The opinion of the court was delivered by: SUSAN ILLSTON, District Judge
ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
ON PHASE I
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
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.
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
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
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
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.
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
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
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
(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 ...