Document ID: ./input/supremecourt_opinions/opinions/boundvolumes/524bv.pdf
Page Number: 106

524US1

Unit: $U74

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

61

Opinion of the Court

III

It is a general principle of corporate law deeply “ingrained
in our economic and legal systems” that a parent corporation
(so-called because of control through ownership of another
corporation’s stock) is not liable for the acts of its subsidiar-
ies. Douglas & Shanks, Insulation from Liability Through
Subsidiary Corporations, 39 Yale L. J. 193 (1929) (hereinafter
Douglas); see also, e. g., Buechner v. Farbenfabriken Bayer
Aktiengesellschaft, 38 Del. Ch. 490, 494, 154 A. 2d 684, 687
(1959); Berkey v. Third Ave. R. Co., 244 N. Y. 84, 85, 155 N. E.
58 (1926) (Cardozo, J.); 1 W. Fletcher, Cyclopedia of Law of
Private Corporations § 33, p. 568 (rev. ed. 1990) (“Neither
does the mere fact that there exists a parent-subsidiary rela-
tionship between two corporations make the one liable for
the torts of its afﬁliate”); Horton, Liability of Corporation for
Torts of Subsidiary, 7 A. L. R. 3d 1343, 1349 (1966) (“Ordi-
narily, a corporation which chooses to facilitate the operation
of its business by employment of another corporation as a
subsidiary will not be penalized by a judicial determination
of liability for the legal obligations of the subsidiary”); cf.
Anderson v. Abbott, 321 U. S. 349, 362 (1944) (“Limited liabil-
ity is the rule, not the exception”); Burnet v. Clark, 287 U. S.
410, 415 (1932) (“A corporation and its stockholders are gen-
erally to be treated as separate entities”). Thus it is horn-
book law that “the exercise of the ‘control’ which stock own-
ership gives to the stockholders . . . will not create liability

(CA1 1990) (parent actively involved in the affairs of its subsidiary may
be held directly liable as an operator of the facility, regardless of whether
the corporate veil can be pierced), cert. denied, 498 U. S. 1084 (1991),
Schiavone v. Pearce, 79 F. 3d 248, 254–255 (CA2 1996) (same), Lansford-
Coaldale Joint Water Auth. v. Tonolli Corp., 4 F. 3d 1209, 1220–1225 (CA3
1993) (same), Jacksonville Elec. Auth. v. Bernuth Corp., 996 F. 2d 1107,
1110 (CA11 1993) (same), and Nurad, Inc. v. William E. Hooper & Sons
Co., 966 F. 2d 837, 842 (CA4) (parent having authority to control subsidiary
is liable as an operator, even if it did not exercise that authority), cert.
denied, 506 U. S. 940 (1992).