THE STATE OF SOUTH CAROLINA 

In The Court of Appeals 

Jacque Lucas, Shirley Ann Lucas, and Daniel Simerly, 

Appellants, 

v. 

KapStone Paper and Packaging Corporation, KapStone 

Kraft Paper Corporation, Safway Group Holdings, LLC, 

Easy Way Insulation Co., Sypris Technologies, Inc. f/k/a 

Tube-Turns Technologies Inc., Thompson Construction 

Group, Inc., and Thompson Industrial Services, LLC, 

Defendants, 

of which KapStone Paper and Packaging Corporation and 

KapStone Kraft Paper Corporation are the Respondents. 

Appellate Case No. 2020-001210 

Appeal from Charleston County 

Jennifer B. McCoy, Circuit Court Judge 

Opinion No. 6036 

Heard October 11, 2023 – Filed November 15, 2023 

AFFIRMED 

Badge Humphries, of Griffin Humphries LLC, of 

Sullivan's Island, and Russell S. Post, of Houston, Texas, 

for Appellants. 

Richard Hood Willis and Brian Hollis Gibbs, both of 

Williams Mullen, of Columbia, for Respondents. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GEATHERS, J.: Appellants—Jacque Lucas, Shirley Ann Lucas, and Daniel 

Simerly—challenge the circuit court's order dismissing this personal injury action as 

to Respondents, KapStone Paper and Packaging Corporation (Paper) and KapStone 

Kraft Paper Corporation (Kraft), for lack of subject matter jurisdiction pursuant to 

Rule 12(b)(1), SCRCP. Appellants argue the circuit court erred by concluding that 

Respondents were alter egos of KapStone Charleston Kraft, LLC (Employer) for 

purposes of the exclusivity provision of the South Carolina Workers' Compensation 

Law,1 section 42-1-540 of the South Carolina Code (2015).2 We affirm. 

FACTS/PROCEDURAL HISTORY 

On May 24, 2016, Jacque Lucas and Daniel Simerly (collectively, Employees) 

were involved in a horrific accident at their workplace in North Charleston, a paper 

mill owned by Employer. While Employees were clearing and cleaning a large 

overhead vessel used to hold hot chemicals, they opened a door at the bottom of the 

vessel, and a buildup in the vessel caused hot "black liquor" to rush out and spray 

them, resulting in severe burns across their bodies.

3 They received extensive 

treatment at the Augusta Burn Center, including skin grafts and psychological 

counseling. 

1 Section 42-1-10 of the South Carolina Code (2015) states, "This title shall be 

known and cited as 'The South Carolina Workers' Compensation Law[.']" 

2 Section 42-1-540 provides, in pertinent part, 

The rights and remedies granted by this title to an 

employee when he and his employer have accepted the 

provisions of this title, respectively, to pay and accept 

compensation on account of personal injury or death by 

accident, shall exclude all other rights and remedies of 

such employee, his personal representative, parents, 

dependents or next of kin as against his employer, at 

common law or otherwise, on account of such injury, loss 

of service or death. 

(emphasis added). 

3 Lucas sustained burns across sixty-six percent of his body, and Simerly sustained 

burns across ten percent of his body. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On February 17, 2017, Appellants filed this personal injury action against 

Paper, the parent corporation of Employer's sole member (Kraft),4 and other 

defendants not involved in this appeal.5 In their First Amended Complaint, 

Appellants added Employer's sole member, Kraft,6 as a defendant and asserted 

causes of action for "Negligence, Gross Negligence and Recklessness" and Loss of 

Consortium. According to paragraph 20 of the First Amended Complaint, Paper and 

Kraft provided "consulting and other services to [Employer] to develop, supervise[,] 

and implement safety procedures and comply with applicable regulations [or] 

standards at the subject facility[] as well as authorize certain capital projects at the 

facility." Paragraph 21 states that Paper and Kraft "had a duty to[,] but failed to[,] 

identify the dangers inherent in the process of cleaning the vessel and failed to 

recommend measures to avoid the injuries suffered by [Employees]." Paragraph 25 

lists several duties attributed to Paper and Kraft, including adequately training their 

"employees, agents [or] contractors," "timely and adequately remedy[ing] a known 

hazard," "provid[ing] a safe working environment," and timely approving "necessary 

capital projects." 

Subsequently, Respondents filed a motion to dismiss this action pursuant to 

Rule 12(b)(6), SCRCP, on the ground that they both "qualif[ied] as statutory 

employers because they operate[d] for all practical purposes as one integrated 

entity," citing to Poch v. Bayshore Concrete Products/South Carolina, Inc., 405 S.C. 

