Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-94-01155/USCOURTS-ca10-94-01155-0/pdf.json

Nature of Suit Code: 893
Nature of Suit: Environmental Matters
Cause of Action: 

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P U B L I S H 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

LYNN and DEYON BOUGHTON, et al., 

Plaintiffs-Appellants, 

vs. 

COTTER CORPORATION, 

Defendant-Appellee. 

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/FILED 

UDitecl States Court of App~!:l 

Tenth Circuit 

SEP 0 G 1995 

PATRICK FISHER ----- Clerk 

No. 94-1155 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D.C. No. 89-Z-1505) 

Louise M. Roselle of Waite, Schneider, Bayless & Chesley, 

Cincinnati, Ohio, and James R. Christoph of McCormick & Christoph, 

Boulder, Colorado (Stanley Chesley of Waite, Schneider, Bayless & 

Chesley; Kenneth N. Kripke, Denver, Colorado; and David Kreutzer, 

Boulder, Colorado, with them on the brief) for PlaintiffsAppellants. 

John Leonard Watson and Edward E. Stevenson of Holme, Roberts & 

Owen, Denver, Colorado for Defendant-Appellee. 

SEYMOUR, Chief Judge, HENRY, Circuit Judge, and COOK, District 

Judge* 

COOK, District Judge 

*Honorable H. Dale Cook, Senior United States District Judge for 

the Northern District of Oklahoma, sitting by designation. 

Appellate Case: 94-1155 Document: 01019276724 Date Filed: 09/06/1995 Page: 1 
The plaintiffs in this case were over 500 individuals alleging 

exposures of their persons and property to hazardous emissions of 

a uranium mill owned by the defendant corporation, Cotter 

Corporation (Cotter). Most of the plaintiffs demanded medical 

monitoring on account of radiation exposure but generally the 

plaintiffs did not allege physical illnesses. The plaintiffs 

brought an action alleging violations of the Comprehensive 

Environmental Response Compensation and Liability Act (CERCLA), 42 

u.s.c. §§ 9601-9675 (1990) and the Price Anderson Act, 42 u.s.c. § 

2210 (1990) as well as state law claims including negligence, 

trespass and nuisance. 

Certification of a class was proposed and denied on three 

occasions. After a trial to a jury for eight bellwether plaintiffs 

a verdict was returned in which all eight plaintiffs prevailed on 

negligence, six.prevailed on trespass and three on nuisance. The 

plaintiffs appeal the denial of class certification, the refusal of 

the trial judge to allow them to depose an attorney for the 

defendant, the refusal of the trial judge to admit evidence of the 

fears of the plaintiffs of contracting disease to show damages and 

the trial judge's decision to grant summary judgment on the issue 

of piercing the corporate veil. We affirm. 

I. CLASS CERTIFICATION 

Although the plaintiffs concede that there are individual 

issues relating to the calculation of damages for those who were 

exposed to the uranium mill emissions they contend that there are 

common issues related to the liability of the defendants that 

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should be tried as a class action. They argue that issues of 

whether the defendants behaved in a wrongful manner and what 

knowledge they had of the harmful effects of the emissions are 

common issues. They also argue that the models used for 

determining the extent of individual exposure and harm resulting 

from the emissions are common issues because such models will have 

variables representing individual characteristics. Although the 

calculation of the damages will be an individual by individual 

determination, plaintiffs nevertheless contend that the issues of 

what models to use for that calculation are common issues. 

The plaintiffs contend that there are three such models: One 

to determine air exposure, another to determine water exposure and 

a third to determine "uptake" or how much of a harmful substance is 

taken into the body. The defendants argue that the plaintiffs' 

approach is too simplistic and that many models would be needed. 

If the lower court did not apply an improper standard the 

court's decision is reviewed for an abuse of discretion. Pilots 

Against Illegal Dues v. Air Line Pilots, 938 F.2d 1123, 1134 (lOth 

Cir. 1991). The plaintiffs conceded in their opening brief that 

this was the appropriate standard of review. The discretion 

granted to the trial court on the certification issue leaves the 

decision as to what method of trial is most efficient primarily to 

the court that is in the best position to determine the facts of 

the case, to appreciate the consequences of alternative methods of 

resolving the issues of the case and that is in the best position 

to select the most efficient method for their resolution. 

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In her December 18, 1991 order, the judge below refused to 

certify a class under FED. R. crv. P. § 23 (b) (3), finding that 

individual questions predominated over common questions of 

liability; such individual issues including whether purchasers were 

aware contamination existed, the extent and nature of injuries, the 

degree and length of exposure, the prevalence of contamination and 

proof of ownership to water rights. With regard to plaintiffs' 

argument that common liability issues could be tried as a class 

with individual issues of damages determined separately, the judge 

decided that this was not appropriate because there was not a 

single course of conduct alleged to have caused the injuries, 

identical with respect to each plaintiff; the judge said that the 

plaintiffs alleged that their injuries derived from more than one 

source and that it could not be shown that the claims of the 

proposed class members were all based upon one legal or remedial 

theory. 

The plaintiffs argue that the abuse of discretion standard is 

one that has teeth, citing the case of Esplin v. Hirschi, 402 F.2d 

94 {lOth Cir. 1968), cert. denied, 394 u.s. 928 {1969) --the first 

case we decided on the issue under Rule 23 after the 1966 

amendments -- where we required certification under Rule 23 

notwithstanding the trial judge's decision to the contrary. 

Of course, a decision to deny certification may, under certain 

circumstances, constitute an abuse of discretion. Nevertheless, it 

is not clear that we were applying the current abuse of discretion 

standard in deciding Esplin v. Hirschi. our opinion in that case 

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did not acknowledge discretion in the trial judge on the 

certification question except for discretion on whether to apply 

the 1966 amendments to pending cases. 

In any event, it is not necessary for us to critically examine 

Esplin v. Hirschi at this time because, even assuming that the case 

applied an abuse of discretion standard and was otherwise correctly 

decided, we find that the facts of that case are easily 

distinguished. Esplin v. Hirschi was a securities fraud case. The 

notes of the advisory committee accompanying the 1966 amendments 

state that predominance of common issues over individual issues 

would be necessary for the economies of the class action device 

under Rule 23(b) (3) to be achieved, and specifically stated: "In 

this view, a fraud perpetrated on numerous persons by the use of 

similar misrepresentations may be an appealing situation for a 

class action " On the contrary, only a few sentences later 

the advisory committee notes caution that " [a] 1 mass accident 1 

resulting in injuries to numerous persons is ordinarily not 

appropriate for a class action because of the likelihood that 

significant questions, not only of damages but of liability and 

defenses of liability, would be present, affecting the individuals 

in different ways." We also note that where the claim is based on 

a particular financial transaction, such as a purchase of stock, it 

is more easy to identify similarly situated individuals who made 

such purchases than to identify individuals who might have been 

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Appellate Case: 94-1155 Document: 01019276724 Date Filed: 09/06/1995 Page: 5 
exposed to hazardous substances released into the environment in 

varying ways and degrees at different times. 1 

Cook v. Rockwell Int'l Corp., 151 F.R.D. 378 {D.Colo. 1993), 

cited by the plaintiffs, is not to the contrary because it is a 

district court decision, certifying a medical monitoring class 

under Rule 23{b) {2) and a property class under Rule 23(b) (3); the 

issue on appeal here is not whether the trial court could have 

certified a class but whether it was an abuse of discretion not to 

certify. The plaintiffs seek, among other things, the 

certification of a class for medical monitoring under Rule 

23{b){2). Although it is not necessary for common issues to 

predominate over individual issues under Rule 23{b) {2), provided 

that the trial judge does not apply an improper standard the 

decision whether to certify is still discretionary. Adamson v. 

