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Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 

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PUBLISH 

FI LED 

United States Court of Appea.Js 

Tenth Circuit 

UNITED STATES COURT OF APPEALS 

JUN 21 1990 

ROBERT L. HOECKER 

Clerk 

FOR THE TENTH CIRCUIT 

JAMES V. KEY; FRANCIS L. KEY; ) 

JOHN E. OUTHOUSE; GLENDA OUTHOUSE,) 

) 

Plaintiffs-Appellees, ) 

) 

vs. ) 

) 

LIQUID ENERGY CORPORATION, a ) 

Delaware Corporation; MITCHELL ) 

ENERGY AND DEVELOPMENT CORPORATION) 

a Texas corporation, ) 

) 

Defendants-Appellants. ) 

No. 88-2643 

Appeal from the Pnited States District Court 

for the Western District of Oklahoma 

(D.C. No. CIV 85-1761 E) 

Daniel J. Hoehner, Tom L. King and Jeff R. Beeler, King, 

Roberts & Beeler, Oklahoma City, Oklahoma, for DefendantsAppellants. 

Howard K. Berry, Jr., Berry and Berry, Oklahoma city, Oklahoma, 

for Plaintiff-Appellees. 

Before BALDOCK and EBEL, Circuit Judges, and CONWAY,* 

District Judge. 

CONWAY, District Judge. 

*The Honorable John E. Conway, United states District Judge for 

the District of New Mexico, sitting by designation. 

Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 1 
After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not 

materially assist the determination of this appeal. See Fed; R. 

App. P., 34A; 10th Cir. R. 34.1.9. Therefore, the case is 

ordered submitted without oral argument. 

This is an appeal from an order of the United States 

District Court for the Western District of Oklahoma denying the 

Motion for Judgment Notwithstanding the Verdict, or in the 

Alternative, Motion. for a New Trial, filed by Liquid Energy 

Corporation and Mitchell Energy and Development, collectively 

referred to as "the defendants'' or "the appellants." The final 

order was entered on September 19, 1988, and this appeal was 

timely filed on October 18, 1988. The following issues are 

raised on appeal. 

As to appellant Mitchell Energy and Development (Mitchell): 

whether the district court erred in failing to direct a verdict 

or grant a judgment notwithstanding the verdict in favor of 

Mitchell; whether the district court erred in failing to direct a 

verdict or grant a judgment notwithstanding the verdict in favor 

of Mitchell on the issue of proximate cause; and whether the 

district court erred in failing to direct a verdict or grant a 

judgment notwithstanding the verdict in favor of Mitchell on the 

issue of legal duty. 

As to both appellants: whether the district court erred in 

giving a negligence per se instruction, and an instruction 

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regarding future loss of earnings, and in not giving an 

instruction regarding proximate cause; and, whether the district 

court erred in awarding two rates of pre-judgment interest. 

We are persuaded py Mitchell's argument that the district 

court erred in failing to direct a verdict or grant judgment 

notwithstanding the verdict as to Mitchell, and we will therefore 

reverse the district court on that basis. Having made this 

determination, we need not address the remaining issues as to 

appellant Mitchell. In addition, we find that the district court 

properly instructed ·the jury and will therefore affirm on those 

issues related to the jury instructions. Finally, we find that 

the district court did not err in awarding two separate rates of 

pre-judgment interest, and instead acted within the scope of its 

discretion. The district court will therefore be affirmed on 

this final issue. 

Facts 

This is an action for damages resulting from an explosion 

which injured plaintiffs/appellees Key and Outhouse, who were 

employed as truck drivers by the Great Plains Transport Company 

on February 6, 1985, the date of the accident. In January of 

1985, approximately one month before the accident, the plaintiffs 

began hauling butane condensate from the appellant Liquid Energy 

Company's facility in Stinnett, Texas, to Velma, Oklahoma. 

Liquid Energy has three separate stations for loading condensate, 

variously known as Canadian River, Barnhill and TP-1. On 

February 5, 1985, both Key and Outhouse loaded their tanks at the 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 3 
Canadian River plant pursuant to Liquid Energy's instructions. 

( The appellees then drove to Clinton, Oklahoma where they stopped 

for the night. The following morning, samples were taken ~rom 

their trailers, and the appellees drove on to Velma, Oklahoma. 

Upon arriving at the Lee Petroleum facility in Velma, the 

appellees were advised by a Mr. Kappel, a Lee Petroleum employee, 

that tests had to be made on the condensate they were 

transporting. The tests were made on the product contained in 

the trailer driven by Key, but Kappel was unable to perform the 

tests on the condensate in the trailer driven by outhouse due to 

pressure in the tank. After lunch, on February 6, Kappel and 

Outhouse decided to take a sample from the second trailer for 

testing. outhouse checked the rear vent, then both men got on 

top of the trailer and prepared to open the rear hatch. When 

Outhouse released the rear.hatch, the still pressurized 

condensate blew out in a 15-foot high column. While airborne, 

the condensate ignited, causing the explosion which resulted in 

the appellees' injuries. 

