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ELSE v. INFLIGHT CINEMA INTL.

February 28, 1979

H. T. ELSE, Plaintiff,
v.
INFLIGHT CINEMA INTERNATIONAL, INC., a corporation, and Inflight Services, Inc., a corporation, Defendants



The opinion of the court was delivered by: COHILL

This diversity action subsequently ensued. Plaintiff brought his complaint in three counts against ICI and against its parent corporation, Inflight Services ("Inflight"), a Delaware corporation. Count one alleges that the defendants induced the plaintiff to purchase a franchise in violation of the California Franchise Investment Law; count two alleges fraudulent misrepresentation; count three is a claim for punitive damages. Both defendants were served pursuant to Pennsylvania's long-arm statute as authorized by Federal Rule of Civil Procedure 4(d)(7). Both have filed motions to dismiss pursuant to Rule 12(b).

 ICI moves to dismiss for lack of personal jurisdiction over it under the long-arm statute and for lack of subject matter jurisdiction over a contractual dispute where remedies provided in the contract have not been pursued. Inflight has joined in these two assertions and further contends that the plaintiff has failed to state a claim against it upon which relief can be granted under counts two and three.

 I.

 Failure to State a Claim

 We will first discuss whether plaintiff has stated a claim against Inflight before reviewing the jurisdictional question. Inflight argues that counts two and three the misrepresentation claim and the claim for punitive damages fail to state a claim against it because there is no allegation that Inflight is the alter ego of ICI. We disagree. Paragraph 13 of the plaintiff's complaint alleges that Inflight directly controlled ICI and that it had or should have had direct knowledge of the facts on which this complaint was grounded.

 Although a parent corporation is not generally liable for the acts of its subsidiary, it may become liable where the subsidiary acts as its "mere instrumentality." Fanfan v. Berwind Corp., 362 F. Supp. 793, 795 (E.D.Pa.1973); Whayne v. Transportation Management Service, 252 F. Supp. 573, 577 (E.D.Pa.1966), Aff'd, 397 F.2d 287 (3d Cir. 1968), Cert. denied, 393 U.S. 978, 89 S. Ct. 445, 21 L. Ed. 2d 438 (1968). Whether the subsidiary acted as an instrumentality of its parent is a question of fact on which the plaintiff should be allowed to offer proof. Unless it appears to be a certainty that the plaintiff would not be entitled to relief under any state of facts offered in support of his claims, he must be allowed to go forward with his proof. Conley v. Gibson, 355 U.S. 41, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957); 2A Moore's Federal Practice § 12.08. Therefore, Inflight's motion to dismiss counts 2 and 3 for failure to state a claim will be denied.

 II.

 Personal Jurisdiction

 The Third Circuit has recently set forth the criteria for determining whether jurisdiction over out-of-state defendants is constitutionally permissible. In Empire Abrasive Corp. v. H. H. Watson, Inc., 567 F.2d 554 (3d Cir. 1977), the Court recognized two tests:

 
"First, out of respect for values of federalism, the due process clause was held to forbid a state to exercise its adjudicatory authority in a manner that would encroach upon the authority of a sister state. A state must have some palpable interest rationally connected with public policy in adjudicating a dispute within its borders for jurisdiction to be lawfully acquired.
 
The second jurisdictional limitation . . . focuses upon the parties and the burdens associated with litigating in a particular forum. This limitation . . . prevents a state of a plaintiff's choosing from coercing defense of a suit in a forum, which, because of its remoteness from defendant's residence and from witnesses and proof, would be fundamentally unfair."

 Under these criteria, jurisdiction is clearly within due process as to defendant ICI. The state's interest in protecting its citizens from injuries caused by out-of-state defendants is a legitimate interest which normally does not encroach on another state's authority. By soliciting business in Pennsylvania and by executing contracts whereunder franchises were to operate in Pennsylvania, defendant ICI invoked the benefits and protections of Pennsylvania laws. The only significant out-of-state contact was the signing of the contract in California. Since the injury, and therefore the tort claim, Action Industries, Inc. v. Wiedeman, 236 Pa. Super. 447, 346 A.2d 798, 808 (1975); Gorso v. Bell Equipment Corp., 476 F.2d 1216 (3d Cir. 1973), arose in Pennsylvania, since the contract was solicited here and was to be ...


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