Court Opinion

ID: 5162045
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:56:15.565606+00
Date Added: 2024-06-11T08:25:40.051662
License: Public Domain

BURKE, Justice,
with whom, MOORE, Justice, joins, dissenting.
Although I agree with the majority’s basic presentation of the facts, I cannot agree that those facts support the majority’s conclusion that UV and Mueller operated as a unitary business.
I
The majority concludes that UV and Mueller are functionally integrated. However, I believe that the facts lead to the conclusion that Mueller acted “autonomously and independently” from UV. F.W. Woolworth Co. v. Taxation and Revenue Dep’t, 458 U.S. 354, 365, 102 S.Ct. 3128, 3135, 73 L.Ed.2d 819, 828 (1982). The record shows that Mueller’s management made its own decisions regarding production output, customer credit extensions, merchandise storage, and site selection for its plant expansion. Only those capital expenditures in excess of $100,000 required UV approval; all other expenditures were within the sole discretion of Mueller’s management. Further, Mueller managed its own, albeit small, advertising budget with no input from UV. It had its own accounting and tax departments with its own staff, its own separately-staffed, separately-funded pension plans, retained its own outside counsel, and had its own insurance plans maintained without UV review or consultation. Although Mueller’s executive salaries above $30,000 needed approval from the UV president, it is clear that, on the whole, Mueller was responsible for its own finances and daily operations.
The majority finds evidence of integration in the copper output contract between Mueller and UV. Although this may be one indication of integration, I do not believe it deserves the emphasis afforded it by the majority. The copper sales were made at the prevailing market prices determined according to price lists published in Metals Week, an independent trade journal. Thus, there was no special economic advantage for UV, despite this flow of goods. Since the copper sales were conducted at arms-length, the contract does not provide a sufficient basis for finding functional integration.
Finally, the majority reasons that the circumstances here are similar to those *255present in Earth Resources of Alaska v. State, Dep’t of Revenue, 665 P.2d 960, 968 (Alaska 1983), where we looked at the extent of the parent’s involvement in the subsidiaries’ finances. In Earth Resources, the parent financed the subsidiaries’ business operations by making direct loans, guaranteeing bank loans, and acting as guarantor on performance bonds on several occasions. Id. Moreover, the parent established mandatory salary guidelines for its subsidiaries and provided a company-wide retirement plan. Id. at 969. In contrast, as the hearing examiner found, there were “no actual cases of advances or other indebtedness between UV and Mueller” in 1975,1976, or 1977, and Mueller had its own entirely independent pension plan. UV did guarantee Mueller’s lease obligations in connection with two industrial development revenue bonds, but this limited involvement falls far short of the activity which we found sufficient in Earth Resources.
On the whole, Mueller’s financial transactions were conducted entirely independently from UV. Thus, I would hold that the two companies were not functionally integrated.
II
Although Mueller is a wholly-owned subsidiary of UV, the facts fail to support the majority’s conclusion that Mueller and UV shared one centralized management. In Earth Resources, we did not base our finding of centralized management solely upon the parent’s 100% ownership in the subsidiary or upon the existence of shared officers and directors. Rather, we also relied on the fact that the “parent corporation appear[ed] to be primarily in the business of running and overseeing its subsidiaries.” 665 P.2d at 969. In addition, we recognized in that case that the parent held company-wide management meetings annually for the purpose of assuring uniform pay scales for all of its subsidiaries, that there was a common stock purchase plan for all salaried employees and a common executive compensation plan based on performance, and that the parent’s chief legal officer provided assistance to the subsidiary in connection with the issuance of stock and other corporate functions. Id. at 969-70.
In contrast, absolutely none of these factors existed in the UV/Mueller relationship. First, according to the affidavit of Mueller’s president, the one Mueller officer who was also on the UV board had no responsibilities or duties with respect to Mueller’s daily operations. Second, UV is not “primarily in the business of running ... its subsidiaries.” Id. at 969. Rather, UV is involved in the manufacture and sale of electrical and copper products, and the extraction of natural resources, it has its own totally separate business. See Woolworth, 458 U.S. at 367, 102 S.Ct. at 3136-37, 73 L.Ed.2d at 830 (although parent was actively involved in the same form of business as its subsidiaries, the fact that the parent had no department, as such, devoted to overseeing the subsidiaries favored a finding of no centralized management). Third, there is no evidence that UV held any company-wide meetings or established any uniform pay scales. In fact, Mueller paid the salaries of all of its employees, established its own salary adjustments based on performance, and had its own incentive compensation plans, since Mueller employees were not eligible to participate in UV’s incentive compensation plans. Finally, in light of Mueller’s autonomy in developing its annual financial plan,1 its separate accounting system, separate pension plan, separate training program, separate purchasing department and general independence in all aspects of decision-making, I am convinced that no centralized management existed.
Ill
As the majority notes, whether economies of scale exist is inextricably related to the other two factors. For the reasons already discussed, I believe that the over*256whelming evidence of Mueller s autonomy outweighs the isolated instances of UV control, and I would, therefore, hold that the usual economies of scale are absent in this case.
Unlike the situation in Earth Resources, 665 P.2d at 970, Mueller did not receive any direct loans from UV and there is no evidence that Mueller obtained financing from outside sources at more favorable rates because of its relationship with UV. Furthermore, Mueller had its own group medical, surgical, dental, life insurance2 and pension plans, whereas the parent in Earth Resources had one umbrella insurance plan for its subsidiaries. Id. Finally, there was no arrangement between UV and Mueller for auto leasing. Thus, this situation differs markedly from that in Earth Resources.3
IV
I believe that Alaska Gold has met its burden of showing, by clear and cogent evidence, that Mueller and UV did not operate as a unitary business. I view the few instances of UV control as merely “the type of occasional oversight ... that any parent gives to an investment in a subsidiary,” Woolworth, 458 U.S. at 369,102 S.Ct. at 3138, 73 L.Ed.2d at 831, and hence not indicative of a unitary business. Therefore, I would reverse.

. These plans needed UV approval, but the submissions were invariably accepted without modification.

. The fact that UV and Mueller used a common insurance broker is insignificant. Much more relevant is the fact that Mueller's insurance programs were maintained "without review by or consultation with UV officials," and that títere were no blanket policies covering both companies.

. The majority refers to "an additional consideration” here: the $216,000 per year Mueller paid to UV. I do not believe that this is an indicant of economies of scale; in fact, this amount was an estimate of administrative expenses, and tends to suggest that Mueller and UV maintained separate identities. With this fee, Mueller actually paid for the few services UV provided, such as preparation of the executive payroll. Such payment indicates that the two companies did not “share" resources or provide gratuitous services for each other, but that they interacted as two autonomous businesses would.