Opinion ID: 1595020
Heading Depth: 2
Heading Rank: 1

Heading: Whether the Trial Court Erred in Denying Penn National's Motion to Dismiss under Miss. R. Civ. P. 12(b)(6)

Text: ¶ 6. This Court reviews de novo a trial court's grant or denial of a motion to dismiss. Harris v. Miss. Valley State Univ., 873 So.2d 970, 988 (Miss.2004). When considering a motion to dismiss, the allegations in the complaint must be taken as true, and the motion should not be granted unless it appears beyond a reasonable doubt that the plaintiff will be unable to prove any set of facts in support of his claim. Id. Dismissal is proper if the complaint lacks an allegation regarding a required element necessary to obtain relief. Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir.1995) (citations omitted). Conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to defeat a motion to dismiss. Id.
¶ 7. The Ratliffs' complaint alleges that Casino Magic and its employee McManus violated this state's prohibition of the sale of alcoholic beverages to persons who are visibly intoxicated. However, the prohibition in Mississippi's dram shop statute creates liability for the permit holder and any employees of the permit holder. Penn National, as the sole shareholder of permit-holder BSL, is neither. This Court has long recognized the legal integrity of the corporate entity and the concomitant limited liability of shareholders. Gray v. Edgewater Landing, Inc., 541 So.2d 1044, 1046 (Miss.1989). A corollary principle is that an individual shareholder, by virtue of his ownership of shares, does not own the corporation's assets. Dole Food Co. v. Patrickson, 538 U.S. 468, 123 S.Ct. 1655, 1660, 155 L.Ed.2d 643, 652 (2003). Even when a parent corporation owns all of the stock of a subsidiary corporation, the parent does not, for that reason alone, own or have legal title to the assets of the subsidiary. Id. The retail alcohol permit is a privilege granted by the state, held by the permittee, and cannot be transferred without the written consent of the State Tax Commission. See Miss.Code Ann. § 67-1-67 (Rev.2005). As such, it cannot be attributed to a lawfully distinct corporate entity. ¶ 8. The Ratliffs nevertheless argue that Penn National is vicariously liable for the actions of the casino's staff because the parent company sets the policies of the casino and is involved in its daily operations. This claim amounts to an allegation that BSL is merely the alter ego of Penn National, which would justify this Court's piercing the corporate veil and attributing the acts or omissions of BSL to Penn National.
¶ 9. Corporate veil claims are analyzed under state law. United States v. Bestfoods, 524 U.S. 51, 61-63, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998). We decline to pierce the corporate veil except in those extraordinary factual circumstances where to do otherwise would subvert the ends of justice. Gray, 541 So.2d at 1046 (citing Johnson & Higgins of Miss., Inc. v. Comm'r of Ins., 321 So.2d 281, 284 (Miss. 1975)). Consequently, we have adopted the general rule that the corporate entity will not be disregarded in contract claims unless the complaining party can demonstrate: (1) some frustration of expectations regarding the party to whom he looked for performance; (2) the flagrant disregard of corporate formalities by the defendant corporation and its principals; and (3) a demonstration of fraud or other equivalent misfeasance on the part of the corporate shareholder. Gray, 541 So.2d at 1047. ¶ 10. While we have never articulated whether a different standard applies to tort claims, precedent from other jurisdictions suggests that the same basic standard should apply. See Miles v. Am. Tel. & Tel. Co., 703 F.2d 193, 195 (5th Cir.1983) (Although the attitude toward judicial piercing of the corporate veil is more flexible in tort, the legal precepts governing both tort and contract suits are substantially the same.). It is similarly accepted that some misfeasance other than the tort itself must be shown. See LaSalle Nat'l Bank v. Perelman, 82 F.Supp.2d 279, 295 (D.Del.2000) (In order to prevail on a claim to pierce the corporate veil . . . a plaintiff must prove that the corporate form causes fraud or similar injustice. ) (emphasis added); Mobil Oil Corp. v. Linear Films, Inc., 718 F.Supp. 260, 268-69 (D.Del.1989) (The law requires that fraud or injustice be found in the defendant's use of the corporate form.). We therefore recognize that the corporate veil will not be pierced, in either contract or tort claims, except where there is some abuse of the corporate form itself.
