Justia.com Opinion Summary: Plaintiff Darlene Howsden was injured on premises that were leased to her employer by a legally distinct entity that was owned and operated by the same shareholders as her employer. Plaintiff sued Defendant, the entity that owned the premises, for negligence. The district court granted summary judgment to Defendant, concluding that Plaintiff's exclusive remedy was under the Nebraska Workers' Compensation Act. The Supreme Court reversed, holding that the district court erred in concluding that the exclusive remedy rule extended to Defendant because (1) Defendant was a legally separate entity from Plaintiff's employer, despite their corporate kinship, and there was no equitable basis to justify piercing the corporate veil between the two entities; and (2) therefore, Defendant was a third party to the employment relationship between Plaintiff and her employer, so Plaintiff's third-party claim against Defendant was not barred by the exclusive remedy provisions of the Act.
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we affirm in part, and in part reverse and remand for further
proceedings.
Affirmed in part, and in part reversed and
remanded for further proceedings.
Darlene Howsden, appellant, v. Roper’s
R eal Estate Company, a Nebraska
corporation, appellee.
___ N.W.2d ___
Filed October 28, 2011.
No. S-11-174.
1. Summary Judgment: Appeal and Error. An appellate court will affirm a lower
court’s granting of summary judgment if the pleadings and admissible evidence
offered at the hearing show that there is no genuine issue as to any material facts
or as to the ultimate inferences that may be drawn from those facts and that the
moving party is entitled to judgment as a matter of law.
2. Workers’ Compensation. If an injury arises out of and in the course of employment, the Nebraska Workers’ Compensation Act is the injured employee’s exclusive remedy against his or her employer.
3. Corporations: Fraud. A court will disregard a corporation’s identity, or pierce
the corporate veil, only where the corporation has been used to commit fraud,
violate a legal duty, or perpetrate a dishonest or unjust act in contravention of the
rights of another.
4. Corporations: Courts: Equity. A court exercises its equitable power when it
disregards the corporate form.
Appeal from the District Court for Lancaster County:
Jeffre Cheuvront, Judge. Reversed and remanded for further
p
roceedings.
Jefferson Downing and Joel Bacon, of Keating, O’Gara,
Nedved & Peter, P.C., L.L.O., for appellant.
James A. Snowden and Joseph M. Aldridge, of Wolfe,
Snowden, Hurd, Luers & Ahl, L.L.P., for appellee.
Heavican, C.J., Wright, Connolly, Gerrard, Stephan,
McCormack, and Miller-Lerman, JJ.
Gerrard, J.
The plaintiff in this case was injured on premises that were
leased to her employer by a legally distinct entity that is owned
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and operated by the same shareholders as her employer. The
question presented in this appeal is whether the plaintiff can
go to district court and sue the entity that owns the premises
for negligence, or whether her exclusive remedy is under the
Nebraska Workers’ Compensation Act (the Act). We conclude
that the plaintiff is not barred by the Act from bringing her
third-party claim against the entity that owns the premises.
Background
Roper & Sons, Inc., is a funeral home that was incorporated
in Lincoln, Nebraska, in 1914. It operates from real property
owned by Roper’s Real Estate Company, Inc. (Roper’s Real
Estate). Roper’s Real Estate was incorporated in Lincoln in
2003. Roper’s Real Estate was created to separate Roper &
Sons’ real property from its funeral home business, for tax
and other business purposes. The stock ownership of Roper &
Sons and Roper’s Real Estate is identical, both in the shareholders and the distribution of their stock, and most of the
directors and officers are the same, although their roles and
titles differ between the two entities. Tom Roper, director and
president of Roper & Sons, testified that the two businesses
were not run separately and that without the funeral home
business engaged in by Roper & Sons, Roper’s Real Estate
would not exist.
