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March 22, 2004.

LARRY BOWOTO, et al., Plaintiffs, V. CHEVRON TEXACO CORP., et al. and MOES 1-50, Defendants

The opinion of the court was delivered by: SUSAN ILLSTON, District Judge

Defendants' motion for summary judgment regarding Phase I of this trial is currently pending before the court. Having carefully considered the argument of the parties and the papers submitted, the motion for summary judgment on Phase I is DENIED.


  This action was filed on May 27, 1999 by five Nigerian plaintiffs who alleged that defendant Chevron Texaco. Corporation*fn1 ("ChevronTexaco" or"CVX") was involved in the commission of human rights abuses in Nigeria. The complaint has been amended several times, and now includes as defendants both CVX, a United States-based corporation, and Chevron Texaco. Overseas Petroleum, Inc. ("CTOP"*fn2), a Delaware corporation which is a wholly-owned subsidiary of CVX, as well as 500 "Moe" defendants. Chevron Nigeria Page 2 Limited (CNL) operates a joint venture with the Nigerian National Petroleum Company, the Nigerian state oil company. At the time of the Parabe incidents, CTOP owned 90% of CNL directly, and owned the other 10% through a wholly-owned subsidiary.

  Plaintiffs allege that the United States defendants, CVX and CTOP, are liable for their own acts and for the acts of CNL in three incidents that occurred in Nigeria, in which defendants and CNL allegedly acted unlawfully and committed human rights abuses.

  — The first was the Parabe incident, which occurred on May 28, 1998. Plaintiffs allege that CNL, acting in concert with defendants, recruited the Nigerian military and police to fire weapons at Nigerians staging a protest on one of Chevron's oil platforms, the Parabe platform. Two protesters were killed in this incident. Plaintiffs allege that CNL's management and security forces were involved in the subsequent detainment and torture of Bola Oyinbo, one ofthe leaders ofthe protest movement on the Parabe platform.

  — The second and third were the Opia and likenyan incidents, which occurred on January 4, 1999. Plaintiffs allege a helicopter flown by Chevron pilots and transporting Nigerian military and/or police flew over the community of Opia and opened fire on the villagers, killing one person and injuring others. Plaintiffs allege that the helicopter then flew to the Ikenyan community, opened fire and killed one person and injured several others. Plaintiffs allege that thirty minutes later, CNL sea trucks containing CNL personneland Nigerian military approached Opia and opened fire on the villagers, killing several people. Plaintiffs allege that the soldiers disembarked from the sea trucks and set fire to buildings and livestock, killing another person.

  In October, 2001, the parties stipulated to a bifurcated discovery schedule which limited Phase I discovery to issues related to the liability/responsibility of the United States defendants, CVX and CTOP, for whatever occurred in Nigeria at Parabe, Opia and Ikenyan. It was contemplated that at the end of Phase I discovery, CVX and CTOP would move for summary judgment on the limited issue of their direct or derivative liability for their own acts, or the acts of their employees, agents, co-conspirators, alter egos, or joint venturers. in the summary judgment motion currently before the Court, defendants CVX and CTOP seek summary adjudication that plaintiffs have not presented a triable issue of fact supporting defendants' liability under any of these theories. Page 3


  1. Summary judgment

  Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, 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." Fed.R.Civ.P. 56(c). The moving party bears the initialburden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party, however, has no burden to negate or disprove matters on which the non-moving party will have the burden of proof at trial. The moving party need only point out to the Court that there is an absence of evidence to support the non-moving party's case. See id. at 325.

  The burden then shifts to the non-moving party to "designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324 (quoting Fed.R.Civ.P. 56(e)). To carry this burden, the non-moving party must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co., Ltd, v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "The mere existence of a scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for the non-moving party." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 252 (1986).

  In deciding a motion for summary judgment, the evidence is viewed in the light most favorable to the non-moving party, and all justifiable inferences are to be drawn in its favor. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge ruling on a motion for summary judgment." Id. at 255.

  2. Liability of a parent corporation for the acts of its subsidiary

  The law allows corporations to organize for the purpose ofisolating liability of related corporate entities. Frank v. U.S. West. Inc., 3 F.3d 1357, 1362 (10th Cir. 1993). Only in unusual circumstances will the law permit a parent corporation to be held either directly or indirectly liable for the acts of its subsidiary. "It is a general principle of corporate law deeply ingrained in our legal system that a corporation is not liable for the Page 4 acts ofits subsidiaries." U.S. v. Bestfoods, 524 U.S. 51, 68 (2003).*fn3 Courts do disregard the corporate form in some instances where such disregard is necessary to prevent injustice to a person or entity that would be harmed by refusing to impose liability on the basis of the corporate structure. The party seeking to disregard the corporate form bears the burden of showing that there are good reasons for doing so. Mobil Oil Co. v. Linear Films Inc., 718 F. Supp. 260, 278 (D.Del. 1989). "Mere ownership of a subsidiary does not justify the imposition of liability on a parent." Pearson v. Component Tech. Corporation, 247 F.3d 471, 484 (3d Cir. 2001).

  Officers of a parent corporation may be involved in the supervision of a subsidiary corporation without incurring liability for the parent corporation. Typical acts of parent corporation officers which are within the bounds of corporate formalities and do not warrant veil-piercing include: supervising the acts of the subsidiaries; receiving regular reports from the subsidiaries; creating general policies and procedures which the subsidiaries must follow; and overseeing the financial management of the subsidiaries. "Appropriate parental involvement includes: `monitoring of the subsidiary's performance, supervision of the subsidiary's finance and capitalbudget and articulation of general policies and procedures.'" U.S. v. Bestfoods, 524 U.S. at 69 (citations omitted).

