The opinion of the court was delivered by: Getzendanner, District Judge.
MEMORANDUM OPINION AND ORDER
This matter is before the court on defendant SKM's motion to
dismiss for lack of personal jurisdiction. For the reasons stated
below, defendant's motion is denied.
I. Statement of the Facts
Plaintiff, Graco, Inc., a Minnesota corporation, filed a patent
infringement suit against SKM, a French corporation, and its
wholly owned subsidiary, Kremlin, Inc. The alleged patent
infringement involves the manufacture and sale of paint spraying
equipment. SKM asserts that this court has no jurisdiction over
it under the Illinois long-arm statute.
Kremlin manages an independent distribution network in the
United States. Only Kremlin and its distributors are parties to
the distribution contracts. These contracts are set up by
Kremlin; SKM is not involved in their procurement or execution.
Kremlin receives no instruction from SKM in regard to marketing
strategy or distribution. Furthermore, Kremlin resells goods
purchased from SKM at any location and upon any terms and
conditions Kremlin so desires. SKM and Kremlin have separate
distributors in Canada and compete with one another in that
jurisdiction. There are no distribution contracts between SKM and
SKM owns all of the stock of Kremlin. Gerard Binoche, chairman
of the board of Kremlin, is the son of Michel Binoche, president
of SKM, and is also employed in some capacity by SKM.*fn1 Gerard
Binoche informed Domingue Lefebvre, president of Kremlin, that it
was possible to purchase paint spraying equipment from SKM.
Lefebvre was not instructed, however, that SKM was to be the
exclusive source of paint spraying equipment for Kremlin.
Although Lefebvre reports to Gerard Binoche regarding Kremlin's
activities, he manages the daily internal operations of Kremlin
on his own.
As a parent corporation, SKM has the right to inspect the
books, operations and premises of Kremlin, but Kremlin maintains
separate corporate records, tax returns and financial statements.
Kremlin only pays for goods purchased and makes no other
payments, such as royalties or dividends, to SKM. Kremlin has
never received credit from SKM and has sufficient capital to run
its own business independently. As a result of the
parent-subsidiary relationship, SKM permits Kremlin to use a
variation of SKM's trademark in its resale of paint spraying
equipment in the United States, although there is no assignment
of rights in the mark. Also, SKM supplies some promotional
material to Kremlin.
Aside from SKM's parent relationship with Kremlin, SKM has no
other direct contact with Illinois. SKM does not maintain any
showrooms, warehouses, offices or branches in Illinois. The
French corporation does not own or lease any real or personal
property within the state. It is not licensed to do business in
Illinois and has not solicited or promoted business here. SKM
maintains no bank accounts in Illinois and it has never obtained
or extended credit within the state. Furthermore, SKM makes no
tax payments, has no telephone listing or mailing address, and
insures no risks in Illinois. SKM has not appointed an agent for
service of process in Illinois.
This case presents the following four issues: (1) whether SKM's
parent-subsidiary relationship with Kremlin provides a basis for
exerting jurisdiction over SKM; (2) whether the Illinois long-arm
statute permits jurisdiction over SKM; (3) whether SKM could be
said to be "doing business" in Illinois; and (4) whether personal
jurisdiction over SKM complies with constitutional due process.
II. Parent-Subsidiary Relationship
The Supreme Court in Cannon Manufacturing v. Cudahy Co.,
267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925), first stated that a
parent corporation must engage in more than a normal
parent-subsidiary relationship to be amenable to suit in the
jurisdiction where its subsidiary is located.*fn2 The Cannon Court
held that the subsidiary was an independent corporate entity,
despite the fact that the parent owned all stock and
dominated its subsidiary, because separate books were kept and
transactions between the two companies were represented in the
ledgers as though they were separate corporations. 267 U.S. at
335, 45 S.Ct. at 251. The Supreme Court found that "corporate
separation, though perhaps merely formal, was real." 267 U.S. at
337, 45 S.Ct. at 251. Under Cannon, where a parent corporation is
shown to be separate from its subsidiary, personal jurisdiction
over the subsidiary does not equal personal jurisdiction over the
The Cannon rationale has generated several factors to be
considered in determining whether a parent corporation is
sufficiently separate from its subsidiary for jurisdictional
purposes. Such factors include whether the parent arranges
financing for and capitalization of the subsidiary; whether
separate books, tax returns and financial statements are kept;
whether officers or directors are the same; whether the parent
holds its subsidiary out as an agent; the method of payment made
to the parent by the subsidiary; and how much control is exerted
by the parent over the daily affairs of its subsidiary. 2 Moore's
Federal Practice ¶ 4.25 at 4-275-276.
An application of these factors to the present case indicates
that SKM and Kremlin are clearly two separate corporations.
Kremlin retains sufficient capital and does not rely on financing
from SKM to keep its business in operation. As in Cannon, all
corporate books, tax returns and financial statements are
separately maintained by the two corporations. There are no
common officers or directors serving both SKM and Kremlin, and
the record does not indicate that SKM holds Kremlin out as its
agent.*fn3 Kremlin pays SKM for purchased goods by depositing
letters of credit in a French bank located in Chicago, Illinois;
the bank then ...