Plaintiff May Not ‘Pierce Veil’ of Corporation to Reach the Assets of Its Sister Company
2008-0170. Minno v. Pro-Fab, Inc., Slip Opinion No. 2009-Ohio-1247.
Trumbull App. No. 2007-T-0021, 2007-Ohio-6565. Judgment reversed.
Moyer, C.J., and Pfeifer, Lundberg Stratton, O'Connor, O'Donnell, Lanzinger, and Cupp, JJ., concur.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2009/2009-Ohio-1247.pdf 
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(March 25, 2009) The Supreme Court of Ohio ruled today that, where two separate corporations are wholly owned by the same individual shareholders, but neither corporation owns an interest in the other, a plaintiff asserting civil claims against one of those companies may not go behind or “pierce” the corporate structure of that company to recover damages from its sister company.
The Court’s 7-0 decision, authored by Justice Robert R. Cupp, reversed a ruling by the 11th District Court of Appeals.
The case involved James Minno of Trumbull County, an ironworker who suffered serious injuries in a fall in the course of his employment by See-Ann Inc. Minno filed a civil lawsuit seeking damages for alleged negligence by his employer in failing to provide a safe working environment. In an amended complaint, Minno asserted intentional tort damage claims not only against See-Ann, but also against Pro-Fab Inc., a separate company wholly owned by the same two shareholders who owned See-Ann. In his complaint, Minno noted that See-Ann and Pro-Fab not only shared common owners and officers, but had the same business address and engaged in similar lines of work.
Pro-Fab filed a summary judgment motion seeking dismissal of all Minno’s claims against it, arguing that Minno was employed by and under the sole control of See-Ann at the time he was injured, and had no legal claim against Pro-Fab, which was a separate corporate entity with no ownership interest in or operational control over See-Ann and no control over Minno in the performance of his duties while working for See-Ann. The trial court granted summary judgment dismissing all of Minno’s claims against Pro-Fab.
On review, the 11th District Court of Appeals reversed the trial court’s ruling and remanded Minno’s claims against Pro-Fab to the trial court for further proceedings. In a 2-1 decision, the court of appeals held that Minno had provided the trial court with sufficient evidence regarding the close relationship between the two companies to raise a material question of fact regarding whether See-Ann was actually an “alter ego” so intertwined with Pro-Fab that the two companies were effectively a single business, enabling Minno to breach See-Ann’s corporate veil and reach the assets of Pro-Fab under the Supreme Court’s 1993 decision in Belvedere Condominium Owners Assn. v. R.E. Roark Companies. Pro-Fab appealed that ruling, and the Supreme Court agreed to review the 11th District’s decision.
Writing for a unanimous Court in today’s decision, Justice Cupp pointed out that Belvedere involved damage claims asserted against individual shareholders in a corporation for damages cause by the corporation. In this case, he noted, Minno did not seek to recover from the shareholders of the two companies, but rather sought to disregard the corporate form of See-Ann in order to reach the assets of a separate corporate entity, Pro-Fab.
He wrote: “The Belvedere test for piercing the corporate veil has been applied to determine whether an individual shareholder may be held liable for corporate wrongdoings. When a shareholder exercises such control over a corporation that the corporation becomes the shareholder’s alter ego, and when the shareholder misuses his control of a corporation to commit specific, egregious acts that injure a third party, then it is unjust to allow the shareholder to use the corporate form as a shield to escape the consequences of those wrongful acts. ... The Belvedere test for piercing the corporate veil has also been applied to ascertain whether a parent corporation could be held liable for its subsidiary corporation’s misconduct. ... The common element in both of these situations is that the party upon whom liability is sought to be imposed had a controlling interest through ownership of more than one-half of the voting stock in the corporation allegedly committing wrongful acts.”
Distinguishing the facts of this case from Belvedere, Justice Cupp wrote: “Minno seeks to impose liability upon a corporation that holds no ownership interest in the corporation that allegedly committed the wrongful acts. ... In contrast to a shareholder’s ownership of a corporation or a parent corporation’s ownership of another corporation, the common shareholder ownership of sister corporations does not provide one sister corporation the inherent ability to exercise control over the other. Any wrongful act committed by one sister corporation might have been instigated by the corporation’s owners, but it could not have been instigated by the corporation’s sister. Thus, we hold that a plaintiff cannot pierce the corporate veil of one corporation to reach its sister corporation. Despite the element of common shareholder identity, sister corporations are separate corporations and are unable to exercise control over each other in the manner that a controlling shareholder can. This lack of ability of one corporation to control the conduct of its sister corporation precludes application of the piercing-the-corporate-veil doctrine.”
Contacts
Craig G. Pelini, 330.305.6400, for Pro-Fab Inc.
James R. Scher, 330.393.3200, for James Minno.