359, 372–73, 747 S.E.2d 757, 764 (2013), and therefore, they were immune from 

suit pursuant to the South Carolina Workers' Compensation Law. They later 

amended the motion on two occasions and indicated that their motion was based on 

Rule 12(b)(1), SCRCP, rather than Rule 12(b)(6). Respondents also indicated that 

they were seeking dismissal as to themselves only. According to Respondents, in 

November 2018, while their motion to dismiss was pending, WestRock purchased 

Paper and all of its subsidiaries. Those subsidiaries included Employer and Kraft. 

In February 2020, the circuit court granted Respondents' motion to dismiss, 

concluding that Employer and Respondents were economically integrated pursuant 

to the factors set forth in Poch. The circuit court later denied Appellants' Rule 59(e), 

SCRCP, motion. This appeal followed. 

4 Employer is a limited liability company. 5 Appellants' Complaint and First Amended Complaint include two products-liability 

claims. 

6 Appellants substituted Kraft for KapStone Container Corporation, which was listed 

as a defendant in the original Complaint and dropped from the First Amended 

Complaint. 
I. Did the circuit court misapply the "alter ego" factors set forth in Poch 

by treating Paper and Kraft as one? 

II. Were Paper and Employer separate and distinct corporate entities rather 

than alter egos under the Poch factors? 

III. Were Kraft and Employer separate and distinct corporate entities rather 

than alter egos under the Poch factors? 

STANDARD OF REVIEW 

 

 

 

 

 

 

 

 

 

ISSUES ON APPEAL 

Generally, "[w]hether subject matter jurisdiction exists is a question of law, 

which th[e appellate c]ourt is free to decide with no particular deference to the circuit 

court." S.C. Pub. Int. Found. v. Wilson, 437 S.C. 334, 340, 878 S.E.2d 891, 894 

(2022). "[D]etermination of the employer-employee relationship for workers' 

compensation purposes is jurisdictional. Consequently, this [c]ourt has the power 

and duty to review the entire record and decide the jurisdictional facts in accord with 

the preponderance of the evidence." Keene v. CNA Holdings, LLC, 426 S.C. 357, 

365, 827 S.E.2d 183, 188 (Ct. App. 2019) (alterations in original) (quoting Poch, 

405 S.C. at 367, 747 S.E.2d at 761), aff'd, 436 S.C. 1, 870 S.E.2d 156 (2021). 

LAW/ANALYSIS 

Appellants argue that both Respondents were separate and distinct from 

Employer rather than alter egos of Employer, and thus, they were not immune from 

this lawsuit for purposes of section 42-1-540. We disagree. 

I. Background 

"A parent corporation is generally not immune from an action in tort by an 

injured employee of its subsidiary by virtue of the employee's entitlement to workers' 

compensation." Poch, 405 S.C. at 370, 747 S.E.2d at 763 (quoting 82 Am. Jur. 2d 

Workers' Compensation § 90 (2003)). 

Where an employee of a subsidiary is injured while 

working on property owned by the parent corporation and 

receives workers' compensation benefits from the 
 

 

 

 

 

 

 

 

subsidiary, the employee may maintain an action in tort 

against the parent corporation even though parent and 

subsidiary are covered by same policy of workers' 

compensation insurance. 

However, a parent corporation's immunity has been 

recognized in some instances on the theory that the parent 

is or may be found to be the alter ego of the employersubsidiary corporation. 

Id. at 370–71, 747 S.E.2d at 763 (quoting 82 Am. Jur. 2d Workers' Compensation § 

90 (2003)). In Poch, our supreme court applied the factors set forth in Monroe v. 

Monsanto Company, 531 F. Supp. 426 (D.S.C. 1982), "that courts should consider 

in determining whether two related businesses are separate and distinct corporations 

for workers' compensation purposes." 405 S.C. at 371–74, 747 S.E.2d at 763–65. 

The court stated, 

These factors may be assessed by answering the following 

questions: 

(1) Did the two businesses maintain separate corporate 

identities? 

(2) Did the two businesses maintain separate Boards of 

Directors? 

(3) Did the two businesses transact business from different 

locations under different managers? 

(4) Did the two businesses hire and pay their own 

employees? 

(5) Did the two corporations hold themselves out to their 

employees as two separate identities? 

(6) Did the two corporations engage in different business 

activities? 

(7) Did the two corporations maintain separate books, 

bank accounts, and payroll records? 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8) Did the two corporations file separate tax returns? 

