Court Opinion

ID: 3135433
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:37:17.681878+00
Date Added: 2024-06-11T11:54:10.323846
License: Public Domain

Docket No. 101570.

                        IN THE
                   SUPREME COURT
                          OF
                 THE STATE OF ILLINOIS

MARGUERITE FORSYTHE et al., Appellees, v. CLARK
             USA, INC., Appellant.

                  Opinion filed February 16, 2007.

    JUSTICE GARMAN delivered the judgment of the court, with
opinion.
    Justices Fitzgerald and Karmeier concurred in the judgment and
opinion.
    Justice Freeman specially concurred, with opinion, joined by
Justice Burke.
    Chief Justice Thomas and Justice Kilbride took no part in the
decision.

                              OPINION

    On March 13, 1995, Michael F. Forsythe and Gary Szabla,
mechanics at a refinery owned and operated by Clark Refining and
Marketing (Clark Refining), were killed. The estate of each decedent
received payment from Clark Refining pursuant to the Workers’
Compensation Act (820 ILCS 305/1 et seq. (West 2002)). In 1996
and 1997, plaintiffs Marguerite Forsythe and Elizabeth Szabla, as
special administrators of the estates of their late husbands, filed suits
against Clark Refining and other defendants. Subsequently, plaintiffs
added Clark Refining’s parent company, Clark USA, as a defendant.
    Clark USA is the only defendant involved in this appeal. At the
close of discovery, the trial court granted Clark USA’s motion for
summary judgment pursuant to section 2–1005 of the Code of Civil
Procedure (735 ILCS 5/2–1005 (West 2002)). The trial court did not
state its reasoning. Plaintiffs appealed, and the appellate court
reversed and remanded. 361 Ill. App. 3d 642. Following that decision,
defendant petitioned this court for leave to appeal pursuant to
Supreme Court Rule 315 (177 Ill. 2d R. 315).
    We granted defendant’s petition to consider two issues: first,
whether a parent company can be held liable under a theory of direct
participant liability for controlling its subsidiary’s budget in a way
that led to a workplace accident; second, if such a theory is
recognized, whether the exclusive-remedy provision of the Workers’
Compensation Act (820 ILCS 305/5 (West 2002)) immunizes a
parent company from liability.

                           BACKGROUND
    Clark Refining operated an oil refinery in Blue Island, Illinois.
Defendant is Clark Refining’s parent company and sole shareholder.
On March 13, 1995, decedents were on their lunch break when a fire
broke out at the refinery, killing them both. The fire was apparently
caused when other Clark Refining employees attempted to replace a
valve on a pipe without ensuring that flammable materials within the
pipe had been depressurized. Plaintiffs claim that those employees
were not maintenance mechanics and were not trained or qualified to
perform the work they were attempting.
    Plaintiffs’ allegations of liability center around defendant’s
overall budgetary strategy. Specifically, plaintiffs allege that
defendant breached a duty to use reasonable care in imposing its
business strategy on Clark Refining by (1) “requiring [Clark
Refining] to minimize operating costs including costs for training,
maintenance, supervision and safety,” (2) “requiring [Clark Refining]
to limit capital investments to those which would generate cash for
the refinery thereby preventing [Clark Refining] from adequately
reinforcing the walls of the lunchroom or relocating the lunchroom to
a safe position within the refinery,” and (3) “failing to adequately

                                 -2-
evaluate the safety and training procedures in place at the Blue Island
Refinery.” Moreover, plaintiffs allege that defendant’s strategy of
capital cutbacks forced Clark Refining to have unqualified employees
act as maintenance mechanics which, in turn, led to the fire that killed
the decedents. This, plaintiffs argue, constitutes proximate cause.
    In support of its motion for summary judgment, defendant
contended that it owed no duty to either decedent by virtue of its
status as a mere holding company, which was connected to Clark
Refining only as a shareholder. Defendant submitted evidence to
prove that Clark Refining owned and operated the refinery while
defendant itself had no control over the day-to-day operations.
Plaintiffs countered that defendant was directly responsible for
creating conditions that precipitated the accident.
    In support of their argument, plaintiffs cited evidence that
defendant’s directors created and approved Clark Refining’s budget,
striving to “position itself as a low cost refiner and marketer” with the
goal of replenishing defendant’s cash reserve by “decreas[ing] capital
spending *** to minimum sustainable levels” through the institution
of a “survival mode” business plan. Plaintiffs also produced evidence
that the boards of directors of Clark Refining and defendant met
simultaneously. Moreover, plaintiffs relied upon evidence that the
belt-tightening budget created by Clark Refining was overseen by
Paul Melnuk, who served as defendant’s president as well as chief
executive officer of Clark Refining.
    The trial court granted summary judgment without explanation.
Subsequently, plaintiffs appealed and the appellate court reversed and
remanded, rejecting a claim by defendant that it was entitled to
immunity under the Workers’ Compensation Act. The appellate court
held that “plaintiffs presented sufficient evidence to raise an issue of
material fact as to whether defendant directly participated in creating
conditions within the refinery which led to the deadly fire.” 361 Ill.
App. 3d at 655. One justice dissented, finding that plaintiffs presented
no evidence of separate acts, attributable solely to defendant, by
which defendant directly caused the injuries in this case. 361 Ill. App.
3d at 658 (McNulty, J., dissenting).

                                  -3-
                              ANALYSIS
     Section 2–1005 of the Code of Civil Procedure provides for
summary judgment when the pleadings, depositions, and admissions
on file, together with any affidavits, show that there is no genuine
issue as to any material fact such that the moving party is entitled to
a judgment as a matter of law. 735 ILCS 5/2–1005 (West 2002). The
purpose of summary judgment is not to try a question of fact but
simply to determine if one exists. Robidoux v. Oliphant, 201 Ill. 2d
324, 335 (2002). In reviewing a summary judgment disposition, this
court will construe the record strictly against the movant and liberally
in favor of the nonmoving party. Jackson v. TLC Associates, Inc., 185
Ill. 2d 418, 423-24 (1998). Moreover, it must be noted that summary
judgment dispositions “should not be allowed unless the moving
party’s right to judgment is clear and free from doubt.” Jackson, 185
Ill. 2d at 424. If the undisputed material facts could lead reasonable
observers to divergent inferences, or where there is a dispute as to a
material fact, summary judgment should be denied and the issue
decided by the trier of fact. Jackson, 185 Ill. 2d at 424. This court
reviews a grant of summary judgment de novo. Roth v. Opiela, 211
Ill. 2d 536, 542 (2004).

                      I. Direct Participant Liability
     To state a cause of action for negligence, plaintiffs must show that
defendant owed and breached a duty of care, proximately causing the
plaintiffs injury. Espinoza v. Elgin, Joliet & Eastern Ry. Co., 165 Ill.
2d 107, 114 (1995). The threshold issue in this case is the existence
of a duty, which is a question of law for the court to decide. Chandler
v. Illinois Central R.R. Co., 207 Ill. 2d 331, 340 (2003). As we have
recently stated, the “touchstone of this court’s duty analysis is to ask
whether a plaintiff and a defendant stood in such a relationship to one
another that the law imposed upon the defendant an obligation of
reasonable conduct for the benefit of the plaintiff.” Marshall v.
Burger King Corp., 222 Ill. 2d 422, 436 (2006), citing Happel v. Wal-
Mart Stores, Inc., 199 Ill. 2d 179, 186 (2002). Four factors inform
this inquiry: (1) the reasonable foreseeability of injury, (2) the
likelihood of injury, (3) the magnitude of the burden of guarding
against the injury, and (4) the consequences of placing the burden
upon the defendant. Marshall, 222 Ill. 2d at 436-37.

