Opinion ID: 3010150
Heading Depth: 1
Heading Rank: 7

Heading: CSC's liability

Text: Defendants argue on appeal that Ms. Marzano improperly named Computer Science Corp. as a defendant and that the claims against CSC must be dismissed as a result. Appellees' Brief at 46-47. Ms. Marzano argues, however, that there is a genuine issue of material fact regarding the interrelationship of CSC and CSC Partners, Appellant's Reply Brief at 24, and that accordingly CSC was properly named as a defendant. Id. at 22. It is a fundamental proposition[] of New Jersey corporate law that a corporation is a separate entity from its shareholders, State of New Jersey v. Ventron Corp., 468 A.2d 150, 164 (N.J. 1983) (citing Lyon v. Barrett, 89 N.J. 294, 300 (1982)), and that shareholders are insulated from the liabilities of the corporate enterprise. Ventron Corp., 468 A.2d at 164. Even in the case of a parent corporation and its wholly-owned subsidiary, limited liability normally will not be abrogated. Id. (citing Muller v. Seaboard Commercial Corp., 5 N.J. 28, 34 (1950)). A court may not depart from this principle and pierce the corporate veil unless it finds that a subsidiary was 'a mere instrumentality of the parent corporation.' Ventron Corp., 468 A.2d at 164 (citing Mueller, 5 N.J. at 34-35). The requisite finding is that the parent so dominated the subsidiary that it had no separate existence but was merely a conduit for the parent. Ventron Corp., 468 A.2d at 164. We are aware of no case in New Jersey or the Third Circuit on the subject of piercing the corporate veil in the context of an employment discrimination lawsuit. Other courts, however, have considered the issue. Closest to home, a Pennsylvania federal district court held that [w]here separate corporate entities are so interrelated and integrated in their activities, labor relations, and management, it is clear that for Title VII jurisdictional purposes they may be treated as a single employer. Ratcliffe v. Insurance Co. of North America, 482 F. Supp. 759, 764 (E.D. Pa. 1980). Other courts have addressed similar questions and conducted similar types of analysis. In Johnson v. Flowers Industries, Inc., 814 F.2d 978 (4th Cir. 1987), the plaintiffs brought an age discrimination lawsuit against the company that employed them, West Virginia Baking Company (WVBC), as well as WVBC's parentcompany, Flowers Industries, and another Flowers subsidiary. The court, after noting that when a subsidiary hires employees, there is a strong presumption that the subsidiary, not the parent company, is the employer, id. at 980, noted that the presumption could be overcome if the parent-company exercises excessive control in one of two ways. Id. at 981. First, the parent could control the employment practices and decisions of the subsidiary. If the parent company hired and fired the subsidiary employees, routinely shifted them between the two companies, and supervised their daily operations, it would be hard to find that the parent was not their employer. Second, the parent might so dominate the subsidiary's operations that the parent and the subsidiary are one entity and thus one employer. For example, the subsidiary may be highly integrated with the parent's business operations, as evidenced by the commingling of funds and assets, the use of the same work force and business offices for both corporations, and the severe undercapitalization of the subsidiary. The parent might also fail to observe such basic corporate formalities as keeping separate books and holding separate shareholder and board meetings. Id. The court concluded that the courts have found parent corporations to be employers only in extraordinary circumstances. Id.; see also Frank v. U.S. West, Inc., 3 F.3d 1357, 1363 (10th Cir. 1993) (same). In Daniels v. Kerr McGee Corp., 841 F. Supp. 1133 (D. Wyo. 1993), the plaintiff sought to pierce the corporate veil against his employer's parent-company in his wrongful discharge action based on several facts demonstrating interrelatedness: interlocking directorates between the two corporate entities; reference in the parent's annual report to the operations of the subsidiary, and inclusion of the revenues generated by the subsidiary; management by the parent of the benefit plan for the subsidiary's employees; use of the same corporate logo; shared corporate headquarters; medical examination of the plaintiff by a doctor employed by the parent. Id. at 1136-37. The court, while acknowledging that there is some degree of interdependence between these two corporations, concluded that the facts cited by plaintiff could not overcome the strong presumption of liability. Id. at 1137. The court noted that plaintiff conceded that he was an employee of the subsidiary only, that the subsidiary was adequately capitalized and had sufficient assets to satisfy any potential judgment against it, and that the decision to terminate the plaintiff was made by the management of the subsidiary and that the parent had no role in that decision. Id. By contrast, the Court of Appeals for the Second Circuit did pierce the corporate veil in a lawsuit alleging improper termination on the grounds that the parent-company dominated its subsidiary and effectuated [the plaintiffs'] discharges, and that the employees were terminated as the result of personnel actions ordered by the CEO and the Board of the parent-company. Gorrill v. Icelandair/Flugleidir, 761 F.2d 847, 853 (2d Cir. 1985). In the instant case, it is undisputed that at the time of her layoff, Ms. Marzano was an employee of CSC Partners, and CSC Partners only. While she suggests that there is a question of fact regarding the interrelatedness of the two companies that should go to the jury, Appellant's Reply Brief at 23, she points only to the following evidence to support her position: first, that she was initially hired by CSC, and continued to believe she was a CSC employee until the day she was fired, id.; second, that while Defendants claim that her division merged with CSC Partners sometime between 1991 and 1992, from the employee's perspective, there was no notice of any changes or explanation of what [the merger] meant, if anything, id. at 24; third, that she continued to receive paychecks from CSC as late as May 1992, and continued to belong to the CSC pension plan, id.; fourth, that CSC Partners['s] maternity leave policy was based on information provided by CSC Corporate on the FMLA, id.; and, finally, that she continued to have regular involvement with CSC corporate as part of her job responsibilities. Id. Even if we accept all of Ms. Marzano's statements as true, we conclude that these facts, taken together, do not demonstrate that CSC and CSC Partners were so interrelated and integrated in their activities, labor relations and management that we should pierce the corporate veil. Her only direct involvement with CSC at the time of her layoff was her participation in CSC's pension plan. In addition, she offers no evidence that CSC was in any way, shape or form involved in CSC Partners' management or personnel decisions. For this reason, we conclude that the charges against CSC should be dismissed.