Court Opinion

ID: 9702748
Source: CourtListenerOpinion
Date Created: 2023-08-25 23:22:34.761827+00
Date Added: 2024-06-11T18:21:41.273010
License: Public Domain

GLASSMAN, Justice,
with whom RUDMAN and DANA, JJ., join,
dissenting.
[¶ 18] Because I agree with LVI that the amendment to section 625-B(l)(C), enacted in 1989 (effective July 1, 1990) violates the Maine and United States Constitutions, I respectfully dissent.
• [¶ 19] As noted by the Court, the principle has long been established at common law that in the absence of fraud or bad faith shareholders are not liable for corporate debts. In Atlantic Oceanic Kampgrounds v. Camden Nat. Bank, 473 A.2d 884, 886 (Me.1984), we reaffirmed an equally well-established principle clearly articulated over a half century ago in Palmer v. Town of Sumner, 133 Me. 337, 177 A. 711 (1935), that
[i]t is not to be presumed that the Legislature intended to abrogate or modify a rule of the common law by the enactment of a statute upon the same subject; it is rather to be presumed that no change in the common law was intended, unless the language employed clearly indicates such an intention.... The rules of eommon law are not to be changed by doubtful implication, nor overturned except by clear and unambiguous language.
Id. at 340, 177 A. 711 (citations omitted). The Court properly relied on these two well-established principles when it determined in Curtis v. Lehigh Footwear, Inc., et al., 516 A.2d 558 (Me.1986), that the language of 26 M.R.S.A. § 625-B(C) (1988) did not impose on Lehigh Valley Industries, Inc. or Lehigh, a wholly-owned subsidiary of Lehigh Valley Industries, Inc.,7 the obligation of severance pay to the employees of Loree Footwear Corporation, a wholly-owned subsidiary of Lehigh.
[¶20] Absent the 1989 legislation, the record in this case would not support a determination that LVI as a stock owner of H.M.D. is responsible for Dori’s liabilities.8 *967See, e.g., United Paperworkers Intern. Union v. T.P. Property Corp., 583 F.2d 33, 35 (1st Cir.1978) (based on examination of federal common law, parent corporation’s ownership of all of subsidiary’s stock, and intertwining of management “as to be almost indistinguishable,” not sufficient to pierce corporate veil of parent stockholder and bind it to subsidiary’s arbitration agreement).
[¶ 21] An analysis of the cases relied on by the Court to support the 1989 legislation discloses that in each case the constitutional challenges arose in the context of the existing and uneontroverted legal relationship between the parties of employer and employee, and the challenged statute was determined to be a lawful adjustment of the rights and burdens existing in that relationship. In the instant case, the 1989 enactment of the amendment to section 625-B(l)(C) created a new employer-employee relationship and, by P.L. 1989, ch. 667, § 2, made that newly created relationship retroactive to October 1, 1975, and imposed a previously nonexistent liability on that newly created relationship.
[¶ 22] The law is well established in Maine that “[t]here can be no doubt that Legislatures have the power to pass retrospective statutes, if they affect remedies only.... But they have no constitutional power to enact retrospective laws which impair vested rights or create personal liabilities.” Coffin v. Rich, 45 Me. 507, 514 (1858). See Thut v. Grant, 281 A.2d 1, 6 n. 8 (Me.1971) (“This aspect of the law was not questioned or adversely affected by the holding in Hawthorne v. Calef, [69 U.S. (2 Wall.) 10, 17 L.Ed. 776] (1864).”) A “curative statute ... clearly designed to have retrospective application ... must be carefully construed so as not to violate constitutional requirements.” Sabasteanski v. Pagurko, 232 A.2d 524, 525 (Me.1967) (citing Coffin and setting forth the above-quoted principle in that case).
[¶ 23] Pursuant to section 625-B(l)(C), the liability, if any, for the remedy of severance pay to all eligible employees of Dori attached on the date Dori ceased its manufacturing operations in August 1985. Director of Bureau of Labor Standards v. Fort Halifax Packing Co., 510 A.2d 1054, 1063 (Me.1986), aff'd, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). It is undisputed that the complaint in Bernier v. Dori Shoe, et al. filed in the Superior Court on June 13, 1986, failed to state a claim against LVI on which any relief could be granted. By its present complaint filed in December 1990, the plaintiff seeks relief from LVI for the statutory remedy of severance pay based on the amendment to section 625-B(l)(C). This curative, retrospective amendment cannot be construed to affect the remedy only of eligible employees — the remedy remains as it was prior to July 14, 1990, i.e., one week’s pay for each year of employment, as provided in section 625-B(2). It can only be construed as creating the personal liability of a stockholder for the unchanged remedy. Applying the required legal principles to section 625-B(l)(C), it is apparent that the Legislature violated the constitutional limitations placed on it when enacting retrospective legislation.
[1124] The taking clause of the Fifth Amendment of the United States Constitution made applicable to the states by the Fourteenth Amendment and set forth in Art. I, § 21 of the Maine Constitution prohibits the taking of property for public use without just compensation. Here, the property in question is the money of LVI. In analyzing taking cases, the United States Supreme Court has relied on the test articulated in Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 212, 106 S.Ct. 1018, 1019-20, 89 L.Ed.2d 166 (1986), that three factors must be considered: “(1) ‘the economic impact of the regulation on the claimant’; (2) ‘the extent to which the regulation has interfered with distinct investment-backed expecta*968tions’; and (3) ‘the character of the governmental action.’ ” (quoting Penn Central Transportation Co. v. New York City, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978)). Examining the present case in light of these factors supports the conclusion that the challenged legislation violates the Taking Clause. It cannot be said that the challenged legislation does not interfere with “the distinct investment-backed expectations” of LVI. There was no expectation that the closing of Dori Shoe, Inc. in 1985 would in 1995 impose on LVI liability for the severance pay to the employees of Dori.
[¶ 25] Nor do I agree with the Court that our decision in Shapiro Bros. Shoe Co. v. Lewiston-Auburn Shoeworkers Assoc., 320 A.2d 247, 252-54 (Me.1974), is determinative of LVI’s contention that section 625-B(l)(C) is unconstitutionally vague. In Shapiro, the plaintiff shoe company by a written notice posted on the company’s bulletin board announced to its employees that it was “voluntarily going out of business and shall conclude all of its activities in the manufacture of shoes on February 22, 1973.” In fact, the company ceased operations on February 5, 1973. On report ordered by the trial court, we addressed Shapiro’s action seeking, inter alia, a declaratory judgment that the phrases (1) “going out of business” and, (2) “he shall give one month’s prior notice” contained in paragraph two of 26 M.R.S.A. § 6259 were totally ambiguous and unconstitutionally vague. The challenged language of paragraph two stated in pertinent part that “[w]henever a person, firm or corporation employing 100 or more employees, is voluntarily going out of business, he shall give one month’s prior notice to his employees....” We properly determined that the challenged language did not violate the due process protection against vagueness. Recognizing that the statute involved a loss of property and a possible due process violation, we stated the following test:
A statute is void for vagueness when it sets guidelines which would force men of general intelligence to guess at its meaning, leaving them without assurance that their behavior complies with legal requirements and forcing courts to be uncertain in their interpretation of the law. (Citation omitted). Such an unacceptable statute would often be ‘so vague and indefinite as really to be no rule or standard at all.’ A B. Small Co. v. Am. Sugar Ref. Co., 267 U.S. 233, 239, 45 S.Ct. 295, 297, 69 L.Ed. 589 (1925).
Id. at 253.
[¶ 26] LVI specifically contends, as it did before the trial court, that the phrase “parent corporation” used in the 1989 amendment to section 625-B(l)(C) is unconstitutionally vague. I agree. That it does not meet the test set forth in Shapiro is clearly demonstrated by a review of the record. In the trial court’s decision denying LVI’s motion for a summary judgment, the court (Mead, /.), in response to LVI’s contention that it was not a “parent corporation” because at the time Dori closed H.M.D. it owned only 50 percent of Dori stock, ruled that “the standard to determine whether a corporation is a ‘parent’ of another is whether the former has working control of the latter by virtue of stock ownership.” When presented with the same contention at the time of the trial of this matter, the court (Perkins, A.R.J.) ruled, “This subsection defines an employer as including a parent corporation. A parent corporation, however, need not exercise control over its subsidiary.... An indirect owner and operator need not exercise direct control over a facility; the source of its liability is its ownership of the subsidiary ... the court finds that the amount of control exercised by the parent may be minimal in order for it to be found to be an indirect owner and operator.” The court further stated that “[a]s for Poco’s purchase of half of Dori’s shares, the court finds that this eleventh hour purchase does not change LVI’s role as a parent corporation of Dori.”
[¶ 27] The Court’s summary dismissal of this issue by stating that “persons of ‘general intelligence [do not have] to guess at its meaning without assurance that their behav*969ior complies with legal requirements’ nor does it force ‘courts to be uncertain in their interpretation of the law5 ” (quoting Shapiro, 320 A.2d at 253), is belied by the record. LVTs unanswered inquiries,
If stock ownership is the key, how much is enough? Is direct ownership in the putative subsidiary required? ... In this case were LVI and Poco both parents when the Lewiston facility closed because each held fifty percent of HMD? [If] ownership were divided three or more ways, would all be parents? Could a corporation avoid being deemed a parent by remaining passive while other stockholders, individual or corporate, actively participate in business affairs? [Hjow can the ordinary person determine what constitutes “working control” or “minimal” control?
coupled with the confusion demonstrated by the different definitions articulated by the trial court when presented with the issue, bring in focus that the challenged phrase is “so vague and indefinite as really to be no rule or standard at all.” Shapiro, 320 A.2d at 253.
[¶28] I would vacate the judgment and remand this case for the entry of a judgment in favor of LVI.

