APT Electronics, a California-based automated electronic contract manufacturer serving clients like Boeing and NASA, sued Delaware-based SMTC Corporation and its Florida subsidiary MC Assembly over a failed defense contract project. APT alleged that SMTC used MC Assembly's federal contractor authorization to secure work on a Boeing-NASA project, then failed to complete the assembly work according to quality specifications, forcing APT to cancel remaining work and seek reimbursement of $453,008 in payments.
Judge Otis D. Wright II found APT adequately pleaded that the companies shared a "unity of interest," noting they used the same bank account, shared executives and headquarters, and publicly represented themselves as a "combined company" operating under the SMTC name. "The fact of MC Assembly's unique authorization and SMTC's lack thereof distinguishes Defendants' relationship from the typical parent-subsidiary relationships," Wright wrote, emphasizing that SMTC improperly accessed restricted defense contract materials without proper authorization.
The ruling reversed the court's previous dismissal of claims against MC Assembly for lack of personal jurisdiction. In an earlier order, Wright had granted defendants' motion to dismiss, finding insufficient allegations to establish the alter ego relationship. APT amended its complaint with additional factual allegations about shared banking arrangements and unified business operations.
The decision allows APT's breach of contract, conversion, and unfair competition claims to proceed against both companies. The case highlights the challenges facing defense contractors in maintaining corporate separateness while operating integrated business structures, particularly when federal authorization requirements create regulatory barriers between parent and subsidiary entities.