Court Opinion

ID: 9691400
Source: CourtListenerOpinion
Date Created: 2023-08-24 20:29:31.581042+00
Date Added: 2024-06-11T09:54:47.226752
License: Public Domain

*574Kelly, J.
(dissenting). The threshold question in this case is whether the Michigan Education Special Services Association (messa) acted as an agent of the Michigan Education Association (mea). I would find that the messa did not act as an agent of the mea when it increased the lifetime maximum health care coverage for messa policyholders.
The Michigan Employment Relations Commission (merc) made a substantial and material error of law when it adopted the reasoning of the hearing referee.1 The hearing referee’s conclusion that the messa acted as an agent of the MEA was made, not by applying the ability-to-control test, but through a newly created “symbiotic-relationship” test. The majority appears to have endorsed that test. I find that the proper test is the control test. Applying it, I conclude that the MERC decision is not supported by substantial evidence sufficient for a reasonable mind to accept as adequate to justify its conclusion.
i
The leading case in Michigan jurisprudence on determining whether an agency relationship exists under the public employment relations act (pera),2 is Capitol City Lodge No 141, FOP v Meridian Twp, 90 Mich App 533; 282 NW2d 383 (1979). There, the Court *575concluded that to hold that the Ingham County Sheriff is an agent of Meridian Township requires a finding that the township has a right to control an elected official. The finding would have no basis in law or fact, as the township did not have the actual ability to control the actions of the sheriff. In fact, the township requested that the sheriff not take the action he did, but was unable to prevent it.
The Court of Appeals recognized that the “right to control an agent is fundamental to the existence of an agency relationship.” Id. at 541, citing Nat'l Labor Relations Bd v Local No 64, Falls Cities Dist Council of Carpenters, 497 F2d 1335, 1336 (CA 6, 1974). Though the majority in this case also acknowledges the edict, it fails to be guided by its wisdom.
The majority’s analysis focuses on the significant amount of overlap between the MBA and the messa. It appears to endorse the symbiotic-relationship test. A similar detailed examination of areas not relevant to the immediate decision is absent from the analysis in Capitol City Lodge. Rather, the Court there concentrated its attention on the exact decision at hand, the termination of the deputy’s employment, and found no ability to control. In fact, the Court found a futile attempt by the township to prevent the action from occurring.
Here, I find that the mea, likewise, engaged in a futile protest against action taken by the messa, rather than actually controlling the decision under consideration. In Capitol City Lodge, the Court found no need to focus extensively on the interworkings of the close relationship between the township and the sheriff beyond the matter in question. Its attention was on the actual decision leading to the charged action. *576Where the majority looks primarily at extrinsic aspects of the relationship between the mea and the messa, it is ignoring Capitol City Lodge’s teaching, despite acknowledging its applicability.
Like Capitol City Lodge, in this case, the mea lacked the ability to control the actions of the messa. In fact, the mea, through its executive director, Beverly Wolkow, specifically opposed the disputed increase in lifetime benefits. Even in the face of her direct opposition, the messa’s board of trustees voted to increase the insurance coverage.
We are mindful that this board consists of thirteen persons, all of whom must be messa members. Of these thirteen, six trustees must be elected from and by the mea board of directors and two trustees are the president and vice president of the mea. Thus, a majority of the MESSA board members are from the MEA.
Regardless of its majority, the mea was not able to control the MESSA board when it decided to increase the lifetime benefits for its members. That is because those trustees owe a fiduciary duty to the board on which they sit, regardless of their other affiliations.3 *577Thus, while the mea members sit on the messa board, they vote in conformity with their fiduciary duty to the members of the MESSA and not to the MEA.4 Frequently, the best interests of the MESSA membership will be aligned with the best interests of the MEA membership; even so, mutual interests are insufficient to establish control.
n
As noted by the majority, the relationship between the mea and the messa is that of parent-subsidiary. As this Court recently stated:
It is a well-recognized principle that separate corporate entities will be respected. Wells v Firestone, 421 Mich 641, 650; 364 NW2d 670 (1984). Michigan law presumes that, absent some abuse of corporate form, parent and subsidiary corporations are separate and distinct entities. See, e.g., Herman v Mobile Homes Corp, 317 Mich 233, 243; 26 NW2d 757 (1947); Gledhill v Fisher & Co, 272 Mich 353, 357-358; 262 NW 371 (1935). This presumption, often referred to as a “corporate veil,” may be pierced only where an otherwise separate corporate existence has been used to “subvert justice or cause a result that [is] contrary to some clearly overriding public policy.” Wells, supra at 650; Helzer v F Joseph *578Lamb Co, 171 Mich App 6, 9; 429 NW2d 835 (1988). More specifically, Michigan courts have generally required that a subsidiary must “become ‘a mere instrumentality’ of the parent” before its separate corporate existence will be disregarded. Maki v Copper Range Co, 121 Mich App 518, 524; 328 NW2d 430 (1982). [Seasword v Hilti, Inc (After Remand), 449 Mich 542, 547-548; 537 NW2d 221 (1995).]
Additionally, as the United States Court of Appeals for the Sixth Circuit recently reaffirmed in a case involving a parent-subsidiary relationship;
Michigan appears to follow the general rule that requires demonstration of patent abuse of the corporate form in order to pierce the corporate veil. There must be such a unity of interest and ownership that the separate personalities of the corporation and its owner cease to exist, and the circumstances must be such that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice. [United States v Cordova Chemical Co of Michigan, 113 F3d 572, 580 (CA 6, 1997).]
The messa is, as acknowledged by the majority, a Michigan nonprofit, nonstock corporation, hence, a separate entity from the MEA.
The symbiotic-relationship test impliedly ratified by the majority today is inconsistent with the well-established rule that separate corporate identities will be respected, absent a substantial abuse of the corporate form. There is no evidence of any abuse of the corporate form by the MEA and the MESSA. The two are separate entities, as shown by the inability of one to control the other. There is no evidence of an understanding that one will act on behalf of the other, subject to that party’s control.
The majority’s decision today allows an erosion of the distinction between parent corporations and their *579subsidiaries. It permits a “symbiotic relationship” to suffice for the conclusion to be drawn that an agency relationship exists, absent evidence of the ability to control. This finding defeats the very purpose for which many corporations create subsidiaries — to insulate themselves from liability in connection with the subsidiary’s activities. Absent a showing of abuse of the corporate form, the corporate veil should not be pierced. The majority has allowed that veil to become so porous as to allow the protection it previously provided to escape.
The messa has continually acted as a separate entity, making decisions that depart from what the mea wished would occur. For instance, when the messa was searching for a new headquarters, negotiations between the messa and the mea broke down over the price of MEA-owned property. The messa looked elsewhere for land before the mea lowered the price to an acceptable level.
The majority states that the affiliation/disaffiliation policy of the messa was considered material to the question whether there was an agency relationship between the messa and the mea. The policy permits enforcement of the membership requirements in the messa’s bylaws and furthers the messa’s marketing goal of being identified as offering MEA-affiliated products. To maintain its tax-exempt status as a voluntary employees’ beneficiary association under subsection 501(c)(9) of the Internal Revenue Code, the messa must comply with the requirement that MESSA members share an “employment-related common bond.” 26 CFR 1.501(c)(9)-2(a). In this case, that common bond is the education industry.
*580Simply because the mea markets messa products does not demonstrate an agency relationship. It makes good business sense for the messa to concentrate its efforts on a particular group in the education industry, teachers. Thus, it solicits the aid of the MEA to market its products and pays the mea for it. The mea provides the MESSA with a unique opportunity to present its products to an attentive and select audience.5 The existence of a homogenous client base does not suffice to establish an agency relationship.
I acknowledge that the two entities have many similarities and overlapping concerns. However, the existence of entanglements without the ability to control is not enough to establish an agency relationship.
Because I do not find the existence of an agency relationship between the mea and the MESSA, I do not reach the issue whether the mea committed an unfair labor practice. Unless the MESSA is found to be an agent of the mea, its actions are not governed by the PERA. Without a finding of agency, this Court has no jurisdiction over the MESSA to grant the relief requested under plaintiffs pera claim.
I would reverse the Court of Appeals decision because it has not been shown that the mea has the ability to control the messa. Additionally, there is powerful evidence to show that the messa did not act on behalf of the MEA when its board decided to increase the lifetime health benefits.
*581Cavanagh, J., concurred with Kelly, J.

