Partners Andy Davis, Sam Lucas, and Lee Carter secured an important ruling from the Georgia Court of Appeals on March 6th, which provides parent holding companies significant protection from lawsuits involving subsidiaries that the parent does not control.
Out-of-state parent holding companies, which have no connection to the forum state or the underlying litigation, are, at times, named as defendants in Georgia lawsuits. Brinson Askew Berry represents one such holding company, whose subsidiaries own and operate nursing homes throughout the country, including Georgia.
The holding company itself is not authorized to conduct business in Georgia, and it leaves all decision-making up to the employees of its subsidiaries that own and operate the facilities. Its limited role is basic budgeting oversight and the filing of the tax returns on behalf of its subsidiaries.
Despite its limited role as a parent holding company, Georgia trial courts have refused to dismiss the holding company from lawsuits involving the nursing homes.
The Georgia Court of Appeals issued an important decision, reversing this trend, and giving the client, Brinson Askew Berry, and all other parent holding companies that had been improperly subjected to litigation a significant victory.
The Court of Appeals had previously held that for a subsidiary’s contacts to be imputed to a parent for jurisdictional purposes there must be evidence that the parent completely controls the subsidiary such that the subsidiary is merely a division or department of the parent. In this case, the plaintiff attempted to rely on the parent company’s limited budgetary oversight and the filing of a tax return to show the existence of control and minimum contacts—neither of which had been addressed by a reported Georgia appellate decision.
Davis, Lucas, and Carter argued—relying on significant persuasive authority—that neither limited budgetary oversight nor filing a tax return established the necessary minimum contacts with Georgia or the control needed to impute the contacts of the client’s subsidiaries to it for jurisdictional purposes.
The Court of Appeals agreed and reversed the trial court. The reported decision may be found at Drumm v. Wright, 2014 WL 866257 (Ga. Ct. App. March 6, 2014).