                                  -4-
     Before undertaking our analysis, we note, as did the parties and
the appellate court, that the theory of direct participant liability
presented here has not previously been addressed in Illinois. It has
been addressed in other states and throughout the federal courts,
however. We will consider this authority where appropriate in our
analysis.
     Plaintiffs argue that defendant demanded Clark Refining operate
its refinery pursuant to an overall business strategy that it knew would
adversely affect safety by forcing reductions in training and
maintenance. Indeed, plaintiffs contend that defendant actively and
directly mandated unreasonable cuts in Clark Refining’s budget in
order to carry out its strategy. This strategy was outlined in Clark
USA business records calling for a “survival mode” business
philosophy accomplished through “reduced capital spending,”
“reduced working capital investment,” and “reduced operating
expense level.” Plaintiffs allege that this “survival mode” strategy
was mandated, despite the fact that defendant knew or should have
known that the only feasible budget cuts would come from safety,
maintenance, and training expenses. This, plaintiffs’ conclude,
constitutes direct participation by defendant in the harm caused. As
such, plaintiffs contend the appellate court correctly found that
defendant owed them a duty based on the direct participant theory and
not on the legal relationship of defendant to its subsidiary.
     Defendant contends that unless the standards for piercing the
corporate veil are met, a parent company cannot be held liable for the
negligence of its subsidiary. Attendant to that rule is the principle that
a parent company does not owe a duty to third parties to supervise or
control the conduct of its subsidiary to ensure that the subsidiary acts
with reasonable care. Clark Refining owed a nondelegable duty to its
employees to provide them with a safe workplace while defendant, as
a parent, owed no duty whatsoever to ensure that Clark Refining met
its obligations.
     Additionally, even if direct liability is a recognized theory of
recovery, defendant argues that the simple task of setting financial
goals and employing an overall strategy to meet those goals is not
improper but, instead, is “consistent with the parent’s investor status”
and thus “should not give rise to direct liability.” United States v.
Bestfoods, 524 U.S. 51, 69, 141 L. Ed. 2d 43, 62, 118 S. Ct. 1876,

                                   -5-
1889 (1998). Because its conduct was always consistent with its
investor status, defendant claims, there is no basis to treat it as a
direct participant in the negligence alleged herein.
    While the Supreme Court has held that “[i]t is a general principle
*** deeply ‘ingrained in our economic and legal systems’ that a
parent corporation *** is not liable for the acts of its subsidiaries”
(Bestfoods, 524 U.S. at 61, 141 L. Ed. 2d at 55-56, 118 S. Ct. at 1884,
quoting W.O. Douglas & C. Shanks, Insulation from Liability
Through Subsidiary Corporations, 39 Yale L.J. 193 (1929)), a
significant body of case law supports the direct participant theory of
liability urged by the plaintiffs. Some of that authority relies on the
1929 article quoted above and written, in relevant part, by then-
Professor William O. Douglas.
    Douglas noted that liability has been imposed in “instances where
the parent is directly a participant in the wrong complained of.” 39
Yale L.J. at 208. In such instances, “the use of the latent power
incident to stock ownership to accomplish a specific result made the
parent a participator in or doer of the act,” specifically evident where
“there was interference in the internal management of the subsidiary;
an overriding of the discretion of the managers of the subsidiary.” 39
Yale L.J. at 209. Douglas stated further that “direct intervention or
intermeddling by the parent in the affairs of the subsidiary and more
particularly in the transaction involved, to the disregard of the normal
and orderly procedure of corporate control carried out through the
election of the desired directors and officers of the subsidiary and the
handling by them of the direction of its affairs, seems to have been
determinative in some cases to holding the parent liable.” 39 Yale L.J.
at 218.
    The United States Supreme Court quoted the Douglas & Shanks
article approvingly in Bestfoods, 524 U.S. at 64-65, 141 L. Ed. 2d at
58, 118 S. Ct. at 1886 (“As Justice (then-Professor) Douglas noted
almost 70 years ago, derivative liability cases are to be distinguished
from those in which ‘the alleged wrong can seemingly be traced to the
parent through the conduit of its own personnel and management’ and
‘the parent is directly a participant in the wrong complained of.’
[Citation.] In such instances, the parent is directly liable for its own
actions”). The Court noted that the simple fact that directors of a
parent corporation serve as directors of its subsidiary does not,

                                  -6-
standing alone, expose the parent corporation to liability for its
subsidiary’s acts. Bestfoods, 524 U.S. at 69-70, 141 L. Ed. 2d at 60-
61, 118 S. Ct. at 1888. The Court went on to state, however, that “the
acts of direct operation that give rise to parental liability must
necessarily be distinguished from the interference that stems from the
normal relationship between parent and subsidiary,” and “[t]he
critical question is whether, in degree and detail, actions directed to
the facility by an agent of the parent alone are eccentric under
accepted norms of parental oversight of a subsidiary’s facility.”
Bestfoods, 524 U.S. at 71-72, 141 L. Ed. 2d at 62, 118 S. Ct. at 1889.
     Similarly, in Esmark, Inc. v. National Labor Relations Board, 887
F.2d 739 (7th Cir. 1989), the Seventh Circuit, in a case dealing with
a potential violation of the National Labor Relations Act, cited
Douglas & Shanks’ article extensively and noted that Judge Learned
Hand also recognized that a parent corporation could be held liable
for the actions of its subsidiaries if the parent directly supervised the
conduct of a specific transaction. In Kingston Dry Dock Co. v. Lake
Champlain Transportation Co., 31 F.2d 265, 267 (2d Cir. 1929),
Judge Hand wrote that such liability “normally must depend upon the
parent’s direct intervention in the transaction, ignoring the
subsidiary’s paraphernalia of incorporation, directors and officers.”
Relying on that authority, the Seventh Circuit held that “a parent
corporation may be held liable for the wrongdoing of a subsidiary
where the parent directly participated in the subsidiary’s unlawful
actions.” Esmark, 887 F.2d at 756.
     Moreover, the court held that “[w]here the parent specifically
directs the actions of its subsidiary, using its ownership interest to
command rather than merely cajole” the possibility of direct liability
is present and will be imposed “where a parent disregards the separate
legal personality of its subsidiary (and the subsidiary’s own
decisionmaking ‘paraphernalia’), and exercises direct control over a
specific transaction.” Esmark, 887 F.2d at 757. The court described
this as a “transaction-specific” theory of direct participation, citing
numerous cases where parent companies have been held liable for
misconduct by their subsidiaries. Esmark, 887 F.2d at 756 (collecting
cases); see, e.g., L.B. Industries, Inc. v. Smith, 817 F.2d 69, 71 (9th
Cir. 1987) (per curiam); United States v. Sutton, 795 F.2d 1040, 1060
(Temp. Emer. Ct. App. 1986) (“A shareholder may be liable if he is

