Title: Kenkel v. Parker
Citation: 2015 OK 81
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: November 24, 2015

Kenkel v. Parker Annotate this Case Justia Opinion Summary Joseph Parker was allegedly injured on the job. It was undisputed that Global Health Initiative (GHI), which at one time employed Parker, did not have workers' compensation insurance. Parker filed a workers' compensation claim in the Workers' Compensation Court. That court awarded Parker, by default judgment against GHI, $17,595.60 plus interest. Parker filed the judgment in the district court of Tulsa County in an attempt to collect the money awarded by the Workers' Compensation Court. After futile efforts to garnish the GHI bank accounts, Parker filed a motion to pierce the corporate veil and to proceed against individual GHI shareholders in an attempt to collect his compensation awards. The trial judge denied Parker's request due to lack of evidence. Thereafter, GHI filed notice of bankruptcy. By August of 2004, Parker had filed an appeal in which the Court of Civil Appeals reversed the trial court's determination that stockholders could not be held liable for the workers' compensation award and remanded the case to the trial court. GHI did not defend or participate in the case on appeal. Parker did not pursue collection against individual shareholders but, instead, returned to the Workers' Compensation Court seeking permanent partial and permanent total awards and an increase in his original award. GHI was not served notice of this proceeding and the cause was consequently undefended. The Workers' Compensation Court entered another award in favor of Parker and against GHI totaling $236,476.20. In June of 2009, Parker, through his counsel, sent letters to some of the GHI shareholders, seeking collection of the shareholders' pro rata share for payment of workers' compensation awards. However, for unexplained reasons, not all shareholders were asked to pay "their portion" of the judgment. The plaintiffs-appellants, doctors Thomas Kenkel and Robert Gold were two of the doctor stockholders, and they appealed seeking a declaration that: (1) Parker had no valid judgment against them; (2) Parker was not entitled to proceed against them for the injuries he sustained; (3) Parker was not entitled to collect the workers' compensation judgment; (4) they had the right to defend against any of Parker's claims ab initio; (5) they were not shareholders of GHI at all but if they were, they were merely minority shareholders; and (6) they were not liable for the debts Parker is attempting to collect. The trial court agreed and sustained the doctors' motion for summary judgment. Parker appealed and the Court of Civil Appeals reversed the trial court and remanded with directions for the trial court to enter judgment in the appellant's favor. The Oklahoma Supreme Court granted certiorari to address the issue of whether a business' failure to secure workers' compensation insurance rendered its shareholders personally liable for a workers' compensation award to an employee. The Court held that it did not. Read more Want to stay in the know about new opinions from the Oklahoma Supreme Court? Sign up for free summaries delivered directly to your inbox. Learn More › You already receive new opinion summaries from Oklahoma Supreme Court. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here . KENKEL v. PARKER 2015 OK 81 Case Number: 109832 Decided: 11/24/2015 THE SUPREME COURT OF THE STATE OF OKLAHOMA NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL. THOMAS C. KENKEL, M.D. and ROBERT GOLD, M.D., Plaintiffs/Appellees, v. JOSEPH PARKER a/k/a JOSEPH G. PARKER, Defendant/Appellant, and ROBERT BLANKENSHIP, M.D., CHRIS M. BOXWELL, M.D., WILLIAM BURNETT, M.D., JOHN CATTANEAO, M.D., ERIC ENGLES, M.D., MARSHA HOWERTON, M.D., FRANK FORE, M.D., BARBARA FRIES M.D., E. BRADLEY GARBER, M.D, ROBERT GARRETT, M.D., JOEY MANDUANO, D.O., WILLIAM SAWYER, M.D., VICKI BAKER, M.D., LANCE MILLER, M.D., Plaintiffs/Third Party Defendants/Intervenors. CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION II Honorable Rebecca Brett Nightingale, Trial Judge ¶0 Doctors Thomas Kenkel and Robert Gold, plaintiffs/appellees, were stockholders in Global Health Initiative, a business that filed for bankruptcy. The appellant, Joseph Parker, obtained default workers' compensation awards against the business for a work-related accident. The business had not purchased workers' compensation insurance, nor did it carry its own risk policy. Consequently, Parker filed the workers' compensation awards in the district court of Tulsa County to obtain certified judgments against both the business and its shareholders in an attempt to collect his workers' compensation awards. The doctors filed a motion for summary judgement, seeking a declaration that, as mere shareholders, they could not be held personally liable for Parker's workers' compensation award. The trial court agreed and sustained the doctors' motion for summary judgment. Parker appealed and the Court of Civil