Opinion ID: 468217
Heading Depth: 3
Heading Rank: 2

Heading: Claims against Yamaha Parts Distributors, Inc. and Yamaha

Text: International Corporation 11 The first, second and fourth elements of res judicata are also satisfied with respect to Yamaha Parts and Yamaha International for the reasons stated above. The only element at issue is whether these entities were either parties to the original action or in privity with a party. 12
13 Neither Yamaha Parts nor Yamaha International was expressly named as a defendant in the original action. Nonetheless, this factor is not determinative; the issue is complicated by the Alabama fictitious party pleading rule. Defendants argue Yamaha Parts and Yamaha International became parties to the original action before removal by virtue of identification by YMC/USA. The district court found that Yamaha Parts and Yamaha International were parties to the prior action because they fully intended to expose themselves to a consideration of the merits of plaintiff's claim against them ... by allowing [YMC/USA] to substitute them for two of the fictitious defendants as described. (R1-11-40). Under the Alabama fictitious party rule, however, substitution occurs when a plaintiff who has designated defendants by fictitious names amends the complaint to substitute the defendant's true name for the fictitious one. See e.g., Kinard v. C.A. Kelly and Co., 468 So.2d 133, 134-35 (Ala.1985). Appellant never amended his pleadings to substitute Yamaha Parts or Yamaha International; it was defendant YMC/USA who identified these entities in connection with its removal petition. This identification was sufficient under Hamby v. Zayre Corp., 544 F.Supp. at 178-79, to show that the fictitious parties were entities whose citizenship would not prevent removal, but Hamby does not hold that persons so identified automatically become parties to the action. YMC/USA does not cite any authority, nor can we find any, to support its contention that a defendant's uncontradicted identification of fictitious parties brings the named persons in as parties without substitution under Ala.R.Civ.P. 9(h). 14 Even if we accept YMC/USA's argument that the affidavit identifying Yamaha Parts and Yamaha International brought them in as named but unserved defendants, they would not be parties for res judicata purposes. A party is one who is both named as a party to the action and subjected to the court's jurisdiction. Restatement (Second) of Judgments Sec. 34 (1980). Persons become subject to a court's jurisdiction in one of several ways. One may voluntarily subject oneself to the court's jurisdiction by making an appearance or participating in the action in a manner that has the effect of an appearance. In the absence of such a submission to the jurisdiction of the court, to become a party a person must be served with process or its equivalent.... Id. comment a. As to defendants, the fundamental requirements are designation as a party, compliance with valid procedures designed to give notice of the action, and a basis of jurisdiction. Most statements of this principle are negative: a person is not bound absent compliance with these requirements. 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 4449 at 411-12 (1981). E.g., E.B. Elliott Adv. Co. v. Metropolitan Dade County, 425 F.2d 1141, 1148 (5th Cir.1970) ([I]t is equally elementary that one is not bound by a judgment in personam resulting from litigation in which he is not designated as a party or to which he has not been made a party by service of process.) Neither Yamaha Parts nor Yamaha International submitted itself to the district court's jurisdiction in the original action. Moreover, YMC/USA's identification of these entities did not result in their appearance in that action. 15 A defendant makes an appearance in an action whenever, either in person or by an authorized attorney, he takes any part in the action, whether by formal entry of appearance or by an answer or demurrer or motion, or by taking part in the trial of the action, or by taking steps in the action after judgment either in the trial court or in an appellate court. 16 Restatement (Second) of Conflict of Laws Sec. 33 comment b (1969). Neither Yamaha Parts nor Yamaha International participated of record in any capacity in the original action. Likewise, appellant did not serve either of these entities with process in that action. We therefore conclude that Yamaha Parts and Yamaha International were not parties in the original action. 17