 MCL 24.306(1)©; MSA 3.560(206)(l)(f) provides, in pertinent part:
[T]he court shall hold unlawful and set aside a decision or order of an agency if the substantial rights of the petitioner have been prejudiced because the decision or order is any of the following:
© Affected by other substantial and material error of law.

 MCL 423.201; MSA 17.455(1).

 As noted by the hearing referee, Shlomo Sperka:
Charging Party argues in essence that since many of the same individuals are in leadership positions in both organizations and since the members of Respondent messa are the members of mea (if insurance coverage is secured under collective bargaining agreements) whenever messa advances the interest of its members it is advancing the interest of mea members and acting as an agent of mea. In the opinion of the undersigned, this does not necessarily follow. The trustees of messa are performing their fiduciary duties to messa when they advance messa members’ interest, although those members are also mea members. We need not find as a matter of law that individuals cannot fulfill two roles at different times. [1993 MERC Lab Op 101, 113.]
*577The majority’s decision today implies that persons who sit on both the mea board and the messa board will invariably violate their fiduciary duties to the subsidiary board. It assumes that they will always vote to advance the interests of the mea, rather than those of the messa. This presumption is particularly egregious when viewed in light of the fact that messa board members undergo annual training, during which they receive instruction concerning their fiduciary responsibility to the messa. The majority’s view that messa board members would throw their fiduciary duty to the wind to further the interests of the mea is without a demonstrated basis in fact.

 The mea’s lack of control over the messa is further evidenced by the board’s refusal to provide coverage for hearing aids as requested by the mea representative assembly in 1989. The requisite control by the mea over the messa cannot be found when the messa makes decisions in the best interests of its membership, regardless of the desires of the mea.

 Local mea units are under no obligation to negotiate for messa plans.