Bowen, 855 F. 2d 668 (lOth Cir. 1988) (where a decision not to 

certify was vacated because the trial court incorrectly held that 

predomination of common issues was a prerequisite to certification 

Where a court is faced with a straightforward question to 

certify or not certify a clearly defined class or subclass the 

court can keep both of its options open by certifying the class 

with the idea of later decertifying the class should the evidence 

show that certification was not warranted. However, where, as 

here, there are multiple types of claims, more than one form of 

relief sought and the parties disagree about the number of models 

necessary to deal with the various ways in which properties may 

have become contaminated it may not be so simple as to err on the 

side of certification just to keep the option open because there 

may be mutually exclusive ways of defining subclasses and any 

attempt to certify subclasses before it is clear what the common 

issues are carries with it the potential for making the case less 

manageable. 

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under Rule 23(b) (2) and the case was remanded for the trial court 

to exercise discretion under a correct interpretation of the law). 

The trial judge, in her order filed December 18, 1991, 

considered and rejected certification under Rules 23 (b) (1), {2) and 

(3) . 2 She decided, "[w]hile plaintiffs' claims relating to medical 

monitoring, if brought by themselves, might constitute a proper 

basis for certifying this suit under Rule 23(b) {2), certification 

is not proper here. The relief is predominately money damages 

" The trial judge understood that injunctive relief was 

requested and that certification of a class under such 

circumstances was legally permissible under Rule 23 {b) {2), but 

nevertheless decided that it was not appropriate to certify a class 

under that rule where the relief sought was primarily money 

damages. Refusal to certify for that reason was not an abuse of 

the trial court's discretion. 

2 The lower court found that the plaintiffs failed to show 

that claims would be satisfied from a limited fund under Rule 

23{b) {1) {B). In their written and oral arguments related to class 

certification the plaintiffs did not challenge this finding as 

clearly erroneous or an abuse of discretion, but merely referenced 

their arguments below in a footnote citation to their appendix. 

The lower court did not address Rule 23(b) (1) (A) which provides 

that a class action may be maintained if inconsistent adjudications 

could establish incompatible standards of conduct for the party 

opposing the class (in this case, the defendant). The defendants, 

who should be the ones most concerned about any such potential 

inconsistency do not appeal the decision. In addition, at oral 

argument on appeal the plaintiffs contended that the defendants 

would be bound by the adjudications below on common issues, a 

result that would preclude the possibility of inconsistent 

adjudications. In taking this position the plaintiffs implicitly 

waived any argument for certification under Rule 23(b) (1) (A). 

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Under Rule 23 (b) (3) the trial judge held that individual 

issues predominated over common issues. She noted that the 

"(p)laintiffs allege that their injuries derive from more than one 

source, and questions of injuries and liability may differ 

depending upon where individual plaintiffs reside." (emphasis 

added) Although the wording of the opinion does not state 

expressly that discretion is being exercised and essentially states 

that the plaintiffs failed to meet the statutory prerequisites for 

certification under Rule 23(b) (3) so that certification would be 

legally improper, it has been held that a trial court's 

determination that common issues do not predominate is also 

reviewed under the abuse of discretion standard. "This is so 

because ••• it is •a practical problem, and primarily a factual 

one with which a district court generally has a greater familiarity 

and expertise than does a court of appeals.'" Windham v. American 

Brands, Inc., 565 F.2d 59, 65 (4th Cir. 1977), cert. denied, 435 

u.s. 968 (1978), citing Link v. Mercedes-Benz of North America, 550 

F.2d 860, 864 (3d Cir.), cert. denied, 431 u.s. 933 (1977). 

(Windham speaks generally of case manageability, but the opinion at 

p. 66 makes clear that the specific determination of whether common 

issues predominate is included within the abuse of discretion 

standard.) 

The plaintiffs contend that the defendants • own experts "could 

(not] testify as to the impact the actions of the Defendant had on 

any individual plaintiff. [footnote citation omitted) Rather, 

each and every defense expert spoke of the harm done to the 

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community as a whole." Aplt. Brief 14. Nevertheless, the 

transcript of the direct examination of defense expert Adrian Brown 

contains several pages of testimony regarding the "individual 

bellwethers in this case. " Aplt. App. 2350-2356. In this 

testimony the witness gave his opinion that certain properties were 

not affected by materials from the Cotter mill and that other 

properties were affected in varying degrees. 3 

The plaintiffs cite Cook v. Rockwell, 147 F.R.D. 237, 244 

(D.Colo. 1993) for the proposition that dose reconstruction can 

rarely be based solely on measurements of existing levels of 

contaminants in the air, soil and bodies of individual plaintiffs. 

However, the fact remains that individual measurements can be quite 

relevant evidence in determining the extent of an individual's 

level of exposure and that such measurements . may vary from 

individual to individual. The testimony that particular 

individuals' properties were not exposed to particular kinds of 

emissions might, on at least some of the claims alleging common law 

3 It is appropriate for an appellate court, in affirming a 

trial court's decision on a class certification motion to take into 

account evidence that was not before the court below until after it 

made its certification rulings because under Rule 23 (c) (1) an order 

for class certification may be altered or amended -- and is 

therefore not final -- until the decision on the merits. Even if 

a trial court were to abuse its discretion in denying class 

certification at an early stage, the error is harmless if, upon a 

more full development of the record, the trial court would have had 

discretion to decertify at a later time for the same reasons that 

were given earlier for not certifying (or for decertifying) and 

those reasons were not advanced in bad faith. 

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torts, have defeated liability. 4 Whether, on balance, individual 

issues predominated over common issues and whether the advantages 

of a class action outweighed the potential problems such as case 

manageability and jury confusion of multiple issues are 

determinations that are generally best left to the trial court. In 

this case the trial court decided that the best method for handling 

this case would be to select a set of bellwether plaintiffs and 

have a trial on their claims. We hold that the trial court 1 s 

decision not to certify under Rule 23(b)(3) was not an abuse of 

discretion. 