In 2003, Roper & Sons purchased the Metcalf/Nelson
Funeral Home, LLC (Metcalf). In 2005, Roper’s Real Estate
completed the purchase of what had been Metcalf’s real property. Although Metcalf still exists as a business entity, the only
member of its limited liability company is Roper & Sons. The
Metcalf funeral home business operates from property owned
by Roper’s Real Estate, which is leased by Roper & Sons pursuant to an oral lease. The taxes on the property were paid by
Metcalf. But neither Roper’s Real Estate nor Metcalf have any
employees of their own, and Tom Roper averred that Roper’s
Real Estate does not maintain, repair, or manage the property it
owns—Roper & Sons is solely responsible for it.
Neb. Rev. Stat. §§ 48-101 to 48-1,117 (Reissue 2004 & Cum. Supp.
2008).
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The plaintiff in this case, Darlene Howsden, was an employee
of Roper & Sons who worked at a former Metcalf property.
There is an old elevator in the building that connects to two
hallways: one running to the south, and the other running to
the east. The elevator is rarely used to travel between floors,
but employees apparently use it as a makeshift passageway
between the hallways abutting it. Nonetheless, on some occasions, it was used to travel between floors. One day, when
Howsden was leaving work, she went down one of the hallways and opened the elevator door to pass through. Unknown
to her, the elevator was upstairs, so she fell down the elevator
shaft into the basement and was seriously injured. She received
workers’ compensation disability and medical benefits under
an insurance policy issued to Roper & Sons and expressly
providing coverage for Roper & Sons, Roper’s Real Estate,
and Metcalf.
Howsden filed a complaint in district court against Roper’s
Real Estate, alleging that Roper’s Real Estate’s negligence
caused her injuries. In response, Roper’s Real Estate alleged
among other things that Howsden’s exclusive remedy was
under the Act. Howsden and Roper’s Real Estate filed crossmotions for summary judgment on the exclusive remedy
issue, and the district court, citing our decision in Millard v.
Hyplains Dressed Beef, granted Roper’s Real Estate’s motion.
Howsden appeals.
Assignments of Error
Howsden assigns that the court erred in (1) concluding that
the exclusive remedy rule extended to Roper’s Real Estate,
an entity legally distinct from Howsden’s employer, Roper &
Sons, and (2) concluding it was bound by Millard.
Standard of Review
[1] An appellate court will affirm a lower court’s granting
of summary judgment if the pleadings and admissible evidence
Millard v. Hyplains Dressed Beef, 237 Neb. 907, 468 N.W.2d 124 (1991),
disapproved on other grounds, Salkin v. Jacobsen, 263 Neb. 521, 641
N.W.2d 356 (2002).
Id.
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offered at the hearing show that there is no genuine issue as to
any material facts or as to the ultimate inferences that may be
drawn from those facts and that the moving party is entitled to
judgment as a matter of law.
Analysis
[2] We have held that if an injury arises out of and in the
course of employment, the Act is the injured employee’s exclusive remedy against his or her employer. In this case, however,
Howsden’s employer was Roper & Sons, and she is trying to
sue Roper’s Real Estate. Roper’s Real Estate, on the other
hand, contends that for these purposes, it and Roper & Sons
should be considered the same entity. We disagree.
The issue presented to the district court was a disagreement
about whether the “dual persona” or “dual capacity” doctrines
should apply. We have discussed these doctrines in the past,
although we have had no occasion to adopt or reject them.
We have explained that under the “dual capacity” doctrine, an
employer may become liable to an employee in tort if, with
respect to that tort, the employer occupies a position which
places upon it obligations independent of and distinct from its
role as an employer. But, we noted, the dual capacity doctrine
has been discredited. Under the narrower “dual persona” doctrine, “‘[a]n employer may become a third person, vulnerable
to tort suit by an employee, if—and only if—it possesses a
second persona so completely independent from and unrelated
to its status as employer that by established standards the law
recognizes that persona as a separate legal person.’”
But those doctrines are not precisely applicable here, because
the question in this case is not whether Roper & Sons had
Britton v. City of Crawford, ante p. 374, 803 N.W.2d 508 (2011).
