Sears, Roebuck and Co. v. Sears plc

• Decision Date: 30 November 1990
• Docket Number: Civ. A. No. 88-342-JLL.
• Parties: SEARS, ROEBUCK AND CO., Plaintiff, v. SEARS PLC and Sears Financial Services Limited, Defendants.
• Court: U.S. District Court — District of Delaware

752 F. Supp. 1223

SEARS, ROEBUCK AND CO., Plaintiff, v. SEARS PLC and Sears Financial Services Limited, Defendants.

Civ. A. No. 88-342-JLL.

United States District Court, D. Delaware.

November 30, 1990.

Arthur G. Connolly, Jr., of Connolly, Bove, Lodge & Hutz, Wilmington, Del., James A. Drobile of Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., Nancy Schaefer, Thomas D. Rosenwein and David S. Fleming of Schaefer, Rosenwein & Fleming, Chicago, Ill., of counsel, for plaintiff.

Jesse A. Finkelstein, Robert W. Whetzel and James C. Strum of Richards, Layton & Finger, Wilmington, Del., Shelby R. Grubbs and Susan Kerr Lee of Grant, Konvalinka & Grubbs, Chattanooga, Tenn., of counsel, for defendants.

OPINION

LATCHUM, Senior District Judge.

I. BACKGROUND

On June 28, 1988 Sears, Roebuck and Company ("Roebuck") filed a trademark and trade name infringement action against Sears plc ("PLC") a British corporation.¹ (Complaint, Docket Item "D.I." 1.) Discovery closed on December 15, 1989. The Court issued two memorandum opinions and related orders on July 24, 1990 which addressed PLC's motions to dismiss, and motions for summary judgment made by both PLC and Roebuck. Sears, Roebuck & Co. v. Sears plc, 744 F.Supp. 1289, 744 F.Supp. 1297 (D.Del. 1990). For present purposes, it is noteworthy that the Court, in its opinions, dismissed the claims against Sears Financial Services Limited and the American Depositary Receipts ("ADR")² claims against PLC for lack of personal jurisdiction, but did not dismiss the claims against PLC related to the alleged trade name infringements of its Delaware subsidiary Delaware Mercantile Holding Company ("DMH"). The Court also noted in the July 24 opinions that it could not grant summary judgment for PLC on the claims related to activities by PLC's non-Delaware subsidiaries³ because PLC may have "directed and controlled" their use of the trade name "Sears." What was left open in footnote 17, because the parties failed to brief the issue, was whether the Court has personal jurisdiction over PLC for the alleged trade name infringements of these subsidiaries. As the Court noted at footnote 17:

While the parties have not argued it, under the law of the case as established above, it is unclear that this Court has personal jurisdiction over PLC for the acts of its non-Delaware subsidiaries.

Sears, 744 F.Supp. 1297, 1309 n. 17. If the Court lacks personal jurisdiction over PLC for these claims, it will have to dismiss them pursuant to Fed.R.Civ.P. 12(b)(2). The Court has received supplemental briefs from the parties, and will now decide the question left open in footnote 17.

II. FACTS

PLC is the parent of several American and British subsidiaries that have only minimal, if any, contacts with Delaware. PLC itself is incorporated under the laws of England and Wales and is only subject to the Court's specific personal jurisdiction. The Court's exercise of specific personal jurisdiction over PLC has been premised on either of two theories: first, PLC took advantage of Delaware law when it incorporated a subsidiary, DMH, in Delaware; and second, there is a limited agency between PLC and DMH by which PLC allegedly directs and controls DMH's use of the trade name "Sears." A more detailed discussion of the case's procedural history and facts can be found in the Court's opinions of July 24, 1990. Sears, Roebuck & Co. v. Sears plc, 744 F.Supp. 1289, 744 F.Supp. 1297 (D.Del.1990).

III. DISCUSSION

A. Introduction

The Court's personal jurisdiction over PLC, an out-of-state party, is governed by Fed.R.Civ.P. 4(e). Under Rule 4(e) the Court can assert personal jurisdiction over PLC only to the extent permitted by Delaware's long arm statute.⁴ In an opinion dated July 24, 1990 the Court held that only § 3104(c)(3) of Delaware's long arm statute was applicable to the claims asserted by Roebuck against PLC.⁵ If personal jurisdiction over PLC for the acts of its non-Delaware subsidiaries cannot be had under § 3104(c)(3) the Court must dismiss these claims for lack of personal jurisdiction.