II. DEPOSITION OF DEFENSE COUNSEL 

The lower court issued a protective order prohibiting the 

plaintiffs from taking the deposition of Edward McGrath, outside 

counsel representing the defendants in this matter. The plaintiffs 

appeal that decision. The decision of a trial judge to enter a 

protective order under Rule 26(c) is reviewed for abuse of 

discretion. Florida v. Kerr-McGee Corp., 669 F.2d 620, 623 (lOth 

Cir. 1982). 

The plaintiffs argue that Mr. McGrath should have been deposed 

because of his role as spokesperson for cotter Corporation before 

regulatory agencies and the press and because of his involvement in 

helping Cotter prepare its various license applications and giving 

"business advice" to Cotter on the location of a new mill on the 

4 The plaintiffs 1 

geographic region in which 

during a specified period. 

of action. 

proposed class was defined by the 

people lived, owned property or worked 

It was not limited to particular causes 

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site of the old one. The plaintiffs in their motion for leave to 

take McGrath's deposition gave four areas of inquiry for which the 

deposition was sought: 

"(1) (T]he decision to construct a new uranium mill in 

the mid-1970's; 

(2) the construction and licensing of the new mill in 

the 1975-1979 time frame; 

( 3) Cotter's environmental program during that same 

period; and 

(4) the basis of the statements Mr. McGrath made to the 

public, the media, and various governmental agencies with 

regard to the construction, licensing, operation and 

environmental impact of the new mill." 

Aplt. App. 707. 

Notwithstanding plaintiffs' claims that McGrath had other 

roles, the lower court treated McGrath as an attorney for Cotter 

subject to the protection of Shelton v. American Motors Corp., 805 

F.2d 1323 (8th Cir. 1986). The record supported the lower court's 

treatment of McGrath's status. David P. Marcott, who was executive 

vice president and general manager of Cotter from February 1956 

until February 1980, said, "Mr. McGrath operated solely as an 

attorney. He made no operating decisions."5 George Rifakes, the 

president of Cotter after May of 197 4, said, "Mr. McGrath was 

working as a lawyer, intermediary. He was not authorized to make 

commitments on behalf of the company without prior approval from 

management. He was a spokesperson like most lawyers are." 6 

s 

6 

Aplt. App. 1546. 

Aplt. App. 1735. 

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Both sides cite the rule of Shelton v. American Motors Corp., 

805 F.2d 1323, 1327 (8th Cir. 1986). 7 The Shelton court held that 

depositions of opposing counsel should be limited to where the 

party seeking to take the deposition has shown that: (1) no other 

means exist to obtain the information than to depose opposing 

counsel; (2) the information sought is relevant and nonprivileged; 

and (3) the information is crucial to the preparation of the case. 8 

The court gave the following as reasons for its decision to 

restrict the circumstances under which opposing counsel may be 

deposed: 

"Taking the deposition of opposing counsel not only 

disrupts the adversarial system and lowers the standards 

of the profession, but it also adds to the already 

burdensome time and costs of litigation. It is not hard 

to imagine additional pretrial delays to resolve workproduct and attorney-client objections, as well as delays 

to resolve collateral issues raised by the attorney's 

testimony. Finally, the practice of deposing counsel 

7 The plaintiffs pointed out, however, that some district 

courts have held that the blanket protection is inappropriate and 

objections should be made to inappropriate questions, i.e., qad., 

inc. v. Aln Associates, Inc., 132 F.R.D. 492 (N.D.Ill. 1990) which 

disagreed with the holding in Shelton. Our affirmation of the 

protective order in the case before us is based solely on the 

discretion of the trial judge under Rule 26(c) and, therefore, we 

need not distinguish or disapprove of lower court cases such as qad 

v. Aln Associates, Inc. at this time. 

8 The opinion in Shelton indicates that all the information 

sought in that case was protected by the work product rule (a 

conclusion vigorously disputed in a dissenting opinion). Although 

apparently the majority in that case could have reached its 

decision on that ground alone it stated its holding more broadly in 

the three criteria set forth above. Although the dissenting 

opinion of District Judge Battey in Shelton would have permitted 

the questioning of opposing counsel even Judge Battey conceded that 

"discovery should be liberally permitted subject to the control of 

the court to prevent abuse." (emphasis added) Id., at 1331. In 

the case before us the district court properly exercised its 

discretion to control discovery under Rule 26(c). 

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detracts from the quality of client representation. 

Counsel should be free to devote his or her time and 

efforts to preparing the client's case without fear of 

being interrogated by his or her opponent." 

Id., at 1327. 

FED R. crv. P. 26(c) provides that a court may make "any order 

which justice requires to protect a party or person from annoyance, 

embarrassment, oppression, or undue burden or expense, including . 

. • that the disclosure or discovery not be had." Rule 26(c) is 

broader in scope than the attorney work product rule, attorneyclient privilege and other evidentiary privileges because it is 

designed to prevent discovery from causing annoyance, 

embarrassment, oppression, undue burden or expense not just to 

protect confidential communications. Accordingly, in the context 

of this case, the critical issue is not whether the plaintiffs 

sought privileged information or how such a privilege should be 

asserted, the question is whether the trial court abused its 

discretion in attempting to protect the defendants from an 

unnecessary burden. Viewed in this light we approve of the 

criteria set forth in Shelton v. American Motors, supra, but at 

this time we need only make the more limited holding that 

ordinarily the trial court at least has the discretion under Rule 

26 (c) to issue a protective order against the deposition of 

opposing counsel when any one or more of the three Shelton criteria 

for deposition listed above are not met. 9 

9 Shelton presented to the Eighth Circuit the question 

whether to reverse sanctions imposed against a party's in-house 

counsel for failure to answer questions. In the case before us we 

need not reach the issue whether a protective order or other denial 

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The defendants have argued that the Shelton criteria were not 

met in this case because the plaintiffs failed to seek the 

information they desired from other sources. The plaintiffs argue 

in response that they should not be required to question many 

witnesses who may not possess the necessary information and that, 

in any event, no one other than the lawyer himself can explain what 

he meant by what he said. 

The record indicates, however, that the plaintiffs did not 

even fully explore those matters upon which they wished to inquire 

of defendant's counsel with the witnesses they did depose. 10 It is 

of discovery in such a case is mandatory, but merely affirm the 

trial judge's decision to issue a protective order preventing the 

questioning of a party's counsel as being at least a reasonable 

exercise of discretion under Rule 26(c) regardless of whether for 

other reasons or on other legal grounds the order might have been 

permissible or even required by law. We do not decide those issues 

at this time although it is obvious that the Shelton requirement 

that the information sought be nonprivileged is mandatory, not 

discretionary, in nature. 

In holding that the trial judge generally at least has 

discretion to issue such a protective order when the Shelton 

criteria are met we also need not and do not, by implication, 

exclude the possibility that a trial judge would have discretion to 

issue such a protective order in other appropriate situations where 

the criteria are not met. 