Hofferber v. City of Hastings, 275 Neb. 503, 747 N.W.2d 389 (2008). See,
also, Bennett v. Saint Elizabeth Health Sys., 273 Neb. 300, 729 N.W.2d 80
(2007); Millard, supra note 2.
Bennett, supra note 5.
See id. See, also, 6 Arthur Larson & Lex K. Larson, Larson’s Workers’
Compensation Law § 113.01[4] (2000).
Bennett, supra note 5, 273 Neb. at 308, 729 N.W.2d at 86. See, also, 6
Larson & Larson, supra note 7, § 113.01[1].
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another capacity, separate from its capacity as Howsden’s
employer, or even whether Roper & Sons had a second “persona” that was completely independent. The dual capacity and
dual persona doctrines, to the extent they have any vitality, are
implicated when there is one business entity that an employee
nonetheless tries to sue as a “third party” because of an injury
caused by a function of the employer that is separate from the
employment relationship. For instance, the paradigmatic example is that of a truckdriver employed by a tire manufacturer,
who was injured when one of the tires on his truck blew out.
The tire had been manufactured by the employer, but the truckdriver was still permitted to recover for product liability.10
In other words, the dual capacity and dual persona doctrines were intended to address situations in which the plaintiff
alleges that his or her employer should nonetheless be considered a “third party” for purposes of workers’ compensation
exclusivity. There is no need to resort to such doctrines, however, when the defendant is actually a legally separate entity. In
such a case, resorting to a legal fiction is unnecessary, because
the separate existence of the defendant is a legal fact.11 And
under such circumstances, courts have refused to disregard the
corporate form to apply the exclusive remedy rule.12
10
11
12
Mercer v. Uniroyal, 49 Ohio App. 2d 279, 361 N.E.2d 492 (1976), disapproved, Schump v. Firestone Co., 44 Ohio St. 3d 148, 541 N.E.2d 1040
(1989).
See id.
See Larson, supra note 7, § 113.01[3].
See, e.g., Boggs v. Blue Diamond Coal Co., 590 F.2d 655 (6th Cir. 1979);
Matter of Johns-Manville/Asbestosis Cases, 511 F. Supp. 1229 (N.D. Ill.
1981); Great Atlantic Tea v. Imbraguglio, 346 Md. 573, 697 A.2d 885
(1997); McQuade v. Draw Tite, Inc., 659 N.E.2d 1016 (Ind. 1995) (superseded by statute as stated in Hayes Lemmerz Intern., Inc. v. Ace American
Ins., 619 F.3d 777 (7th Cir. 2010)); LaBelle v. Crepeau, 593 A.2d 653
(Me. 1991); Smith v. Cotton’s Fleet Service, Inc., 500 So. 2d 759 (La.
1987); Wodogaza v H & R Terminals, 161 Mich. App. 746, 411 N.W.2d
848 (1987); Searcy v. Paul, 20 Mass. App. 134, 478 N.E.2d 1275 (1985);
Gaber v. Franchise Services, Inc., 680 P.2d 1345 (Colo. App. 1984);
Mingin v. Continental Can Company, 171 N.J. Super. 148, 408 A.2d 146
(1979).
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Those courts have based their reasoning upon the principle
that a business enterprise has a range of choices when determining how to organize itself into a corporate structure.13 But,
as the Sixth Circuit explained, “reciprocal obligations arise
as a result of the choice it makes.”14 While the “owners [of
the business] may take advantage of the benefits of dividing
the business into separate corporate parts,” the court said,
“principles of reciprocity require that courts also recognize
the separate identities of the enterprises when sued by an
injured employee.”15
Many considerations may move a business entity to diversify its structure through the creation of other entities, but
those considerations should include the obligations which
arise as a consequence of such diversification.16 One cannot
claim the benefits of incorporation without the burdens.17 So,
when two companies are corporations which benefit from
legally recognized identities separate and apart from one
another, they must also bear the responsibility and liability of
such separation.18
[3,4] Those courts have also reasoned that the separate identity of different corporate entities should be pierced only in
cases of fraud.19 We have explained that a corporation’s identity as a separate legal entity will be preserved, as a general
rule, until sufficient reason to the contrary appears and that
“[a] court will disregard a corporation’s identity,” or pierce the
corporate veil, “only where the corporation has been used to
commit fraud, violate a legal duty, or perpetrate a dishonest
13
14
15
16
17
18
19
See Boggs, supra note 12.