  Officers of a parent may also simultaneously act as officers of the subsidiary without having their duties as parent corporation officers' presumed to be effectuated also on behalf of the subsidiary corporation. Liability will not be imposed "on a parent merely because directors of the parent corporation also serve as directors of the subsidiary." Pearson, 247 F.3d at 383, citing Bestfoods, 524 U.S. at 69.

  Doctrines which courts have employed to analyze the liability of a parent corporation include "piercing the corporate veil" (which is often referred to as "alter ego" liability); "single enterprise liability" (referred to in the employment context as "single employer liability"); agency-based liability; aiding and abetting; and ratification. "The terminology used by courts in considering whether a parent corporation will be held liable for Page 5 the actions of its subsidiary has not been a model of clarity. Plaintiff's so-called `alter ego theory' is often used interchangeably with such expressions as `disregarding the corporate entity' and `piercing the corporate veil'. . . . In addition, some courts use the word `agent' describe what is essentially the same relationship contemplated by the term `alter ego.'" Mobil Oil Co. v. Linear Films Inc., 718 F. Supp. 260, 266 (D.Del. 1989).*fn4

  Whether to hold a parent liable for the acts of its subsidiary is a highly fact-specific inquiry. "There are no inflexible tests by which courts determine when to hold corporations liable for the acts of their subsidiaries. Generally, the corporate separateness is respected unless' . . . to do so would work an injustice upon innocent third parties.' Fidelity & Deposit Co. of Maryland v. Usaform Hail Pool. Inc., 523 F.2d 744, 758 (5th Cir. 1975). But each case must be considered on its own facts." Edwin K. Williams & Co. v. Edwin K. Williams, 542 F.2d 1053, 1063 (9th Cir. 1976), cert. den. 433 U.S. 908 (1977)

  The parties have not squarely confronted whether state or federal law applies to the question of a parent corporation's liability for the subsidiary's actions in this case, and the answer to the question does not emerge clearly from the case law. In U.S. v. Bestfoods, the Supreme Court noted this uncertainty,*fn5 cited cases from several jurisdictions with differing viewpoints, but declined to rule on the issue because it had not been presented below. Id. at 68. In any event, the tests are quite similar.*fn6 Page 6

  In Mobil Oil Co. v. Linear Films Inc., 718 F. Supp. 260, 267 (D.Del. 1989), the court noted the existence of a body of federal common law which has developed on the veil-piercing question and observed that federal courts deciding this question in federal cases have often opted to apply federal common law.

  In Seymour v. Hull & Moreland Engineering, 605 F.2d 1105, 1111 (9th Cir. 1979), the federal test for piercing the corporate veil was articulated as follows: "Viewing the jumble of federal court decisions together, we find a sort of generalized federal substantive law on disregard of corporate entity which concentrates on three general factors: the amount of respect given to the separate identity of the corporation by its shareholders, the degree of injustice visited on the litigants by recognition of the corporate entity, and the fraudulent intent of the incorporators. Federal decisions naturally draw upon state law for guidance in this field." (footnotes omitted)

  Many of the cases analyzing the question of a parent's relationship to its subsidiary do so for the purpose of determining whether that relationship is sufficient to find that the minimum contacts requisite to personaljurisdictionexist over the parent or subsidiary corporation. Personal jurisdiction disputes are generally resolved with reference to law of the state in which the action is brought. Bellomo v. Pennsylvania Life Co., 488 F. Supp. 744, 748 (S.D.N.Y. 1980).

  While the question of whether to pierce the corporate veil has significant overlap with the jurisdictional issue of minimum contacts, the questions of jurisdiction and liability for the subsidiary's actions are different. The liability question is less procedural than substantive, rendering the federal law a more appropriate guide to this Court's analysis. Where the causes of action in the complaint are federal in nature, application of federal law will better effectuate the purposes of those statutes. Finally, state and federal precedent on this issue do not appear to diverge in any way meaningful to the adjudication of this case. For these reasons, this Court will apply such federal law as it can find when determining these questions.

 A. Piercing the corporate veil

  "Although the tests employed to determine when circumstances justifying `veil-piercing' exist are variously referred to as `alter ego', `instrumentality' or `identity' doctrines, the formulations are generally similar and courts rarely distinguish between them." Pearson v. Component Tech. Corporation, 247 F.3d 485 Page 7 (3d Cir. 2001). Pearson, a case decided under the Worker Adjustment and Retraining Notification (WARN) Act, 29 U.S.C. § 2101-09, noted that the biggest difference across jurisdictions is whether fraudulent intent in incorporation is necessary for veil-piercing. Pearson further observed that federal courts are more likely to pierce the corporate veil where necessary to effectuate a federal statute that would otherwise be frustrated by the state's corporate laws. In the Ninth Circuit, cases suggest, at least in contexts arising from California, that fraudulent intent in incorporation need not be shown to pierce the veil, as long as it can be shown that the separate identity of the corporation has not been respected and that respecting the corporate form would work an injustice on the litigants. RRX Industries Inc. v. Lab-Con Inc. 772 F.2d 543, 596 (9th Cir. 1985).

  The test for alter ego liability appears almost interchangeable with the veil-piercing test. See Mobil. 718 F. Supp. at 266, defining alter ego as lack of attention to corporate formalities, commingling of assets, and intertwining of operations. Alter-ego requires ...

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