                                  -7-
a ‘central figure’ in a corporation’s tortious conduct”); Cher v. Forum
International, Ltd., 692 F.2d 634, 640 (9th Cir. 1982); D.L. Auld Co.
v. Park Electrochemical Corp., 553 F. Supp. 804, 808 (E.D.N.Y.
1982) (denying summary judgment in favor of the defendant where
the plaintiff presented a claim that the defendant participated in the
patent infringement perpetrated by its subsidiary); International
Union, United Auto Workers v. Cardwell Manufacturing Co., 416 F.
Supp. 1267, 1283-84, 1287-89 (D. Kan. 1976) (court found a parent
liable for breach of bargaining agreement by subsidiary where parent
specifically directed the subsidiary to disregard obligations under the
NLRA); State v. Ole Olsen, Ltd., 35 N.Y.2d 979, 980, 365 N.Y.S.2d
528, 528-29, 324 N.E.2d 886, 886 (1975) (holding a corporate officer
liable not on account of his being an officer of the corporate
defendant but as an active individual participant in the wrongdoing);
Cooper v. Cordova Sand & Gravel Co., 485 S.W.2d 261, 271-72
(Tenn. App. 1971); My Bread Baking Co. v. Cumberland Farms, Inc.,
353 Mass. 614, 619, 233 N.E.2d 748, 752 (1968) (holding that while
common ownership and management will not ordinarily give rise to
liability, liability may be imposed where there is active and direct
participation by one corporation in the affairs of another or where
there is “confused intermingling” of the activities of the two
corporations); Crescent Manufacturing Co. v. Hansen, 174 Wash.
193, 198, 24 P.2d 604, 606 (1933). Under this “transaction-specific”
theory, shareholders or parent corporations are not held directly liable
for their own independently wrongful acts but, instead, for their
actions against third-party interests through the agency of
subsidiaries. Esmark, 887 F.2d at 756. Accordingly, the court held
that a parent corporation can be liable for interposing a guiding hand
in the transactions of its subsidiary. Esmark, 887 F.2d at 756.
    Plaintiffs also cite other cases approving of direct liability. In
Papa v. Katy Industries, Inc., 166 F.3d 937, 941 (7th Cir. 1999), the
Seventh Circuit, again interpreting the National Labor Relations Act,
evinced its continuing support for direct participant liability when it
cited Esmark, Bestfoods, and Kingston Dry Dock to state “that limited
liability does not protect a parent corporation when the parent is
sought to be held liable for its own act, rather than merely as the
owner of the subsidiary that acted.” Similarly, in Pearson v.
Component Technology Corp., the Third Circuit, interpreting federal

                                  -8-
law, stated that “[a]lthough not often employed *** it has long been
acknowledged that parents may be ‘directly’ liable for their
subsidiaries’ actions when the ‘alleged wrong can seemingly be
traced to the parent through the conduit of its own personnel and
management,’ and the parent has interfered with the subsidiary’s
operations in a way that surpasses the control exercised by a parent as
an incident of ownership.” Pearson, 247 F.3d 471, 486-87 (3d Cir.
2001), citing Bestfoods, 524 U.S. at 64, 141 L. Ed. 2d at 58, 118 S.
Ct. at 1886, quoting 39 Yale L.J. at 207. Likewise, in Boggs v. Blue
Diamond Coal Co., 590 F.2d 655, 663 (6th Cir. 1979), the Sixth
Circuit, interpreting Kentucky law, implicitly indicated its recognition
of direct liability when it stated that “a parent is not immune from tort
liability to its subsidiary employees for its own, independent acts of
negligence.”
    The Indiana Supreme Court, in Commissioner of Department of
Environmental Management v. RLG, Inc., 755 N.E.2d 556, 559, 563
(Ind. 2001), also accepted direct participant liability when it held a
defendant’s sole officer and shareholder liable for violations of
Indiana environmental laws and stated that “an individual, though
acting in a corporate capacity *** may be individually liable *** as
a direct participant under general legal principles.” Additionally, the
Iowa Supreme Court accepted a direct participant theory of liability
when it held that a member of a limited liability corporation could be
sued because it had undertaken to perform management services for
the corporation and allegedly performed those services negligently.
Estate of Countryman v. Farmers Cooperative Ass’n, 679 N.W.2d
598, 605 (Iowa 2004). Other courts have also accepted the theory of
direct participant liability. See, e.g., United States v. TIC Investment
Corp., 68 F.3d 1082, 1091 n.9 (8th Cir. 1995) (interpreting the
Comprehensive Environmental Response, Compensation, and
Liability Act, the court held that “a parent corporation may be directly
liable for activities carried out ostensibly by its subsidiary if the
parent corporation, in effect, actually operated the subsidiary’s facility
by having the authority to control and actually or substantially
controlling the facility”); United States v. Kayser-Roth Corp., 910
F.2d 24, 27 (1st Cir. 1990) (parent corporation can be held directly
liable if actively involved in the affairs of its subsidiary); Dassault
Falcon Jet Corp. v. Oberflex, Inc., 909 F. Supp. 345, 347, 354

                                   -9-
(M.D.N.C. 1995) (direct participant liability could be maintained
against a parent company for breach of warranty). Taken together,
these cases make evident the substantial weight of authority
supporting recognition of this theory of liability.
     In opposition to plaintiffs’ theory, defendant contends that a
parent corporation owes no duty to supervise its subsidiary’s conduct
for the benefit of third parties. Defendant cites Young v. Bryco Arms,
213 Ill. 2d 433, 452 (2004), where this court noted its recognition of
the general rule that “one has no duty to control the conduct of
another to prevent him from causing harm to a third party, absent a
special relationship with either the person causing the harm or the
injured party.” Building on that point, defendant argues that courts
have uniformly rejected the argument that the parent-subsidiary
relationship qualifies as the kind of “special relationship” necessary
to give rise to a duty to supervise or control the conduct of the
subsidiary. In re Birmingham Asbestos Litigation, 619 So. 2d 1360
(Ala. 1993). Supporting this contention, defendant cites Joiner v.
Ryder System Inc., 966 F. Supp. 1478 (C.D. Ill. 1996), where the
district court applied Illinois law and concluded that a duty could not
be predicated either on the parent’s ability to control its subsidiary or
on its actual exercise of control:
             “RSI–as every parent corporation does–obviously has the
         power to control its subsidiaries. In fact, RSI owns them and
         RSI can ‘force’ them to do anything it wants. That power, by
         itself, however, does not impose a duty upon RSI. Only if RSI
         abused the power–by exerting too much control–could it be
         held liable for the conduct of its subsidiaries as an alter ego.”
         Joiner, 966 F. Supp. at 1490.
     Additionally, defendant contends that direct participant claims
virtually identical to those raised here were rejected by two state
appellate decisions, one from Texas and one from California. In
Coastal Corp. v. Torres, 133 S.W.3d 776 (Tex. App. 2004), refinery
employees injured in an explosion brought a negligence action against
the refinery’s parent company. The employees alleged that “ ‘through
central budgetary authority exercised by Coastal’s corporate officers
*** Coastal *** assumed control over maintenance, turnaround, and
inspection matters at the plant,’ ” limited expenditures, and
“controlled and influenced its subsidiary in a way that directly

                                  -10-
resulted in appellees’ injuries.” Coastal Corp., 133 S.W.3d at 777,
779. The Coastal Corp. court noted that the plaintiffs in that case
alleged “negligent control of the budget, not negligent control over
details of specific operational activities,” and eventually found that
the parent company had no duty as a matter of Texas law to “approve
budgets for its subsidiaries in order to assure that the subsidiaries
repair defects on their premises.” Coastal Corp., 133 S.W.3d at 779,
782.
    Similarly, in Waste Management Inc. v. Superior Court of San
Diego, 69 Cal. Comp. Cas. 759 (2004), plaintiffs brought an action
against a parent company for negligently controlling its subsidiary’s
budget such that the subsidiary was prevented from replacing and
repairing trash trucks. The court recognized direct participant liability
and stated that “the parent may owe a duty arising out of obligations
independent of the parent subsidiary relationship.” Waste
Management., 69 Cal. Comp. Cas. at 762. The court went on to hold,
however, that “[n]egligently controlling or intentionally mismanaging
a subsidiary’s budget does not create a duty on the part of the parent
corporation to ensure safety or prevent injuries to the subsidiary’s
employees.” Waste Management, 69 Cal. Comp. Cas. at 763.
    As defendant points out, Coastal Corp. and Waste Management
stand for the proposition that mere budgetary mismanagement is not
enough to support direct participant liability. Additionally, however,
the Coastal Corp. court noted that “it is apparent that liability is
imposed when there is specific control over the activity that caused
the accident.” Coastal Corp., 133 S.W.3d at 779. Similarly, the Waste
Management court stated that the plaintiffs’ case failed because they
could not show that the parent company “directed and authorized the
manner in which the subsidiary conducted its business.” (Emphasis
in original). Waste Management, 69 Cal. Comp. Cas. at 763. In other
words, these courts found that a viable claim of liability under the
direct participant theory cannot rest solely upon budgetary
mismanagement, but budgetary mismanagement can make up one
part of a viable claim, in conjunction with the direction or
authorization of the manner in which an activity is undertaken. The
Joiner decision echoes this sentiment. There, the court granted
summary judgment in favor of the parent/defendant, noting
significantly that the parent/defendant did “not get involved in the

