APL-2015-00162
New York County Clerk’s Index No. 190187/10
Court of Appeals
STATE OF NEW YORK
RAYMOND FINERTY and MARY FINERTY,
Plaintiffs-Respondents,
—against—
ABEX CORPORATION et al.,
Defendants,
FORD MOTOR COMPANY,
Defendant-Appellant.
BRIEF OF AMICUS CURIAE CHAMBER OF COMMERCE
OF THE UNITED STATES OF AMERICA
IN SUPPORT OF FORD MOTOR COMPANY
d
U.S. CHAMBER LITIGATION
CENTER, INC.
1615 H Street, NW
Washington, DC 20062
Telephone: (202) 463-5337
Facsimile: (202) 463-5346
E. JOSHUA ROSENKRANZ
Counsel of Record
MATTHEW L. BUSH
ORRICK, HERRINGTON
& SUTCLIFFE LLP
51 West 52nd Street
New York, NY 10019
Telephone: (212) 506-5000
Facsimile: (212) 506-5151
Attorneys for Chamber of Commerce of the United States of America
November 24, 2015
i
CORPORATE DISCLOSURE STATEMENT
Pursuant to Rule 500.1(f) of the Rules of the Court of Appeals of
the State of New York, the Chamber of Commerce of the United States
of America states that it is a non-profit membership organization, with
no parent company and no publicly traded stock.
ii
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES....................................................................iii
INTEREST OF AMICUS CURIAE.......................................................... 1
ARGUMENT ............................................................................................ 3
I. This Court Should Reject The Appellate Division’s
“Pressure” Theory Of Parent Liability As An End Run
Around Well-Established Veil-Piercing Requirements......... 5
A. Courts across the country uniformly recognize
that parent companies are not liable for their
subsidiaries’ acts unless the requirements for
veil-piercing are satisfied.............................................. 6
B. United States v. Bestfoods demonstrates that the
Appellate Division’s decision violates corporate
separateness................................................................ 11
II. Plaintiffs’ Alternative Theory Of Liability Based On
Ford USA’s Global “Design And Marketing” Role Is
Foreclosed By Well-Established Law Limiting Strict
Liability To Manufacturers, Distributors, And Sellers....... 13
A. Strict liability does not apply to entities outside
the distribution chain. ................................................ 14
B. The design and marketing role Plaintiffs allege
simply reflects the typical product
standardization efforts made by major
corporations................................................................. 16
CONCLUSION ....................................................................................... 19
iii
TABLE OF AUTHORITIES
Page(s)
Cases
Armstrong Rubber Co. v. Urquidez,
570 S.W.2d 374 (Tex. 1978) ................................................................15
BASF Corp. v. POSM II Properties P’ship, L.P.,
No. CIV.A. 3608-VCS, 2009 WL 522721 (Del. Ch. Mar. 3, 2009) ........9
Billy v. Consol. Mach. Tool Corp.,
51 N.Y.2d 152 (1980) ............................................................................6
In re Birmingham Asbestos Litig.,
619 So. 2d 1360 (Ala. 1993) ..................................................................9
Broussard v. Meineke Disc. Muffler Shops, Inc.,
155 F.3d 331 (4th Cir. 1998).................................................................9
Eure v. Norfolk Shipbuilding & Drydock Corp.,
263 Va. 624, 561 S.E.2d 663 (2002) (en banc) ......................................9
First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba,
462 U.S. 611 (1983)...............................................................................6
Ford v. GACS, Inc.,
265 F.3d 670 (8th Cir. 2001)...............................................................16
Lopez v. Am. Baler Co.,
No. CIV 11-0227 JB/GBW, 2013 WL 4782155 (D.N.M. Aug. 12,
2013)....................................................................................................16
Marzano v. Comput. Sci. Corp.,
91 F.3d 497 (3d Cir. 1996) ....................................................................9
Minton v. Ralston Purina Co.,
146 Wash. 2d 385, 47 P.3d 556 (2002)..................................................9
Morris v. New York State Dep’t of Taxation & Fin.,
82 N.Y.2d 135 (1993) ...................................................................... 8, 10
iv
Murray v. Miner,
74 F.3d 402 (2d Cir. 1996) ....................................................................8
New Tex. Auto Auction Servs., L.P. v. Gomez De Hernandez,
249 S.W.3d 400 (Tex. 2008) ................................................................15
Port Chester Elec. Constr. Corp. v. Atlas,
