruling was justified for several reasons

1. From the start, Petitioner’s business has incMded the

design, manufacture, and sale of child restraints. In recent

years, Petitioner has delegated some—but not a!]—of that

business to DJG (whose contacts with California are not

disputed). If DJG did not perform the functions delegated to

it, Petitioner would have to perform those functions.

2. In supervising DJG’s conduct of its business,

Petitioner is not a mere passive investor. Petitioner and DJG

work “closely” on designing child restraints and other

business activities. Petitioner conducts business activities in

California for DJG. And Petitioner still carries on part of the

business itself—selling child restraints in Canada.

3. Petitioner presents itself to the public as a single entity

in SEC filings and annual reports, describing its subsidiaries’

activities as its own.

2

Finally, the exercise of California jurisdiction over

Petitioner is not unreasonable. Petitioner has undertaken its

own activities in California—obtaining a license from the

State of California and, in a California lease procured by

Petitioner for DJG, agreeing to be sued in California courts.

These facts show that California’s exercise of jurisdiction

over Petitioner did not violate due process.

Moreover, the rationale below does not conflict with

federal circuit court decisions. Federal courts, like the court

below, exercise general jurisdiction over a parent corporation

where (as here) a subsidiary corporation with forum contacts

performs “representative services” that in the absence of the

subsidiary the parent would have to perform itself. As shown

below, this rationale is adopted in 13 federal decisions.

Moreover, the federal decisions cited by Petitioner create no

conflict with the decision below because they are either

inapposite or apply the rule applied below—that jurisdiction

may be asserted where (as here) a subsidiary with sufficient

forum contacts assists the parent corporation’s business by

performing services the parent would otherwise have to

perform itself.

Hence, Petitioner’s claim—that the opinion below

supposedly “eliminates the distinction between parent and

subsidiary companies” (Pet. 8)—is simply not true. Indeed,

the opinion below rejected jurisdiction “where the parent is

merely a holding-company whose only business pursuit is

the investment in the subsidiary.” Pet. App. A 15a. Similarly,

the trial court reasoned that “neither ownership nor control

of a subsidiary corporation by a foreign parent corporation,

without more, subjects the parent to the jurisdiction of the

state where the subsidiary does business.” Pet. App. B 28a

(citation omitted). Hence, contrary to Petitioner’s claim, the

3

California courts below recognize the distinction between

parent and subsidiary companies and reject jurisdiction

simply because the defendant is the parent of a subsidiary

with forum contacts.

The court below agreed with a multitude of federal courts

that allow jurisdiction under the “representative services

doctrine” where (as here) a subsidiary with sufficient forum

contacts “‘provides services beyond “mere solicitation” and

these services are sufficiently important to the foreign

corporation that if it did not have a representative to perform

them, the corporation’s own officials would undertake to

perform substantially similar services.’” Pet. App. A 14a

(quoting Chan v. Society Expeditions, Inc., 39 F.3d 1398,

1405 (9th Cir. 1994)). The trial court applied the same

representative services doctrine to assert jurisdiction over

Petitioner, also citing federal authority: Gallagher v. Mazda

Motors of America, Inc., 781 F. Supp. 1079, 1085 (E.D. Pa.

1992). Pet. App. B 29a.

In sum, California courts assert jurisdiction over a parent

corporation based on the same rationale as federal courts.

Hence, the conflict that Petitioner imagines between the

opinion below and federal courts simply does not exist.

Moreover, any conflict between California’s intermediate

appellate courts and federal appellate courts does not create

a “compelling reason” for granting certiorari. Sup. Ct. R.

10(c). The petition should therefore be denied.

4

STATEMENT OF THE CASE

A. Petitioner’s business is child restraints. Petitioner

delegated design and manufacture to its subsidiary

DJG.

Petitioner, an active operating company, was founded in

Canada 1962 to design and manufacture child restraints in

Canada. Pet. App. A 3a. Petitioner “is the sole owner of all

patents and manufacturing licenses for its products.” Brief

in Opp. App. A 4a, § 7(1). In 1987, Petitioner merged with

Ridgewood Industries, a Canadian corporation. Through a

Canadian public offering, Petitioner became publicly-owned.

Ibid. In 1988 Petitioner expanded into the United States by

buying Cosco, Inc. (corporate predecessor of DJG). Ibid.

Cosco was a leading manufacturer of child restraints in the

United States. /bid.

Petitioner transferred design and manufacturing activities

to “facilities in. . . California,” as described by the trial court:

In the late 1980s, Petitioner sought to expand its

business internationally and thus purchased two

juvenile product manufacturers located in the

United States, Cosco, based in Indiana and

Infantino, Inc., based in San Diego. Cosco was

manufacturing a line of child care seats that was

competing with Petitioner’ products. After the

acquisition, Petitioner ceased manufacturing

juvenile products in Montreal and began

importing these products from the facilities in

Indiana and California.

