Opinion
Civil Action Nos. 99-0166-CB-S, 99-0167-CB-S
February 5, 2001
FINAL JUDGMENT
Pursuant to separate order entered this date granting the Defendant's motion for summary judgment, it is hereby ORDERED, ADJUDGED, and DECREED that the claims of the Plaintiffs, CHARLES LAURENDINE WHATLEY and MARGARET H. WHATLEY, as Administratrix of the Estate of her son, TYLER EUGENE WHATLEY, against the Defendant, McLANE COMPANY, INC., be and hereby are DISMISSED with prejudice.
ORDER
This matter comes before the Court on "Defendant McLane Company, Inc.'s Motion For Summary Judgment" (Doc. 142), "Plaintiffs' Brief In Opposition To Defendants' Motion For Summary Judgment" (Doc. 164), and "Defendants Merit and McLane's Reply Brief To Plaintiffs' Response To Defendants' Motion For Summary Judgment" (Doc. 179).
As to Docs. 164 and 179, this Order addresses only those portions related to McLane. Additionally, for simplicity of citation and to avoid repetition, this Order only cites to the docket numbers for these pleadings as set forth in case number 99-166.
I. Background
Plaintiffs' Third Amended Complaint alleges four causes of action. Count One alleges that Defendant Robertson, acting in line and scope of his employment as an agent or employee of Merit and/or McLane, negligently operated a tractor-trailer unit. Count Two alleges that Defendant Robertson's actions individually and within the line and scope of his employment were wanton. Count Three alleges that Merit and/or McLane are liable for their direct negligence. Count Four alleges the direct wantonness of Merit. Federal jurisdiction for this matter rests on the parties' diversity of citizenship under 28 U.S.C. § 1332.II. Discussion A. Summary Judgment Standard of Review
Pursuant to FEDERAL RULE OF CIVIL PROCEDURE 56(c), summary judgment shall be granted:
if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
A factual dispute is "`genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is "material" if it "might affect the outcome of the suit under the governing [substantive] law" Id; accord, Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998 (11th Cir. 1992), cert. denied, 507 U.S. 911 (1993).
The party seeking summary judgment bears "the initial burden to show the district court, by reference to materials on file that there are no genuine issues of material fact that should be decided at trial." See Clark v. Coats Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). Once the moving party has satisfied its burden, the burden shifts to the nonmovant to "come forward with specific facts showing that there is a genuine issue for trial." Id; and, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis omitted). "A mere `scintilla' of evidence supporting the [nonmoving] party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party. See Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990) (citation omitted). "[T]he nonmoving party may avail itself of all facts and justifiable inferences in the record taken as whole." See Tipton, 965 F.2d at 998. "[T]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 999; Anderson, 477 U.S. at 255; and, Matsushita, 475 U.S. at 587.
If the nonmoving party fails to make "a sufficient showing on an essential element of its case with respect to which she has the burden of proof," the moving party is entitled to summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." See Matsushita, 475 U.S. at 587 (quotation marks and citation omitted). The function of the court is not to "weigh the evidence and determine the truth of the matter but to determine whether there is an issue for trial." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Thus, because the nonmovant bears the "burden of coming forward with sufficient evidence on each element that must be proved[,]" if "a party . . . fails to make a showing sufficient to establish the existence of an element essential to that party's case[,]" RULE 56(c) mandates that summary judgment be entered against the non-movant. See Early v. Champion Int'l Corp., 907 F.2d 1077, 1080 (11th Cir. 1990) (emphasis in original) (citation omitted); and,Celotex, 477 U.S. at 322.
