Case Name: Yosefa ALOMANG, On Behalf of Herself and All Others Similarly Situated, v. FREEPORT-McMORAN, INC., and Freeport-McMoran Copper and Gold, Inc.
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 2002-02-20
Citations: 811 So. 2d 98
Docket Number: No. 2000-CA-2099
Parties: Yosefa ALOMANG, On Behalf of Herself and All Others Similarly Situated, v. FREEPORT-McMORAN, INC., and Freeport-McMoran Copper and Gold, Inc.
Judges: Court composed of Judge JOAN BERNARD ARMSTRONG, Judge PATRICIA RIVET MURRAY, and Judge DAVID S. GORBATY.
Reporter: Southern Reporter, Second Series
Volume: 811
Pages: 98–111

Head Matter:
Yosefa ALOMANG, On Behalf of Herself and All Others Similarly Situated, v. FREEPORT-McMORAN, INC., and Freeport-McMoran Copper and Gold, Inc.
No. 2000-CA-2099.
Court of Appeal of Louisiana, Fourth Circuit.
Feb. 20, 2002.
Joseph M. Bruno, David S. Scalia, Anthony D. Irpino, Bruno & Bruno, and Martin E. Regan, Jr., Regan & Associates, New Orleans, LA, for Plaintiffs/Appellants.
John C. Reynolds, M. Richard Schroeder, Virginia W. Gundlach, Alida C. Haink-el, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., and John S. Keller, New Orleans, LA, for Defendants/Appellees.
Court composed of Judge JOAN BERNARD ARMSTRONG, Judge PATRICIA RIVET MURRAY, and Judge DAVID S. GORBATY.

Opinion:
GORBATY, Judge.
Plaintiffs appeal a judgment dismissing their claims, with prejudice, pursuant to defendants' (Freeport-McMoRan, Inc., and Freeport-McMoRan Copper & Gold, Inc.) Exception of No Cause of Action. For the following reasons, we affirm.
FACTS AND PROCEDURAL HISTORY:
Yosefa Alomang, a citizen of the Republic of Indonesia, filed this lawsuit on her behalf and others similarly situated, alleging numerous acts and/or omissions by two Louisiana corporations, FreeporL-McMo-Ran, Inc. (FMI), and Freeport-McMoRan Copper & Gold, Inc. (FMC & G). In their first petition, plaintiffs alleged foreign environmental violations, international human rights violations and cultural genocide. Plaintiffs thereafter amended their petition to add allegations that the claims raised in their original petition were the result of decisions made by |2Freeport>-McMoran, Inc., and FMC & G, in their corporate headquarters in New Orleans. The trial court granted defendants' exception of lack of subject matter jurisdiction. This Court reversed and remanded, finding that plaintiffs' allegations also included personal injury damages that were subject to the trial court's subject matter jurisdiction. Alomang v. Freeport-McMoran, Inc., 97-1349 (La.App. 4 Cir. 3/4/98), 718 So.2d 971, writ denied 98-1352 (La.7/2/98), 724 So.2d 734.
Following remand, plaintiffs filed a second amended petition adding four named plaintiffs. Defendants' exception of no right of action was granted because the petition did not establish the right of the named plaintiffs to assert a cause of action for wrongful death. That judgment was not appealed and is now final.
Also following the remand, plaintiffs were granted leave to file an amended petition with instructions from the trial court to "plead facts, as necessary under Louisiana law, to assert claims for personal injury with sufficient detail to place defendants on notice of the facts sought to be proven."
Plaintiffs thereafter filed a third supplemental and amending petition in which they alleged that a contract of work was entered into between Freeport Minerals Company, an Indonesian corporation, and the government of the Republic of Indonesia that obligated Freeport Minerals to the citizens of Indonesia via a stipulation pour autri contained in the contract. The petition further alleged that FMC & G, as the successor to Freeport Minerals, is the alter ego of Freeport Minerals and, is therefore responsible for Freeport Mineral's negligent and/or intentional acts and breaches of the 1967 contract. Defendants filed numerous ^exceptions, including exceptions of no cause of action and lack of subject matter jurisdiction. The latter exception was withdrawn. Plaintiffs are now before this Court appealing the judgment granting defendants' exception of no cause of action, dismissing plaintiffs' claims, with prejudice.