Pet. App. B 26a.

5

Petitioner continued to make child products, including car

seats, in Canada until 1995 or 1996, when it began importing

Cosco’s restraints to Canada. Pet. App. A 43. Thereafter,

Petitioner had its juvenile products for both Canada and the

United States designed and manufactured at Cosco in the United

States. /bid.

“(I]t was undisputed that DJG manufactured juvenile

products that Petitioner had previously manufactured itself for

sale to Petitioner’s Canadian customers.” Pet. App. A 18a.

Petitioner is now sole owner of Dore! U.S.A., Inc. (Dorel-

USA), a Delaware corporation with its principal place of

business in Indiana. Pet. App. A 3a. Dorel-USA is the sole owner

of DJG. Pet. App. A 3a.

By 2003, 73 percent of sales by Petitioner and its

subsidiaries were in the United States. /bid.

“(T]here was evidence that DJG, the Indiana subsidiary,

over which there is no dispute as to jurisdiction, performed

functions that were compatible with and assisted the parent

company (Petitioner) in the pursuit of the parent’s own business

as a Canadian operating company.” Pet. App. A 19a.

For example, “the Canadian parent company [Petitioner]

used its U.S. subsidiary [DJG] to design and manufacture the

car seats, a task it otherwise would have done itself, to meet the

demands of its Canadian customers.” Pet. App. A 19a-20a.

In 2000, Petitioner acquired Safety Ist, a manufacturer of

juvenile safety devices and merged Safety 1st and Cosco to form

DJG, which continued the Cosco business of designing and

manufacturing child safety seats for the United States and

Canada. Pet. App. A 4a.

6

B. Petitioner is not a mere passive investor.

Petitioner is not a mere passive investor:

(1) Petitioner and DJG work “closely” on design of child

restraints and other business activities.

(2) Petitioner conducts some business activities in

California for DJG.

(3) Petitioner is an operating company, selling child

restraints in Canada.

1. Petitioner and DJG work “closely” on design of

child restraints and other business activities.

“Petitioner worked closely with DJG to insure that the car

seats met the requirements of the Canadian government with

regard to safety and labeling and the demanas of the Canadian

market place in terms of style.” Pet. App. A 19a (emphasis

added). “This work was done by DJG-Canada, a division of

Petitioner that was not a separate subsidiary company.” Ibid.

(emphasis added).

“There was also evidence that DJG-Canada, got involved

in customer service issues related to DJG products that were

manufactured in the U.S. and distributed in Canada. /bid

Moreover, Petitioner provides DJG “financing, insurance,

and procurement”: For its “United States subsidiaries,”

Petitioner “provides basic structural services, such as

arrangements for financing, insurance, and procurement,” with

the subsidiaries engaged in “designing, manufacturing,

marketing, and distributing quality products.” Pet. App. A 4a.

7

2. Petitioner conducts activities in California for DJG.

Petitioner conducts several activities in California that

benefit DJG:

* Petitioner guaranteed the lease of a California

warehouse for DJG. Pet. 5; Pet. App. A 13a.

* Petitioner’s lease guarantee has a forum selection clause

selecting Orange County, California. Pet. 5.

* Petitioner has a license from the California Bureau of

Home Furnishings and Thermal Insulation. Pet. 5; Pet.

App. A |3a-14a.

3. Petitioner sells child restraints.

A division of Petitioner called DJG-Canada buys juvenile

products from DJG and sells them to Canadian customers. Pet.

App. A 4a-Sa. “DJG-Canada is a division of Petitioner and not

a separate subsidiary company.” Pet. App. A 5a. “Petitioner

continued its traditional business of manufacturing and

distributing juvenile products in Canada, including car seats,

and. . . relied on DJG to design and manufacture those car seats.”

Pet. App. A 19a.

C. Petitioner regards its subsidiaries’ activities as its own.

Ample evidence showed that DJG was carrying on the

business of Petitioner.

|. Petitioner’s 2003 annual report filed with the

Securities and Exchange Commission describes the

manufacture and sale of car seats as the business of

Petitioner—anot of its subsidiaries:

8

e Petitioner is “a global manufacturer of consumer

products.”

¢ Child restraints are part of the “product offering” of

“Dorel.”

¢ The manufacture and sale of child restraints in the

United States are Petitioner's “business,” conducted

by its “juvenile products segment” (nor subsidiary)

(emphasis added).

Pet. App. A Sa.

2. Dorel Industries’s annual reports describe DJG, the

entity that manufactures the child safety seats in Indiana, as

a “division.” Pet. App, B 26a (emphasis added).

3. “DJG employees are Dorel Industries employees . . .

carry|ing| out Dorel Industries’ business, including the sale

of juvenile products, such as car seats, in California.”