                                  -11-
day-to-day activities or management of the subsidiaries.” Joiner, 966
F. Supp. at 1490. Based upon this analysis, we conclude that
budgetary mismanagement, accompanied by the parent’s negligent
direction or authorization of the manner in which the subsidiary
accomplishes that budget, can lead to a valid cause of action under
the direct participant theory of liability.
     Considering the above, we hold that direct participant liability is
a valid theory of recovery under Illinois law. Where there is evidence
sufficient to prove that a parent company mandated an overall
business and budgetary strategy and carried that strategy out by its
own specific direction or authorization, surpassing the control
exercised as a normal incident of ownership in disregard for the
interests of the subsidiary, that parent company could face liability.
The key elements to the application of direct participant liability,
then, are a parent’s specific direction or authorization of the manner
in which an activity is undertaken and foreseeability. If a parent
company specifically directs an activity, where injury is foreseeable,
that parent could be held liable. Similarly, if a parent company
mandates an overall course of action and then authorizes the manner
in which specific activities contributing to that course of action are
undertaken, it can be liable for foreseeable injuries. We again stress,
though, that allegations of mere budgetary mismanagement alone do
not give rise to the application of direct participant liability.
     Our finding is supported by the policy-based factors courts use to
determine whether a duty exists. Marshall v. Burger King Corp., 222
Ill. 2d at 436-37 (the factors are (1) the reasonable foreseeability of
injury, (2) the likelihood of injury, (3) the magnitude of the burden of
guarding against the injury, and (4) the consequences of placing the
burden upon the defendant). Certain heavy industries, like refining,
inherently involve a great amount of danger. It is conceivable that
severe cutbacks in staffing, safety, maintenance, and training in such
industries could lead, with reasonable foreseeability, to the injury of
others. The likelihood of injury in those circumstances would not be
remote and could be deadly. Additionally, the magnitude of the
burden of guarding against such injury would not be great. Parent
companies are free to craft overall business and budgetary strategies;
such companies simply must not interfere directly in the manner their
subsidiaries undertake certain activities such that the subsidiaries are

                                 -12-
no longer free to utilize their own expertise. Alternatively, if parent
companies do interfere directly in the manner their subsidiaries
undertake certain activities, they must do so with reasonable care.
Finally, it is not an undue burden to require that parent corporations
engage in the considered exercise of due care in an already limited
role. As we have already acknowledged, parent corporations are
generally not liable for the acts of their subsidiaries. Bestfoods, 524
U.S. at 61, 141 L. Ed. 2d at 55-56, 118 S. Ct. at 1884, quoting 39
Yale L.J. 193 (1929). Moreover, the mere fact of a parent-subsidiary
relationship, without a great deal more, does not give rise to liability.
Bestfoods, 524 U.S. at 61, 141 L. Ed. 2d at 56, 118 S. Ct. at 1884,
quoting 1 W. Fletcher, Cyclopedia of Law of Private Corporations
§33, at 568 (rev. ed. 1990).
    This court has repeatedly and consistently highlighted the point
that it is “axiomatic that every person owes to all others a duty to
exercise ordinary care to guard against injury which naturally flows
as a reasonably probable and foreseeable consequence of his act.”
Frye v. Medicare-Glaser Corp., 153 Ill. 2d 26, 32 (1992), quoting
Nelson v. Union Wire Rope Corp., 31 Ill. 2d 69, 86 (1964); see also
Mt. Zion State Bank & Trust v. Consolidated Communications, Inc.,
169 Ill. 2d 110, 124 (1995); Widlowski v. Durkee, 138 Ill. 2d 369, 373
(1990); Feldscher v. E & B, Inc., 95 Ill. 2d 360, 368-69 (1983).
Recognizing that a parent company may have a duty based upon
direct participant liability does not end the analysis though. Certain
facts must still be present to give rise to its application.

               II. Direct Participant Liability Applied
    Returning to the specific issue in this case, we must resolve
whether there exists a question of material fact such that the evidence
presented could lead a reasonable observer to believe that defendant’s
overall business and budgetary strategy involved the negligent
direction or authorization of the manner in which Clark Refining
conducted its business. If so, the trial court’s grant of summary
judgment was inappropriate.
    Defendant’s overall business strategy at the time of the tragic
accident involved here mandated increased productivity driven, at
least in part, by budgetary cuts. The question remains, though,

                                  -13-
whether those cuts were negligently directed by or conducted in a
manner authorized by defendant at the expense of Clark Refining.
Answering this question requires a close look at the role of
defendant’s president, Paul Melnuk, who also served as chief
executive officer of Clark Refining.
    In Bestfoods, the Supreme Court pointed out that lower courts
must “recognize that ‘it is entirely appropriate for directors of a parent
corporation to serve as directors of its subsidiary, and that fact alone
may not serve to expose the parent corporation to liability for its
subsidiary’s acts.’ ” Bestfoods, 524 U.S. at 69, 141 L. Ed. 2d at 60,
118 S. Ct. at 1888, citing American Protein Corp. v. AB Volvo, 844
F.2d 56, 57 (2d Cir. 1988). The Court acknowledged the “ ‘well
established principle [of corporate law] that directors and officers
holding positions with a parent and its subsidiary can and do “change
hats” to represent the two corporations separately, despite their
common ownership.’ ” Bestfoods, 524 U.S. at 69, 141 L. Ed. 2d at 61,
118 S. Ct. at 1888, citing Lusk v. Foxmeyer Health Corp, 129 F.3d
773, 779 (5th Cir. 1997). Further, the Court noted that it should be
presumed that directors are wearing their “subsidiary hats,” rather
than their “parent hats,” when acting for the subsidiary. Bestfoods,
524 U.S. at 69, 141 L. Ed. 2d at 61, 118 S. Ct. at 1888.
    Accordingly, to establish liability, plaintiffs must establish more
than the fact that Paul Melnuk made policy decisions and supervised
subsidiary activities. Bestfoods, 524 U.S. at 69, 141 L. Ed. 2d at 61,
118 S. Ct. at 1888. Instead, plaintiffs must show that the conduct
complained of occurred while Paul Melnuk was acting in his capacity
as an officer of Clark USA, rather than as an officer of Clark
Refining. Bestfoods, 524 U.S. at 69, 141 L. Ed. 2d at 61, 118 S. Ct.
at 1888. In attempting to do so, plaintiffs point to additional language
from Bestfoods, where the Court stated that “the presumption that an
act is taken on behalf of the corporation for whom the officer claims
to act is strongest when the act is perfectly consistent with the norms
of corporate behavior, but wanes as the distance from those accepted
norms approaches the point of action by a dual officer plainly
contrary to the interests of the subsidiary yet nonetheless
advantageous to the parent.” Bestfoods, 524 U.S. at 70 n.13, 141 L.
Ed. 2d at 61 n.13, 118 S. Ct. at 1888 n.13.
    Seizing upon that language, plaintiffs point to the April 1995