B. Findings of Fact
Kenneth Robertson ("Robertson") was a commercial motor vehicle driver in the employment of Merit Distribution Services, Inc. ("Merit"). Merit is a wholly owned subsidiary of McLane Company, Inc. ("McLane"). See Affidavit of James Kent. Merit and McLane maintain separate corporate records. Id. Merit is not the alter ego of McLane. Id. The companies have separate business departments, file separate financial statements and tax returns, and the daily operations of both, are kept separate. Id. McLane does not finance Merit. Merit has adequate operating capital and pays its own salaries and expenses. Id. Merit has business independent of that given by McLane and McLane does not use Merit's property as its own. Id.
On November 15, 1998, at approximately 10:30 p.m., Robertson left Merit distribution center in New Albany, Mississippi, en route to the Wal-Mart Super Center in Tillman's Corner, Alabama, with a load of groceries. See Robertson Dep. at 63-64. Robertson arrived at around 3:30 a.m. and unloaded the shipment and began the return leg of his trip at 5:15 a.m.Id. Robertson's route took him north on Interstate 65 to Alabama Highway 158 and ultimately to U.S. Highway 45. Id. at 94.
On November 16, 1998, Robertson had an accident which resulted in his tractor-trailer becoming jack-knifed so that his tractor rotated almost 180 degrees clockwise, smashing the passenger side crawl space access door up against the trailer, and his trailer became situated squarely in the northbound lane of traffic. Shortly after this accident, a second accident occurred in which a vehicle driven by Tyler Whatley with passenger Charles Whatley, struck the rear of the Robertson's trailer and resulted in the death of Tyler Whatley and caused physical injury to his brother, Charles Whatley.
C. Conclusions of Law
This Court notes, as did the court in In Re Silicone Gel Breast Implants Products Liability Litigation, 887 F. Supp. 1447, 1452 (N.D. Ala. 1995), that: "an initial question is whether veil-piercing may ever be resolved by summary judgment. Ordinarily the fact-intensive nature of the issue will require that it be resolved only through a trial. Summary judgment, however, can be proper if . . . evidence presented could lead to but one result." As such, this Court finds it proper to address alter ego on this summary judgment motion.
McLane moves this Court for summary judgment as to the counts alleged by Plaintiffs because there is no genuine issue of material fact which exists as to the Plaintiffs' claims and McLane is thus due to have judgment entered in its favor as a matter of federal and state law. (Doc. 142). As grounds for this motion, McLane contends that they are not the alter ego of Merit and as such, Plaintiffs can not pierce the corporate veil to attach liability to them.
Under Alabama law, a parent corporation is a distinct entity from its subsidiary and is not liable for the acts of its subsidiary unless it is a mere adjunct, instrumentality, or alter ego, of the parent corporation. See In Re Birmingham Asbestos Litigation, 997 F.2d 827, 829-30 (11th Cir. 1993); and, Oxford Furniture Companies, Inc., v. Drexel Heritage Furnishings, Inc., 984 F.2d 1118, 1126 (11th Cir. 1993) (citingEx Parte Baker, 432 So.2d 1281, 1284 (Ala. 1983)). However, mere control or domination of a corporation is not enough because a Plaintiff must show fraud in asserting the corporate existence or must show that recognition of the corporate existence will result in injustice and/or inequitable consequences. Id. Alter-ego status is found when two corporations have substantial identity of management, business purpose, operation, equipment, customers, and supervision, as well as ownership.See Graphics Communications International Union Local 121-C v. Southern Coupon, Inc., 852 F. Supp. 970, 976 (N.D. Ala. 1993). Here, Plaintiffs must first "pierce the corporate veil" before McLane, the parent corporation's, liability may be established.