. LVI, the defendant in the present action, was formerly known as Lehigh Valley Industries, Inc. LVT is a Delaware corporation. Dori Shoe Company, also named as a defendant in the present action, is a Massachusetts corporation that operated a shoe manufacturing plant in Lewiston.

. LVI has never owned stock in Dori Shoes, Inc.; LVI owned all the H.M.D. stock. H.M.D. in turn owned all the Dori stock. In June 1985, pursuant to the May 10, 1985 agreement between the parties granting Poco an option to purchase 50% of the stock in Don in consideration, inter alia, of Poco’s contribution of $150,000 to the working capital of Dori, H.M.D. sold 50% of the Dori stock to Poco. Poco's stock was owned by Jeffrey K. Endervelt, the former chief executive officer and chairman of the board of directors of LVI, and his wife, Polly Bergen. There is no contention that this sale was for fraudulent or illegal purposes or to circumvent a statute, thereby defeating legislative policy.
*967The record reflects no allegation or evidence that each of the corporations was not established as separate entities, did not have its own board of directors and did not maintain its own set of corporate books and headquarters. Nor is there any allegation or evidence that assets or income of H.M.D. or Dori were diverted to LVI. Although LVI was involved in the management of Dori, there is no evidence that mismanagement by LVI caused the demise of Dori’s operations. The individuals who worked at the Dori facility were hired by Dori on terms of mutual agreement between them, paid by Dori and supervised by Dori.

. 26 M.R.S.A. § 625, a predecessor to the present statute, was repealed and replaced by P.L. 1973, ch. 545.