                                  -14-
“Memorandum to the Executive Committee,” prepared by Paul
Melnuk, completed on Clark USA letterhead, and including a
document entitled “1995 Economic Imperatives.” Moreover,
plaintiffs point to another Clark USA business record, the agenda for
the February 15, 1995, board of directors meeting, which includes a
section entitled “Clark USA Liquidity Overview.” That document
lays out a “survival mode” business philosophy marked by “reduced
capital spending,” “reduced working capital investment,” and
“reduced operating expense level.” The document further states that
the “goal is to replenish [defendant’s] strategic cash reserve to $200
million.” Defendant’s continued emphasis on this goal is supported
by the “1995 Economic Imperatives,” one of which was to
“[r]eplenish cash balance to 200 million” by reducing capital
spending to “minimum sustainable levels.” Relying on this, plaintiffs
contend that the business and budgetary strategy defendant mandated
in this case was carried out for its own benefit at the foreseeable
expense of safety and spending at Clark Refining and at the direction
of Paul Melnuk. As such, the only benefit of the business and
budgetary strategy involved in this case ran to defendant and not
Clark Refining. This, plaintiffs argue, proves that Paul Melnuk was
acting not on behalf of Clark Refining but, instead, on behalf of Clark
USA.
    In opposition, defendant cites the testimony of Paul Melnuk
himself where he claims that the 1995 Imperatives, though completed
on defendant’s letterhead, were actually carried out for Clark
Refining. Additionally, defendant notes that the 1995 Imperatives
include discussion of the continuing need to spend on necessary
health and safety as well as ensure that all existing environmental,
health, and safety needs are fully supported.
    At the very least, there is a genuine issue of material fact as to
whose “hat” Melnuk was wearing when he completed the 1995
memorandum. If the fact-finder concludes that Melnuk was acting on
behalf of defendant and thus wearing his Clark USA “hat,” there is
some evidence that he was directing or authorizing the manner in
which Clark Refining’s budget was implemented such that he had a
duty, under the direct participant theory of liability, to do so with
reasonable care. The additional evidence produced by plaintiffs
indicating that Melnuk knew both that the budgetary reductions

                                 -15-
involved here had to come in large part from controllable costs such
as education, training, repairs, and equipment maintenance, and that
these reductions were compromising safety at the refinery raises an
issue of material fact as to whether or not defendant breached that
duty. The trial court’s grant of summary judgment was therefore
inappropriate.
    If Paul Melnuk, acting on behalf of defendant, directed or
authorized the manner in which the budget cuts in this case were
taken, he had a duty to do so in a nonnegligent way. If Melnuk
directed or authorized the manner in which the budget cuts at issues
were taken, knowing that safety at the Blue Island refinery would be
compromised, and did so superseding the discretion and interest of
Clark Refining, direct participant liability could attach. Determining
whether this duty applies to the facts of this case, and whether
defendant is liable, involves factual inquiry. See, e.g., O’Hara v. Holy
Cross Hospital, 137 Ill. 2d 332, 342-44 (1990) (this court held that
whether or not a hospital had a duty to protect a nonpatient invited
into an emergency room involved a factual inquiry into whether the
nonpatient was invited to participate in the care and treatment of the
patient and thus summary judgment in favor of hospital was
inappropriate). This inquiry is not suitable for this court on review
and not appropriate for disposition at summary judgment, especially
considering that this court must interpret the record strictly against the
moving party and liberally in favor of the nonmoving party. Jackson,
185 Ill. 2d at 423-24.

    III. Immunity Under the Illinois Workers’ Compensation Act
     Having found that direct participant liability is a potentially valid
theory of recovery in this case, and that a genuine issue of material
fact exists as to its application, we still must analyze the exclusive
remedy provision of the Workers’ Compensation Act (820 ILCS
305/5(a) (West 2002)). Defendant claims that, even if it were found
liable under the direct participant theory, the exclusivity provision
renders it immune. The provision, found in section 5(a) of the Act,
provides:
             “No common law or statutory right to recover damages
          from the employer *** for injury or death sustained by any

                                  -16-
         employee while engaged in the line of his duty as such
         employee, other than the compensation herein provided, is
         available to any employee who is covered by the provisions
         of this Act ***.” 820 ILCS 305/5(a) (West 2002).
This provision serves a balancing function. On the one hand, the Act
establishes a new “system of liability without fault, designed to
distribute the cost of industrial injuries without regard to common-
law doctrines of negligence, contributory negligence, assumption of
risk, and the like.” Gannon v. Chicago, Milwaukee, St. Paul & Pacific
Ry. Co., 13 Ill. 2d 460, 463 (1958). On the other hand, the Act
imposes “statutory limitations upon the amount of the employee’s
recovery, depending upon the character and the extent of the injury”
and provides “that the statutory remedies under it shall serve as the
employee’s exclusive remedy if he sustains a compensable injury.”
McCormick v. Caterpillar Tractor Co., 85 Ill. 2d 352, 356 (1981).
    Defendant asserts that plaintiffs’ theory of liability in this case
should be treated no differently than a conventional veil-piercing
theory, contending that plaintiffs’ claim has to be that the parent
company interfered to such an extent in the subsidiary’s business that
it should be treated as if it were the subsidiary. In that situation,
defendant continues, the parent company has become the
subsidiary/employer and should be subject to the same burdens and
entitled to the same protections a subsidiary/employer would have
under the Workers’ Compensation Act. See Kotecki v. Cyclops
Welding Corp., 146 Ill. 2d 155 (1991) (holding that a third party sued
by an employee injured in a workplace accident can bring a
contribution claim against the employer, but that the employer’s
liability is limited to the amount it would be required to pay under the
Workers’ Compensation Act).
    We reject this argument. Direct participant liability, as we now
recognize it, does not rest on piercing the corporate veil such that the
liability of the subsidiary is the liability of the parent. On the contrary,
this form of liability is asserted, as its name suggests, for a parent’s
direct participation, superseding the discretion and interest of the
subsidiary, and creating conditions leading to the activity complained
of. Here, plaintiffs claim that defendant directly participated in
creating conditions within the Blue Island refinery that led to the fire
by directing or authorizing the manner in which Clark Refining’s

                                   -17-
cost-cutting budget was instituted with no regard for the discretion
and interest of Clark Refining itself.
    In essence, defendant is requesting that it be allowed to pierce its
own corporate veil in order to avoid liability. Illinois courts have
consistently expressed reluctance for allowing such a practice. See In
re Rehabilitation of Centaur Insurance Co., 158 Ill. 2d 166, 173-74
(1994) (citing with approval the principle that the general law
mandates that piercing must never be made in favor of a corporation
or its shareholders); Main Bank of Chicago v. Baker, 86 Ill. 2d 188,
206 (1981) (stating that a party “cannot assert the equitable doctrine
of piercing the corporate veil to disregard the separate corporate
existence of a corporation he himself created to gain an advantage
which would be lost under his present contention”); see Hughey v.
Hoffman Rosner Corp., 109 Ill. App. 3d 633, 636 (1982); Schmidt v.
Milburn Brothers, Inc., 296 Ill. App. 3d 260, 267 (1998). The
appellate court in this case recognized this point when it rejected
defendant’s attempt “to have its cake and eat it too: asserting, on the
one hand, that it was merely a shareholder in arguing that it owed no
duty to the decedents, while, at the same time, attempting to invoke
the Act’s grant of immunity by characterizing itself as the decedents’
employer.” 361 Ill. App. 3d at 651-52.
    In Schmidt, this point was made particularly clear. That case
involved a plaintiff injured in a collision with a driver who worked
for a company loosely affiliated with the defendant, plaintiff’s own
employer. The defendant in the case asserted the protection of the
exclusive remedy provision of the Workers’ Compensation Act. The
court was not persuaded, stating that:
         “[I]f defendants are right, [defendant] pays nothing for the
         negligence of its driver– no workers’ compensation
         premiums, no workers’ compensation benefits, no tort
         liability. That would turn the exclusive remedy provision of
         the [Workers’ Compensation Act] into a sword, instead of a
         shield. No useful societal purpose would be served.
         [Defendant] would receive all the benefits the law provides to
         a separate and distinct corporate body with none of the usual
         detriments ***.” Schmidt, 296 Ill. App. 3d at 269.
    We agree with this analysis. It was Clark Refining, not defendant,
who paid workers’ compensation benefits to the decedents’ families.