Pet. App. B 26a.

4. Dorel [Industries employees participated in and

approved DJG design and marketing activities:'

¢ “Two Dorel Industries’ employees, Liz Klaus and

David Hall, participated in design meetings for

the Cosco Grand Explorer Shield Booster Seat.”

Pet. App. B 26a.

1. This evidence presented by Real Parties in Interest was

disputed by Petitioner. The trial court did not expressly resolve the

dispute, but its ruling, denying Petitioner’s motion to quash, impliedly

accepted Real Parties’ version presented above.

9

¢ “fA]pproval” by Klaus and Hall is “required for

details such as product labels as well as design

features.” Ibid. (emphasis added).

¢ Jeffrey Segal, Dorel Industries’ Executive Vice

President of Sales and Marketing, “regularly

participa[ted] in marketing and sales activities with

DJG customers,” attended “product development

meetings in Indiana,” “received copies of

the [product development] meeting minutes

each month,” and “offered opinions” on DJG

expenditures. Pet. App. B 27a.

D. The trial court ruling.

Based on this evidence, the trial court denied Petitioner’s

motion to quash, asserting jurisdiction over Petitioner under

the following test: “[I]f a parent uses a subsidiary to do what

it otherwise would have done itself, it has purposely availed

itself of the privilege of doing business in the forum.”

Pet. App. B 29a. In so ruling, the trial court cited a federal

decision, Gallagher v. Mazda Motors of America, Inc., 781

F. Supp. 1079, 1085 (E.D. Pa. 1992).

E. The court of appeal ruling.

The opinion below denied Petitioner’s challenge to the

trial court’s ruling under the following test:

A foreign corporation is doing business in

the forum state under this theory when its

representative in the forum state “provides

services beyond ‘mere solicitation’ and these

services are sufficiently important to the foreign

corporation that if it did not have a representative

10

to perform them, the corporation’s own officials

would undertake to perform substantially similar

services.”

Pet. App. A 14a.

REASONS FOR DENYING THE PETITION

Petitioner asserts a conflict between the ruling below

and federal Circuit court rulings. Petitioner’s Question

Presented asserts that California’s “representative services

doctrine”—attributing to foreign parent corporations the

contacts of their subsidiaries when those subsidiaries assist

in the parent’s business—’’conflicts with every federal Circuit

that has considered the issue. . . .” Pet. i; 11 (“frank conflict”);

13 (“other courts conflict”); 15 (“stark conflict”).

In truth, Petitioner’s claim of a conflict between

California’s courts and federal courts is simply wrong, as

shown below.

A. No conflict: California and federal courts apply the

same rule, asserting jurisdiction where the subsidiary

conducts the parent’s business.

California and federal courts apply the same test when

asked to assert jurisdiction over a parent corporation. Under

that test, where (as here) the parent corporation is not a mere

holding company but is an active operating company using a

subsidiary to conduct “representative services” for the

parent’s corporation’s business, jurisdiction may be asserted

over the parent corporation (based on the subsidiary’s

forum contacts). Using the subsidiary’s contacts to support

jurisdiction over the foreign parent corporatiea in such

1]

circumstances is justified for two reasons: (1) the subsidiary is

performing services the parent corporation would otherwise have

to perform in the forum itself; and (2) to reject jurisdiction over

the parent corporation where the subsidiary 1s assisting the parent

corporation’s business would allow the parent corporation to

“hide behind the corporate fiction” to evade accountability

for injurious effects the parent caused in the forum.

K.J. Schwartzbaum, Inc. v. Evans, Inc., 44 F.R.D. 589, 590-591

(S.D.N.Y. 1968).

1. California courts.

Under the test articulated by the California intermediate

appellate court below, a subsidiary’s forum contacts support

jurisdiction over a foreign parent corporation where (as here)

the subsidiary “provides services beyond ‘mere solicitation’

and these services are sufficiently important to the foreign

corporation that if it did not have a representative to perform

them, the corporation’s own officials would undertake to

perform substantially similar services.” Pet. App. A 14a.

This statement of the “representative services doctrine” is

consistent with California decision for the last half century.

For example, in 1961 the California Supreme Court ruled

that if a subsidiary corporation conducts the parent’s “economic

activity,” the parent corporation is subject to personal

jurisdiction:

Empire [the parent corporation] has engaged in

economic activity within this state and obtained the

benefits and protection of our laws . . . through the

instrumentality of a subsidiary corporation. . . .

Empire Steel Corp. v. Superior Court, 56 Cal.2d 823, 834 (1961)

(emphasis added).