Id. at 662.
Id. Accord, McQuade, supra note 12; Wodogaza, supra note 12.
See Wodogaza, supra note 12.
See LaBelle, supra note 12.
See Gaber, supra note 12.
See, Matter of Johns-Manville/Asbestosis Cases, supra note 12; McQuade,
supra note 12; LaBelle, supra note 12; Smith, supra note 12; Searcy, supra
note 12; Mingin, supra note 12.
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or unjust act in contravention of the rights of another.”20 And
there is no allegation of fraud here. A court exercises its equitable power when it disregards the corporate form,21 but there
is “little likelihood that equity will ever require [a court] to
pierce the corporate veil to protect the same party that erected
it. It was, after all, [the] defendant that chose to structure itself
in its present multi-corporate form.”22 In short, defendants have
uniformly been denied the opportunity to pierce their own corporate veil in order to avoid liability.23
LaBelle v. Crepeau24 presents a good example of that
reasoning being applied to facts comparable to those of the
instant appeal. In LaBelle, the plaintiff was injured at his
place of employment, allegedly due to inhaling paint fumes in
an improperly vented paint and body shop. The plaintiff’s corporate employer leased the building from the defendant, who
owned the building in his individual capacity, but also owned
98 percent of the stock in the corporation, and managed and
controlled it. The Supreme Judicial Court of Maine held that
it was improper to ignore the corporate entity in order to
allow a shareholder to avoid the burden of incorporation.25
The court held that the plaintiff could not sue the corporation, nor could he sue the defendant in any capacity related to
the defendant’s employment or association with the corporation as an employee or officer. But, the court reasoned, the
defendant had been sued “as the owner of premises he leased
to a separate corporate entity, solely for failure to conform
to an alleged legal duty on the part of a landlord to [en]sure
the safety of the premises.”26 So, the court concluded, the
20
Christian v. Smith, 276 Neb. 867, 883, 759 N.W.2d 447, 462 (2008)
(emphasis supplied). See, also, Medlock v. Medlock, 263 Neb. 666, 642
N.W.2d 113 (2002).
21
See Medlock, supra note 20.
22
McQuade, supra note 12, 659 N.E.2d at 1020.
23
See Matter of Johns-Manville/Asbestosis Cases, supra note 12.
24
See LaBelle, supra note 12.
25
See id.
26
Id. at 655.
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plaintiff’s claim was not barred by his acceptance of workers’
compensation.27
We agree with that reasoning. In this case, Roper & Sons
chose to diversify its corporate form, presumably because of
the business advantages of such diversity. But that choice has
legal consequences. We are not at liberty to disregard the corporate form in the absence of circumstances that would justify
invoking equitable power. But there are no such allegations
here. Therefore, there is no basis in this record to set aside the
corporate structure that Roper & Sons and Roper’s Real Estate
decided to form. We find merit to Howsden’s first assignment
of error.
We also find merit to Howsden’s second assignment of error.
Howsden argues that the court erred in finding that our decision in Millard was controlling here. We agree with Howsden
that Millard is distinguishable.
As context, we note that several courts have held that an
employee’s third-party claim may be barred by the exclusive
remedy rule based upon factors such as the third party’s control of the employee’s duties, payment of wages, and right to
hire and fire.28 But the reasoning of those cases is based on
the recognition that sometimes, an employee can work for
two employers at the same time.29 For instance, in Saf-T-Cab
Service v. Terry,30 a taxicab driver was employed by the owner
of the cab he was driving when he was injured, but a separate
entity was responsible for directing the cab’s operation and the
driver’s duties. The driver’s third-party action against the operating entity was barred because the court found the evidence
sufficient to show that both entities were functionally employing the driver at the time of the injury.31
27
See id.
