Opinion ID: 441783
Heading Depth: 1
Heading Rank: 1

Heading: Parent Corporation a Statutory Principal of a Wholly Owned Subsidiary

Text: 4 Under the Louisiana Worker's Compensation Law, La.R.S. 23:1021 et seq., the compensation remedy afforded an injured employee against his employer or any principal thereof is exclusive, thus barring a tort remedy. La.R.S. 23:1032 (1976). A principal is a person that undertakes to execute any work, which is part of his trade, business or occupation through a contractor, in which event the principal is liable in compensation benefits to employees of the contractor injured in the execution of the work so undertaken as if the employee had been immediately employed by him [the principal]. La.R.S. 23:1061 (1950). 1 See also La.R.S. 23:1032 (1976), defining principal for purposes of the statutory immunity as any person who undertakes to execute any work which is a part of his trade, business or occupation. 5 In Lewis v. Exxon Corporation, 441 So.2d 192 (La.1983), the Supreme Court of Louisiana recently summarized the purpose 2 and the requirements 3 of a tort immunity claimed by a compensation principal under La.R.S. 23:1032, 1061. Stating that the facts of each individual case must be examined to determine whether a particular activity is within the scope of a principal's trade, business or occupation, the court observed that, in general, to be so considered, the work must be routine or customary ... or some other type of activity which is necessary for the principal's day to day activity or, [p]ut another way, those activities that are an actual part of the nature and purpose of the principal's enterprise. Lewis, supra, 441 So.2d at 198. Also, the entire scope of the work contract must be considered in order to determine whether the work in which the injured employee of the contractor was injured was part of the principal's trade, business or occupation. Id. See also Hodges v. Exxon Corporation, 727 F.2d 450, 453 (5th Cir.1984). 6 Under these jurisprudential tests, which the district court felt to be inapposite on the basis of two Louisiana intermediate court decisions (to be discussed below), there were genuine disputes of material fact concerning whether the plaintiff's immediate employer, although a wholly-owned subsidiary of Heist, was performing part of Heist's trade, business, or occupation. As will be shown, the employer was a separate and distinct corporation, with its own employees, assets, and customers, performing work not shown to be part of Heist's routine and customary day to day activity performed by its own employees. Under usual Louisiana compensation principles, Heist would no more be liable as a principal for worker's compensation to injured employees of its corporate subsidiary than it would be liable under ordinary tort principles for the subsidiary's employees' torts that injured third persons. 7 The district court dismissed the plaintiff Dorden's claim by granting Heist's motion for summary judgment. A grant of summary judgment is appropriate only where it appears from the pleadings, depositions, admissions, answers to interrogatories, and affidavits--considered in the light most favorable to the opposing party--that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Williams v. Shell Oil Company, 677 F.2d 506, 509 (5th Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 570, 74 L.Ed.2d 933 (1982), quoting, Fed.R.Civ.P. 56(c). Any doubt as to the existence of a material fact is to be resolved against the moving party. Id.; Murphy v. Georgia-Pacific Corporation, 628 F.2d 862, 866 (5th Cir.1980).