40 N.Y.2d 652 (1976) ............................................................................6
Rapid Transit Subway Constr. Co. v. City of New York,
259 N.Y. 472 (1932) ..............................................................................7
Rodriguez v. Riddell Sports, Inc.,
242 F.3d 567 (5th Cir. 2001)...............................................................16
Semenetz v. Sherling & Walden, Inc.,
7 N.Y.3d 194 (2006) ............................................................................14
Smith v. Ford Motor Co.,
No. 1814, 2014 WL 8845355 (Pa. Ct. Com. Pl. Jan. 24, 2014)...........18
Sprung v. MTR Ravensburg, Inc.,
99 N.Y.2d 468 (2003) ..........................................................................14
St. Clare Hosp. of Monroe, Wis. v. Schmidt, Garden, Erickson, Inc.,
148 Wis. 2d 750, 437 N.W.2d 228 (Ct. App. 1989) .............................15
United States v. Bestfoods,
524 U.S. 51 (1998)........................................................................... 6, 11
Winters v. Fru-Con Inc.,
498 F.3d 734 (7th Cir. 2007)...............................................................16
OTHER AUTHORITIES
Mohan Subramaniam & Kelly Hewett, Balancing Standardization
and Adaptation for Product Performance in International
Markets: Testing the Influence of Headquarters-Subsidiary
Contact and Cooperation, 44 Mgmt. Int’l Rev. 171 (2004)........... 17, 18
Robert B. Thompson, Piercing the Corporate Veil: An Empirical
Study, 76 Cornell L. Rev. 1036 (1991)..................................................8
v
Stephen B. Presser, Piercing the Corporate Veil, Westlaw
(database updated Sept. 2015) .............................................................9
Stephen B. Presser, Thwarting the Killing of the Corporation:
Limited Liability, Democracy, and Economics,
87 Nw. U. L. Rev. 148 (1992)................................................................7
James J. White, Corporate Judgment Proofing: A Response to
Lynn LoPucki’s The Death of Liability, 107 Yale L.J. 1363
(1998).....................................................................................................8
1
INTEREST OF AMICUS CURIAE
The Chamber of Commerce of the United States of America (the
“Chamber”) is the world’s largest business federation. It represents
300,000 direct members and indirectly represents the interests of more
than three million companies and professional organizations of every
size, in every industry sector, from every region of the country. The
Chamber advocates its members’ interests before Congress, the
Executive Branch, and the courts, and regularly files amicus briefs in
cases raising issues of concern to the Nation’s business community.
This case presents two questions of importance to the Chamber
and its members. The first is whether the Appellate Division erred in
holding that, even in the absence of any basis for corporate veil-
piercing, a parent company can be held liable for allegedly defective
products manufactured and sold by its subsidiary on the theory that the
parent is “in the best position to exert pressure for the improved safety
of products.” Because this holding is contrary both to well-settled Court
of Appeals precedent on corporate separateness and to basic principles
of corporate law uniformly recognized by courts across the country, this
Court should reverse.
2
The second question raised by Plaintiffs’ brief is whether
Plaintiffs’ claims may nonetheless proceed based on their alternative
theory that a parent company is strictly liable for defective products
manufactured and sold by its subsidiaries if the parent participated in
designing and marketing the products as part of its global
standardization efforts. This question, too, is resolved by this Court’s
well-settled precedent that strict liability extends only to the entities
involved in placing the allegedly defective product into the stream of
commerce, and not to the design and marketing activities alleged by
Plaintiffs.
The Chamber’s members have a strong interest in the proper
resolution of these important questions.
3
ARGUMENT
Plaintiffs seek to hold Ford Motor Company (“Ford USA”) strictly
liable for injuries allegedly arising from products manufactured and
sold in Ireland by Ford UK. Because Plaintiffs do not seriously contest
that Ford USA did not manufacture, distribute, or sell a single one of
the products at issue, well-established New York law forecloses their
claims. Plaintiffs base their arguments to the contrary on two flawed
legal theories: both conflict with basic principles of corporate law, and
one also conflicts with basic principles of products liability law.