Appeals reversed the trial court and remanded the cause with directions for the trial court to enter judgment in the appellant's favor. We granted certiorari to address the issue of whether a business' failure to secure workers' compensation insurance renders its shareholders personally liable for a workers' compensation award to an employee. We hold that it does not. CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT AFFIRMED. John E. Howland, Frederick J. Hengenbart, Tulsa, Oklahoma, for Petitioners/Appellees. Brian J. Rayment, Tulsa, Oklahoma, for Defendant/Appellant. KAUGER, J. ¶1 The issue presented is whether shareholders, uninvolved in the management of a bankrupt corporation which was without workers' compensation insurance, may be held personally liable for a workers' compensation court award to an employee. We hold that, under such circumstances, shareholders cannot be held personally liable for the payment of the employee's workers' compensation award. ALLEGED FACTS AND PROCEDURAL HISTORY ¶2 This cause concerns a litany of litigation and pleadings lasting over 15 years between the defendant/appellant, Joseph Parker (Parker/employee) and a bankrupt business named Global Health Initiative (GHI) which at one time employed Parker. Cardiology Digital Education (CDE), the apparent precursor entity to GHI, was an Oklahoma limited liability company, established in 1998, to provide materials for continuing medical education. CDE shut down and GHI replaced it sometime in 2000. The assets of CDE were transferred to GHI. GHI issued shares in GHI to the former shareholders of CDE. Additional shares in GHI were available for purchase.1 The chairman of the board and president of GHI was Amjad Iqubal, M.D. There were three additional officers.2 None of these individuals are parties to this cause. ¶3 On December 11, 2000, Parker was allegedly injured on the job. It is undisputed that GHI did not have workers' compensation insurance. On February 9, 2001, Parker filed a workers' compensation claim in the Workers' Compensation Court. On November 12, 2002, it awarded the employee, by default judgment against GHI, $17,595.60 plus interest. On November 22, 2002, Parker filed the judgment in the district court of Tulsa County in an attempt to collect the money awarded by the Workers' Compensation Court. ¶4 On March 7, 2003, after futile efforts to garnish the GHI bank accounts, Parker filed a motion in the district court of Tulsa County to pierce the corporate veil and to proceed against individual GHI shareholders in an attempt to collect his compensation awards. The trial judge denied Parker's request due to lack of evidence. On May 22, 2003, GHI filed notice of bankruptcy. By August of 2004, Parker had filed an appeal in the Tulsa County case that culminated in an unpublished opinion in case no. 101,038, Parker v. Global Health Initiative, (Parker 1) in which the Court of Civil Appeals, on March 16, 2007, reversed the trial court's determination that stockholders could not be held liable for the workers' compensation award and remanded the cause to the trial court. GHI did not defend or participate in the case on appeal. ¶5 Subsequently, according to Parker, he did not pursue collection against individual shareholders but, instead, returned to the Workers' Compensation Court on June 19, 2008, seeking permanent partial and permanent total awards and an increase in his original award. GHI was not served notice of this proceeding and the cause was consequently undefended. On February 20, 2009, the Workers' Compensation Court entered another award in favor of Parker and against GHI totaling $236,476.20. In June of 2009, Parker, through his counsel, sent letters to some of the GHI shareholders, seeking collection of the shareholders' pro rata share for payment of workers' compensation awards. However, for unexplained reasons, not all shareholders were asked to pay "their portion" of the judgment.3 ¶6 Meanwhile, the GHI stockholders filed a declaratory judgment action in Tulsa County against Parker on April 21, 2010, in case no. CV-2010-468 asserting that the employee could not pierce the corporate veil and hold them personally liable for the GHI's workers' compensation debt. After Parker 1 was remanded to the trial court, it was consolidated with the GHI stockholders' case on April 13, 2011. ¶7 The plaintiffs/appellants, doctors Thomas Kenkel and Robert Gold (doctors/stockholders) were two of the doctor stockholders, and they brought this appeal. In the trial court, the doctors specifically sought a declaration that: 1) Parker had no valid judgement against them; 2) Parker was not entitled to proceed against them for the injuries he sustained; 3) Parker was not entitled to collect the workers' compensation judgment; 4) they have the right to defend against any of Parker's claims ab initio; 5) they are not shareholders of GHI at all but if they were, they were merely minority shareholders; and 6) they are not liable for the debts Parker is attempting to collect. According to exhibits filed by Parker,4 there were 4,072,800 shares issued in the CDE and GHI companies. Of the seventeen plaintiff/appellees who have their shares listed in Parker's affidavit, (not all are listed), the shares held by the individuals ranged from forty thousand to one-hundred eighty thousand. 