                                 -18-
It was Clark Refining, not defendant, who actually employed the
decedents. As such it is Clark Refining, not Clark USA, that should
enjoy the exclusive remedy provision of the Workers’ Compensation
Act. We decline to allow Clark USA to pierce its own corporate veil.
Accordingly, the Workers’ Compensation Act does not immunize
defendant from liability.

                             CONCLUSION
     Drawing no ultimate conclusions on the merits of plaintiffs’ case
and mindful that summary judgment is an extraordinary remedy,
summary judgment was inappropriate in this matter. We recognize
the direct participant theory of liability. We note, however, that this
theory of liability gives rise to a duty only in limited circumstances.
Budgetary oversight alone is insufficient, as is a parent company’s
commission of acts consistent with its investor status.
     If there is sufficient evidence to show that a parent corporation
directed or authorized the manner in which an activity is undertaken,
however, a duty arises. Specifically, the duty to utilize reasonable care
in directing or authorizing the manner in which that activity is
undertaken. Accordingly, a parent corporation can be held liable if,
for its own benefit, it directs or authorizes the manner in which its
subsidiary’s budget is implemented, disregarding the discretion and
interests of the subsidiary, and thereby creating dangerous conditions.
In such situations, parent-defendants will not be protected by the
exclusive remedy provision of the Workers’ Compensation Act.
     For these reasons, we affirm the appellate court’s reversal of the
trial court’s grant of summary judgment and its remand of the cause
to the circuit court for further proceedings.

                                                              Affirmed.

    CHIEF JUSTICE THOMAS and JUSTICE KILBRIDE took no
part in the consideration or decision of this case.

    JUSTICE FREEMAN, specially concurring:
    Our ruling today, for the first time, recognizes that direct

                                  -19-
participant liability is a valid theory of recovery under Illinois law.
We also find that, on the specific record presented in this case, the
trial court erred in granting defendant, Clark USA, Inc., summary
judgment on plaintiffs’ direct participant liability claims. I am in
agreement with the ultimate result reached by the majority opinion.
I write separately, however, to offer additional reasons in support of
the reversal of summary judgment in this matter.
     In March 1995, plaintiffs’ decedents were killed in a fire which
followed an explosion occurring at their workplace, a refinery located
in Blue Island. The refinery is owned and operated by decedents’
employer, Clark Refining & Marketing, Inc. (Clark Refining).
Defendant, Clark USA, Inc., owns 100% of the stock of Clark
Refining. Plaintiffs allege that the fatal fire started when untrained
operators, who were not maintenance mechanics, performed
maintenance tasks and disassembled a valve which, instead of being
drained of flammable materials, was still pressurized. As a result,
these materials escaped and burst into flames. Decedents were eating
in a lunchroom located in the maintenance building at the refinery
across an access road from the maintenance work, and the explosion
and subsequent fire trapped and killed them before they could escape
the building.
     Subsequent to the accident, plaintiffs filed suit, naming Clark
Refining’s parent company, Clark USA, Inc., as a defendant based
upon the theory of direct participant liability for controlling the
budget of its subsidiary in such a way that directly led to the
workplace accident and, ultimately, to the death of decedents.
Plaintiffs alleged that defendant negligently imposed an “overall
business strategy” directing the subsidiary to minimize costs and
capital investments, which allegedly caused the subsidiary to engage
in the dangerous practice of reducing training and maintenance.
According to plaintiffs, as a result of this direct interference by the
parent company, untrained operators were assigned to perform
dangerous maintenance tasks at the plant. This occurred, plaintiffs
contend, because there was a large maintenance backlog caused by
economic cutbacks specifically dictated and directed by defendant in
order to increase its own profits.
     During the course of this lengthy litigation, the parties have
engaged in an extensive amount of discovery, including the exchange

                                 -20-
of countless business records as well as the taking of depositions of
numerous individuals with knowledge of the events that occurred
prior, during and after the time of the accident. Indeed, the appellate
record in the instant matter exceeds 60 volumes and reaches nearly
15,000 pages. Two weeks before this cause was set for jury trial, the
circuit court of Cook County granted defendant summary judgment
pursuant to section 2–1005 of the Code of Civil Procedure (735 ILCS
5/2–1005 (West 2002)). The trial court’s order granting summary
judgment, however, stated only that defendant’s motion was granted
and contained no specific findings by the trial court to indicate the
basis for its ruling.
     It is in this procedural posture that the instant cause comes to us
on appeal. We must, therefore, review the ruling of the circuit court
to determine whether, under the specific facts and circumstances of
this case, the circuit court erred in granting defendant summary
judgment. The standards used to determine the propriety of a grant of
summary judgment are familiar and well settled. The purpose of
summary judgment is not to try a question of fact but, rather, to
determine whether a genuine issue of material fact exists. Adams v.
Northern Illinois Gas Co., 211 Ill. 2d 32, 42-43 (2004). The entry of
summary judgement is appropriate only where “the pleadings,
depositions, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.”
735 ILCS 5/2–1005(c) (West 2004).
     In determining whether a genuine issue of material fact exists, a
court must construe the pleadings, depositions, admissions, and
affidavits strictly against the movant and liberally in favor of the
opponent. Bagent v. Blessing Care Corp., No. 102430, slip op. at 6
(January 19, 2007). A triable issue precluding the entry of summary
judgment exists where the material facts are disputed or where, the
material facts being undisputed, reasonable persons might draw
different inferences from the undisputed facts. Bagent, slip op. at 6.
Although summary judgment can aid in the expeditious disposition
of a lawsuit, it is nevertheless a drastic means of disposing of
litigation and, therefore, should be allowed only where the right of the
moving party is clear and free from doubt. Adams, 211 Ill. 2d at 43
(and cases cited therein).