12

Similarly, a California appellate court has said

jurisdiction exists over a foreign parent “when the local

subsidiary performs a functions that is compatible with, and

assists the parent in the pursuit of, the parent’s own

business. ...” Hoffman-La Roche vy. Superior Court, 30

Cal.Rptr.3d 407, 419 (Cal.Ct.App. 2005)(emphasis in

original); accord, Paneno v. Centres for Academic

Programmes Abroad Ltd., 13 Cal.Rptr.3d 759, 765

(Cal.Ct.App. 2004)Qurisdiction over a parent that “uses a

subsidiary to do what it otherwise would have done itself

...)} DVI v. Superior Court, 128 Cal.Rptr.2d 683, 692

(Cal.Ct.App. 2002) (jurisdiction where “the local subsidiary

performs a function that is compatible with, and assists the

parent in the pursuit of, the parent’s own business.”)

(emphasis in original); Sonora Diamond Corp. v. Superior

Court, 99 Cal.Rptr.2d 824, 839 (Cal.Ct.App. 2000)(same).

These uniform statements of the “representative services

doctrine” have resulted in uniform decisions—rejecting

jurisdiction where the parent is a passive holding company.

For example, where a Swiss parent drug company was

“a true passive ho!lding company that globally invests in

pharmaceutical subsidiaries,” the domestic entities were not

“mere instrumentalities” of the Swiss corporation and the

California court refused jurisdiction over the parent.

F. Hoffman-La Roche v. Superior Court, supra, 30

Cal.Rptr.3d at 422; accord, DVI v. Superior Court, supra

(no jurisdiction over foreign parent corporation where

subsidiary did not perform representative services for the

parent); Sonora Diamond Corp. v. Superior Court, supra (no

jurisdiction over foreign parent corporation that was merely

a passive investor).

13

The rule stated in these California decisions—barring

jurisdiction over a mere passive investor parent corporation,

but allowing jurisdiction where the subsidiary assists in the

parent’s own business—does not conflict with federal court

rulings but is echoed in a multitude of federal decisions, as

shown below.

2. Federal courts.

Federal courts articulate the same test stated by

California courts for jurisdiction over a foreign parent

corporation—rejecting jurisdiction where the parent is a

passive holding company, but asserting jurisdiction where

the parent conducts a business with a subsidiary performing

services the parent would otherwise have to perform itself.

For example, in 1962 the Tenth Circuit articulated the

“representative services doctrine” as follows: where the

activities of a “wholly owned subsidiary [as] agent” of a

foreign corporation “amount to doing business of the parent,

the parent is subjected to the in personam jurisdiction of the

state... .” Curtis Publishing Co. v. Cassel, 302 F.2d 132,

137 (10th Cir. 1962)(emphasis added).

This rule is followed by a multitude of federal courts.

The Ninth Circuit applied a jurisdictional test similar to

the test in Curtis in Chan v. Society Expeditions, Inc., 39

F.3d 1398, 1405 (9th Cir. 1994), after remand, 123 F.3d 1287

(1997):

[A] foreign corporation is doing business in [the

forum] “in the traditional sense” when its [forum]

representative provides services beyond “mere

14

solicitation” and these services are sufficiently

important to the foreign corporation that if it did

not have a representative to perform them, the

corporation’s own officials would undertake to

perform substantially similar services.

Chan, supra, 39 F.3d at 1405 and fn. 9; accord, Wells Fargo

& Co. v. Wells Fargo Express Co., 556 F.2d 406, 423 (9th

Cir. 1977).

The Second Circuit espouses the same rule—that a

foreign corporation is subject to jurisdiction where its

subsidiary “renders services on behalf of the foreign

corporation that . . . are sufficiently important to the foreign

entity that the [foreign] corporation itself would perform

equivalent services if no agent were available.” Wiwa v. Royal

Dutch Petroleum Co., 226 F.3d 88, 95 (2d Cir. 2000); accord,

Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116, 121 (2d

Cir. 1967); Freeman v. Gordon & Breach, Science Publishers,

Inc., 398 F.Supp. 519, 521 (S.D.N.Y. 1975); Sunrise Toyota,

Ltd. v. Toyota Motor Co., 55 F.R.D. 519, 528-529 (S.D.N.Y.

1972); Tokyo Boeki (U.S.A.), Inc. v. S.S. Navarino, 324 F.

Supp. 361, 366 (S.D.N.Y. 1971); Spectacular Promotions,

Inc. v. Radio Station WING, 272 F.Supp. 734, 736 (E.D.N_Y.

1967).

The Eleventh Circuit also applies this rule to assert

jurisdiction over international foreign parent corporations

deemed to be doing business in the forum state through a

subsidiary that promotes the parent’s business. Meier v. Sun

Int’l Hotels, Inc., 288 F.3d 1264, 1275 (11th Cir. 2002)

(Florida subsidiary promoting travel for Bahamian parent

corporation), citing Wiwa, supra, 226 F.3d at 95.