First, Plaintiffs defend the Appellate Division’s holding that, even
though no basis exists for piercing the corporate veil between Ford USA
and Ford UK, Ford USA is nonetheless strictly liable for products
manufactured and sold by Ford UK based on its ability as the parent
company to “exert pressure” on Ford UK. As even Plaintiffs recognize,
however, a corporation cannot be held liable for its subsidiary’s acts
based on the parent’s control unless the conditions for piercing the
corporate veil have been met. Although Plaintiffs attempt to
circumvent this rule by characterizing a parent’s ability to “exert
pressure” on a subsidiary as an act taken by the parent itself, this novel
4
theory of corporate liability would wholly eviscerate basic principles of
corporate separateness long recognized under New York law and indeed
the laws of all 50 states. Under Plaintiffs’ theory, the narrow exception
for veil-piercing would be meaningless because, by definition, every
parent company is in a position to exert pressure on its subsidiary and
therefore is liable for products manufactured and sold by that
subsidiary regardless of veil-piercing requirements. Obviously, that is
not the law of this State or any other, and should be flatly rejected by
this Court.
Second, perhaps recognizing this fatal problem with the Appellate
Division’s reasoning, Plaintiffs alternatively argue that Ford USA is
strictly liable for the allegedly defective products based on its role in the
design and marketing of Ford products globally—or, in the Appellate
Division’s words, as “global guardian of the Ford brand.” It is well-
established under New York law, however, that strict liability extends
only to corporate activities within the distribution chain, specifically the
manufacture, distribution, or sale of the product. Plaintiffs fail to
identify a single case or other authority suggesting that a corporation is
strictly liable for designing or marketing an allegedly defective product.
5
And indeed, the conduct on which Plaintiffs rely—Ford USA’s effort to
standardize its brand globally—is part of the normal parent-subsidiary
relationship for multinational corporations. Accepting Plaintiffs’ theory
would essentially eliminate the principle of corporate separateness in
that context, at least as applied to products liability law. Neither
principle nor precedent supports that result.
I. This Court Should Reject The Appellate Division’s
“Pressure” Theory Of Parent Liability As An End Run
Around Well-Established Veil-Piercing Requirements.
Because a corporation exists separately from its owner, federal
and state courts across the country uniformly recognize that a parent
corporation is not liable for the acts of its subsidiary absent narrow
circumstances where the parent has abused the corporate form. Only
then may the “corporate veil” be “pierced.”
The Appellate Division’s decision disregards this important tenet
of corporate law. Everyone—including the Appellate Division—agrees
that the conditions for piercing the corporate veil are not met here. Yet
the Appellate Division held that Ford USA may be held strictly liable
for products manufactured and sold by Ford UK based on its ability to
6
control (“exert pressure on”) Ford UK. That decision is wrong and
should be reversed.
A. Courts across the country uniformly recognize that
parent companies are not liable for their subsidiaries’
acts unless the requirements for veil-piercing are
satisfied.
“It is a general principle of corporate law deeply ‘ingrained in our
economic and legal systems’ that a parent corporation . . . is not liable
for the acts of its subsidiaries.” United States v. Bestfoods, 524 U.S. 51,
61 (1998). The concept is so fundamental that it is “an almost
indispensable aspect of the public corporation.” First Nat’l City Bank v.
Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 625 (1983).
New York law has long recognized this basic truth of corporate
separateness. See Port Chester Elec. Constr. Corp. v. Atlas, 40 N.Y.2d
652, 656 (1976) (“Corporations, of course, are legal entities distinct from
their managers and shareholders and have an independent legal
existence.”). As this Court has explained, “the avoidance of personal
liability for obligations incurred by a business enterprise is one of the
fundamental purposes of doing business in the corporate form.” Billy v.
Consol. Mach. Tool Corp., 51 N.Y.2d 152, 163 (1980).
7
Indeed, nearly a century ago, this Court pronounced that “[m]any
a man incorporates his business” and that “[h]e may do so for the very
purpose of escaping personal liability.” Rapid Transit Subway Constr.