The appellees' theory at trial was that the product they 

received from Liquid Energy was a high pressure condensate and 

should not have been transported in the type of trailers 

provided. 

At the close of the evidence, the defendants moved for a 

directed verdict which was denied by the trial court. Defendant 

Mitchell specifically moved for a directed verdict on the theory 

that it could not be held liable for the acts of its subsidiary, 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 4 
Liquid Energy. The jury returned a verdict finding negligence on 

all parties and awarding damages to the plaintiffs. The 

defendants then filed a Motion for Judgment Notwithstanding the 

Verdict U'JNOV"), or in the Alternative, for a New Trial, which 

was also denied by the trial court. The defendants now request 

I 

the trial court be reversed on these rulings and that judgment be 

entered in their favor, or in the alternative, that a new trial 

be ordered. 

In ruling on an appellant's request to overturn a trial 

court for failure to direct a verdict or grant a JNOV, the 

appeals court must determine whether the trial court's refusal to 

set aside the jury verdict constituted a manifest abuse of the 

trial court's discretion. Karnes v. Emerson Electric co., 817 

F.2d 1452 at 1456 (10th Cir. 1987); Brown v. McGraw Edison co., 

736 F.2d 609, 616 (10th Cir. 1984). A verdict claimed to be 

against the weight of the evidence is normally not reversed 

absent an "unusual situation" or a "gross abuse of discretion." 

Brown, 736 F.2d at 616. We now turn to Mitchell's first argument 

regarding the trial court's denial of a directed verdict or a 

JNOV in favor of Mitchell. 

Mitchell urges that the sole basis for judgment against it 

is its status as a parent corporation of Liquid Energy. In 

support of its motion for directed verdict and/or JNOV, Mitchell 

argued that it was at all relevant times a distinct·corporate 

entity, insufficiently related to Liquid Energy to warrant 

liability. Mitchell further argued that the plaintiff had failed 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 5 
to prove that it should be liable given the factors set forth in 

Rea v. An-son corp., 79 F.R.D. 25 (W.D. Okla. 1978). Mitchell 

states that at the trial the plaintiffs were only able to prove 

that the Liquid Energy facility at Stinnett, Texas had a sign 

which read "Liquid Energy Company, a Subsidiary of Mitchell 

Energy and Development Company." In its favor, Mitchell argues 

that there was no evidence that any of Mitchell's employees were 

in any way involved in the alleged acts of negligence, and 

further argues that Liquid Energy was owned entirely by Liquid 

Energy Corporation and not by Mitchell. Finally, Mitcheil argues 

that it has no interest in any of the field liquids sold by 

Liquid Energy. 

By way of response, the appellees urge that Liquid Energy 

and Mitchell Energy are both energy-related businesses, that 

Liquid Energy is designated a subsidiary of Mitchell on the sign 

in front of the Canadian River plant, and that the post office 

box address in Woodlands, Texas is the same for both 

corporations. As a legal basis for imposing liability on 

Mitchell, the appellees contend that the relationship between 

Mitchell and Liquid Energy is analagous to that of an employer 

and an independent contractor and not necessarily that of a 

parent and its subsidiary corporation. Having thus characterized 

the relationship between Mitchell and Liquid Energy, the 

appellees argue that the employer, by analogy, Mitchell, cannot 

shed liability for the actions of the independent contractor, by 

analogy, Liquid Energy, where the work involved has a peculiar 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 6 
• 

risk of physical harm to others. This argument is founded on 

section 413 of the Restatement Second of Torts and is commonly 

known as the Peculiar Risk Doctrine. 

We will first address the validity of Mitchell's argument 

under traditional parent/subsidiary analysis and will then turn 

to the alleged applicability of the Peculiar Risk Doctrine. 

This circuit's prior decisions on the law applicable to 

parent/subsidiary corporations are clear, and consistent with 

Oklahoma law in setting forth the appropriate concerns when 

determining whether a parent may be held liable for the acts of 

its subsidiary. In Fish v. East, 114 F.2d. 177 (10th Cir. 1940), 

this Court addressed the question of the liability of a parent 

corporation for the acts of its subsidiary in the context of a 

bankruptcy proceeding. The Court held that where the subsidiary 

is a mere instrumentality of the parent the corporate entity may 

be disregarded. In addition, th~ Court identified the following 

determinative circumstances for deciding whether a subsidiary is 

a mere instrumentality of the paren~: 

whether the parent owns all of the stock of 

the subsidiary; whether the corporations have 

common directors and officers; whether the 

parent finances the subsidiary; whether the 

parent caused the subsidiary's incorporation; 

whether the parent pays salaries or expenses 

of the subsidiary; whether the subsidiary has 

business with anyone outside the parent, or 

assets which have not been transferred to it 

by the parent; whether the directors and 

officers act independently in the interest of 

the subsidiary; whether the formal legal 

requirements of the subsidiary, such as 

keeping minutes, are observed; whether 

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( 

there are distinctions between the parent and 

subsidiary that are routinely disregarded or 

confused; and, whether the subsidiary has a 

full board of directors. 