15

Similarly, “allagher v. Mazda Motor of America, Inc.,

781 F.Supp. | 1084-1085 (E.D.Pa. 1992) said jurisdiction

exists Over a fu.scign parent where the subsidiary engages in

“activities that, but for the existence of the subsidiary, the

parent would have to undertake itself.” /d. at 1084. “Put

another way, if a parent uses a subsidiary to do what it

otherwise would have done itself, it has purposely availed

itself of the privilege of doing business in the forum.

Jurisdiction over the parent is therefore proper.” /d. at 1085.

Gallagher cited other district court decisions stating the same

test for jurisdiction over a foreign parent corporation. E.g.,

Mirrow v. Club Med. Inc., 118 F.R.D. 418, 419-420 (E.D.Pa.

1986)(allowing jurisdiction over the parent corporation

because the subsidiary “performs a function that [the parent

corporation] would otherwise have to perform. .. .”); Bulova

Watch Co., Inc. v. K. Hattori & Co., Ltd., 508 F.Supp. 1322,

1342 (E.D.N.Y. 1981)(same).

In sum, federal courts uniformly assert jurisdiction over

a foreign parent corporation on the ground that the foreign

parent is present in the forum through a subsidiary’s activities

which, if the subsidiary did not exist, the parent corporation

would have to perform itself.

3. Petitioner’s cases create no conflict.

Petitioner cites four cases as supposedly conflicting with

the decision below. But Petitioner’s analysis of these cases

is flawed. In truth, three of these cases are inapposite, and

the fourth applies the rationale stated in the foregoing

California and federal cases.

Petitioner first cites Mylan Laboratories, Inc. v. Akzo,

N.V., 2 F.3d 56 (4th Cir. 1993). But Mylan does not conflict

16

with the ruling below because it was decided under a different

state-law test hinging on “control”—allowing jurisdiction

Over a parent Corporation only if the parent exercised

“considerable contro/ over the activities of the subsidiary.”

Id. at 61 (emphasis added). By contrast, the parent

corporation’s control is not an essential element for

jurisdiction over the parent corporation where (as here) the

subsidiary performs essential services to advance the parent’s

business.

Petitioner next cites Digi-Tel Holdings, Inc. v. Proteq

Telecommunications (PTE), Ltd., 89 F.3d 519 (8th Cir. 1996).

But Digi-Te/l, which rejected jurisdiction over a foreign

subsidiary (Proteq)* despite forum activities by the foreign

parent corporation (Goldtron), does not conflict with the

ruling below for several reasons.

First, Digi-Te/, adopted the same reasoning as the court

below:

In determining whether “minimum contacts”

exist, contacts with the forum state that are made

on behalf of the defendant by others may be

considered. The Supreme Court has indicated that

“when commercial activities are ‘carried on in

behalf of an out-of-state party those activities

may sometimes be ascribed to the party, at least

where [it] 1s a ‘primary participan[t]* in the

2. Digi-Tel agreed to buy cell phones from Major, which in

turn agreed to buy those phones from Proteg. After Proteq failed to

deliver the phones, Digi-Tel sued Proteq, asserting Digi-Tel’s rights

as third-party beneficiary of the Major/Proteq agreement and as

assignee of Major’s rights under that agreement.

17

enterprise and has acted purposefully in directing

those activities.” Burger King, 471 U.S. at 480

n. 22, 105 S.Ct. at 2186 n. 22 (citations omitted).

Digi-Tel, supra, 89 F.3d at 523-524.

Second, Digi-Te/ rejected jurisdiction because the forum

contacts of both parent and subsidiary were insufficient

(unlike the instant case). For example, in Digi-7Je/ the foreign

parent corporation entered the forum to register its own

trademark for a wide range of products (fax machines;

cassette players; security equipment) including cell phones,

the foreign subsidiary’s business. But the parent’s forum

activities pertained to a cell phone different from the phone

described in the subsidiary’s forum contract. Though the

parent did attempt to settle Digi-Tel’s claim against Proteq,

public policy bars settlement discussions from providing

“contacts” for jurisdictional purposes, Digi-Te/, supra, at

524-525, and no evidence showed the parent’s settlement

discussions were “conducted primarily for the benefit of or

at the direction of Proteq.” /d. at 525.

Third, the type of jurisdiction addressed in Digi-Te/ was

“specific jurisdiction,” requiring the alleged contacts to relate

to the dispute leading to the suit (id. at 523, fn. 4), not

“general jurisdiction,” addressed in the opinion below.

Because of these fact-specific reasons for rejecting

jurisdiction in Digi-Te/, that decision does not conflict with

the ruling below.

Petitioner next cites Religious Technology Center v.