Co. v. City of New York, 259 N.Y. 472, 487-88 (1932) (internal quotation
marks omitted). And the Court recognized that the principle that a
corporation is separate from its owner “is true equally where the
corporation is controlled by a natural or an artificial person.” Id. at
488.
The policy rationale for corporate separateness, as Plaintiffs
acknowledge, is that it “promotes the expansion of smaller divisions
without fear of liability for every tortious act that may occur at those
separate divisions.” Respondents Br. 25; see also Stephen B. Presser,
Thwarting the Killing of the Corporation: Limited Liability, Democracy,
and Economics, 87 Nw. U. L. Rev. 148, 173 (1992) (noting that
incorporating subsidiaries allows a corporation to “subdivid[e] risks”
which in turn promotes investment in the parent). Treating parent and
subsidiary corporations as distinct entities serves several beneficial
purposes by supporting the formation of capital, extension of credit,
optimal allocation of risk, efficient use of assets, and compliance with
8
local laws (such as investment and tax laws). See generally Robert B.
Thompson, Piercing the Corporate Veil: An Empirical Study, 76 Cornell
L. Rev. 1036, 1039-41 (1991) (describing the purposes behind the
principle of corporate separateness); James J. White, Corporate
Judgment Proofing: A Response to Lynn LoPucki’s The Death of
Liability, 107 Yale L.J. 1363, 1389-91 (1998) (describing the purposes of
subsidiaries).
To prevent the corporate form from being abused, there are
narrow circumstances where the “corporate veil” may be “pierced.”
Under New York law, “piercing the corporate veil requires a showing
that: (1) the owners exercised complete domination of the corporation in
respect to the transaction attacked; and (2) that such domination was
used to commit a fraud or wrong against the plaintiff which resulted in
plaintiff’s injury.” Morris v. New York State Dep’t of Taxation & Fin.,
82 N.Y.2d 135, 141 (1993). Similar veil-piercing requirements exist in
all 50 states and under federal law.1
1 See, e.g., Murray v. Miner, 74 F.3d 402, 404 (2d Cir. 1996) (“The law
allows a corporation to organize so as to isolate liabilities among
separate entities. Under the doctrine of limited liability, a corporate
entity is liable for the acts of a separate, related entity only under
extraordinary circumstances, commonly referred to as piercing the
9
corporate veil.”) (internal citation omitted); Broussard v. Meineke Disc.
Muffler Shops, Inc., 155 F.3d 331, 349 (4th Cir. 1998) (“A corporate
parent cannot be held liable for the acts of its subsidiary unless the
corporate structure is a sham and the subsidiary is nothing but a ‘mere
instrumentality’ of the parent.”) (citation omitted); Marzano v. Comput.
Sci. Corp., 91 F.3d 497, 513 (3d Cir. 1996) (“Even in the case of a parent
corporation and its wholly-owned subsidiary, limited liability normally
will not be abrogated. A court may not depart from this principle and
pierce the corporate veil unless it finds that a subsidiary was a mere
instrumentality of the parent corporation.”) (internal citations and
quotation marks omitted); Minton v. Ralston Purina Co., 146 Wash. 2d
385, 399, 47 P.3d 556, 563 (2002) (“[A] parent corporation is not liable
for the torts committed by its wholly owned subsidiary absent a
showing of an intentional disregard for the corporate entity or an
intentional fraud.”); Eure v. Norfolk Shipbuilding & Drydock Corp., 263
Va. 624, 634, 561 S.E.2d 663, 669 (2002) (en banc) (“[C]ourts will
disregard the separate legal identities of the corporation only when one
is used to defeat public convenience, justify wrongs, protect fraud or
crime of the other.”) (internal quotation mark and citation omitted); In
re Birmingham Asbestos Litig., 619 So. 2d 1360, 1362 (Ala. 1993) (“It is
well settled that a parent corporation, even one that owns all the stock
of a subsidiary corporation is not subject to liability for the acts of its
subsidiary unless the parent so controls the operation of the subsidiary
as to make it a mere adjunct, instrumentality, or alter ego of the parent
corporation. . . . Thus, it is the law in Alabama that a plaintiff must
first ‘pierce the corporate veil’ before the parent corporation’s liability
may be established.”); BASF Corp. v. POSM II Properties P’ship, L.P.,
No. CIV.A. 3608-VCS, 2009 WL 522721, at *8 n.50 (Del. Ch. Mar. 3,
2009) (Strine, J.) (“Delaware public policy does not lightly disregard the
separate legal existence of corporations. The reason for that is that the
use of corporations is seen as wealth-creating for society as it allows
investors to cabin their risk and therefore encourages the investment of
capital in new enterprises.”) (internal citation omitted); Stephen B.