Id. at 372, 747 S.E.2d at 764 (citing Monroe, 531 F. Supp. at 434). The court also 

noted that there may be additional relevant factors in any given case and no one 

factor by itself provides immunity. Id. at 373, 747 S.E.2d at 764. After applying 

these eight factors to compare the claimant's statutory employer with its parent 

corporation, the court found the preponderance of the evidence showed the two 

corporations "operated as one economic entity." Id. at 374, 747 S.E.2d at 765. 

In the present case, during oral argument, Appellants urged us to apply the 

Poch factors narrowly because (1) the alter-ego analysis is merely one means of 

piercing the corporate veil, and our courts have discouraged veil piercing;

7 and (2) 

the general rule is that a subsidiary's employee may maintain an action in tort against 

the parent corporation and the alter-ego theory is an exception to that rule. 

Appellants argue this places the burden on Respondents to show they have a genuine 

economic identity with Employer. Appellants further argue that Respondents have 

shown merely the kind of identity that exists in every "common multi-entity 

corporate structure" designating a holding company as the parent entity providing 

shared financial and operational services and oversight to the operations of its 

subsidiaries. Appellants ask us to draw a "principled line" to avoid "collapsing" all 

of these common structures into alter egos and, thus, inverting the general rule (that 

a claimant may sue a parent corporation) and the rule's exception. 

To illustrate their point, Appellants cite to Respondents' One KapStone 

project, which we address in more detail below, as "the most compelling evidence 

that supports reversal" of the circuit court's order. However, Poch reminds us that 

"no one factor is controlling." 405 S.C. at 373, 747 S.E.2d at 764. Further, we view 

the determination of whether two corporations truly operate as one economic entity 

7 See Drury Dev. Corp. v. Found. Ins. Co., 380 S.C. 97, 101 n.1, 668 S.E.2d 798, 

800 n.1 (2008) ("Although often used interchangeably, the terms 'alter ego' and 

'piercing the corporate veil' are not one and the same. Whereas 'alter ego' describes 

a theory of procedural relief, 'piercing the corporate veil' refers to the relief itself. In 

other words, '[t]he alter ego doctrine is merely a means of piercing the corporate 

veil.'" (citation omitted) (quoting 18 C.J.S. Corporations § 23 (2008))); see also 

Catawba Indian Tribe of S.C. v. State of S.C., 978 F.2d 1334, 1344 (4th Cir. 1992) 

("[A] piercing of the corporate veil generally will not be permitted for the benefit of 

the parent corporation or its stockholders."); id. ("[A] sole shareholder may not 

choose to ignore the corporate entity when it is convenient."). 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(and are, therefore, alter egos) as already built into the Poch factors such that our 

duty is to simply weigh the evidence relevant to those factors in an unbiased manner. 

See Keene, 426 S.C. at 365, 827 S.E.2d at 188 ("[D]etermination of the employeremployee relationship for workers' compensation purposes is jurisdictional. 

Consequently, this [c]ourt has the power and duty to review the entire record and 

decide the jurisdictional facts in accord with the preponderance of the evidence." 

(quoting Poch, 405 S.C. at 367, 747 S.E.2d at 761)). We may not stray from that 

duty unless and until our supreme court draws a new principled line as Appellants 

have asked us to do. If the preponderance of the evidence as to the Poch factors 

shows that two corporations operated as one economic unit, we must treat them as 

alter egos no matter how "common" Appellants view such a relationship. 

Appellants also urge us to avoid applying the rule that all doubts are resolved 

in favor of workers' compensation coverage to a Poch alter-ego analysis.

8 Again, 

we view our duty as that of simply deciding the facts pertaining to the Poch factors 

in accordance with the preponderance of the evidence, and we remain mindful that 

"no one factor is controlling." Poch, 405 S.C. at 373, 747 S.E.2d at 764; see 

Wilkinson ex rel. Wilkinson v. Palmetto State Transp. Co., 382 S.C. 295, 300–01, 

676 S.E.2d 700, 702 (2009) ("This Court remains sensitive to the general principle 

sanctioned by the Legislature that workers' compensation laws are to be construed 

liberally in favor of coverage. That principle, however, does not go so far as to 

justify an analytical framework that preordains the result."). 