114 F.2d. at 191. 

The ruling in Fish was adopted by the United states District 

Court for the western District of Oklahoma in Palmer v. Stokely, 

255 F. Supp. 674 (W.D. Okla. 1966), and Rea v. An-son Corp., 79 

F.R.D. 25 (W.D. Okla. 1978), which are consistent with cases from 

the Oklahoma Supreme Court. See, Frazier v. Byron Memorial 

Hospital Auth., 775 P.2d 281 (Okla. 1989) and Gulf Oil corp. v. 

state, 360 P.2d 933 (Okla. 1961). In Palmer, the court 

elaborated on the Fish analysis by adding that the corporate veil 

should be pierced when a failure to do so would defeat public 

convenience, justify wrong and protect fraud. 255 F. Supp. at 

681. In Rea the district court added that the fact that ·a 

corporation owns all of the stock of another corporation does not 

destroy the identity of the latter as a distinct legal entity, 79 

F.R.D. at 29, and the fact that stockholders or officers of two 

corporations may be the same persons does not operate to destroy 

the legal identity of either corporation. Id. 

This Court reaffirmed the determinative considerations set 

out in Fish, Palmer and Rea in Luckett v. Bethlehem Steel, 618 

F.2d 1373 (10th Cir. 1980), a tort case which more closely 

parallels the instant case than those cited above. There the 

Court held that even though a parent corporation indirectly owned 

seventy percent of the stock of a foreign subsidiary, furnished 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 8 
ten of the managing officers of the latter, many of whom held 

( managerial posts in the parent, and had contracted to furnish the 

subsidiary with technical services and manufacturing equipment as 

well as locating business, it could not be said that the 

subsidiary was the mere alter ego instrumentality of the parent 

so as to hold the parent liable for any negligence of a 

subsidiary employee, especially absent any showing of fraud or 

inequitable conduct resulting from the use of separate corporate 

structures. 

In Luckett this Court cautioned that whether a separate 

corporate structure was adopted for the purpose of fraud or 

illegality is ordinarily a fact question for the jury; however, 

this question should not be submitted to the jury if the evidence 

discloses no real issue of disputed fact. 618 F.2d. at 1379. 

Turning then to the present case, it is clear that in order 

for the plaintiffs to prevail against Mitchell for the acts of 

Liquid Energy, they must establish that Liquid Energy is a mere 

instrumentality or alter ego of Mitchell under the Rea test, 

and/or, show that the use of the separate corporate structures 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 9 
somehow results in fraud, illegality, or inequity. 1 The 

plaintiffs cannot carry this burden by a simple showing that the 

parent wholly owns the subsidiary, or that the corporations share 

some personnel. 

As noted above, the only facts the plaintiffs offered 

throughout the conduct of this case were that a sign in front of 

the Canadian River Plant designated Liquid Energy as a subsidiary 

of Mitchell, and that the mailing address for both corporations 

was the same. Even assuming that this is the case, such 

declarations simply do not meet the requirements outlined above. 

On the public policy issue of inherent injustice 

attributable to the maintenance of separate corporate structures, 

the plaintiffs failed to offer any evidence that the Mitchell/LEC 

relationship is detrimental to the public good, justifies wrong, 

or protects fraud. Even if we were inclined to rule in favor of 

the appellees on this issue, we would be forced to do so without 

an evidentiary basis. 

Therefore, having concluded that the plaintiffs did not meet 

their burden at trial, we find the appellant Mitchell's argument 

1

We need not decide whether under Oklahoma law proof that a 

subsidiary corporation is the mere instrumentality or alter ego 

of its parent corporation is enough to pierce the corporate veil 

of the subsidiary or whether the plaintiff must also establish 

fraud, illegality or inequity, because here we hold that the 

plaintiffs failed to prove either (1) mere instrumentality or 

alter ego, or (2) fraud, illegality or inequity. Compare Tara 

Petroleum Corp. v. Hughey, 630 P.2d 1269, 1275 (Okla. 1981) and 

Gulf Oil Corp. v. State, 360 P.2d 933, 936 (Okla. 1961) with 

Sautbine v. Keller, 423 P.2d 447, 451 (Okla. 1966) and Mainord v. 

Sharp. 569 P.2d 546, 548 (Okla. ct. App. 1977). 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 10 
( 

persuasive on the first issue. We conclude that the trial court 

abused its discretion in failing to grant the motion for directed 

verdict and the Motion for JNOV on this issue. 