                                 -21-
    It is with these standards in mind that we hold today that the trial
court improvidently granted defendant summary judgment. We have
carefully reviewed the vast amount of evidence adduced by plaintiffs
in opposition to defendant’s motion for summary judgment. Various
business documents generated by defendant and/or its subsidiary,
coupled with the deposition testimony of several individuals familiar
with events transpiring prior, during and subsequent to the accident,
raise numerous genuine issues of material fact as to whether
defendant, through its direct control of Clark Refining, negligently
caused the maintenance and training of employees at the Blue Island
facility to degrade to such a level that safe operation of the plant
became impossible, ultimately leading to the fatal accident in this
case.
    At this juncture, I underscore that our opinion today does not alter
the bedrock principle of limited liability for corporate shareholders,1
and that direct participant liability is a very narrow exception to this
general principle. Today’s decision stands for the proposition that if
a parent company merely articulates general policies and supervises
a subsidiary’s budgeting decisions, such conduct alone is not enough
to give rise to direct liability on the part of the parent. In other words,
conduct that is entirely “consistent with the parent’s investor status”
does not pose a problem. United States v. Bestfoods, 524 U.S. 51, 69,
141 L. Ed. 2d 43, 62, 118 S. Ct. 1876, 1889 (1998). Thus, activities
by the parent company that involve the subsidiary, such as
“monitoring of the subsidiary’s performance, supervision of the
subsidiary’s finance and capital budget decisions, and articulation of
general policies and procedures,” will, generally, not give rise to
direct liability. Bestfoods, 524 U.S. at 72, 141 L. Ed. 2d at 62, 118 S.
Ct. at 1889. The “critical question” in deciding whether the parent
company can be held liable under a theory of direct participant
liability is “whether, in degree and detail, actions directed to the

    1
     As the United States Supreme Court observed in United States v.
Bestfoods, “it is hornbook law that ‘the exercise of the “control” which
stock ownership gives to the stockholders ... will not create liability beyond
the assets of the subsidiary.’ ” Bestfoods, 524 U.S. at 61-62, 141 L. Ed. 2d
at 56, 118 S. Ct. at 1884, quoting W.O. Douglas & C. Shanks, Insulation
from Liability Through Subsidiary Corporations, 39 Yale L.J. 193 (1929).

                                    -22-
[subsidiary] by an agent of the parent alone are eccentric under
accepted norms of parental oversight of a subsidiary’s facility.”
Bestfoods, 524 U.S. at 72, 61-62, 141 L. Ed. 2d at 62, 118 S. Ct. at
1889. Throughout these proceedings, defendant has voiced the valid
concern that the direct participation liability theory of recovery must
not be stretched to such an extent that it encompasses routine and
proper exercises of shareholder control, lest the exception swallows
the general rule and serves to spawn a flood of lawsuits against parent
companies. I agree with defendant on this point, and our opinion
today preserves the proper balance between the general rule and this
narrow exception.
    In addition, defendant has voiced concern that it could be held
liable under the direct participant theory simply because it shares its
officers and directors with its subsidiary. Our opinion today guards
against such a result, as it recognizes the principle that “it cannot be
enough to establish liability [under a direct participation theory] that
dual officers and directors made policy decisions and supervised
activities at the facility.” Bestfoods, 524 U.S. at 69-70, 141 L. Ed. 2d
at 61, 118 S. Ct. at 1888. This is true because when an individual
wears two “hats”–i.e., as an officer and/or director of both the parent
and the subsidiary companies–a court will “generally presume ‘that
the directors are wearing their “subsidiary hats” and not their “parent
hats” when acting for the subsidiary.’ ” Bestfoods, 524 U.S. at 69, 141
L. Ed. 2d at 61, 118 S. Ct. at 1888, quoting P. Blumberg, Law of
Corporate Groups: Procedural Problems in the Law of Parent &
Subsidiary Corporations §1.02.1, at 12 (1983). In other words, a
parent company will generally not be found liable for decisions made
by a subsidiary’s board and/or officers simply because these
individuals are also officers or directors of the parent company.
Rather, liability will result only in instances where the conduct
complained of occurred while the officers/directors were acting in
their capacity as officers/directors of the parent, rather than of the
subsidiary. As the court in Bestfoods explained: “the presumption that
an act is taken on behalf of the corporation for whom the officer
claims to act is strongest when the act is perfectly consistent with the
norms of corporate behavior, but wanes as the distance from those
accepted norms approaches the point of action by a dual officer
plainly contrary to the interests of the subsidiary yet nonetheless

                                 -23-
advantageous to the parent.” Bestfoods, 524 U.S. at 70 n. 13, 141 L.
Ed. 2d at 61 n.3, 118 S. Ct. at 1888 n.3.
      It should be emphasized that rarely will a parent company that
generally observes corporate formalities step outside the proper role
of a parent to so pervasively interfere with the operations of the
subsidiary that it can be viewed as directly inflicting harm on the
subsidiary’s employees or third parties doing business with the
subsidiary. In the matter before us, however, plaintiffs have presented
sufficient evidence of conduct by defendant to create a genuine issue
of material fact as to whether that conduct could not only be deemed
“eccentric under accepted norms of parental oversight” of a
subsidiary’s business (Bestfoods, 524 U.S. at 72, 141 L. Ed. 2d at 62,
118 S. Ct. at 1889), but also “plainly contrary to the interests of the
subsidiary yet nonetheless advantageous to the parent” (Bestfoods,
524 U.S. at 70 n.13, 141 L. Ed. 2d at 61 n.13, 118 S. Ct. at 1888
n.13), to the extent that it could serve as a predicate for direct
participant liability on the part of defendant.
     First, the record contains several business documents which raise
a genuine issue of material fact with respect to the nature and extent
of direct involvement by defendant in the affairs of its subsidiary,
Clark Refining. As background, I note that throughout the time period
at issue in this matter, defendant and Clark Refining had largely
(although not entirely) overlapping boards of directors, which often
held joint meetings. In addition, the President and Chief Executive
Officer of defendant, Paul Melnuck, was also the President, Chief
Executive Officer (CEO) and Chief Operating Officer (COO) of
Clark Refining. As further background information, I note that, in his
deposition, Melnuk testified that he had no previous experience in the
oil refining business, and that he concentrated on the financial aspects
of the business. Melnuck further stated in his deposition that
defendant had no operations personnel, and that its function was to
simply serve as a holding company.
     It is against this background that we have reviewed the following
business records. For example, plaintiffs point to a business record
entitled “Clark USA Liquidity Overview.” This document is part of
the agenda for the Clark USA, Inc., February 15, 1995, board of
directors meeting, and commands that the “1995 philosophy is
survival mode,” and that the “goal is to replenish the strategic cash

                                 -24-
reserve to $200 million.” This goal was to be accomplished through
“reduced capital spending,” “reduced working capital investment,”
and “reduced operating expense level.”
     Defendant’s continued focus on this financial goal is reflected in
a document entitled “Interoffice Memorandum,” which is dated April
19, 1995, from Paul Melnuk to the “Executive Committee” regarding
an “EC Meeting” to be held the following week. As part of this
memo, Melnuk included as attachments documents entitled “Clark
USA, Inc. 1995 Imperatives April 1995,” “Clark USA, Inc. 1994
Performance Distribution Grade Level 13 and Above,” and “Clark
USA, Inc. Scorecard First Quarter, 1995.” In the 1995 “Imperatives”
document, focus was placed upon replenishing Clark USA Inc.’s
strategic cash reserve of $200 million by reducing the capital
spending at the Blue Island refinery to the “minimum sustainable
level.” In the “Scorecard” document, “key achievements” were listed
to include “cash balance” and “1995 Imperatives,” whereas key
disappointments were listed to include “performance management,”
“employee morale/lack of leadership,” “short-term thinking,” and
“Blue Island tragedy.”
     These documents create, in several respects, genuine issues of
material fact that preclude entry of summary judgment. First,
although defendant has asserted that it is a mere holding company, the
“Interoffice Memo” contains documents which, on their face, deal
with Clark USA, Inc., matters, and the memo itself is directed to the
“Executive Committee.” The existence of an executive committee
for Clark USA, Inc., however, would run counter to defendant’s
argument that it is merely a holding company and has no operating
personnel. During his deposition, Melnuk acknowledged the words
as they are written in the memo, and specifically, in the attachment
entitled “Clark USA, Inc. 1995 Imperatives.” Melnuck, however,
offered another, alternative reading of these words, stating: “The
words on this page as you read them are the words as you read them.
These are actually, in fact, the 1995 Imperatives of Clark Refining
and Marketing, Inc., and in this regard the title on this page is
incorrect.” (Emphasis added.) Similarly, with respect to the
attachment to the memo entitled “Clark USA, Inc. Scorecard First
Quarter, 1995,” Melnuk testified in his deposition that although the
title states “Clark USA,” this document “is in fact a score card of the