II. Combined Analysis 

Appellants' first assignment of error is to the circuit court's examination of the 

corporate relationships of all three entities collectively. Appellants maintain that the 

circuit court should have bifurcated the analysis. We have not found any precedent 

explicitly rejecting a joint analysis of the relationships between a claimant's 

employer and two related corporations. However, the language in Poch addresses a 

comparison of the employer with just one other business entity. 405 S.C. at 372, 

747 S.E.2d at 764 ("[Monroe] analyzed South Carolina law and gleaned eight factors 

8 See Posey v. Proper Mold & Eng'g, Inc., 378 S.C. 210, 217, 661 S.E.2d 395, 399 

(Ct. App. 2008) ("It is the policy of South Carolina courts to resolve jurisdictional 

doubts in favor of the inclusion of employers and employees under the Workers' 

Compensation Act."); see also Poch, 405 S.C. at 367, 747 S.E.2d at 761 ("Any 

doubts as to a worker's status should be resolved in favor of including him or her 

under the [South Carolina Workers' Compensation Law]." (quoting Posey, 378 S.C. 

at 218–19, 661 S.E.2d at 400)). 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

that courts should consider in determining whether two related businesses are 

separate and distinct corporations for workers' compensation purposes." (emphasis 

added)); id. ("These factors may be assessed by answering the following questions: 

(1) Did the two businesses maintain separate corporate identities? . . . ?" (emphasis 

added)). Therefore, out of an abundance of caution, we will bifurcate our analysis. 

III. Paper/Employer 

Before we compare Employer with Paper, we emphasize that we are 

considering only the evidence relevant to May 24, 2016—the date of the accident.9 

1. Did the two businesses maintain separate corporate identities? 

No. Paper, which is headquartered in Northbrook, Illinois, provided the 

following history in its 2016 annual report to the United States Securities and 

Exchange Commission (SEC) (Form 10-K): 

KapStone Paper and Packaging Corporation was formed 

in Delaware as a special purpose acquisition corporation 

on April 15, 2005 for the purpose of effecting a merger, 

capital stock exchange, asset acquisition or other similar 

business combination with an unidentified operating 

business in the paper, packaging, forest products, and 

related industries.[10] Unless the context otherwise 

9 The parties occasionally cite to affidavits and reports prepared by their respective 

financial analysts for the purpose of giving an opinion on whether Paper or Kraft 

operated with Employer as one economic entity. To the extent these documents 

provide opinions, we disregard them because Poch clearly requires this court to 

conduct its own legal analysis comparing the claimant's employer with the 

defendant-entities based on the court's own view of the preponderance of the 

evidence relating to the Poch factors. However, we will consider any raw data pulled 

from corporate records that appear in these documents when the data does not appear 

elsewhere in the record and its veracity has not been challenged. 10 A special purpose acquisition company is defined as "a corporate shell . . . set up 

by investors for the sole purpose of raising money through an initial public offering 

to acquire another business yet to be determined." Special Purpose Acquisition 

Company, Merriam-Webster, https://www.merriamwebster.com/dictionary/special%20purpose%20acquisition%20company (last 

visited Nov. 13, 2023). A shell corporation is defined as "[a] corporation that has 
 

 

 

 

 

 

 

 

 

 

 

 

requires, references to "KapStone," the "Company," "we," 

"us[,]" and "our" refer to KapStone Paper and Packaging 

Corporation and its subsidiaries. 

Paper also described (1) its acquisition of "substantially all of the assets" of two 

businesses operating kraft paper manufacturing facilities in Roanoke Rapids, North 

Carolina and North Charleston, South Carolina, respectively; (2) its merger with a 

company that owned a recycled containerboard paper mill in Cowpens, South 

Carolina; and (3) its acquisition of other businesses owning similar facilities. 

In that same report, Paper stated, 

We report our operating results in two reportable 

segments: Paper and Packaging and Distribution. Our 

Paper and Packaging segment manufactures and sells a 

wide variety of containerboard, corrugated products and 

specialty paper for industrial and consumer markets. The 

Distribution segment, through [Victory Packaging, L.P. 

and its subsidiaries ("Victory")], a North American 

distributor of packaging materials, with more than 60 

distribution centers located in the United States, Mexico 

and Canada, provides packaging materials and related 

products to a wide variety of customers. 

Paper further stated, "Our Paper and Packaging segment competes in the 

containerboard, corrugated products[,] and specialty paper markets. We view the 

specialty paper market as including kraft paper, saturating kraft[,] and unbleached 

folding carton board." Moreover, Paper reported that it operated four paper mills, 

including Employer's facility in North Charleston and Kraft's facility in Roanoke 

Rapids, North Carolina. The Form 10-K also included a table summarizing Paper's 

paper mills and the "principal products produced" at each. It listed "North 

Charleston, SC" as producing "Containerboard/Specialty Paper" and "Roanoke 

Rapids, NC" as producing "Containerboard/Specialty Paper." 