The evaluation of corporate control claims cannot, however, disregard the fact that, no different from other stockholders, a parent corporation is expected — indeed, required — to exert some control over its subsidiary. See In Re Silicone Gel Breast Implants Products Liability Litigation, 887 F. Supp. 1447 (N.D. Ala. 1995). This "real world" evaluation requires a review of the totality of the circumstances in reaching a determination whether a subsidiary may be found to be the alter ego or mere instrumentality of the parent corporation. Id. at 1452. Moreover, "[a]lthough the standards are not identical in each state, all jurisdictions require a showing of substantial domination."Id. In deciphering this "totality," the courts have recognized several factors which may be considered when attempting to reach a decision on whether substantial documentation has been shown. These factors include:
1. The parent corporation owns all or most of the capital stock of the subsidiary.
2. The parent and subsidiary corporations have common directors or officers.
3. The parent corporation finances the subsidiary.
4. The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation.
5. The subsidiary has grossly inadequate capital.
6. The parent corporation pays the salaries and other expenses or losses of the subsidiary.
7. The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation.
8. In the papers of the parent corporation or in the statements of its officers, the subsidiary is described as a department or division of the parent corporation, or its business or financial responsibility is referred to as the parent corporation's own.
9. The parent corporation uses the property of the subsidiary as its own.
10. The directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take their orders from the parent corporation.
11. The formal legal requirements of the subsidiary are not observed.See Silicone Gel Breast Implants, 887 F. Supp. at 1452-53; and, United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691-92 (5th Cir. 1985)cert. denied, 475 U.S. 1014 (1986).
Yet, when adding up these factors, the courts have cautioned that "piercing the corporate veil is not a power that is lightly exercised."See Econ Marketing, Inc. v. Leisure American Resorts, Inc., 664 So.2d 869, 870 (Ala. 1995). Indeed, Econ noted that the corporate veil may be pierced only where:
[a] corporation is set up as a subterfuge, where shareholders do not observe the corporate form, where the legal requirements of corporate law are not complied with, where the corporation maintains no corporate records, where the corporation maintains no corporate bank account, where the corporation has no employees, where corporate and personal funds are intermingled and corporate funds are used for personal purposes or where an individual drains funds from the corporation.Id. at 870.
Here, however, the undisputed facts of this case do not manifest the requisite conditions to pierce the corporate veil. As to McLane and Merit, there is not any substantial intercorporate meshing or interweaving of their respective activities and operations to create any "special relationship." First, Robertson was not an employee of McLane and was at all times relevant to this action, an employee of Merit. See Robertson Dep. at 7. McLane did not employ, train, or supervise Robertson. (Doc. 143 at 4). McLane did not own the tractor-trailer Robertson drove, it was not used by McLane for corporate purposes, and they were under no obligation to maintain it. See Affidavit of James Kent. As such, McLane neither exercised control or authority over Robertson nor did they exercise control over Merit, to the extent that Plaintiffs can pierce the corporate veil. Id. at 5.
In addition to Robertson, counsel for the Plaintiffs deposed three other Merit employees: Don Willett, Darryl Paulette, and Randy Bass. (Doc. 143 at 9). Willett was termination manager at Merit's New Albany, Mississippi, distribution facility at the time of the accident and was subsequently promoted to Director of Dedicated Grocery Divisions for Merit Distribution Services. See Willett Dep. at 5-6. He testified that Merit was a wholly owned subsidiary of McLane with four separate Dedicated Grocery Divisions. Id. at 15. Willett also stated emphatically that he did not work for McLane. Id. at 82.
Bass went to work for Merit approximately the same time Robertson did, starting out as a driver for Merit and ultimately advancing to recruiter. See Bass Dep. at 12, 14. While he identified certain documents used in the hiring process as being printed on McLane "letterhead," there is no evidence contained in his deposition that would even rise to the level required to establish Merit as an alter ego of McLane. Id. at 100.
Paulette was Merit's operation manager at its New Albany facility. He also identified the documents that Bass did but, just as in Bass and Willett's depositions, the testimony from Paulette is absent any evidence that would trigger a piercing of the corporate veil. See Paulette Dep. at 6, 11-12.