Presser, Piercing the Corporate Veil §§ 2:1-55, 3:1-15, Westlaw
(database updated Sept. 2015) (outlining veil-piercing law in all 50
states and under federal law).
10
According to the Appellate Division, holding a parent strictly
liable for its ability to “exert pressure” on a subsidiary is a form of
“direct” liability and therefore does not require piercing the corporate
veil. But that theory flips “limited liability” on its head, opening the
door for near limitless liability of a parent for the acts of its subsidiary.
Nearly every parent corporation is in a position to “exert pressure” on
its subsidiary; the parent owns the subsidiary.
No matter what Plaintiffs or the Appellate Division label their
“exerting pressure” theory of liability, it operates the same way: Ford
USA is strictly liable for its subsidiary’s manufacture and sale of
allegedly defective products. It was Ford USA’s “role in facilitating”
Ford UK’s distribution of auto parts and its ability “to exert pressure”
on Ford UK that led the court to conclude that Ford USA could be held
liable. Imposing strict liability on a parent company based on its ability
to “exert pressure” on a subsidiary is incompatible with New York law
requiring that a parent exercise “complete domination” over the
subsidiary to “perpetrate a wrong or injustice” before the parent may be
held liable for the subsidiary’s acts. Morris, 82 N.Y.2d at 141-42.
11
B. United States v. Bestfoods demonstrates that the
Appellate Division’s decision violates corporate
separateness.
Although Plaintiffs suggest that the U.S. Supreme Court’s
decision in Bestfoods supports the Appellate Division’s theory of
liability, see Finerty Brief 19, 25-27, Bestfoods in fact demonstrates why
the Appellate Division’s decision is wrong. The issue in that case was
“whether a parent corporation that actively participated in, and
exercised control over, the operations of a subsidiary may, without
more, be held liable as an operator of a polluting facility owned or
operated by the subsidiary.” Bestfoods, 524 U.S. at 55. The Court’s
resolution of that question was clear: “We answer no, unless the
corporate veil may be pierced.” Id. The Court went on to explain that
because liability in that case attached to those “operating” certain
facilities, a parent can be held liable when the parent itself operated the
facility. Id. Bestfoods thus establishes a straightforward principle:
Veil-piercing is unnecessary to hold a corporation liable for its own
actions, but veil-piercing requirements do apply when a plaintiff
attempts to hold a corporation liable based on its control over a
subsidiary.
12
Plaintiffs do not contest this reading of Bestfoods, but instead
argue that the Appellate Division’s decision is consistent with Bestfoods
because it rests on “Ford USA’s substantial and direct role in the
design, development, and use of parts distributed by its wholly owned
subsidiary.” Finerty Brief 19. This is a manipulation of the Appellate
Division’s decision: Although the opinion notes that Ford USA was
involved in the design and development of the allegedly defective
products “as the global guardian of the Ford brand,” Op. 13, it
specifically states that the contemplated liability rests on Ford USA’s
control over its subsidiary, not its own conduct: Plaintiffs’ claims may
proceed, the Appellate Division held, because “issues of fact exist
whether Ford USA may be held directly liable . . . on the ground that it
was in the best position to exert pressure for the improved safety of
products” distributed by Ford UK. Op. 13-14.
The Appellate Division certified the question of whether its
decision was “properly made.” The answer is no. Holding Ford USA
liable for its ability to exert pressure on Ford UK violates corporate
separateness and undermines the policy rationales underlying it—
whether or not it is incorrectly labeled “direct” liability.
13
II. Plaintiffs’ Alternative Theory Of Liability Based On Ford
USA’s Global “Design And Marketing” Role Is Foreclosed
By Well-Established Law Limiting Strict Liability To
Manufacturers, Distributors, And Sellers.