All of these representations to the SEC are credible evidence of Paper's 

purpose to serve as the foundation and support for a nationwide network of specialty 

no active business and usu[ally] exists only in name as a vehicle for another 

company's business operations." Corporation, Black's Law Dictionary (11th ed. 

2019). 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

paper manufacturing and distribution, and this purpose aligned with Employer's role 

in the network. The testimony of Paper's Corporate Controller, Mark Niehus, is 

consistent with this. He stated that Paper had "a centralized group on behalf of our 

entire mill system" and Paper had four different paper mills; the centralized group 

determined which location would fulfill a particular purchase order based on various 

factors. 

Correspondence and employment-related documents also show a shared 

identity between Paper and Employer. They both used the registered "KapStone" 

trademark and "K-Box" logo,

11 which can be seen on Employer's letterhead and 

Paper's employment-related documents, such as the benefits brochure, job 

descriptions, employment applications, and offer letters. Further, specified work 

locations set forth in Paper's job-description documents included Employer's facility. 

Moreover, the 2016 W-2 form for Lucas listed Employer's name and tax 

identification number but associated Employer's name with Paper's address in 

Northbrook, Illinois. Additionally, Paper adopted numerous written policies 

applicable to all of the company's mills, including Employer. 

Paper's Director of Treasury and Risk, Kelly Hulseman,12 stated in her 

affidavit that Paper collected receivables from Employer and Kraft, and they were 

"ultimately swept into bank accounts in the name of [Paper]." She stated that Paper 

"use[d] the receivables it collect[ed] to pay for expenses for [Employer] and [Kraft], 

including payroll, employee benefits[,] and all accounts payable" as neither 

Employer nor Kraft kept cash, except for the limited purpose of international 

transactions. Rather, these two entities had zero-balance bank accounts for 

collecting revenues and then directing those funds to Paper's Master Account at the 

end of each day. 

Finally, Paper's workers' compensation insurance policy also covered 

Employer and Kraft. 

2. Did the two businesses maintain separate Boards of Directors? 

No. Employer was a limited liability company and therefore did not have a 

board. However, Employer's sole managing member, Kraft, had two directors who 

were also members of Paper's Board. The three entities also shared common Chief 

Executive Officers (CEOs), Chief Financial Officers (CFOs), Chief Operating 

11 Kraft owned the trademark. 

12 In 2017, her title changed to Vice President of Shared Services. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Officers (COOs), and Secretaries. According to Mark Niehus, Paper's Corporate 

Controller, board meetings for all of Paper's subsidiaries were conducted at the 

Northbrook, Illinois headquarters.

13 

3. Did the two businesses transact business from different locations 

under different managers? 

They had different locations but overlapping management. Paper's 

headquarters was in Northbrook, and Employer's facility was in North Charleston.14 

Kelly Hulseman confirmed that none of the employees performing the 

manufacturing work itself were located at headquarters. Yet, despite their separate 

locations, Paper entered into third-party contracts to supply raw materials to, and 

lease equipment for, Employer's facility. Paper's Director of Strategic Sourcing 

signed these contracts on behalf of Paper. We acknowledge that some equipment 

leases were executed by Employer as the lessee, but the individual who signed on 

behalf of Employer was Paper's Director of Strategic Sourcing. 

Further, Paper employees determined which location should fulfill a particular 

purchase order based on various factors and processed the cash receipts of the 

various subsidiaries. Moreover, a single legal department and other common 

managerial departments, such as the accounting department, were based at the 

corporate headquarters in Northbrook, Illinois—Hulseman testified that all three 

entities' locations were on the same accounting system. She also testified that before 

January 2017, there was no formal "Shared Services Department," but "the functions 

were the same before and after [her] title changed." The duties of her position 

included accounts receivable, accounts payable, credit collections, insurance, and 

payroll, and she dealt with these areas "for the whole company[,] which include[d] 

[Employer]." She knew exactly what was going on at every plant, including 

13 Appellants argue that a document listing the board members and officers is 

unverified and lacks credibility. They also assert that the document shows the 

companies' officers for the year after the accident. However, the document on pages 

1702-03 of the record indicates the officers "[a]s of 02/23/2016," which was before 

the May 24, 2016 accident. Therefore, Appellants must be referring to a different 

document referenced in another part of the record. Nevertheless, the document on 

pages 1702-03 is also unverified as it does not bear the KapStone trademark or other 

indicia that it was officially adopted by Paper. However, its content can be verified 

by consistent information in Paper's written policy specifying individuals who were 

authorized to sign contracts on behalf of Paper or its subsidiaries. 14 Employer owned the Charleston facility. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employer's facility, as to the areas she dealt with, and she dealt with the day-to-day 

operations at Employer's facility as to those areas. 