Section 3104(c)(3) of Delaware's long arm statute gives the Court specific personal jurisdiction over out-of-state defendants, see La Nuova D & B, S.p.A. v. Bowe Co., 513 A.2d 764, 768 (Del.1986), and reads as follows:

(c) As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or his personal representative, who in person or through an agent:

* * * * * *

(3) Causes tortious injury in the State by an act or omission in this State;

(emphasis added). Under this section, a court can exercise specific personal jurisdiction over a defendant on either of two grounds. First, the Court has specific jurisdiction over defendants who cause tortious injury in Delaware by their acts or omissions in the state. Jacobs/Kahan & Co. v. Marsh, 740 F.2d 587, 590 (7th Cir. 1984).⁶ These acts or omissions within Delaware are called "jurisdictional acts." Id. Second, the Court can assert personal jurisdiction over a party for its involvement in a cause of action that "arises from" an above described "jurisdictional act," regardless of the locus of that cause of action. Id. In either case, the Court must also be certain that its exercise of jurisdiction comports with the requirements of due process. Id.

B. Basis Upon Which Personal Jurisdiction Can Be Exercised Over A Parent Corporation For The Acts Of Its Subsidiaries

The primary issue before the Court is whether the claims against PLC for the acts of its non-Delaware subsidiaries are sufficiently related to Delaware so as to justify an exercise of specific jurisdiction over PLC pursuant to § 3104(c)(3). For purposes of clarification, the Court notes that Roebuck may be able to prove sufficient facts at trial to warrant holding PLC liable for the trade name infringements of its non-Delaware subsidiaries. The Court recognizes that under Delaware law, tortious conduct by a subsidiary does not alone justify an exercise of personal jurisdiction over the parent. Dentsply International, Inc. v. Pentron Corp., 648 F.Supp. 856, 860-61 (D.Del.1986), Waters v. Deutz Corp., 460 A.2d 1332, 1337 (Del.Super.1983) ("Having examined all of the aforementioned precedents, this Court acknowledges the general rule that ownership alone of a subsidiary is not sufficient to justify jurisdiction over the parent."). But in the present case, Roebuck has alleged sufficient facts to survive summary judgment on the issue of whether PLC "directed and controlled" its subsidiaries in the use of the name "Sears." Sears at 1309. It is this alleged "direction and control" that could give rise to specific jurisdiction over PLC for the acts of its subsidiaries. Id. at 1306 & n. 7.

In its July 24 opinion, the Court recognized that under a theory of "limited agency" a court can assert specific personal jurisdiction over a parent company, for the acts of its subsidiaries, to the extent that the actions of the subsidiaries are "directed and controlled" by the parent. Id. (citing Altech Indus., Inc. v. Al Tech Specialty Steel Corp., 542 F.Supp. 53 (D.Del.1982)). With respect to PLC's subsidiaries, the Court held:

The statement of PLC's chairman that "while Sears plc has the ability to prevent a subsidiary from using the `Sears' name, in practice it would not do so," D.I. 238A at 28-29, indicates that PLC has retained control over the use of the name "Sears." The extent of this control, and whether that control creates an agency relationship, involves disputed facts that are inappropriate for resolution in a motion for summary judgment.

Sears at 1309. The Court has already concluded that a limited agency relationship exists between PLC and its Delaware subsidiary DMH. Id. at 1306 n. 7 & 1309. The Court finds that for present purposes there is no reason to distinguish between the "direction and control" exercised by PLC over DMH and that exercised over PLC's non-Delaware subsidiaries. Roebuck has sufficiently alleged that PLC "directed and controlled" its non-Delaware subsidiaries in their use of the name "Sears" such as to warrant an exercise of specific jurisdiction over PLC for the acts of trade name infringement by the non-Delaware subsidiaries, if the Court has jurisdiction over these claims. But the Court cannot exercise jurisdiction over these claims unless the alleged violations by the non-Delaware subsidiaries are sufficiently related to conduct in Delaware for which PLC is already accountable and subject to personal jurisdiction. This latter point is the crux of the "footnote 17 issue."

C. Delaware's Long Arm Statute

Turning to the issue of whether Delaware's long arm statute permits jurisdiction over PLC for trade name infringements by its non-Delaware subsidiaries, the Court first notes that Roebuck has failed to allege any "acts or omissions" in Delaware by the non-Delaware subsidiaries.⁷ In other words, there are no "jurisdictional acts" by these non-Delaware subsidiaries on which the Court could base specific jurisdiction over PLC. Therefore, if the Court is going to exercise specific personal jurisdiction over PLC, for acts of trade name infringement by PLC's non-Delaware subsidiaries, Roebuck must show that the alleged trade name infringements "arise from" tortious acts in Delaware for which the Court has personal jurisdiction over PLC. The claims that are based on the acts of the non-Delaware subsidiaries must be shown to have "arisen from" "jurisdictional acts" by PLC in Delaware. Whether a cause of action "arises from" other conduct, of course, depends upon the nature of the conduct from which the cause of action is alleged to have arisen. It is therefore necessary for the Court to first set out what the "jurisdictional acts" in Delaware, by PLC, are in the present case.

Specific jurisdiction over PLC for the out-of-state actions of its non-Delaware subsidiaries can only be obtained if...