Opinion ID: 561305
Heading Depth: 3
Heading Rank: 2

Heading: Envirodyne's invocation of the alter ego doctrine

Text: 44 Our above conclusion does not wholly pave the way for plaintiffs' suit against Envirodyne to go forward, for Envirodyne advances another argument in favor of its position. It is what the plaintiffs characterize as the defendant's express release argument--that the defendant is released because WSC and EDC are specifically named in the Settlement Agreement and because Envirodyne is the parent corporation of the two subsidiaries, it benefits from the release under an alter ego theory. 45 Envirodyne, in advancing this argument, seeks protection from a doctrine whose purpose is to prevent a corporation that has acted fraudulently or unjustly from protecting itself from liability by shielding itself with the protective mantle of the corporate form. Essentially, defendant's argument is but another way of restating the argument that the release of one party operates to release all others. This time, however, the defendant bases its argument on a principle of corporate law--in short, the defendant has served up a red herring. As we understand its approach to the alter ego doctrine, defendant argues that if it is found to be the alter ego of the subsidiaries, then its relation to the subsidiary is close enough for Envirodyne to be considered a party to the release. 46 However, the alter ego doctrine, as invoked by Envirodyne, does not work this way. Courts will allow plaintiffs to pierce the corporate veil to impose liability on a defendant who unjustly seeks protection in the corporate form. The alter ego doctrine is a sword, not a shield, the basis for a cause of action, not a defense. By asserting that the alter ego doctrine applies to its case, Envirodyne essentially inculpates itself by admitting that WSC and EDC are corporate shells and that Envirodyne, the parent corporation, is the real party at interest in the Settlement Agreement. Envirodyne's wish to be recognized as an alter ego of the subsidiaries here could return to haunt it when the district court decides whether plaintiffs may pierce the corporate veil. By asserting that it is an alter ego, Envirodyne may be barred from stating that it is not an alter ego at a later stage of the litigation. In Goldstein v. Scott, 108 Ill.App.3d 867, 872, 64 Ill.Dec. 374, 378, 439 N.E.2d 1039, 1043 (1982), the Illinois Appellate Court recognized that a party may not assert that it is the alter ego and then, when it is no longer advantageous to do so, deny it. Goldstein involved a defendant church corporation, which sued its liability insurer for coverage on a property damage claim. A federal district court held in favor of the church believing it to be the alter ego of the uninsured beneficial owner of the property. Id. at 871, 64 Ill.Dec. 374, 439 N.E.2d 1039. Subsequently, the church attempted to escape liability for personal injuries caused by the property damage, claiming that it was not the alter ego of the property owner. Id. at 872, 64 Ill.Dec. 374, 439 N.E.2d 1039. The state appellate court concluded that the church may not assert that it is the alter ego and later deny it: 47 [The church] having sought the finding that it was [the property owner's] alter ego    and having obtained the finding it so vigorously sought is judicially estopped from denying in this action that it is the [property owner's] alter ego.    A party cannot play fast and loose    or blow hot and cold during the course of litigation. When a party assumes a certain position in a legal proceeding and succeeds in maintaining that position, he may not thereafter assume a contrary position. 48 Id. at 872, 64 Ill.Dec. 374, 439 N.E.2d 1039, citing Finley v. Kesling, 105 Ill.App.3d 1, 60 Ill.Dec. 874, 433 N.E.2d 1112 (1982). 49