Additionally, three invoices from a third party relating to certain equipment 

listed the asset location as Employer's facility, yet, at the top, the invoices set forth 

Paper's address in Northbrook. Also, the checks written to pay these invoices were 

written by Paper. A fourth invoice from the same business was for KapStone 

Container Corporation, associated with Paper's Northbrook address, but showed the 

asset location as Employer's facility. 

The above arrangements are similar to the arrangements of the parent 

corporation in Poch: 

As to the third factor, Bayshore Corp. was headquartered 

in Virginia whereas Bayshore SC operated exclusively in 

South Carolina. However, Bayshore Corp. entered into 

the lease agreement in South Carolina, purchased the 

equipment to be used on the jobsite, and periodically sent 

several Bayshore Corp. employees to oversee the 

completion of the project. Significantly, all of the billing 

invoices and normal correspondence for Bayshore SC 

were sent to Bayshore Corp. in Cape Charles, Virginia. 

Bayshore Corp. also retained all of Bayshore SC's 

corporate and personnel files. 

405 S.C. at 373, 747 S.E.2d at 764. 

4. Did the two businesses hire and pay their own employees? 

Generally, Paper and Employer hired their own respective employees, but 

some of Paper's employees worked at Employer's facility, and Kelly Hulseman (a 

Paper employee) supervised the time and attendance analyst who worked at 

Employer's location. Also, the employment application bore Paper's name and the 

KapStone trademark and logo, and it required the applicant to authorize a 

background check by Paper. 

Payment of Employer's employees was a joint arrangement between Paper 

and Employer. Employees for each respective entity received a paycheck bearing 

the names of their respective employers, but with the Northbrook address. Paper 

managed payroll for all of its subsidiaries' employees through its payroll services 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

department and ADP, a third-party processor. Also, the 2016 W-2 forms and the 

earnings statements for Lucas and Simerly associated Employer's name with Paper's 

address in Northbrook. Further, Paper kept track of the various "pay groups" and 

payroll frequency for its subsidiaries, including Employer. 

5. Did the two corporations hold themselves out to their employees as 

two separate identities? 

Generally, no. The respective offer letters to Lucas and Simerly had a return 

address for Employer, but the stationery was marked with the KapStone logo, which 

was also used by Paper and was owned by Kraft. Further, as part of their respective 

employment applications, Employees signed a form giving their consent for Paper 

to request investigative consumer reports from a consumer reporting agency. Other 

employment-related documents used by Employer bore the KapStone trademark and 

logo, and some of them clearly addressed employees of all of Paper's subsidiaries. 

Additionally, Employer's employees were required to sign an acknowledgement that 

they had received and read Paper's ethics code, and the introduction to the written 

policy represented Paper as the employer. 

Collective bargaining agreements with labor unions were specific to certain 

facilities in varying locations. Yet, Paper provided the fringe benefits to Employer's 

employees, and both Employer and Kraft participated in Paper's 401(k) and Deferred 

compensation plans. 

6. Did the two corporations engage in different business activities? 

Yes and no. On its 2016 federal tax return, Paper indicated that its principal 

business activity was serving as a holding company. Further, Kelly Hulseman 

acknowledged that Paper did not manufacture or sell paper products itself. 

Employer manufactured the packaging and paper products at the North Charleston 

plant, and some of Paper's internal communications indicate that Employer operated 

with a significant level of independence. Yet, as indicated above, Paper was 

intimately involved with directing order fulfillment, arranging for the supply of raw 

materials and equipment for Employer, providing general guidelines for operations,

15 and 

15 As previously stated, Paper adopted numerous written policies applicable to all of 

the company's mills, which included Employer. These policies included, inter alia, 

requirements to count raw materials and finished goods annually and to establish a 

written procedure for taking annual inventories or monthly cycle counts. Further, 

Paper's Form 10-K indicated that productivity at its mills was monitored by 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

providing virtually all other support services, such as payroll, employee benefits, 

insurance, and receivables.

16 

7. Did the two corporations maintain separate books, bank accounts, 

and payroll records? 