10 The protective order was granted by Magistrate Hilbert 

Schauer at a hearing on July 30, 1990. The magistrate found that 

the plaintiffs had not shown that the information they sought could 

not be obtained elsewhere, mentioning two past officers of the 

corporation as possible alternative sources. By her Minute Order 

dated August 24, 1990 Judge Weinscheink denied the plaintiffs' 

motion for reconsideration with leave to the plaintiffs to move for 

reconsideration again if further discovery revealed that the 

information sought was not available from other sources. 

One of the past officers mentioned by Magistrate Schauer was 

David P. Marcott, who was present at the public meeting where 

plaintiffs suspect that McGrath may have intentionally made false 

statements. In denying the plaintiffs' motion for leave to take 

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certainly not too much to expect the plaintiffs to make a 

reasonable effort to seek information from the sources they chose 

to pursue. The only information for which Mr. McGrath was likely 

to be the exclusive source is McGrath's own reasons for making 

certain statements as a spokesperson for Cotter. Nevertheless, 

even this is not clear because it is possible that the testimony of 

some of the officers and directors regarding statements McGrath 

McGrath's deposition by Order dated March 30, 1992, Chief 

Magistrate Judge Abram, after noting several avenues of inquiry by 

deposition not yet pursued by the plaintiffs, pointed out that in 

their deposition of Mr. Marcott the plaintiffs did not attempt to 

refresh Mr. Marcott's recollection of statements made by Edward 

McGrath at a public meeting when Marcott said he did not 

specifically remember those statements. The magistrate judge found 

that the plaintiffs had failed to show a "substantial effort" to 

obtain the information sought from other sources and this finding 

appears reasonable on the record before us. 

on page 28 of their opening brief plaintiffs cite a couple of 

points in the transcript of Mr. Marcott where he did not remember 

a specific statement of McGrath or could not comment on the state 

of mind of McGrath regarding an issue faced by Cotter, but not in 

reference to any inquiry about a particular statement made by 

McGrath. These citations do not contradict the findings of the 

chief magistrate judge. Although in an earlier statement not 

referenced by the plaintiffs Marcott said that he had no 

recollection of any statements McGrath made at the public hearing 

the transcript also shows, as the chief magistrate judge pointed 

out, that Marcott could recall some discussions with McGrath when 

his memory was refreshed. 

The plaintiffs gave no citation for their assertion that 

George Rifakes (also present at the public meeting) was also unable 

to testify as to the matters for which they sought to question 

McGrath. The two transcripts of the depositions of Rifakes total 

to well over 350 pages. The burden is on the plaintiffs to 

establish that the Shelton criteria are met and we need not search 

the record to substantiate plaintiffs' claim. Gilbert v. Shalala, 

45 F.3d 1391, 1395 (lOth Cir. 1995), Sil-Flo, Inc. v. SFHC, Inc., 

917 F.2d 1507, 1513 (lOth Cir. 1990). See also u.s. v. Voigt, 877 

F.2d 1465, 1470 (lOth Cir.), cert. denied, 493 u.s. 982 (1989) (not 

the task of the court to search the record for error where a party 

cites to the court "approximately 400 pages of transcript and 

identifies no particular instance.") 

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made to them in private might have a bearing on McGrath's state of 

mind and be admissible evidence under the state of mind or 

admissions exceptions to the rule against hearsay. 11 In any event, 

the plaintiffs have not established that inquiry into these matters 

was crucial to their case. 

The plaintiffs argue that McGrath's testimony was essential to 

their claims for punitive damages. Even assuming that proof of a 

fraud by McGrath acting as an agent is relevant to punitive damages 

claims against the principal corporation in what the plaintiffs 

have characterized as a nuisance/trespass case, in order to 

demonstrate that McGrath's state of mind was crucial to their case 

the plaintiffs would first have to establish as many other elements 

of the fraud as possible, including the nature of the statements 

made, through alternative sources. The failure of the plaintiffs 

to make a substantial effort to establish as many elements of the 

alleged wrongs as was possible through alternative sources before 

seeking the testimony of defendants' counsel not only undermines 

the argument that all the information sought from him was 

exclusively within his possession, it also undermines the argument 

that the particular information (if there was any) that was 

exclusively within his possession would be proof of a crucial link 

or corroborative of a weak link in a chain of proven elements to 

establish punitive damages. Inquiry could at least have been 

directed to the officers and directors first; knowledge or 

fraudulent intent on their part would be more directly probative of 

11 FED • R. EviD • 8 0 1 & 8 0 3 ( 3 ) • 

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the corporation's liability for punitive damages and during their 

questioning they could also have been asked about any nonprivileged 

statements McGrath may have made regarding his intentions and 

knowledge. Only after such questioning would the district court 

have been fully able to assess whether McGrath's deposition was 

crucial to their case. Accordingly, we affirm the decision to 

grant the protective order. 12 

12 Although the plaintiffs only challenge the protective 

order restricting the deposition of McGrath in their statement of 

issues, in their brief they also mention and criticize the trial 

court's refusal to allow the plaintiffs to put McGrath on the 

witness stand at trial to identify an exhibit. 

Rule 26 (c), upon which we premise our decision, applies by its 

terms only to discovery, however, "[i]t is axiomatic that the trial 

court also has considerable discretion in determining how a trial 

is to be conducted." Blair v. Eagle-Picher Industries, Inc., 962 

F.2d 1492, 1500 (lOth Cir. 1992), cert. denied, u.s. , 113 

S.Ct. 464, 121 L.Ed.2d 372 (1992); Palmer v. Krueger, 897 F.2d 

1529, 1538 (lOth Cir. 1990); Thweatt v. Ontko, 814 F.2d 1466, 1470 

(lOth Cir. 1987) where the court said "the direction of the trial 

court will not be disturbed absent a manifest injustice to the 

parties." This discretion has been held to extend to limiting the 

number of expert witnesses. Chapman v. United States, 169 F.2d 

641, 642-43 (lOth Cir. 1948), cert. denied, 335 U.S. 860 (1948); 

Blair, supra. It would be an anomalous holding to say that the 

trial court was within its discretion in preventing the deposition 

of opposing counsel and on the other hand to hold that the trial 

court exceeded its discretion in protecting opposing counsel from 

being called as a witness at trial. Accordingly, we hold that 

where the Shelton criteria are not all met during trial it will 

ordinarily be permissible to protect opposing counsel from being 

compelled to testify at trial as well. 

The plaintiffs contend that McGrath's testimony was essential 

for the identification and admission of a relevant and important 

exhibit, a conference report on a waste disposal study. The 

plaintiffs, however, fail to explain the importance of this exhibit 

to their case or to show any prejudice resulting from the trial 

court's decision. Accordingly, we conclude that the Shelton 

criteria were neither met before trial nor at the trial. 