DISCUSSION:
This Court recently restated the function of an exception of no cause of action and addressed the standards for evaluating the exception:
The function of an exception of no cause of action is to test the legal sufficiency of the petition by determining whether the law affords a remedy on the facts alleged in the pleading. Darville v. Texaco, Inc., 447 So.2d 473 (La.1984). No evidence may be introduced to support or controvert the objection that the petition fails to state a cause of action. La.Code Civ. Proc. art. 931. Therefore, the court reviews the petition and accepts well pleaded allegations of fact as true, and the issue at the trial of the exception is whether, on the face of the petition, the plaintiff is legally entitled to the relief sought. Hero Lands Co. v. Texaco, Inc., 310 So.2d 93 (La.1975); Kuebler v. Martin, 578 So.2d 113 (La.1991).
Guidry v. First Nat'l Bank of Commerce, 98-2383, pp. 2-3 (La.App.3/1/00), 755 So.2d 1033, 1035-36, citing Everything on Wheels Subaru, Inc. v. Subaru South, Inc., 616 So.2d 1234, 1235 (La.1993). The Court further explained that "the nonmoving party must be given the benefit of all reasonable inferences, and the exceptor has the burden of showing that no cause of action exists on the facts alleged." Guidry, citing City of New Orleans v. Bd. Of Directors of La. State Museum, 98-1170, p. 9 (La.3/2/99), 739 So.2d 748, 755.
Plaintiffs claim that their third amending petition, and all previously filed petitions state several causes of action. Specifically, the latest filed petition states a |4cause of action against FMC & G under an alter ego theory of liability. Paragraph XI of the Third Supplemental and Amending Petition alleges:
At all times herein, the defendant FREEPORT McMoRan COPPER & GOLD, INC., was and is the principal shareholder (81.28%) and the alter-ego of P.T. FREEPORT INDONESIA COMPANY in that all of the activities of P.T. FREEPORT INDONESIA COMPANY were and are directed solely by FREEPORT McMoRan COPPER & GOLD, INC. from its corporate headquarters within the Parish of Orleans, and as such FREEPORT McMo-Ran COPPER & GOLD, INC. is responsible for all of the negligent and/or intentional acts of P.T. FREEPORT INDONESIA COMPANY.
Plaintiffs allege that the above statement is not a "mere conclusion of law," but is an allegation of fact sufficient to state a cause of action that FMC & G is liable as the real party causing plaintiffs' injuries. They seek to attach liability to FMC & G by proving that FMC & G directed all of the activities of PTFI. They also seek to "pierce the corporate veil," by proving that FMC & G is the alter ego of PTFI, and, therefore, should be held liable for the acts and/or omissions of PTFI. Plaintiffs argue that they are not making a general statement, but are alleging specific acts and/or omissions sufficient to state a cause of action, including, negligent or intentional arming of the Indonesian military to cause injury to plaintiff, environmental torts, intentional breach of contract, and fraud.
The following circumstances must be proven to support a finding that one corporation is the alter ego of another: 1) commingling of corporate and shareholder funds; 2) failure to follow statutory formalities required for incorporation and for the transaction of corporate affairs; 3) under capitalization; 4) failure to provide separate bank accounts and bookkeeping records; and 5) failure |Kto hold regular shareholder or director meetings. Rock v. ATPIC Trucking Co., Inc., 98-1420, p. 9 (La.App. 1 Cir. 6/25/99), 739 So.2d 874, 880. Plaintiffs' petition does not allege that any of the above-enumerated conditions exist, and, therefore, their petition is woefully deficient. An allegation that one corporation is a subsidiary of another is not sufficient to "pierce the corporate veil" of the parent corporation thereby making it liable for the actions of the subsidiary, in the absence of a showing that the two corporations are not separate entities or that there is fraud or illegal action. Menard v. Associated Royal Crown Bottling Co., 249 So.2d 363, 364 (La.App. 4 Cir. 1971).