Moreover, Merit was incorporated in 1985. (Doc. 143 at 6). Merit is a wholly owned subsidiary of McLane and it is a Texas corporation. At the time of the accident, Merit had three regional distribution centers for its "dedicated divisions" (centers that served a specific client or route) and one center for its over-the-road division located in Temple, Texas. Id. Although some members of Merit's Board of directors/officers also serve the McLane board, McLane did not oversee the day-to-day operations of Merit. See Affidavit of James Kent. Merit observes the corporate form and complies with the requirements of corporate law. (Doc. 143 at 9).
Following its incorporation, Merit adopted and continued to use certain forms and documents McLane used. (Doc. 143 at 7). These documents include the McLane Company handbook, information on the "McLane Cares" program and certain documents included in Robertson's application. Id. In spite of this limited co-mingling of directors/officers and Merit's adoption of certain McLane documents, Merit maintains a separate board of directors and McLane did not control the daily operations of Merit. Id.
However, Plaintiffs allege that McLane is vicariously liable for Robertson's actions because "there is substantial evidence that McLane was directly involved in the hiring and supervision of Merit's employees, so a jury may find it liable under principal/agent law because it exercised control over drivers employed by Merit." (Doc. 164 at 5). In making this assertion, the "hardest" evidence upon which the Plaintiffs rely includes the form which McLane provided to Merit for the physical examination that was performed on Robertson, as "indicating pervasive involvement of McLane in the hiring and supervision of Merit's employees." Id. at 5-6. However, other than this physical examination form, the only additional facts the Plaintiffs have to buttress their assertion for piercing the corporate veil, surround their claim that deposition testimony shows McLane's exercise of control over Merit's drivers with "McLane Cares" and the testimony of Carla Swann. Based on only these facts, Plaintiffs conclude that there is "substantial evidence" that McLane reserved the right of control over the drivers, so that a fact question is presented as to whether McLane should be held vicariously liable for Robertson's torts. (Doc. 164 at 6).
Stating that Robertson testified he was eligible for a counseling program provided by McLane and described by the name "McLane Cares." Id. at 7.
Plaintiffs claim Carla Swann, a former Merit employee, testified that the decision whether Robertson continued driving was made according to a McLane policy:
Q. Carla, you mentioned a while ago that they took Robertson off the road after the accident because they had not determined how the accident occurred yet?
A. Actually, I think that's McLane's procedure.See Swann Dep. at 19-22.
However, even bearing all of these facts in mind, Plaintiffs have not shown sufficient facts to permit piercing of the corporate veil. Indeed, the factors providing for such action simply do not exist in this case. For example, while the Plaintiffs use the testimony of Carla Swann that when asked if Robertson had been removed from driving, she could only equivocally testify that she "thought" it was a McLane policy. See Swann Dep. at 19-27, 45. Additionally, the affidavit of James Kent, Senior Vice President of Special Division for McLane, establishes, without contradiction by the Plaintiff, that McLane neither controlled nor oversaw the day-to-day operations of Merit. (Doc. 179 at 5).
Swann is a former Merit employee and when deposed, she could not even remember the dates she worked for Merit. See Swann Dep. at 6. Swann was not in a management position but was a dispatcher. Id.
Instead, Plaintiffs "offer mere speculation" to claim that McLane was directly involved in hiring and supervision of Merit's employees; however, Plaintiffs have not cited examples of McLane's "direct involvement." Id. Plaintiffs cite only that McLane "provided the form for the insufficient physical exam [on Robertson]," without offering any proof that someone with McLane gave Merit the form and required them to use it. Id. Merely having another company, albeit a subsidiary, adopt and use certain forms, certainly does not rise to the level of proof contemplated by the courts and set forth in the eleven factors identified herein.
III. Conclusion
In light of the foregoing undisputed facts and conclusions of law, this Court, having reviewed the presentation of evidence in support of and in opposition to McLane's motion for summary judgment, finds and it is hereby ORDERED that Defendant McLane's motion for summary judgment is due to be GRANTED so that the Plaintiffs' claims against McLane are dismissed with prejudice.