Generally, no. A Paper employee, Kelly Hulseman, managed accounts 

receivable, accounts payable, credit collections, insurance, and payroll for Paper and 

all of its subsidiaries, including Employer. Hulseman testified that the accounting 

department for Paper and all subsidiaries was in Northbrook and was run by the 

Corporate Controller, Mark Niehus. All locations were on the same accounting 

system, and the accounting department prepared consolidated financial statements. 

However, it was possible to prepare a combined balance sheet and income statement 

showing separate data for the three entities. Also, as previously indicated, Paper had 

a "Master" bank account into which the subsidiaries' respective bank accounts would 

deposit revenues on a daily basis. 

8. Did the two corporations file separate tax returns? 

No. In its 2016 federal tax return, Paper completed the box for "Name of 

corporation," with "KapStone Paper & Packaging Corporation & Subs." (emphasis 

added). The return's "Affiliations Schedule" does not list Employer; however, 

Employer's sole member, Kraft, is listed. The omission of Employer's name from 

the tax return may be explained by the treatment required by the IRS: 

Depending on elections made by the LLC and the number 

of members, the IRS will treat an LLC either as a 

corporation, partnership, or as part of the owner's tax 

return (a "disregarded entity"). . . . For income tax 

purposes, an LLC with only one member is treated as an 

entity disregarded as separate from its owner, unless it 

management "on a real-time basis with on-line reporting tools that track[ed] 

production values," and equipment efficiency was "also monitored daily through 

production reporting systems." 

16 Appellants argue that the court should give significant weight to the fact that Paper 

forfeited its authority to do business in South Carolina as of June 2015 by failing to 

timely file an annual report with the Department of Revenue and failing to timely 

pay taxes. Although these facts are worthy of consideration, they do not outweigh 

the evidence of Paper's actual involvement in Employer's business. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

files Form 8832 and affirmatively elects to be treated as a 

corporation. 

Single Member Limited Liability Companies, Internal Revenue Serv., 

https://www.irs.gov/businesses/small-businesses-self-employed/single-memberlimited-liability-companies (last visited Nov. 13, 2023). Specifically, "[i]f the 

single-member LLC is owned by a corporation or partnership, the LLC should be 

reflected on its owner's federal tax return as a division of the corporation or 

partnership." Id. Yet, the "owner" of Employer was Kraft, who did not file its own 

tax return. Further, Appellants have not directed the court to anything in the record 

resembling a separate tax return for Employer. 

9. Other factors 

Appellants contend the purpose of the One KapStone project, which Paper 

initiated in late 2016, was "to correct the lack of operational integration among its 

subsidiaries that existed before January 2017." (emphases in original). 

Characterizing the project as "post-accident integration efforts," Appellants assert 

that the project "highlight[ed] the separateness of its subsidiaries' operations at the 

time of the accident." 

The One KapStone project was initiated to remedy a $150 million earnings 

"gap" compared to Paper's peers by addressing inconsistencies between the 

respective operations of Paper's Mill Division and its Container Division. Paper's 

consultant, Deloitte Development, LLC, conducted meetings for the project's 

leadership team to discuss steps for integrating the mill and container systems and 

saving costs. Rather than signaling any transition from separate economic entities 

to one economic entity, much of the communications regarding the One KapStone 

project emphasized a desire to standardize operational procedures across the mill 

and container divisions.17 These communications show that Paper and its 

subsidiaries were already economically integrated, yet the company sought to 

improve the efficiency of its operations, including adding facilities to convert paper 

into corrugated products. We agree with the circuit court's conclusion that "the fact 

17 Some of the One KapStone documents on which Appellants rely specify certain 

"integration" goals or objectives that seem inconsistent with the abundance of other 

evidence objectively indicating that Paper and its subsidiaries operated as one 

economic entity, such as Paper's 2016 Form 10-K, its 2016 consolidated federal tax 

return, its financial and employment documents, and its policy documents. The 

circuit court noticed this same dichotomy. 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

that [Paper] could implement a 'One KapStone' program to make its subsidiaries' 

operations more consistent demonstrates [Paper's] overarching control over its 

subsidiaries' business operations." 

In sum, considering the preponderance of the evidence pertaining to the Poch 

factors, Paper and Employer operated as one economic entity, and therefore, Paper 

was Employer's alter ego. 

IV. Kraft/Employer 

1. Did the two businesses maintain separate corporate identities? 

Generally, no. Kraft was the sole member of Employer, a limited liability 

company. The history of the two entities suggests a shared identity, yet they were 

associated with two separate mills—Kraft owned the mill in Roanoke Rapids, North 

Carolina, and Employer owned the North Charleston mill. 