At the hearing on the subject exception, plaintiffs counsel argued that fraud was alleged in the petition, although he admitted that "I haven't said the word 'fraud,' but that's — what we've said is that — when I say that the superior company, that is the defendant in this case . is the one who gave the guns to the security forces of the company in the other one, that's what I'm saying." At oral argument, counsel cited American Bank of Welch v. Smith Aviation, Inc., 433 So.2d 750 (La.App. 3 Cir.1983), in support of his proposition that fraud is a limited exception to the rule of non-liability of shareholders.
We agree that American Bank does state that fraud is a limited exception to the general rule; however, the case as a whole does nothing to bolster plaintiffs' position. In addressing plaintiffs argument that the defendant's corporate veil should be pierced thus allowing liability to attach to the individual shareholders, the Third Circuit explained that the general rule is that corporations are distinct [ filegal entities, separate and distinct from the individuals who compose them. Id. at 752. The Court then explained that one exception to the non-liability rule involves situations where fraud or deceit has been practiced on a third party by the shareholder acting through the corporation. Id. A review of plaintiffs' third amended petition does not indicate that it contains allega tions of fraud. Louisiana Code of Civil Procedure art. 856 provides that "the circumstances constituting fraud or mistake shall be alleged with particularity." It is not sufficient for plaintiffs' counsel to raise allegations of fraud at the trial court hearing or at oral argument. Plaintiffs' petition is deficient.
Plaintiffs also allege that the trial court erred in dismissing their petition in its entirety, because the exception of no cause of action applied to only the alter ego theory of liability. Therefore, the remaining causes of action, i.e., personal injury from negligent or intentional use, arming and training of military forces to inflict injury upon plaintiff, and fraud in the breach of a stipulation pour autri.
Plaintiffs admit that the contract they claim contains the stipulation pour autri is between Freeport Minerals Company and the Republic of Indonesia. Thus, to find FMC & G liable to the plaintiffs as third party beneficiaries of the contract, plaintiffs must prove that FMC & G is the alter ego of Freeport Minerals Company. As we have already discussed, plaintiffs have not plead with any degree of specificity facts necessary to state a cause of action under the alter ego theory of liability.
|7In the alternative, plaintiffs argue that should this Court decide that the trial court did not err in granting defendants' exception of no cause of action then we should find that the trial court erred in not allowing plaintiffs to amend their petition. However, as the trial court noted in its reasons for judgment, the Supreme Court has ruled that no discovery would be allowed prior to a ruling on the exception. By plaintiffs' own admission, they cannot ascertain the facts necessary to prove an alter ego theory of liability or fraud without discovery. Further, plaintiffs were ordered by the trial court to amend their petition to "plead facts, as necessary under Louisiana law, to assert claims for personal injury with sufficient detail to place defendants on notice of the facts sought to be proven." They have again failed to do so. Therefore, it would be futile to allow plaintiffs to amend their original petition a fourth time in an attempt to cure the defects.
Accordingly, we affirm the trial court's judgment granting defendant's exception of no cause of action, dismissing plaintiffs' claims.
AFFIRMED.
MURRAY, J., concurs with reasons.
ARMSTRONG, J., dissents with reasons.
. Defendants' Motion to Dismiss for Forum Non Conveniens and Motion to Dismiss and Strike "Amended Prayer of Plaintiffs' Third Supplemental and Amending Petition" were rendered moot by the ruling on the Exception of No Cause of Action.
. A similar lawsuit was filed in federal court. It was dismissed, with prejudice, pursuant to defendants' Motion to Strike Third Amended Complaint and to Dismiss with Prejudice.