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III. EXCLUSION OF EVIDENCE OF FEAR OF CANCER AND DISEASE 

The plaintiffs appeal from the decision of the trial court to 

exclude evidence of the plaintiffs' fears of cancer or other 

disease as annoyance and discomfort damages under nuisance and 

trespass theories of recovery. The trial judge found such evidence 

irrelevant. The standard for review of evidentiary rulings is for 

abuse of discretion, as set forth in Ewen v. City of Norman, 

Oklahoma, 926 F.2d 1539, 1553 (lOth cir. 1991), quoting United 

States v. Ortiz, 804 F.2d 1161, 1164 n.2 (lOth Cir. 1986): "Under 

the abuse of discretion standard, a trial court's decision will not 

be disturbed unless the appellate court has a definite and firm 

conviction that the lower court made a clear error of judgment or 

exceeded the bounds of permissible choice in the circumstances." 

In the case before us, however, the plaintiffs allege that the 

trial court based its decision on a clear error regarding Colorado 

law that was crucial to the court's assessment of relevance of the 

excluded evidence. While a ruling on the relevance of the evidence 

is reviewed for abuse of discretion, Ewen v. City of Norman, 

Oklahoma, supra, whether damages are allowed for fear of cancer or 

other disease as "annoyance and discomfort" in a nuisance or 

trespass case is a question of law that we review de novo. 

Damage issues in tort claims arising under state law are 

determined by the applicable state law. Union Oil Co. of 

California v. Heinsohn, 43 F.3d 500, 506 (lOth cir. 1994). In this 

case Colorado law applies. Colorado allows damages for annoyance 

and discomfort in cases of injury to real property. Weld County 

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Appellate Case: 94-1155 Document: 01019276724 Date Filed: 09/06/1995 Page: 18 
Board of county Commissioners v. Slovek, 723 P.2d 1309, 1318 {Colo. 

1986) . The lower court, however, held that "annoyance and 

discomfort" did not include unfounded fears of cancer or other 

disease. 

The plaintiffs argue that even though their emotional distress 

claims were dismissed they should be permitted to introduce 

evidence of fear of cancer and other disease because there is a 

distinction between proof of liability on an emotional distress 

claim through evidence of fear of disease {which the lower court 

did not permit in a decision that the plaintiffs have not 

challenged on appeal) and proof of damages in a nuisance case 

through evidence of fear of disease {which the plaintiffs argue is 

permissible). Ironically, although the plaintiffs argue that the 

lower court confused proof of liability and proof of damages, the 

plaintiffs, in support of their position cite RESTATEMENT OF THE LAw, 

ToRTS 20 § 821F comment f, a comment dealing not with damages but 

rather with proof of liability in a nuisance case. That passage 

reads as follows: 

"f. Normal mental reactions. In determining whether the 

harm would be suffered by a normal member of the 

community, fears and other mental reactions common to the 

community are to be taken into account, even though they 

may be without scientific foundation or other support in 

fact. Thus the presence of a leprosy san[i)tarium in the 

vicinity of a group of private residences may seriously 

interfere with the use and enjoyment of land because of 

the normal fear that it creates of possible contagion, 

even though leprosy is in fact so rarely transmitted 

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through normal contacts that there is no practical 

possibility of communication of the disease. 1113 

13 We decide this case based on the failure of the 

plaintiffs to demonstrate that fear of contracting a disease is a 

form of compensable "annoyance or discomfort" under Colorado law, 

regardless of whether Colorado follows comment f of the Restatement 

§ 821F. Therefore, it is not necessary for us to decide whether 

Colorado would in fact follow that particular Restatement comment. 

We note, however, that even if comment f were on point it is not 

clear that Colorado would follow it. 

Although the Colorado Supreme court has cited the Restatements 

in this kind of case, it has not followed the Restatements 

slavishly (see Weld County Board v. Slovek, 723 P.2d 1309, 1318 

(Colo. 1986) questioning the Restatements rule that a nonoccupantowner cannot recover annoyance and discomfort damages) and we are 

not convinced that it would follow this particular comment from two 

decades ago, allowing compensation for wholly unfounded fears. The 

Supreme Court of Michigan, which decided a case allowing a nuisance 

claim based on unfounded fears of a "pesthouse", or hospital for 

contagious diseases, many years ago (Birchard v. Lansing Board of 

Health, 169 N~w. 901, 4 A.L.R. 590 (Mich. 1918)) recently decided 

not to allow a claim of nuisance based on the depreciation in real 

property values caused by unfounded fears of third party potential 

buyers of the real property due to publicity about nearby 

contamination. Adkins v. Thomas Solvent Company, 487 N.W.2d 715 

(Mich. 1992) . 

The Supreme Court of Michigan was careful to point out that 

the plaintiffs in that case had not made claims based on their own 

fears, but rather based on the effect on property values of the 

fears of third parties. Nevertheless, the form of the court's 

argument calls into question whether a court might continue to 

follow the Restatements rule, let alone adopt it, today. The court 

said: 

"[W]e would think it ... anachronistic that a claim of 

nu1.sance in fact could be based on unfounded fears 

regarding persons with AIDS moving into a neighborhood, 

the establishment of otherwise lawful group homes for the 

disabled, or unrelated persons living together, merely 

because the fears experienced by third parties would 

cause a decline in property values." 

Adkins, supra at 726 (emphasis added, footnotes omitted). 

The Michigan court cited the case of Nicholson v. Connecticut 

Half-Way House, Inc., 218 A.2d 383 (Conn. 1966) where the court 

denied an injunction against a half way house for selected parolees 

even though the plaintiffs alleged their own fears that the 

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We are apparently being urged to draw an inference that if 

fear of disease can prove an element of a nuisance case then fear 

of disease must also be compensable as an item of "annoyance and 

discomfort" damages in a nuisance or trespass case. This is not 

clear, however, from the cited authorities. We must bear in mind 

that nuisance (and trespass) is, at bottom, a claim for injury to 

property, not to the person. It is possible that while fear of 

disease might prove an element of a nuisance claim by showing how 

the utility or desirability of a property had been affected, that 

the fears would, nevertheless, not be relevant in measuring the 

damages. For example, a court could hold that such fears were not 

within the definitions of "annoyance and discomfort" even though 

taking them into account on the issue of liability to determine 

whether to issue an injunction or to award damages for the loss of 

value to the property (measured without direct evidence of the 

fears that caused the loss of value). 

Although the Restatement is quite clear that unfounded fears 

of disease can be taken into account in determining liability in a 

nuisance case the comment dealing with annoyance and discomfort 

damages has no similar language. RESTATEMENT OF THE LAW, TORTS 2D 

§ 929, comment e. Further, two of the cases cited by the 

plaintiffs, Park v. Stolzheise, 167 P.2d 412 (Wash. 1946) and 

Armory Park v. Episcopal Community Services, 712 P.2d 914 (Ariz. 

residents of the half way house would commit criminal acts in the 

neighborhood. The court there, like the court below in the case 

before us, required some evidence to substantiate the fears. 

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1985), both granted injunctive relief and neither held that fears 

of disease could constitute annoyance and discomfort damages. 