Liebreich, 339 F.3d 369, 374 (Sth Cir. 2003). But this decision

18

does not conflict with the decision below because Religious

Technology did not involve jurisdiction over a foreign parent

corporation based on a local subsidiary carrying on the

parent’s business. Rather, Religious Technology involved the

general jurisdiction over an out-of-state estate where (1) the

residence of the estate representative (Liebreich) was in the

forum state and (2) the representative conducted “sporadic

Estate-related activities” in the forum. Religious Technology

rejected general jurisdiction for reasons unrelated to the

instant case: (1) the representative’s personal residence in

the forum was not in a representative capacity, and (2) the

representative had not engaged in “a systematic and

continuous stream of activities tying the Estate to Texas.”

Id. at 374-375. Religious Technology did not cite or discuss

any decisions involving jurisdiction over a foreign parent

corporation. Hence, Religious Technology’s rejection of

general jurisdiction over the representative of an out-of-state

estate does not conflict with the ruling below.

Finally, Petitioner cites Project Promotions, Inc. v.

Cousteau, 495 F.2d 483 (5th Cir. 1974), partial overruling

recognized in Burstein v. State Bar of California, 693 F.2d

511,518, fn. 12 (Sth Cir. 1982). But Project Promotions did

not discuss, let alone criticize, basing jurisdiction over a

parent corporation on the subsidiary’s “representative

services” in the parent corporation’s business. Rather this

case applied an agency theory to reject jurisdiction over the

parent for lack of “evidence that the parent exercised the

type of control necessary to ascribe to it the activities of the

subsidiary.” /d. at 493. Because Project Promotions rejected

jurisdiction for lack of evidence of control, this ruling under

the different agency test does not conflict with the decision

below, which also declined to impose jurisdiction under an

agency theory.

19

As shown. the decisions that Petitioner claims to conflict

with the ruling below raise no conflict at all—either in their

rationales or in their results.

B. The decision below raises no *‘vitally important” issue.

In Part “C” the Petition claims that “resolution of the

conflict is vitally important.” Pet. 17-23. This claim has no

merit.

First, as shown above, California decisions and federal

decisions do not conflict over the standard for asserting

jurisdiction over foreign parent corporations. Hence, the

decision below raises no “vitally important” issue.

Moreover, none of the values cited by Petitioner—

”*Commercial Importance,” “Importance of Due Process

Values,” “International Importance”—are threatened by the

decision below.

Regarding “commercial importance,” Petitioner’s claim

that the decision below leaves foreign parent curporations

in “an unjustified state of uncertainty” (Pet. 18) is simply

wrong. The test articulated by California and federal courts

is quite specific, informing foreign parent corporations they

are subject to jurisdiction if another corporation performs

for the parent “representative services” the parent would

otherwise have to perform itself.

Regarding due process, tnat value is protected by the

“representative services doctrine.” Under that doctrine,

jurisdiction over passive foreign holding companies is barred,

while jurisdiction over foreign parent companies that conduct

business through “representative services” of subsidiaries is

allowed.

20

Indeed, the “representative services doctrine” is supported

by /nternational Shoe Co. v. Washington, 326 U.S. 310 (1945).

International Shoe was a foreign corporation with no office or

inventory in Washington, and International Shoe made no

contracts in Washington. /d. at 313. International Shoe was

represented in Washington by its salesmen, who displayed the

company’s products and solicited orders transmitted to

St. Louis for acceptance or rejection. These salesmen supported

personal jurisdiction over International Shoe by creating the

company’s “presence” in Washington based on “activities

carried on in its behalf by those who are authorized to act for

it.” Id. at 316, 320 (evaluating “activities carried on in behalf

of appellant in the State of Washington. . . .”)(emphasis added).

Hence, the ruling below complies with /nternational Shoe’s

due process requirements because Petitioner’s “presence” in

California rests on “activities carried on in its behalf,” as

International Shoe dictates.

Accepting Petitioner’s contrary argument against

jurisdiction would reduce the due process clause to a sham,,.

allowing foreign parent corporations whose subsidiaries advance

the parent’s business to avoid jurisdiction simply by “hid{ing]

behind the corporate fiction.” K./. Schwartzbaum, Inc. v. Evans,

Inc., 44 F.R.D. 589, 590-591 (S.D.N.Y. 1968).

Finally, regarding “international importance,” the decision

below threatens no unfairness to an alien corporate defendant.

Petitioner thrust itself into the United States by becoming deeply

involved in the business activities of DJG, its USA subsidiary.

Petitioner has further thrust itself into California (1) by obtaining

a license in its own name from the California Bureau of Home

Furnishings and Thermal Insulation (Pet. 5; Pet. App. A 13a-

21

14a), (2) by guaranteeing the lease of a California warehouse

for DJG (Pet. 5; Pet. App. A 13a), and (3) by agreeing under

that lease’s forum selection clause to be sued in Orange

County, California. Pet. 5. As this Court has noted, “modern

transportation and communications have made it much less

burdensome for a party sued to defend himself in a State

where he engages in economic activity.” McGee v.