See, e.g., Clark v United Technologies, 459 Mich. 681, 594 N.W.2d 447
(1999); Imbraguglio, supra note 12, citing Saf-T-Cab Service v. Terry, 167
Md. 46, 172 A. 608 (1934); Ramnarine v. Memorial Center for Cancer,
281 A.D.2d 218, 722 N.Y.S.2d 493 (2001).
29
See, Clark, supra note 28; Ramnarine, supra note 28.
30
Terry, supra note 28.
31
See id.
28
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Millard was such a case.32 In Millard, the pilot of a small
airplane was also the owner of three related companies, and
when the airplane crashed, two employees of one of those
companies were killed. Their estates sued the pilot and the
other two companies that he owned and controlled. But we
found that their exclusive remedy was under the Act, because
their deaths arose out of and in the course of their employment
with the pilot and his corporations. We found that the evidence
would have been insufficient to show that the pilot had a second “persona” unrelated to his status as employer. And we
explained that the decedents “were employees whose professional expertise led them to be asked to provide their opinions,
and [that] those opinions were offered in the course and scope
of their employment.”33 So, we concluded that “[w]hether the
purpose [of the trip] was to benefit the decedents’ employer
. . . or to benefit one of the other entities does not alter [the
pilot’s] liability.”34
In this case, however, as explained above, the separate legal
existence of Roper’s Real Estate is established as a matter
of law. And there is no basis in the record to conclude that
Howsden was employed by both Roper & Sons and Roper’s
Real Estate. The evidence establishes beyond reasonable dispute that Howsden was hired and controlled exclusively by
Roper & Sons. Neither Millard nor any other dual-employer
case is pertinent here.
Roper’s Real Estate also argues that even if it is a third
party against which a tort claim can be maintained, there are
other grounds upon which the district court’s judgment can be
affirmed. Roper’s Real Estate argues that as a landlord, it has
no direct liability for an allegedly dangerous condition on the
premises35 and that it cannot be held vicariously liable for any
32
See Millard, supra note 2.
Id. at 912, 237 N.W.2d at 128.
34
Id.
35
See, generally, Tolbert v. Jamison, 281 Neb. 206, 794 N.W.2d 877 (2011).
33
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torts of Roper & Sons.36 But these arguments would depend
on evidence of the terms of the lease agreement and any specific acts of negligence that occurred. And, we note, it is far
from clear from the record that these arguments were raised
below. They were not specifically presented by the pleadings,
and the cross-motions for summary judgment were specifically directed only at Roper’s Real Estate’s exclusive remedy
defense. In other words, there is nothing in this record to suggest that Howsden had notice that she was expected to present
evidence at the summary judgment hearing on the other issues
raised by Roper’s Real Estate on appeal. Therefore, we decline
to reach those issues at this point in the proceedings.
Conclusion
Roper’s Real Estate is a legally separate entity from Roper
& Sons, despite their corporate kinship, and there is no equitable basis in this record to justify piercing the corporate veil
between the two entities. Roper’s Real Estate is a third party
to the employment relationship between Howsden and Roper
& Sons, so Howsden’s third-party claim against Roper’s Real
Estate is not barred by the exclusive remedy provisions of the
Act. And Roper’s Real Estate’s other asserted defenses are
not ripe for adjudication in this appeal. The judgment of the
district court is reversed, and the cause is remanded for further proceedings.
R eversed and remanded for
further proceedings.
36
See, generally, Plock v. Crossroads Joint Venture, 239 Neb. 211, 475
N.W.2d 105 (1991), overruled on other grounds, Hynes v. Hogan, 251
Neb. 404, 558 N.W.2d 35 (1997), and disapproved on other grounds,
Welsch v. Graves, 255 Neb. 62, 582 N.W.2d 312 (1998).
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