In a January 6, 2014 ruling, Judge Shira A. Scheindlin declined to dismiss plaintiff Rates Technology Inc.’s patent infringement action against Broadvox Holding Company, LLC and others for lack of personal jurisdiction. In considering the jurisdictional issue, the Court applied Federal Circuit law which, like Second Circuit law, applies “the personal jurisdiction rules of the forum state.” Noting that “Broadvox Holding, through its subsidiaries, operates a VoIP [voice over internet] network in New York, which is among its top ten retail markets,” Judge Scheindlin wrote that where “a defendant who has purposefully directed its activities at the forum state seeks to defeat jurisdiction, it must ‘present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.’” The issue thus became whether the actions of Broadvox Holding’s subsidiaries in New York should be imputed to Broadvox Holding. The Court wrote that under “certain circumstances, a court may assert jurisdiction over a foreign parent corporation based of its subsidiaries in New York,” if the subsidiary is “either an ‘agent’ or a ‘mere department’ of a foreign parent.”
Judge Scheindlin concluded that Broadvox Holding’s subsidiaries carrying out business in New York are its agents under the applicable agency test. In particular, the Court found that “Broadvox Holding is more than just an ‘investment mechanism [that] diversif[ies] risk through corporate acquisitions.’ Instead, it is in the same business as its subsidiaries – providing IP-based communication services to customers.” So the Court ruled that “[g]iven the importance of its subsidiaries’ activities in New York – one of its ‘top ten retail markets’ – it is fair to say that Broadvox Holding would perform these functions if no agent were available.” Before finding personal jurisdiction, though, Judge Scheindlin considered whether the assertion of jurisdiction comports with due process. The Court noted that because “Broadvox Holding purposefully directed its business toward New York, it must make a ‘compelling case that the presence of some other considerations would rendered jurisdiction unreasonable,” and ruled that Broadvox Holding failed to do so. The Court thus found personal jurisdiction, and denied the motion to dismiss.
