Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/524bv.pdf
Page Number: 114

524US1

Unit: $U74

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Cite as: 524 U. S. 51 (1998)

69

Opinion of the Court

executive ofﬁcer,” and on “the conduct of CPC ofﬁcials with
respect to Ott II affairs, particularly Arnold Ott”); id., at 558
(“CPC actively participated in, and at times controlled, the
policy-making decisions of its subsidiary through its repre-
sentation on the Ott II board of directors”); id., at 559 (“CPC
also actively participated in and exerted control over day-
to-day decision-making at Ott II through representation in
the highest levels of the subsidiary’s management”).

In imposing direct liability on these grounds, the District
Court failed to recognize that “it is entirely appropriate for
directors of a parent corporation to serve as directors of its
subsidiary, and that fact alone may not serve to expose the
parent corporation to liability for its subsidiary’s acts.”
American Protein Corp. v. AB Volvo, 844 F. 2d 56, 57 (CA2),
cert. denied, 488 U. S. 852 (1988); see also Kingston Dry
Dock Co. v. Lake Champlain Transp. Co., 31 F. 2d 265, 267
(CA2 1929) (L. Hand, J.) (“Control through the ownership of
shares does not fuse the corporations, even when the direc-
tors are common to each”); Henn & Alexander 355 (noting
that it is “normal” for a parent and subsidiary to “have iden-
tical directors and ofﬁcers”).

This recognition that the corporate personalities remain
distinct has its corollary in the “well established principle [of
corporate law] that directors and ofﬁcers holding positions
with a parent and its subsidiary can and do ‘change hats’
to represent the two corporations separately, despite their
common ownership.” Lusk v. Foxmeyer Health Corp., 129
F. 3d 773, 779 (CA5 1997); see also Fisser v. International
Bank, 282 F. 2d 231, 238 (CA2 1960). Since courts generally
presume “that the directors are wearing their ‘subsidiary
hats’ and not their ‘parent hats’ when acting for the subsid-
iary,” P. Blumberg, Law of Corporate Groups: Procedural
Problems in the Law of Parent and Subsidiary Corporations
§ 1.02.1, p. 12 (1983); see, e. g., United States v. Jon-T Chemi-
cals, Inc., 768 F. 2d 686, 691 (CA5 1985), cert. denied, 475
U. S. 1014 (1986), it cannot be enough to establish liability