Because Bestfoods blocks liability based on the “exertion of
pressure,” Plaintiffs also put forward a splattering of facts that
supposedly show Ford USA’s involvement in the design and marketing
of the allegedly defective products. Finerty Brief 15-18.2 In essence,
Plaintiffs appear to argue that even without the “exert pressure” test
adopted below, they can prevail against Ford USA because it served as
the “global guardian of the Ford brand,” with the “apparent goal of the
complete standardization of all products worldwide that carried the
signature Ford logo.” R.1139.
Plaintiffs’ alternative theory fails for two reasons. First, New
York law has long limited strict liability to the manufacturers,
distributors, and sellers of the allegedly defective product, and rightly
2 Although Plaintiffs also make a half-hearted attempt to argue that
Ford USA itself manufactured the products at issue, Finerty Brief 14,
the allegations they rely on for this proposition do not actually involve
Ford USA manufacturing anything. See id. (alleging that one of Ford
USA’s goals fifty years ago was “‘more concentrated management
attention’ on Ford USA’s various overseeing subsidiaries” (emphasis
added)); id. (alleging that Ford USA controlled which products were
“manufactured by Ford UK” (emphasis added)).
14
so: Those are the entities that potentially expose the public to danger
by placing the product into the stream of commerce.
Moreover, product standardization is common among major
corporations with subsidiaries across different markets. If the global
design and marketing role that Plaintiffs assert were enough to trigger
strict liability, then principles of corporate separateness would be
meaningless in the real world, where parents and their subsidiaries
need to interact to balance the competing interests of standardizing
products across the globe and adapting them for the unique needs of a
particular location.
A. Strict liability does not apply to entities outside the
distribution chain.
This Court has explained that the “basic justification for strict
product liability” is “to place responsibility for a defective product on the
manufacturer who placed that product into commerce.” Semenetz v.
Sherling & Walden, Inc., 7 N.Y.3d 194, 201 (2006). It is those entities
that actually put the public at risk of harm, and those entities for whom
that harm “should be treated as a cost of business against which
insurance can be obtained.” Sprung v. MTR Ravensburg, Inc., 99
N.Y.2d 468, 473 (2003).
15
The same is not true for those who simply market or design a
product. An advertising firm, for example, should not be held strictly
liable for defects in a product manufactured by someone else. Similarly,
a mere patent holder puts the public in no danger. As the Supreme
Court of Texas aptly explained: “[S]trict liability [applies only] to those
‘engaged in the business of selling’ a product. . . . [W]e have limited the
scope of those ‘engaged in the business of selling’ to those who actually
placed a product in the stream of commerce. . . . An advertising agency
that provides copy, a newspaper that distributes circulars, an internet
provider that lists store locations, and a trucking business that makes
deliveries all might be ‘engaged’ in product sales, but they do not
themselves sell the products.” New Tex. Auto Auction Servs., L.P. v.
Gomez De Hernandez, 249 S.W.3d 400, 403 (Tex. 2008) (declining to
extend strict liability to auctioneers). Other jurisdictions across the
country likewise recognize that a defendant must place the product into
the stream of commerce for strict liability to attach.3
3 See, e.g., Armstrong Rubber Co. v. Urquidez, 570 S.W.2d 374, 376 (Tex.
1978) (liability rests on the defendant “placing [a product] into the
stream of commerce”); St. Clare Hosp. of Monroe, Wis. v. Schmidt,
Garden, Erickson, Inc., 148 Wis. 2d 750, 757, 437 N.W.2d 228, 231 (Ct.
App. 1989) (citation omitted) (strict liability “is imposed only on
16
B. The design and marketing role Plaintiffs allege simply
reflects the typical product standardization efforts
made by major corporations.
Plaintiffs’ design and marketing allegations—e.g., that “Ford USA
specifically chose the marketing firm Ford UK was to use for its
advertising promotions” or that it had a division “responsible for the
design proposals relating to Ford of Britain,” Finerty Brief 15-17—
amount to nothing more than the typical product standardization
efforts undertaken by major corporations.
As discussed above, supra at 7-8, operating through a subsidiary
has many benefits, especially with foreign subsidiaries that have
expertise in their own distinct legal, business, and cultural landscape.
manufacturers, distributors and sellers—those who place or maintain
the product in the stream of commerce”); Lopez v. Am. Baler Co., No.