¶ 11. Pleadings under Mississippi Rule of Civil Procedure 8(a) must contain (1) a short and plain statement of the claim showing that the pleader is entitled to relief, and (2) a demand for judgment for the relief to which he deems himself entitled. Miss. R. Civ. P. 8(a). All pleadings shall be construed to insure substantial justice is done. Miss. R. Civ. P. 8(f). In construing our rules, we sometimes look for guidance to the federal cases, since the Mississippi Rules of Civil Procedure were patterned after the Federal Rules of Civil Procedure. White v. Stewman, 932 So.2d 27, 39 (Miss.2006) (federal practice should be our guide when considering questions arising under the Mississippi Rules of Civil Procedure.); Bourn v. Tomlinson Interest, Inc., 456 So.2d 747, 749 (Miss.1984). A majority of federal circuits have held that even under the liberal pleading requirements of Rule 8(a), a plaintiff must set forth factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory. United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 240 (1st Cir. 2004); see also Varljen v. Cleveland Gear Co., 250 F.3d 426, 429 (6th Cir.2001) (To survive a motion to dismiss under Fed. R.Civ.P. 12(b)(6), a complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.); Carl Sandburg Vill. Condo. Ass'n No. 1 v. First Condo. Dev. Co., 758 F.2d 203, 207 (7th Cir.1985) (A complaint must state either direct or inferential allegations concerning all of the material elements necessary for recovery under the relevant legal theory.). ¶ 12. The Ratliffs fail to make any assertion in their complaint that BSL is a mere corporate shell or alter ego of Penn National. The Ratliffs do not allege in their complaint that Penn National has disregarded corporate formalities or has used the corporate form to commit misfeasance. ¶ 13. At most, the complaint alleges that Penn National owns the Casino Magic casino, which Penn National denies in its answer to the complaint. Because they have failed to allege all of the material elements necessary to justify disregarding the corporate form, the Ratliffs have not asserted a viable claim against Penn National as required by Miss. R. Civ. P. 12(b). See Wallace v. Wood, 752 A.2d 1175, 1184 (Del.Ch.1999) (failure to allege subsidiary was a vehicle for fraud justifies dismissal for failure to state a claim); Walkovszky v. Carlton, 18 N.Y.2d 414, 421, 276 N.Y.S.2d 585, 223 N.E.2d 6 (1966) (While the complaint alleges that the separate corporations were undercapitalized and that their assets have been intermingled, it is barren of any sufficiently particularized statements that the defendant Carlton and his associates are actually doing business in their individual capacities, shuttling their personal funds in and out of the corporations without regard to formality and to suit their immediate convenience. Such a perversion of the privilege to do business in a corporate form would justify imposing personal liability on the individual stockholders. Nothing of the sort has in fact been charged.) (citations omitted); RMS Techs. v. Nynex Computer Servs. Co., 1993 WL 763469 (N.Y.Misc.1993) (conclusory allegations of domination and control and specific allegations of the use of stationery or the sharing of a legal department are insufficient to withstand motion to dismiss); cf. Geyer v. Ingersoll Publications Co., 621 A.2d 784, 793-94 (Del.Ch.1992) (specific allegations about the use of the corporate form to perpetrate fraud sufficient to withstand motion to dismiss); Edward D. Gevers Heating & Air Conditioning Co. v. R. Webbe Corp., 885 S.W.2d 771, 774 (Mo.Ct.App.1994) (extensive allegations about the co-mingling of funds sufficient to withstand motion to dismiss). The trial court therefore erred in denying Penn National's motion to dismiss the complaint for failure to state a claim on which relief could be granted, and Penn National must be dismissed without prejudice.