Kentucky Finance Corp. v. Paramount Auto Exchange Corp.

Background

A Kentucky finance company sued a Wisconsin auto dealer in Milwaukee to recover an automobile it said had been unlawfully taken in Kentucky and brought to Wisconsin. The dealer won a court order requiring the plaintiff’s secretary (who lived in Louisville) to appear in Milwaukee with company papers and submit to an examination. The plaintiff offered to have the examination in Louisville, and the defendant offered to pay travel and a witness fee; the secretary refused to come, and the Milwaukee court struck the complaint and dismissed the suit. The Wisconsin Supreme Court upheld those orders, and the case was brought here for review.

Reasoning

The Court examined Wisconsin rules that allowed in‑state examinations of officers of “foreign” (out‑of‑state) corporations anywhere in the State and threatened to strike pleadings and enter judgment if the required examination or production of records was refused. Other litigants were not subject to the same rule. The Court held that when an out‑of‑state company enters the State’s courts to repossess specific property, it is a “person” entitled to equal protection. Imposing a uniquely onerous requirement on corporations — but not on similarly situated individuals — was arbitrary. The statute as applied denied equal protection, so the orders based on it were invalid. The Court did not need to decide the separate due process argument.

Real world impact

The decision protects out‑of‑state companies seeking relief in another State from being singled out for harsher discovery rules merely because they are corporations. It prevents states from compelling distant corporate officers and records to be brought in for examination when similar demands would not be imposed on individual litigants. The opinion notes later changes to the statute did not affect this outcome.

Dissents or concurrances

Justice Brandeis (joined by Justice Holmes) dissented, arguing states may shape judicial procedure to require in‑state examinations and that the foreign corporation was not “within” the State for these purposes.