The plaintiffs also cite Bolin v. Cessna Aircraft Co., 759 

F.Supp. 692 (D.Kan. 1991) where the court, applying Kansas law, 

allowed damages for annoyance and discomfort without physical 

injury in a case of groundwater contamination. However, there is 

no dispute that annoyance and discomfort damages are available in 

such a case. The issue at hand is whether unfounded fears of 

disease are a form of recoverable annoyance and discomfort damages. 

The Bolin case did not address that issue14 and the lower court in 

the case before us gave precisely that reason for distinguishing 

the Bolin case. 15 The issue of fears of future harm was addressed 

by the same court, however, in Maddy v. Vulcan Materials Co., 737 

F.Supp. 1528, 1537-38 (D.Kan. 1990) where the court (also applying 

Kansas law) held that unfounded fears are not compensable: 

"The plaintiffs' alleged emotional distress, which 

primarily takes the form of a 'fear of the future,' 

arises as an indirect response to the exposure to 

chemicals allegedly emitted by Vulcan. The plaintiffs, 

however, have not provided proof of exposure to harmful 

levels of toxic chemicals produced by Vulcan, nor have 

they demonstrated that their emotional fears and concerns 

on the subject are reasonable reactions to the alleged 

exposure and that those fears are based on objectively 

verifiable and reliable medical information related to 

that exposure." 

14 Bolin did say that compensation for the endangerment of 

health and peace of mind were allowable but did not say that 

damages could be awarded for unfounded fears. 

15 Normal annoyance and discomfort would include the psychic 

harm caused by past or present odors or noises -- actual annoyances 

not fears of possible future harms. Our opinion on fears of future 

harms does not apply to these other normal annoyances and 

discomforts. 

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(emphasis added) 

Clearly the District Court of Kansas, in applying Kansas law, 

has rejected the plaintiffs' contention that unfounded fears of the 

future can constitute annoyance and discomfort damages and the 

plaintiffs have presented no convincing contrary authority in any 

other jurisdiction. 16 

The ultimate question before us is one of Colorado law, not 

Kansas law. However, our examination of Colorado cases, while 

hardly conclusive on this point17 , suggests to us that the Colorado 

Supreme Court, if confronted with this question, would reach much 

the same conclusion as the Maddy court. 

In Slovek v. Board of County Commissioners, 697 P.2d 781 

{Colo.App. 1984), a trespass and negligence case where the 

plaintiffs' property was flooded, the court did not allow damages 

for emotional distress but did allow damages for unspecified 

annoyance and discomfort (to be determined after remand). On 

16 The plaintiffs point out that Lauri Maddy was never told 

by any medical person that her respiratory conditions were caused 

by exposure to toxic chemicals and that there is no discussion in 

the opinion of any evidence that such an exposure was likely to 

cause medical problems. Nevertheless, Maddy did hold that 

unfounded fears were not compensable, contrary to plaintiff's 

argument based on the Restatements. Whether the fears of the 

plaintiffs in the case before us were well founded is a question we 

will address later in this opinion. 

17 During oral argument Judge Henry advised counsel for the 

plaintiffs that he had examined their authorities and that in his 

judgment they would not prevail before this court on this 

particular issue. He then inquired whether the plaintiffs would 

prefer to have the issue certified to the Colorado Supreme Court if 

the alternative were to lose on the issue. The plaintiffs' counsel 

then said that she believed the issue could still be certified but 

that she preferred that this court decide the issue to avoid 

delaying the resolution of the case. 

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appeal at 723 P.2d 1309 (Colo. 1986) the Colorado Supreme Court was 

not confronted with the issue of emotional distress18 and affirmed 

on the issue of annoyance and discomfort without discussing whether 

that term encompassed unfounded fears of disease or anything else. 

However, the court did make clear that any claim for annoyance and 

discomfort must be based upon "reasonable and competent evidence". 

In the case before us the lower court, citing Slovek as authority, 

would not allow the introduction of evidence of fears of cancer or 

other disease "unless they're grounded by some more substantial 

evidence than just someone saying they're afraid." This 

interpretation, while not clearly required by the Colorado Supreme 

Court's holdings appears to us the correct conclusion to draw from 

the opinion in Slovek. 

The trial court also cited Towns v. Anderson, 579 P.2d 1163 

(Colo. 1978). In Towns Colorado held that "naked claims of 

emotional distress" can be made only where the emotional distress 

results in physical manifestations or mental illness. Id., at 

1164-5. The plaintiffs argue that applying the Towns rule is an 

error of law here because this is a trespass and nuisance case, not 

a naked claim of emotional distress. Of course, for that reason, 

Towns is not on point, however, in view of the lack of authority 

directly on point from the Colorado Supreme Court the rationale of 

18 The Colorado Supreme Court denied certiorari on the 

emotional distress claim. Slovek, 723 P.2d at 1313 n.4. However, 

the denial of the emotional distress claim might simply be a 

statement about the appropriate legal theory on which to establish 

liability; it is not necessarily a statement that similar harms 

cannot be compensated under a trespass or nuisance theory. 

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the Towns case should surely be taken into account. In Towns the 

court, even while perhaps liberalizing the rule for emotional 

distress, noted the policies of guarding against speculative and 

fraudulent claims. The only reason given for not requiring a 

physical impact as a prerequisite for damages was the court's 

belief that "the medical profession has made tremendous advances in 

diagnosing and evaluating emotional and mental injuries." In our 

judgment the potential for fraudulent or speculative claims that 

concerns the Colorado Supreme Court could only be effectively 

limited in a nuisance or trespass case such as this by a rule 

requiring evidence substantiating that the fears of disease, 

resulting from the contamination of land, are reasonable and have 

a sound foundation in medical, scientific or statistical 

evidence. 19 

In the case before us the trial court did not find that the 

fears of the plaintiffs were grounded by substantial evidence and 

it held that such a foundation was a prerequisite to the 

admissibility of the evidence. We hold that the trial court's 

interpretation of the law was not in error on this point and that 

19 Such a requirement is similar to the Towns requirement 

that an act must be negligent because of its tendency to cause harm 

through some manner other than by fright, shock or the internal 

operations of an emotional disturbance. Towns, supra at 1165. In 

view of our holding that there was not sufficient substantiation of 

the risk of cancer or other disease on the record in this case we 

need not reach the question whether the requirement of a proven 

mental illness (or manifestations of physical illness resulting 

from emotional distress) is also required to show annoyance and 

discomfort in a case of injury to real property. 

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based on the record before the court the decision to exclude 

evidence of fears of cancer or other disease was not an abuse of discretion. aJ 

20 The plaintiffs state in their reply brief that Dr. Joseph 

Q. Jarvis "reported that lung cancer was 29% higher than expected 

at the 95% confidence level for the years 1979-90." Aplt. Reply 

Brief 19, citing Aplee. Supp. App. 2001. This statement is false. 

What Dr. Jarvis said at the cited page is: "Lung cancer observed 

cases were 29% greater than expected for men and women combined, 

two cases short of a statistically significant elevation at the 

p=.05 level." (emphasis added) 

The referenced Tables 1, 2 and 3 all confirm this statement. 