International Life Ins. Co., 355 U.S. 220, 223 (1957).

Hence, for Petitioner to defend this suit in California

will impose only a minima! burden that Petitioner a/ready

accepted by agreeing to be sued in Orange County. This

minimal burden contrasts sharply with the burden that would

have been borne by the Japanese defendant with no United

States contacts in Asahi Metal Industry Co., Ltd. v. Superior

Court, 480 U.S. 102 (1987).

22

CONCLUSION

The conflict asserted by Petitioner between the decision

below and federal authorities simply does not exist. As

shown, California and federal courts uniformly assert

jurisdiction where a subsidiary with forum contacts performs

“representative services” that promote the business of the

foreign parent corporation. Because this “representative

services” test for jurisdiction conforms to /nternational Shoe,

the decision below raises no “vitally important” issue.

The Petition should be denied.

Respectfully submitted,

Daniet U. SMITH

Counsel of Record

~ Law Office oF Danie U. SMITH

21 Rancheria Road

Kentfield, CA 94904

(415) 461-5630

Rosert H. Boun

Boun & Boun LLP

152 North Third Street

Suite 200

San Jose CA 95112

(408) 279-4222 x 302

Attorneys for Real Parties in Interest

APPENDIX

la

APPENDIX — DECLARATION OF ROBERT H.

BOHN IN OPPOSITION TO DEFENDANT

DOREL INDUSTRIES, INC.’S MOTION

TO QUASH SERVICE OF SUMMONS

DATED DECEMBER 14, 2004

IN THE SUPERIOR COURT OF THE

STATE OF CALIFORNIA IN AND FOR THE

COUNTY OF SANTA CLARA

No. 1-04-CV014652

JONATHAN JACKSON, III, by and through his

Guardian ad Litem, JOCELYN SULLIVAN; and

JOCELYN SULLIVAN,

Plaintiffs,

V.

DOREL JUVENILE GROUP, INC., et al.,

Defendants.

DATE: December 14, 2004

TIME: 9:00A.M.

DEPT: 7

JUDGE: Socrates Manoukian

TRIAL: Not set yer

I, ROBERT H. BOHN, declare the following under

penalty of perjury:

2a

Appendix

| am an attorney licensed to practice law before all the

courts of the State of California and am the attorney

representing the plaintiffs herein. | know the following of

my own personal knowledge and am competent to testify

thereto if called upon as a witness.

1. Attached hereto and incorporated herein by reference

as Exhibit “1” is a true and correct copy of the complaint in

this action.

2. Attached hereto and incorporated by reference as

Exhibit “2” is a true and correct copy of the amendment to

the complaint substituting DOREL INDUSTRIES, INC. as

Doe 1.

3. Attached hereto and incorporated by reference as

Exhibit “3” is a true and correct copy of a letter from defense

‘counsel to plaintiff's counsel stipulating that the depositions

taken in the case of Rapan v. Cosco can be used as though

taken in this case for the purpose of opposing defendant’s

motion to quash service of summons and complaint.

4. Attached hereto and incorporated by reference as

Exhibit “4” is a true and correct copy of a lease for a

wareheuse in Ontario, California, provided by defendant

DOREL JUVENILE GROUP, INC., in response to plaintiff's

Request For Production of Documents (please note that the

Lease Guarantee, Exhibit “J” to the Lease, at page 58 has

been removed).

5. Attached hereto and incorporated by reference as

Exhibit “5” is a true and correct copy of the Lease Guarantee

3a

Appendix

for the Ontario, California, property at the Shea Center

obtained by subpoena.

6. Attached hereto and incorporated by reference

as Exhibit “6” is a true and correct copy of the California

Bureau of Home Furnishings and Thermal Insulation showing

that DOREL INDUSTRIES OF CANADA is licensed by the

State of California under License Number 123022.

7. Attached hereto and incorporated by reference as

Exhibit “7” is a true and correct copy of DOREL

INDUSTRIES, INC.’S 2003 Renewal Annual Information

form of May 15, 2004, filed with the United States Securities

Exchange Commission, which states that DOREL

INDUSTRIES, INC::

(a) Employs 5,000 people in fourteen countries (page

2);

(b) Its major “divisions” include DOREL

JUVENILE GROUP, which incorporates the Cosco brand

name (page 3);

(c) In 1988 DOREL purchased Cosco of Columbus,

Indiana, which later became DOREL JUVENILE GROUP

(page 3);

(d) In 1991 DOREL purchased Silgo International

in San Diego (page 3);