18 Res judicata also applies to those persons in privity with the parties. Privity describes a relationship between one who is a party of record and a nonparty that is sufficiently close so a judgment for or against the party should bind or protect the nonparty. Southwest Airlines Co. v. Texas International Airlines, 546 F.2d 84, 95 (5th Cir.1977). See also 1B J. Moore, J. Lucas & T. Currier, Moore's Federal Practice Sec. 0.411 at 392 (2d ed. 1984) (hereinafter Moore's Federal Practice). This relationship between the party and nonparty may be one of several types: where the nonparty has succeeded to the party's interest in property, where the nonparty controlled the original suit, where the nonparty's interests were represented adequately by the party in the original suit, Southwest Airlines, 546 F.2d at 95, and where the party and nonparty have concurrent interests in the same property right. 1B Moore's Federal Practice Sec. 0.411 at 392. 19 The district court found Yamaha Parts and Yamaha International were in privity with YMC/USA based on Russell Jura's affidavit and the fact that the complaint makes identical claims against all three defendants. A district court's determination as to whether interrelated corporations are in privity with each other is a factual question which should not be reversed unless its determination is clearly erroneous. Astron Industrial Associates, Inc. v. Chrysler Motors Corp., 405 F.2d 958, 961 (5th Cir.1968). Nonetheless, the factors the district court relied upon do not support a finding of privity. For the most part, Mr. Jura's affidavit merely quotes the language of the complaint; in so doing, it describes three corporate relationships: Yamaha Motor Company, Ltd., a Japanese corporation not a party in either action, is the parent company of YMC/USA; Yamaha Parts is a subsidiary of YMC/USA (SR 5-18) and Yamaha International was the United States distributor for Yamaha Motor Company, Ltd. until 1977. (SR 5-19). 1 Defendants, however, directly contradicted the second-described relationship in their petition to remove the present action, where they specifically stated that no parent-subsidiary relationships exist among the three named defendants, only unspecified stock ownership. (R1-2-4 to 6). 20 Although parent and subsidiary corporations have been held to be in privity with each other in some circumstances, most of these cases addressed the question whether a parent corporation is bound or protected by litigation conducted by its subsidiary. See, e.g., Astron Industrial Associates, Inc., 405 F.2d at 961 (wholly-owned subsidiary was operated by an officer of parent and parent's Board of Directors authorized subsidiary's suit); Pan American Match Inc. v. Sears, Roebuck and Co., 454 F.2d 871, 874 (1st Cir.1972) (parent conveyed subject property to wholly-owned subsidiary long before litigation arose, parent aware of subsidiary's litigation and participated in its defense). Privity between parent and subsidiary corporations generally is governed by the rules that apply to shareholders and their corporations. 18 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 4460 at 534 (1981). In this circuit, stockholders are not in privity with their corporations unless they are found to be alter egos. Dudley v. Smith, 504 F.2d 979, 982 (5th Cir.1974). 2 If the alter ego doctrine applies,  'the corporation and the person who dominates it are treated as one person, so that any act committed by one is attributable to both, and if either is bound, by contract, judgment, or otherwise, both are equally bound....'  Id. (quoting Shamrock Oil and Gas Co. v. Ethridge, 159 F.Supp. 693, 697 (D.Colo.1958) ). The record contains only the defendants' contradictory, generalized representations regarding the relationship between YMC/USA and Yamaha Parts. In particular, there are no facts as to the percent of ownership, YMC/USA's right or ability to control Yamaha Parts, or whether these entities operated independently or as one unit. Due to the lack of any factual basis for its determination, we find the district court was clearly erroneous in concluding Yamaha Parts was in privity with YMC/USA. Therefore, we remand for further factfinding to determine whether the relationship between YMC/USA and Yamaha Parts is sufficiently close to justify preclusion. 21 Finally, we hold the district court's conclusion that Yamaha International was in privity with YMC/USA was clearly erroneous. The record contains no evidence of any corporate interrelationship. Moreover, YMC/USA and Yamaha International are not in privity merely because appellant makes identical claims against them. When a person suffers injury as the result of the concurrent or consecutive acts of two or more persons, he has a claim against each of them.... Accordingly, a judgment for or against one obligor does not result in merger or bar of the claim that the injured party may have against another obligor. Restatement (Second) of Judgments Sec. 49 comment a (1980).