Eight kinds of cancer were studied and the notes to all three 

tables clearly state~ "Observed/Expected ratios that have a 95% 

Confidence Interval that brackets the value 1.00 are not considered 

statistically high or low." Id., at 2008-12. In every table for 

every kind of cancer for which there were observed cases the 

confidence interval included the value of 1. 00; none of the 

observed levels of cancer were elevated to a statistically 

significant level. 

The referenced report also says that "[f) ewer cases of all 

cancers combined are observed compared to expected." Id. at 2001. 

The report did find that residents, especially men, might be at 

moderately increased risk for lung cancer, but "the risk estimate 

is imprecise." Id., at 2002. The Jarvis report also states: "The 

finding of a modest increase in risk for lung cancer in Lincoln 

Park, even with imprecise estimates of the risk, begs the question 

whether exposure to mill-derived radioactive substances may be a 

cause of neoplasia in this community." Id., at 2003. After noting 

possible causes the report continues: "However, Figures 1 and 2 do 

not demonstrate either an unusual age distribution of lung cancer 

cases or a clustering of time diagnosis, both of which might be 

expected with an outbreak of lung cancer due to a point source 

environmental exposure." Id., at 2004. 

Even if the elevated levels of lung cancer for men had been 

statistically significant a court might well take account of the 

statistical "Texas Sharpshooter" fallacy in which a person shoots 

bullets at the side of a barn, then, after the fact, finds a 

cluster of holes and draws a circle around it to show how accurate 

his aim was. With eight kinds of cancer for each sex there would 

be sixteen potential categories here around which to "draw a 

circle" to show a statistically significant level of cancer. With 

independent variables one would expect one statistically 

significant reading in every twenty categories at a 95% confidence 

level purely by random chance. Therefore, a court might reasonably 

look for some medical or other scientific evidence that the alleged 

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IV. PIERCING THE CORPORATE VEIL 

The plaintiffs contend that Commonwealth Edison, the sole 

stockholder of Cotter, should not be protected from liability by 

the fact that Cotter operated in the corporate form. The 

plaintiffs argue that Cotter is a mere instrumentality of 

Commonwealth Edison and that failure to pierce the corporate veil 

would result in a grave injustice because Commonwealth Edison 

bought Cotter to benefit the residents of Illinois, and Colorado 

residents, who live with the contamination caused by Cotter's new 

mill, will be unable to obtain compensation from Commonwealth 

Edison. 

In this case, alleging torts under Colorado law, the question 

of piercing the corporate veil must be determined by Colorado law 

exposure would be expected to cause lung cancer in men to be 

affected differently than other forms of cancer and lung cancer in 

women before concluding that higher rates for just this one form of 

cancer in this one segment of the population were anything more 

than a coincidence. 

The plaintiffs did not argue that any other evidence of the 

likelihood of future cancer was introduced and given their 

statement that contamination has occurred for 30 years the absence 

of evidence of a past or present health effect is especially 

conspicuous. 

The plaintiffs do argue that the area in which they live has 

been placed on the National Priorities List of the Environmental 

Protection Agency (EPA) and that this is evidence of the hazard to 

them. However, proof of damage to the environment is not 

equivalent to proof of danger to humans. The plaintiffs failed to 

show that the EPA status of their area demonstrates a human health 

hazard. 

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as well. Lowell Staats Mining co. v. Pioneer Uravan, Inc., 878 

F.2d 1259, 1262 (lOth Cir. 1989).n 

The lower court granted summary judgment for the defendant 

Commonwealth Edison. A motion for summary judgment is reviewed de 

novo. Bacchus Industries v. Arvin Industries, 939 F.2d 887, 891 

(lOth Cir. 1991). The court must view the evidence in the light 

most favorable to the party opposing the motion. Osgood v. State 

Farm, 848 F.2d 141, 143 (lOth Cir. 1988).n 

"[C]orporate veils exist for a reason and should be pierced 

only reluctantly and cautiously. The law permits the incorporation 

of businesses for the very purpose of isolating liabilities among 

separate entities. Cascade Energy and Metals Corp. v. Banks, 896 

F.2d 1557, 1576 (lOth Cir. 1990), cert. denied, 498 u.s. 849 (1990) 

(applying Utah law); Skidmore v. Canada Life, 907 F.2d 1026 (lOth 

21 Plaintiffs also argued that Commonwealth Edison should be 

held liable as an owner operator under the Comprehensive 

Environmental Response, Compensation and Liability Act (CERCLA), 42 

u.s.c. § 9601 et. seq. The argument for piercing the corporate 

veil under federal law (or simply for liability of Commonwealth 

Edison under the federal statute), citing cases that are several 

years old, was raised for the first time in the plaintiffs' reply 

brief on appeal with no citation of any record reference showing 

that this issue had been raised below. Accordingly, we will decide 

this question solely under Colorado law. See Palmer v. 

Reconstruction Finance Corporation, 164 F.2d 466, 468 (2d Cir. 

1947), cert. denied, 334 u.s. 811 (1948) (where Judge Learned Hand 

stated that the rule against reversing upon a ground not raised 

below has greater force where the issue is raised for the first 

time in a reply brief). 

n Although we have said that the decision whether or not to 

pierce the corporate veil is primarily a factual one it is also 

clear that a verdict as a matter of law may be justified where the 

facts, viewed most favorably to the party seeking to pierce the 

veil, do not justify such a result. Lowell Staats Mining Co. v. 

Pioneer Uravan, Inc., 878 F.2d 1259, 1262 & 1263-4 (lOth Cir. 

1989). 

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Appellate Case: 94-1155 Document: 01019276724 Date Filed: 09/06/1995 Page: 28 
Cir. 1990) {Colorado Law). In order to hold Commonwealth Edison 

liable the plaintiffs must prove that the corporate entity "was 

used to defeat public convenience, or to justify or protect wrong, 

fraud or crime." Lowell Staats Mining Co. v. Pioneer Uravan, Inc., 

878 F.2d 1259, 1265 {lOth Cir. 1989). The possibility that the 

plaintiffs may have difficulty enforcing a judgment against Cotter 

alone is not the type of injustice that warrants piercing the 

corporate veil. Id. 

Whether a subsidiary is an instrumentality is determined by 

reference to the following criteria: 

" { 1) The parent corporation owns all or 

majority 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 or 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, and 

in the statements of its officers, "the 

subsidiary" is referred to as such or as a 

department or division. (9) The directors or 

executives of the subsidiary do not act 

independently in the interest of the 

subsidiary but take direction from the parent 

corporation. (10) The formal legal 

requirements of the subsidiary as a separate 

and independent corporation are not observed." 

Fish v. East, 114 F.2d 177, 191 (lOth Cir. 1940). 