CIV 11-0227 JB/GBW, 2013 WL 4782155, at *13 (D.N.M. Aug. 12, 2013)
(“[A] party who does not sell or otherwise place an allegedly defective
product in the stream of commerce may not be strictly liable. . . .”);
Rodriguez v. Riddell Sports, Inc., 242 F.3d 567, 577 (5th Cir. 2001)
(parent company not liable because it did “not produce anything or
place anything in the stream of commerce”); Ford v. GACS, Inc., 265
F.3d 670, 680 (8th Cir. 2001) (“The common thread among Missouri
products liability cases is that an entity must have ‘plac[ed] a defective
product in the stream of commerce.’”); Winters v. Fru-Con Inc., 498 F.3d
734, 745 (7th Cir. 2007) (“‘[T]he policy reasons which justify extending
the doctrine of strict liability to parties such as retailers or distributors
are [not] applicable to product installers’ when the installer does not
participate in placing the product into the stream of commerce.”).
17
At the same time, it is critical for the parent to maintain its brand.
Successfully selling a product globally thus requires a balance between
“standardizing products across country markets” and “adapting them to
the differences among markets.” Mohan Subramaniam & Kelly Hewett,
Balancing Standardization and Adaptation for Product Performance in
International Markets: Testing the Influence of Headquarters-
Subsidiary Contact and Cooperation, 44 Mgmt. Int’l Rev. 171, 172
(2004). “[B]y balancing standardization and adaptation, [multinational
corporations] can not only simultaneously harness the benefits of
efficiency and responsiveness, but also coalesce into their products
inputs of both headquarters and foreign subsidiaries for greater
competitive advantage.” Id.
A study of 128 products in foreign markets of 62 multinational
corporations showed that this balance was best achieved “through direct
contact between headquarters and subsidiary managers,” which
“positively influences product performance in international markets.”
Id. at 186. That positive influence is “strengthened by headquarters-
subsidiary cooperation.” Id. The cooperation allows “headquarters and
subsidiaries to integrate and harness their unique and differentiated
18
knowledge.” Id. at 188. In short, the study found that to achieve an
effective balance between standardization and adaptation, corporations
“need . . . high headquarters-subsidiary contact.” Id. at 187 (emphasis
added).
Parent-subsidiary cooperation is thus a fact of life for
multinational corporations. There is nothing controversial about a
parent creating a subsidiary explicitly to avoid liability, while also
taking a strong interest in its subsidiary’s activities. Plaintiffs
themselves recognize that corporate separateness “promotes the
expansion of smaller divisions without fear of liability for every tortious
act that may occur at those separate divisions.” Finerty Brief 25. But
that benefit becomes an empty promise if a parent is protected only
when it allows the subsidiary to run amok. No corporation would set up
its subsidiary in that way.
Indeed, looking at the exact same evidence that Plaintiffs
presented here, a Pennsylvania trial court found nothing more than a
typical parent-subsidiary relationship between Ford USA and Ford UK.
In Smith v. Ford Motor Co., No. 1814, 2014 WL 8845355 (Pa. Ct. Com.
Pl. Jan. 24, 2014), the plaintiff obtained through discovery nearly 6,000
19
pages of documents from this very case. R. 954 n.5. They were even
labeled “FNRTY 000001 through FNRTY 005856.” Id. The plaintiff in
Smith extensively cited this evidence in an attempt to demonstrate that
Ford USA could be held liable for products manufactured and sold by
Ford UK. See R. 954-63 (“FNRTY” appears 67 times); compare also,
e.g., R. 958 (“Ford’s International Studio was ‘responsible for design
proposals relating to’ Ford/Britain[].”) with Finerty Brief 15 (“Ford
USA’s Styling Office contained an ‘International Studio’ ‘responsible for
the design proposals relating to Ford of Britain.’”). The Pennsylvania
court saw past the noise, and concluded that “Plaintiff essentially seeks
to hold Defendant Ford Motor Company liable based on its normal
parent-subsidiary relationship with Ford of Britain.” R. 928. The
appellate court affirmed. R. 940-41.
This Court should reach the same conclusion on the same
evidence.
CONCLUSION
The Court should reverse the decision of the Appellate Division.