5 The doctors were apparently minority shareholders of GHI. The record does not show that they had any involvement in the administration of GHI whatsoever. ¶8 The doctors filed a motion for summary judgment and the employee filed a cross-petition for summary judgment. After a July 7, 2011, hearing, the trial court granted the doctors' motion for summary judgment, finding that they were entitled to judgment in their favor on the petition for declaratory judgment and on Parker's counterclaim. In an order filed August 19, 2011, it held that the corporate veil could not be pierced against stockholders to render them personally liable for workers' compensation awards. The trial court entered a judgment for all of the doctors' claims.6 ¶9 The employee appealed and on September 24, 2014, the Court of Civil Appeals reversed the trial court. The matter was remanded to the trial court with directions to enter judgment in Parker's favor, declaring that he may proceed to collect his certified judgments against GHI shareholders. We granted certiorari on January 13, 2015.7 Subsequently, over the employee's objection, we allowed the remaining stockholders to intervene.8 On July 16, 2015, intervenors John Cattaneao, Eric Engles, Marsha Howerton, Barbara Fries, William Sawyer, and Joey Manduano requested to be dismissed as intervenors from the appeal with prejudice because they had entered into a settlement agreement with the employee. We grant that request herein. ¶10 STOCKHOLDERS ARE NOT INDIVIDUALLY LIABLE WHEN A COMPANY NEGLECTS TO SECURE WORKERS' COMPENSATION INSURANCE COVERAGE. ¶11 The employee contends that public policy behind mandating workers' compensation insurance coverage requires corporate entities to be disregarded and stockholders held to be the responsible parties when a company neglects to secure workers' compensation coverage. Regardless of whether there is one shareholder, five shareholders, or 5,000 shareholders, the corporate veil should be pierced without regard to any culpability, or fraud under such circumstances. The doctors argue that stockholders should not be held liable for the recovery of workers' compensation benefits against a company, especially when such stockholders are minority stockholders and are neither officers, directors, employees, nor involved in the management or operation of the corporation. ¶12 A corporation is an artificial person,9 a creature of statutory law.10 The Oklahoma General Corporations Act, 18 O.S. 2011 ¶¶1001 et seq., sets forth the creation of corporations in Oklahoma and the law regarding them. There is a long legal history of a separation between a corporation and its shareholders. A basic tenet of American corporate law is that the corporation and its shareholders are distinct, separate entities.11 Ignoring this distinction is known as "piercing the corporate veil,"12 and the distinction is not ignored, unless it can be shown that there is a design or scheme to perpetrate a fraud or defeat public convenience, justify wrong, or defend crime.13 ¶13 Nearly 80 years ago, in Buckner v. Dillard, 1939 OK 144, ¶0, 88 P.2d 326, the Court clearly explained that one of the recognized purposes of incorporation is to permit persons to avoid personal liability, either entirely or beyond a statutory amount. Buckner involved a coal minor who was injured and who obtained a workers' compensation award for his injuries against an insolvent company. The company had not secured workers' compensation insurance (at that time it was known as Workmen's Compensation). Various incarnations of partnerships and agreements were involved in the coal mine operation, and liability was sought against Buckner, who was an officer and stock-holder in the partnerships involved. The Court held that Buckner could not be individually liable for the compensation award because there was no evidence that the various companies involved were created as a device or artifice to evade the workers' compensation laws. ¶14 Since Buckner, was decided, both corporate law and workers' compensation laws have gone through many incarnations. Nevertheless, the rules of law governing whether a corporate veil may be pierced and the public policy behind the workers' compensation regulatory scheme have not changed. Recently, in Evans & Associates Utility Services v. Espinosa , 2011 OK 81, ¶14, 264 P.3d 1190, the Court explained the purposes behind workers' compensation law, noting that: The Workers Compensation Act was designed to provide compensation to covered workers for loss of earning capacity, incurred as a result of work-related accidents. It is a mutual compromise in which the employee relinquishes his/her right to sue for damages sustained in job-related injuries; and the employer accepts no-fault liability for a