8 The factual context, based upon the depositions, answers to interrogatories, and admissions on file, together with the affidavits, Fed.R.Civ.P. 56(c), construed as required most favorably to the opponent (Dorden) to the summary-judgment motion, show: 9 The plaintiff was hired as a hydroblaster and truck driver by Hydro-Tech Corporation (Hydro-Tech), a Texas corporation, and his duties required him to drive the heavily loaded truck that crashed while he was at work. Hydro-Tech was engaged in the business of furnishing industrial cleaning for refineries and chemical companies in Louisiana, Texas, and Alabama. The allegedly defective truck which crashed had been designed, specially manufactured, and assembled in New York by Heist, a New York corporation with executive offices in Florida, for use as a pump truck in the high-pressure industrial cleaning business, in which both Heist and Hydro-Tech were involved. Hydro-Tech had leased the truck from and had paid rentals to Heist. Hydro-Tech's Louisiana manager had authority to hire and fire Hydro-Tech employees, including the plaintiff Dorden. Hydro-Tech (but not Heist) paid state income and franchise taxes in Louisiana. So far as the record shows, Hydro-Tech secured and billed its own customers, maintained its own employment records, had assets in its own name, without day-to-day supervision or intervention by Heist. 10 In contending that summary judgment holding that Heist was Hydro-Tech's statutory principal was nonetheless proper, Heist relies solely upon its statement of allegedly uncontested facts attached to its motion for summary judgment. These pertinently show: 11 Hydro-Tech was a wholly-owned subsidiary of Heist. Heist provided or supervised all accounting and administrative services for Hydro-Tech and maintained all bank accounts therefor. [P]olicy for the management of Hydro-Tech was provided by Heist, and the management personnel of Hydro-Tech were held accountable by Heist for the successes and failures of their corporation. Although Heist had other facets of its business that Hydro-Tech did not share, Heist and Hydro-Tech are generally in the same business, the furnishing of high-pressure cleaning. Hydro-Tech's equipment, premises, and payroll checks show it as a division of Heist. Heist's annual reports filed with the Securities and Exchange Commission show Hydro-Tech as a wholly owned subsidiary and an operating division of Heist. 4 12 This showing, it should be noted, is negative of any indication that Heist undertook through Hydro-Tech to perform work that was part of Heist's trade, business, or occupation, as defined by the Louisiana supreme court in Lewis, supra. Likewise, with regard to a dispute of material fact, the showing is silent with regard to the affidavits and depositions earlier filed on behalf of Heist, offered by it in support of its motion to dismiss for lack of personal jurisdiction of the action filed in Louisiana federal district court; these emphasized the independent and separate nature of Hydro-Tech from Heist, and Heist's lack of supervision or control of Hydro-Tech, such as would dispute any factual contention that Hydro-Tech was an alter ego of Heist. Cf., Baker v. Raymond International, Inc., 656 F.2d 173, 179-81 (5th Cir.1981).
13 The district court concluded that the statutory employer-principal decisions relied upon by the plaintiff Dorden were inapposite because the present facts involve the distinguishable issue of whether a subsidiary is so dominated by its parent corporation as to be considered a principal for workmen's compensation exclusive-remedy purposes. In therefore granting summary judgment on this domination theory, the court relied upon Coco v. Winston Industries, Inc., 330 So.2d 649 (La.App. 3d Cir.1975), amended on other grounds, 341 So.2d 332 (La.), and Nichols v. Uniroyal, Inc., 399 So.2d 751 (La.App. 3d Cir.1981), which were felt to be virtually indistinguishable from the case at bar. 14 Nichols, however, involved a wholly-owned subsidiary organized solely to provide management and accounting services for stores owned by the parent corporation--as distinguished from a subsidiary such as Hydro-Tech that may have been engaged in business to service its own customers in the general public, and may not have functioned solely to perform services for the parent corporation that were part of the latter's trade, business, or occupation. Likewise distinguishably, Coco involved a wholly-owned subsidiary that was in existence purely for the benefit of the parent corporation, which subsidiary had no actual existence other than as a alter ego of the latter, and both of which corporations were completely run by one individual. Baker v. T.L. James & Co., Inc., 398 So.2d 1223 (La.App. 4th Cir.1981) (distinguishing Coco and reversing the trial court that in reliance upon Coco had granted summary judgment in favor of the dominant corporation). 15 Baker, supra, held that a related or dominant corporation could not claim tort immunity as a principal under La.R.S. 23:1061, for an injury that had been sustained by the employee of another corporation allegedly performing the principal's work. To avail itself of this tort-immune status, Baker held, the alleged principal must show that the other corporation had undertaken to perform part of the work shown to be part of the principal's trade, business or occupation. Baker, 398 So.2d at 1226. This requirement, we believe, is consistent with the statutory intent and the Louisiana jurisprudence, and it is not here met. And, with regard to the alter ego contention, as Baker indicated, id.: 16 Generally, common ownership, identity of management, and the presence of a common insurer are not enough to create identity between parent and subsidiary for compensation purposes. Probably the most significant factor is actual control, and if the subsidiary is in practice not only completely owned but completely controlled by the parent, identity may well be found and immunity conferred. 17 2A Larson's Workmen's Compensation Law (1983), Sec. 724 at p. 14-191. 18 Under the appropriate Louisiana jurisprudence, therefore, there are disputed issues of material fact governing whether Heist can claim tort-immunity as a principal. Summary judgment was improvidently granted. 19