The lower court held that Cotter was not an instrumentality of 

Commonwealth Edison because Cotter was adequately capitalized, had 

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repaid loans from Commonwealth Edison regularly and had 

scrupulously observed all the legal requirements of a corporation. 

The plaintiffs do not dispute that the corporate formalities were 

observed but do dispute that loans were repaid regularly and that 

Cotter was adequately capitalized. 

The plaintiffs contend that Cotter's repayment of its 

indebtedness was illusory because of a "sham stock transaction made 

for the sole purpose of bolstering Cotter's balance sheet while 

preserving Commonwealth's right to receive payment on the funds 

advanced (now in the form of preferred stock dividends rather than 

interest)." The plaintiffs argue that if the preferred stock were 

properly recharacterized as debt it could be seen that Cotter is 

undercapitalized. 

The plaintiffs' argument, however, ignores that preferred 

stock is not debt and that the claims of creditors, including any 

successful plaintiffs, will have priority over the claims of 

preferred stockholders for the return of their capital. The 

purchase of preferred stock by a sole stockholder is not, as the 

plaintiffs contend, "like a consumer buying a sofa for cash and 

then going back and giving the store more money years after the 

purchase;" rather it is like a consumer buying a sofa for cash and 

then going back and paying the store more money years after the 

purchase to have the sofa reupholstered. The purchase of preferred 

stock, whether for cash or in exchange for the discharge of 

indebtedness, adds value to the company and leaves it better able 

to meet its obligations to all its creditors. 

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The plaintiffs also contend that the balance sheet for Cotter 

overstates its current assets because inventories cannot be 

considered current assets. The plaintiffs argue that the mill has 

not been operating for years and, therefore, amounts listed as 

inventories cannot be expected to be consumed within one year, 

which is necessary, by definition, for them to be current assets. 

The plaintiffs offer no authority regarding the standard accounting 

practice for characterization of inventories under these 

circumstances, but rather stand solely on their semantic argument. 

In any event, however, we find that their argument misses the 

point. Regardless of how these assets should be treated on the 

balance sheet the mere fact that a business becomes 

"undercapitalized" solely because of the recharacterization of 

assets when it ceases to operate does not prove that the business 

was set up in a manner so that it would be undercapitalized, nor 

does it show that the corporation "was used to defeat public 

convenience, or to justify or protect wrong, fraud or crime." We 

hold that the Fish v. East criteria must be examined in light of 

the principles and policies underlying the doctrine of piercing the 

corporate veil and in light of those policies the plaintiffs' 

argument that Cotter is (or was) undercapitalized is unavailing. 

The plaintiffs cite Friedman & Son, Inc. v. Safeway Stores, 

712 P.2d 1128 (Colo.App. 1985) as authority that the corporate veil 

may be pierced where the first, second and seventh Fish criteria 

are met. While it is true that the opinion is Safeway relies on 

these three criteria and it is also true that on the record before 

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us under the summary judgment standard these three criteria are 

satisfied, Safeway is distinguishable on its facts because the 

subsidiary in that case was not only owned by the parent but was 

also incorporated as a wholly owned subsidiary to operate a baling 

system to prepare the parent's waste cardboard for recycling (Fish 

criterion number four) . In the case before us the subsidiary, 

Cotter Corporation, existed as an independent corporation for years 

before it was purchased by Commonwealth Edison.n 

The plaintiffs argue that under the various agreements between 

Commonwealth Edison and Cotter that Commonwealth completely 

controlled Cotter. In fact, those agreements do give Commonwealth 

Edison significant control over the general policies and plans of 

Cotter. The May 14, 1975 Operating Agreement, for example, 

requires approval from Commonwealth Edison before Cotter makes any 

material change in its mine development plan, in the design or 

construction of the mine and processing plant, in the mining, 

n The case of Shamrock Oil and Gas Co. v. Etheridge, 159 

F.Supp. 693 (D.Colo. 1958), cited by the plaintiffs, is 

distinguishable on similar grounds in that the corporation in that 

case was held to be an alter ego of one of its incorporators where 

the corporation's sole function was to hold naked legal title to a 

drilling rig. Similarly, Milgo v. United Business Communications, 

623 F.2d 645 (lOth Cir. 1980), cert. denied, 449 u.s. 1066 (1980), 

also cited by the plaintiffs, is distinguishable because there both 

the parent corporation and the alter ego were organized as wholly 

owned subsidiaries of the same third corporation. Id., at 658-9. 

In Garden City Co. v. Burden, 186 F.2d 651 (lOth Cir. 1951) the 

complaint alleged that a company "was organized and . • • 

maintained and operated for the sole purpose of carrying out the 

aims and purposes of the parent." (emphasis added) Id., at 652. 

Although the opinion does not indicate if this allegation was 

proven the case is distinguishable in that the subsidiary did not 

maintain its formal separateness, had no telephone listing or 

offices in its own name and owned no equipment with which to 

operate. 

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concentrating or refining processes employed and before Cotter 

embarked on any of a variety of programs of exploration, mining or 

processing. However, the Operating Agreement also specifically 

states: "Day-to-day mine operations, so long as consistent with 

the 'long range mine development plan•, shall not be deemed to be 

a part thereof but shall be the sole responsibility of Cotter." 

Aplt. App. 960. 

To summarize, reading the record in the light most favorable 

to the plaintiffs for purposes of this decision, it appears to us 

that of the criteria in the Fish v. East case the third (parent 

financing) and ninth (taking direction from parent) are somewhat 

qualifiedly present here. The sixth (that the parent pays 

salaries, expenses or losses of the subsidiary) appears partly 

present in the sense that the parent was required to reimburse 

Cotter for expenses incurred in mining operations for its benefit 

but there is nothing to suggest that the formal separateness of the 

corporations was disregarded. Two entirely independent 

corporations could have an arrangement for reimbursement of 

expenses such as that agreed to here without becoming one 

corporation. 

The first (parent ownership), second (interlocking boards), 

seventh (substantially no business except with the parent) and 

eighth (subsidiary is referred to as such in papers of parent) 

criteria of the Fish case are present here as well. However, the 

fourth (parent organizes or subscribes to all of subsidiary 1 s 

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stock), fifth (grossly inadequate capital) and tenth (lack of 

formalities) criteria are not satisfied. 

In applying the ten criteria in a case such as this we do not 

determine the winner by a numerical score, as in a ball game. We 

must view all the factors and even if a majority favor the party 

seeking to pierce the corporate veil that party does not 

necessarily prevail if the criteria -- when taken as a whole with 

due regard to the extent to which they were and were not fully 

satisfied -- do not demonstrate that the corporate form "was used 

to defeat public convenience, or to justify or protect wrong, fraud 

or crime." In the case before us we hold as a matter of law, that 

on the record before us piercing the corporate veil was not 

warranted. 

VI. CONCLUSION 

We have reviewed all four issues presented to us on this 

appeal and we find no error. 

Affirmed. 

-34-

Appellate Case: 94-1155 Document: 01019276724 Date Filed: 09/06/1995 Page: 34