                                 -25-
business of Clark R[efining] and M[arketing],” again contending that
the title of the document was “incorrect.” At a minimum, these
differing interpretations of the language of these documents and their
contents create a genuine issue of material fact precluding entry of
summary judgment.
    In addition, plaintiffs assert that these documents create a genuine
issue of material fact as to whether defendant’s mandated budget cuts
were targeted to reduce Clark Refining’s capital spending on essential
items such as safety training and maintenance. Plaintiffs contend that
such commands are especially egregious and inappropriate in a
refinery setting dealing with highly explosive materials, where an
accident such as occurred here is foreseeable. According to plaintiff,
the actions of defendant constitute precisely the type of conduct on
the part of a parent company that may be considered “eccentric under
accepted norms of parental oversight” (Bestfoods, 524 U.S. at 72, 141
L. Ed. 2d at 62, 118 S. Ct. at 1889) and “plainly contrary to the
interests of the subsidiary yet nonetheless advantageous to the parent”
(Bestfoods, 524 U.S. at 70 n.13, 141 L. Ed. 2d at 61 n.13, 118 S. Ct.
at 1888 n.13), to the extent that it could serve as a predicate for direct
participant liability on the part of defendant.
    In support of this theory, plaintiffs point to evidence that they
assert shows that although defendant, through Melnuk, was aware of
the negative effects of the mandated cuts on the safety, training, and
maintenance at the Blue Island refinery, it nevertheless continued to
require Clark Refining to comply with its dictates. For example,
Ronald Anderson, a former union president at the refinery, stated in
his deposition testimony that the issue of the lack of preventative
maintenance at the refinery–including that employees were forced to
“cut[ ] corners” with respect to maintenance and safety–was sent up
the corporate chain of command, all the way to Melnuk. According
to Anderson, under the direction of the “corporate office,” members
of the refinery’s safety and environmental department worked only a
daytime shift, even though the plant operated on a 24-hour basis. This
meant that untrained operators were left to perform these specialized
jobs during the off-shifts. In his deposition, Anderson described the
situation at the plant as being one of “continuous deterioration” with
respect to maintenance, safety, and training, and stated that the
refinery was “falling apart.” According to Anderson, Melnuck would

                                  -26-
not provide authorization to remedy the situation, despite the fact
that, as union president, he directly discussed these issues with
Melnuk. Anderson also stated that flyers were posted around the
refinery which discussed the financial status and competitiveness of
the company, which asked for increases in production, and which
pointed out that other refineries had entered into bankruptcy.
Anderson testified that this created a “fear factor” at the plant, in that
“people *** who generally would not compromise situations,
compromised their job, were placed in a position through fear to be
tempted to compromise things,” meaning that they “cut corners”
because they believed that otherwise “the place was going to shut
down and everybody was going to lose their jobs.”
    Based upon this evidence, a genuine issue of material fact was
raised as to whether defendant’s extreme cost-cutting
requirements–dictated to the subsidiary despite the knowledge that its
measures resulted in a dangerous reduction in training and
maintenance which adversely affected safety at the refinery–may be
considered “eccentric under accepted norms of parental oversight”
(Bestfoods, 524 U.S. at 72, 141 L. Ed. 2d at 62, 118 S. Ct. at 1889)
and “plainly contrary to the interests of the subsidiary yet nonetheless
advantageous to the parent” (Bestfoods, 524 U.S. at 70 n.13, 141 L.
Ed. 2d at 61 n.13, 118 S. Ct. at 1888 n.13), to the extent that it could
serve as a basis for direct participant liability on the part of defendant.
In addition, there is clearly a genuine issue of material fact with
respect to what “hat” Melnuck was wearing during this time period
when he was apprised of these safety concerns but nevertheless
dictated budget cuts. I also note that, during these proceedings,
defendant has not challenged plaintiffs’ assertion that it knew of the
potential danger at the refinery due to its business plan.
    In addition, plaintiffs also rely upon the deposition testimony of
Terence Quirke, an economics planning engineer at the Blue Island
refinery, to withstand defendant’s summary judgment motion. Quirke
testified with respect to the development and implementation of
operating budgets at the Blue Island facility. According to Quirke,
Melnuk–the president, CEO and COO of both defendant and its
subsidiary–was personally and actively involved in creating and
implementing operating budgets at the plant. According to Quirke,
starting in 1993 management implemented a “zero based budget”

                                   -27-
approach that took into account the actual costs of each item and
operation in detail.
     According to Quirke, he and colleagues at the refinery established
a working budget and assumed that it would be approved by
management. Quirke testified, however, that he was informed that
“Paul Melnuck had said that the budget was too much.” Quirke then
inquired about what items needed to be cut, and he was told that the
budget had to be reduced by 25%. In response, Quirke compiled a list
of items that could and could not be cut. The bulk of the expenditures
at the refinery were nondiscretionary–including raw materials and
utilities that were necessary to operate the plant. The remaining 20%
of the costs were controllable, including employee wages, benefits,
education, training, repairs, and equipment maintenance. According
to Quirke, the only choice in complying with the requirement to
reduce costs by 25% was to cut the controllable costs within the
budget. According to Quirks’s deposition testimony, this was
explained to Melnuk, and, eventually, the budget with these
reductions was approved. Quirke testified that, as a result of the
mandated budget cuts, several troubling events occurred at the
refinery, including 20 workers being replaced with 6 in one
department, and new operator training and refresher training being
entirely eliminated.
     According to plaintiffs, when defendant ordered the budget cuts
at the Blue Island refinery, it knew that safety, training, staffing,
education and maintenance would all be compromised, and,
accordingly, it was foreseeable that injury would occur as a result.
Plaintiffs further contend that the record reflects that the subsidiary
had no decision in this reduction. Finally, plaintiffs point to Clark
Refining’s own internal investigation of the accident, which cited a
lack of training, maintenance and safety as having played a causative
role.
     Accordingly, in light of the evidence presented by plaintiffs, a
genuine issue of material fact has been raised with respect to whether
defendant merely established parameters or financial goals for its
subsidiary. The evidence raises a question as to whether defendant
actively mandated aggressive cuts in its subsidiary’s budget knowing
that these cuts could only be accomplished by dramatic reductions in
maintenance, training and safety. Moreover, the evidence raises a

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question with respect to the forseeability of injury, as it appears that
defendant had several opportunities, after ordering drastic budget
reductions and observing their negative effects, to change course but
did not. This conduct raises material questions of fact as to whether
defendant’s actions fall within the direct participant liability doctrine.
     In sum, our opinion today recognizes a very narrow exception to
the general rule. I underscore the procedural posture of this case: it is
here on a review of a grant of defendant’s motion for summary
judgment. In assessing the circuit court’s ruling, we construe, as we
must, all evidence strictly against the movant–defendant–and liberally
in favor of the opponent–plaintiffs. With our opinion today, this court
only determines that plaintiff adduced sufficient evidence to
withstand defendant’s motion for summary judgment. The decision
today should not be interpreted as indicating or telegraphing whether
plaintiffs will ultimately succeed on the merits of this cause of action.
That is a question for the trier of fact to decide at trial.

    JUSTICE BURKE joins in this special concurrence.

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