Employer came into existence when Kraft entered into a Limited Liability 

Company Agreement with Employer as Employer's sole member.18 The agreement 

required Kraft to manage Employer and gave Kraft authority to act on behalf of 

Employer and to appoint Employer's officers. Moreover, decisions concerning 

Employer's business affairs were to be made by Kraft, and Kraft's actions were 

binding on Employer. 

On the other hand, Kraft could not be obligated personally for any liability 

solely by reason of being a member or acting as a manager or officer of Employer. 

Also, the agreement allowed Employer to maintain liability insurance at its own 

expense. Employer's books and accounts were to be kept by Kraft but located at 

Employer's principal office, and this location was to be determined by Kraft. 

Employer's funds were to be deposited in its name in an account with a bank 

designated by Kraft. Additionally, Employer had its own labor contracts. 

However, Kraft owned the registered "KapStone" trademark and "K-Box" 

logo that was used on all employment-related documents and the shared KapStone 

website. Also, the offer letter to Lucas signaled that Employer was part of Kraft. 

2. Did the two businesses maintain separate Boards of Directors? 

18 At the time, Employer was named "Oak Acquisition, LLC." 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No. As we previously stated, Employer was a limited liability company and, 

therefore, did not have a board. Rather, Kraft was Employer's sole managing 

member, having direct managerial power over Employer. Further, Kraft had two 

directors who were also members of Paper's Board. Moreover, the three entities also 

shared common CEOs, CFOs, COOs, and Secretaries. According to Mark Niehus, 

Paper's Corporate Controller, board meetings for all of Paper's subsidiaries were 

conducted at the Northbrook, Illinois headquarters. 

3. Did the two businesses transact business from different locations 

under different managers? 

Yes as to different locations, but with the same management. As we 

previously stated, Kraft owned the mill in Roanoke Rapids, North Carolina, and 

Employer owned the North Charleston mill. Yet, their limited liability company 

agreement gave Kraft, Employer's sole member, managerial authority over 

Employer. Further, several, but not all,19 equipment leases in effect on the date of 

the accident were executed by Kraft for Employer's mill. Moreover, the president 

of Kraft, along with other Paper employees, signed the "location approvals" for at 

least one capital funding request to lease equipment for Employer's mill. 

4. Did the two businesses hire and pay their own employees? 

Generally, yes. Kraft and Employer hired their own employees. However, 

approximately thirty-five Kraft employees with duties in management or 

information technology worked at Employer's facility. Employees for each 

respective entity received a paycheck bearing the name of their respective 

employers, but with Paper's Northbrook address. Further, Paper managed payroll 

for all of its subsidiaries' employees through its payroll services department and 

ADP, a third-party payment processor. 

5. Did the two corporations hold themselves out to their employees as 

two separate identities? 

Yes and no. Employer had its own labor contracts. However, as we 

previously stated, the offer letter to Lucas signaled that Employer was part of Kraft. 

Further, the identities of both Employer and Kraft were integrated with Paper's 

identity as shown by numerous employment-related documents and fringe benefits. 

19 At least one equipment lease was executed by Employer for itself. Nonetheless, 

the individual signing on behalf of Employer was a Paper employee. 
 

 

 

 

 

 

 

 

 

6. Did the two corporations engage in different business activities? 

No. Employer and Kraft had the same principal business activity. 

7. Did the two corporations maintain separate books, bank accounts, 

and payroll records? 

Generally, no. A Paper employee, Kelly Hulseman, managed accounts 

receivable, accounts payable, credit collections, insurance, and payroll for all of 

Paper's subsidiaries, including Employer and Kraft. Further, the accounting 

department for all subsidiaries was in Northbrook and was run by Paper's Corporate 

Controller, Mark Niehus. All locations were on the same accounting system, and 

the accounting department prepared consolidated financial statements. However, it 

was possible to prepare a combined balance sheet and income statement showing 

separate data for the three entities. Also, Paper had a "Master" bank account into 

which the subsidiaries' respective bank accounts would deposit revenues on a daily 

basis. 

8. Did the two corporations file separate tax returns? 

Although Kraft and Employer had separate tax identification numbers, they 

did not file separate tax returns. 

In sum, considering the preponderance of the evidence pertaining to the Poch 

factors, Kraft and Employer operated as one economic entity, and therefore, Kraft 

was Employer's alter ego. 

CONCLUSION 

Accordingly, the circuit court's order is 

AFFIRMED. 

THOMAS and KONDUROS, JJ., concur.