(e) In 2000 DOREL purchased Safety Ist, Inc., then

restructured its juvenile business in North America and

4a

Appendix

Europe, renaming the Columbus, Indiana, “Juvenile

Operating Units” in Indiana the DOREL JUVENILE

GROUP (page 4):

(f) The reporting currency of the corporation is in

U.S. dollars (page 5);

(g) Its “Juvenile Products Segment” manufactures

infant car seats under the brand name Cosco (page 6);

(h) The “Juvenile Products Segment’s success

hinges on successful new product development and Dorel’s

commitment to customer service.” (page 6);

(i) In 2003, DOREL had two major customers

(Walmart and Toys-R-Us) each representing more than 10%

of sales.” (page 7);

(3) DOREL maintains close relationships with its

major retailers such as Walmart (page 7);

(k) In 2003 73% of DOREL’s sales took place in

the United States. (page 7);

(1) “Dorel is the sole owner of all patents and

manufacturing licenses for its products.” (page 8);

(m) “Research and development is an important part

of Dorel’s business success. Each year, each of Dorel’s two

operating segments introduces a large number of new

products.” (page 8);

Sa

Appendix

(n) “Quality control is an essential part of Dorel’s

competitive position.” (page 8)

(o) Car seat research and development is done at its

plant in Columbus, Indiana. (page 9);

(p) Dorel’s Class B shares are listed on the

NASDAQ National Market under the symbol DIIB. (page

10);

(q) Martin Schwartz is the company’s President and

CEO (page 10);

(r) Jeff Segel is the company’s Executive Vice

President of Sales and Marketing; (page 11);

8. DOREL’s major divisions in the United States include

Ameriwood Industries and the DOREL JUVENILE GROUP

(DJG USA), which incorporates the Cosco and Safety Ist

brand names. (See Exhibit “7”, p. 3).

9. Attached hereto and incorporated by reference as

Exhibit “8” is a true and correct copy of a Notice of Ruling

denying DOREL INDUSTRY, INC.’S motion to quash

service of Summons and Complaint in an identical case in

Riverside County, California, Case No. INC035190, Jsaiah

Gabriel Rapan v. Cosco, Inc., Dorel Industries, Inc., et al.

10. Attached hereto and incorporated herein by reference

as Exhibit “9” 1s a true and correct copy of a facsimile

message from Nick Costides to Martin Schwartz and Rick

Lechner that on August 2, 1996, press releases issued by

6a

Appendix

Cosco, Inc., (Indiana) had to be approved by Martin Schwartz,

CEO of DOREL INDUSTRIES, INC., Canada.

11. In 1997, while manufacture of all child booster seats

was done in DOREL’s Indiana plant, DOREL INDUSTRIES,

INC., of Canada was recognized as the manufacturer of the

product and responsible for replacement of safety labels on

the products by the Canadian government. Attached hereto

and incorporated by reference as Exhibit “10” is a true and

correct of a memorandum to Mr. David Hall of DOREL

INDUSTRIES, INC., addressing violations of labeling of

these products manufactured in Indiana.

12. Attached hereto and incorporated by reference as

Exhibit “11” is a true and correct copy of a January 9. 1997

facsimile from Terry Emerson of Cosco, Indiana, to David

Hall, DOREL INDUSTRIES, INC., Canada, to review details

of product labels on the Cosco Grand Explorer to gett DOREL

INDUSTRIES, INC.’s approval of label details.

13. Attached hereto and incorporated by reference as

Exhibit “12” are true and correct excerpts of product

development meeting minutes on the Grand Explorer from

meetings on April 17, 1995, May 19, 1995, June 16, 1995,

August 2, 1995, and May 11, 1999, showing complete copies

of all product development meeting minutes were routinely

sent to Martin Schwartz and other top management officers

of DOREL INDUSTRIES, INC., of Canada.

14. Attached hereto and incorporated by reference as

Exhibit “13” are excerpts of the deposition transcript of

Jeffrey Allen Segel, Vice President of Sales and Marketing

of DOREL INDUSTRIES, INC.

-

a

Appendix

15. Attached hereto and incorporated by reference as

Exhibit “14” are excerpts of the deposition transcript of

Elizabeth Mary Chnistine Klaus, Quality Assurance Manager

for DOREL INDUSTRIES, INC.

16. Attached hereto and incorporated by reference as

Exhibit “15” are excerpts of the deposition transcript of David

Hall, Vice President of Sales for DOREL INDUSTRIES, INC.

17. Attached hereto and incorporated by reference as

Exhibit “16” are excerpts of the deposition transcript of David

Cuelar, Director of Distribution for DOREL JUVENILE

GROUP.

Executed this 2nd day of December, 2004, at San Jose,

California, under the laws of the State of California.

s/ Robert H. Bohn

ROBERT H. BOHN, ESQ.