We now address the propriety of adopting the appellees' 

reasoning that this matter should be approached in the cont~xt of 

an employer/independent contractor relationship rather than a 

parent/subsidiary corporation relationship. 

We must begin with the observation that the appellees have 

offered no authority for application of the employer/independent 

contractor analysis to a cause involving two distinct 

corporations. In fact, the provision on which the appellees 

rely, section 416 of the Restatement Second of Torts has, so far 

as we are able to discern, never been applied in the 

parent/subsidiary context. Instead, the doctrine has been 

applied to general contractors who hire sub-contractors, 

El-Meswari v. Washington Gaslight co., 785 F.2d 483 (4th cir. 

1986); the owner of a ship who hired an independent contractor to 

make repairs, Futo v. Lykes Bros. s.s. co., Inc., 742 F.2d 209 

(5th Cir. 1984); and the owner of an ice cream sales operation 

who hired independent contractors to do actual sales, Wilson v. 

Good Humor corp., 757 F.2d. 1293 (D.C. Cir. 1985). The question 

thus presented is whether there is a sufficient reason to apply 

principles from the employment law regime to traditional 

corporate law. We conclude that no such rationale has been 

presented here. 

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The Peculiar Risk Doctrine is a tool whose application 

assures that an employer may not escape liability for especially 

hazardous conduct simply by hiring someone else to do the 

dangerous work. Minnetonka Oil co. v. Haviland, 155 Pac. 217 

(Okla. 1916). As such, the doctrine provides a remedy for those 

who are injured by,the conduct of one acting at the behest of an 

employer, or otherwise once removed party. In essence, the 

Peculiar Risk Doctrine allows a plaintiff to reach beyond the 

actor and hold the one who directed the offensive conduct 

responsible. In determining whether to extend this remedy to 

putative plaintiffs in suits alleging a parent/subsidiary 

relationship, one consideration is whether such relief is already 

available. We find that the laws regulating corporations provide 

for adequate mechanisms to pierce the corporate veil, thereby 

providing plaintiffs an adequate remedy, and assuring that the 

corporate structure is not used to perpetrate inequity. see, Town 

of Brookline v. Gors~ch, 667 F.2d 215 (1st Cir. 1981); c.c.M.S. 

Publishing co., Inc. v. Dooley-Maloof, Inc., 645 F.2d 33 (10th 

Cir. 1981); and Luckett v. Bethlehem Steel Corp., supra. 

Based on the foregoing, we find no basis for extension of 

the Peculiar Risk Doctrine to the present case. In failing to 

direct a verdict or grant JNOV on the issue of the defendant 

Mitchell's liability, the trial court abused its discretion and 

is hereby reversed. 

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,1 

The next issue on appeal is whether the trial court erringly 

gave a jury instruction on negligence per se and future loss of 

earnings, and wrongfully failed to give an instruction regarding 

proximate cause versus condition. 

We have reviewed the instructions of the trial court as a 

whole and find that they fairly embody the law applicable to the 

issues involved and result in no prejudice to the defendant. 

Thweatt v. Ontko, 814 F.2d 1466 (10th Cir. 1987), Boyles v. 

Oklahoma Natural Gas co., 619 P.2d 613 (Okla. 1980). 

The final issue before us is whether the trial court erred 

in awarding two separate rates of pre-judgment interest. The 

provisions of Title XII, Okla. stat. Ann. § 727, in effect at the 

time this I'awsuit was instituted, provided for the award of prejudgment interest at a rate of 15%. Title XII was amended 

effective November 1, 1986 in a manner that tied the applicable 

rate of pre-judgment interest t9 the United States Treasury Bill 

rate. For purposes of this case, the amendments effectively 

reduced the applicable interest rate to 10.03%. At the 

conclusion of the trial, th~ trial judge awarded the plaintiff 

pre-judgment interest at the rate of 15% for the time period 

before November 1, 1986 and 10.03% for the time period after 

November 1, 1986. On appeal, the defendants jointly urge that 

the pre-judgment interest rate should be uniform and should 

reflect the post-November 1986 amendments. 

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Appellate Case: 88-2643 Document: 01019871079 Date Filed: 06/21/1990 Page: 13 
We disagree. We find that the trial court clearly acted 

within its discretion in awarding the 15% interest rate, thereby 

recognizing that the plaintiff was entitled to the prevailing 

rate at the time the action was instituted. See, Nichols v. 

T.I.M.E. - o.c., Inc., 373 F. Supp. 811 (E.D. Okla. 1973). 

In accordance with the foregoing discussion, the trial 

court's judgment is hereby REVERSED for failure to direct a 

verdict or grant a judgment notwithstanding the verdict as to the 

appellant Mitchell and AFFIRMED on the remaining issues. 

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