statutorily prescribed measure of damages. However, in exchange for the employer's greater and more certain exposure, the Act also provides the employer with certain advantages. It offered the employer a maximum loss and protected employers from excessive judgments. The object of the Act is to compensate, within the limits of the act, for loss of earning power and disability to work occasioned by injuries to the body in the performance of ordinary labor. (Citations omitted). ¶15 Workers' Compensation is also a creature of statute, and it does not operate outside the limits designed by the Legislature.14 It is the exclusive remedy for work related accidents sustained during the course and scope of a worker's employment.15 Nevertheless, we find nothing in either the workers' compensation statutes nor the corporate law statutes which indicates that the Legislature intended to trump corporate shareholder liability laws when it provided for a mutual compromise between an employee's right to sue for damages sustained in job-related injuries and an employer's statutorily prescribed liability. To the contrary, statutory limits of liability for the shareholders of dissolved Oklahoma Corporations are expressly set forth in 18 O.S. 2011 §1100.3 which provides that a shareholder liability for claims against a dissolved corporation cannot be greater than the shareholder's pro rata share of the corporation or the amount distributed to the shareholder -- whichever is less.16 Here, GHI was insolvent and bankrupt. There is no evidence presented which would suggest that anything was distributed among shareholders after its dissolution. ¶16 This Court has permitted the piercing of the corporate veil to uphold public policy in limited circumstances.17 We have also declined to permit such piercing if there was no evidence that the establishment of such a corporate entity was done solely to avoid the payment of worker's compensation claims.18 Nor do we permit such a piercing today. There is no evidence that the corporation was established to avoid workers' compensation claims. It is arguable that there was a corporate history of gross mismanagement, as evidenced by its bankruptcy, but the evidence before the trial court would indicate that the decision not to have valid workers' compensation insurance did not rest in the hands of the shareholders who are parties to this action. ¶17 To argue that they are liable because public policy must make someone liable is an argument not well taken. If the corporate veil were pierced under these facts, we would effectively be erasing the doctrine altogether. If the Legislature chooses to expose shareholders to such liability, it may do so. Until then, we hold that shareholders cannot generally be held personally liable for the payment of the employee's workers' compensation award. ¶18 We recognize that the Court of Civil Appeals reached a different conclusion in Thomas v. Vertigo, Inc., 1995 OK CIV APP 45, 900 P.2d 458 , cert. denied, July 13, 1995, when it held that the corporate veil could be pierced for public policy reasons because an employee was injured in the course of her work at a restaurant and the corporate entity that owned the restaurant did not maintain worker's compensation insurance. It is vital to note that, in Thomas, all corporate stock was owned by one individual. The same individual served as the director and president of the corporation that owned the restaurant. The person who was held personally liable was the person who made the decision not have a valid own risk permit or to carry worker's compensation insurance. Because Thomas differs factually from this cause, we need not overrule it today. However, to the extent that the unpublished opinion in case no. 101,038, Parker v. Global Health Initiative, (Parker 1) is inconsistent with today's pronouncement, it is hereby expressly overruled. CONCLUSION ¶19 Both corporations and workers'compensation are creatures of statutes.19 Corporations were specifically designed to separate a corporation from its shareholders, including liability.20 Unless it can be shown that there is a design or scheme to perpetrate a fraud or defeat public convenience, justify wrong, or defend crime, the distinction is not ignored. 21 Workers' Compensation was designed as a mutual compromise to provide compensation to covered workers for loss of earning capacity incurred as a result of work-related accidents, while relinquishing the right to sue and an employer accepting statutorily prescribed no-fault liability for a measure of damages.22 Nowhere under either statutory scheme, has the Legislature chosen to eradicate the reasons for piercing the corporate veil to expose stockholders liable for a company's failure to secure workers' compensation coverage. We decline to do so today. CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT AFFIRMED. COMBS, V.C.J.,(separate writing), KAUGER, WATT, WINCHESTER, EDMONDSON, TAYLOR, JJ., concur. COLBERT, J., concurs in result. REIF, C.J., (separate writing) and GURICH, J., dissent. FOOT