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JOINER v. RYDER SYSTEM INC.

March 15, 1996

DAVID E. JOINER AND RUTH E. JOINER, PLAINTIFFS,
v.
RYDER SYSTEM INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Richard Mills, District Judge:

    Is Ryder System Inc. the alter ego of its subsidiaries? No.

Is Ryder system Inc. the apparent manufacturer of its subsidiaries' products? No.

Does Ryder System Inc. have the duty to control the products of its subsidiaries? No.

Summary judgment is granted in favor of Ryder System Inc.

I. BACKGROUND

This diversity action arises out of an injury to David E. Joiner — a citizen of the State of Illinois — which occurred on June 23, 1993. Joiner, while performing his normal work duties as a driver for Complete Auto Transit, Inc. ("CAT"),*fn1 sustained severe and permanent injuries to his back, hip, and leg while attempting to pull out skids located at the rear of a trailer.*fn2 The trailer was manufactured by Delavan Industries, Inc. In general, Joiner alleges that the trailer was defective and unreasonably dangerous.

Joiner initiated this action sounding primarily in strict products liability and negligence against Ryder System Inc. ("RSI"), Ryder Automotive Carrier Group ("RACG"), and Ryder Automotive Operations, Inc. (RAOI) — a successor by merger to Delavan.

RSI — a Florida corporation — is a holding company, i.e., it is engaged in the business of investing and acquiring other companies.*fn3 RSI owns 100% of the stock of RACG — also a Florida corporation. RACG, in turn, owns 100% of the stock of RAOI — a Florida corporation.*fn4

The company formerly known as Delavan was, as noted, the manufacturer of the trailer at issue. Prior to the merger with RAOI, Delavan was a wholly owned subsidiary of RSI. When RAOI merged with Delavan, RAOI assumed the obligations and liabilities of Delavan regarding trailers manufactured before January 1, 1994.*fn5

RACG and RAOI belong to RSI's Automotive Carrier Division ("ACD"). The ACD is not a corporate entity. Rather, it is a term used to describe a group of sister subsidiary trucking and trucking-related service corporations of RACG and RAOI.*fn6 The ACD does not have offices, administrative staff, or employees. All employees who are considered to be employees of the ACD are actually employees of either RACG, RAOI, or another trucking or trucking-related corporation within the ACD.

II. STANDARD — SUMMARY JUDGMENT

Under Fed.R.Civ.P. 56(c), summary judgment shall be granted if the record shows 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." Black v. Henry Pratt Co., 778 F.2d 1278, 1281 (7th Cir. 1985). The moving party has the burden of providing proper documentary evidence to show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Unquestionably, in determining whether a genuine issue of material fact exists, the evidence is to be taken in the light most favorable to the nonmoving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). Once the moving party has met its burden, the opposing party must come forward with specific evidence, not mere allegations or denials of the pleadings, which demonstrates that there is a genuine issue for trial. Howland v. Kilquist, 833 F.2d 639 (7th Cir. 1987).

III. DISCUSSION

The instant summary judgment motion pertains only to Joiner's claims against RSI — the parent holding company. It appears to the Court that Joiner offers three independent arguments as to why RSI should remain in this case. First, Joiner claims that RSI is the alter ego of its ACD — namely, RACG and RAOI (which includes Delavan by merger). Second, Joiner claims that RSI held itself out as the "apparent manufacturer" of the alleged defective trailer; thus, RSI should be held liable as if it were in fact the manufacturer. Third, Joiner claims that RSI had the right to control the products and/or services of its subsidiaries — namely, Delavan (the manufacturer of the trailer) — thus, RSI should be held liable for the injuries resulting from the alleged defective trailer. Each argument will be addressed in turn.

A. Alter Ego

Before discussing the merits of Joiner's alter ego argument, the Court would like to comment on an issue the parties ignored. Both parties have assumed, without discussing, that Illinois law applies to the alter ego issue. It appears to the Court, however, that the parties' assumption is likely erroneous. Since RSI is the parent corporation and RSI is incorporated in the State of Florida, under Illinois choice of law principles it appears that Florida law governs disputes surrounding whether RSI's corporate form will be disregarded — not Illinois law.*fn7 Mark I, Inc. v. Gruber, 38 F.3d 369, 371 (7th Cir. 1994) (Analyzing Connecticut law to determine whether a Connecticut corporation's veil should be pierced); Kolson v. Vembu, 869 F. Supp. 1315, 1323 (N.D.Ill. 1994) (Analyzing Wisconsin law to determine whether the corporate veil should be pierced where corporation was incorporated and had principal place of business in Wisconsin and sole shareholder was a citizen of Wisconsin); United Nat'l Records Inc. v. MCA, Inc., 616 F. Supp. 1429, 1431 (N.D.Ill. 1985) ("In this case, [the parent company] is a California corporation, . . . California law must be utilized" to determine if the parent is liable for the acts of its subsidiary.); Heyman v. Beatrice Co., No. 89-C-7381, 1995 WL 151872 (N.D.Ill. April 3, 1995).

Regardless, since both parties assume that Illinois law applies to the alter ego issue, the Court will not disturb that assumption, nor will it hold otherwise. Illinois law therefore applies. Vukadinovich v. McCarthy, 59 F.3d 58, 62 (7th Cir. 1995) ("[C]hoice of law, not being jurisdictional, is normally . . . waivable."); Wood v. Mid-Valley, Inc., 942 F.2d 425, 426-27 (7th Cir. 1991) ("The operative rule is that when neither party raises a conflict of law issue in a diversity case, the federal court simply applies the law of the state in which the federal court sits. * * * [The] courts are not required to create issues where the parties agree. * * * Courts do not worry about conflict of laws unless the parties disagree on which state's law appalies.").

In the State of Illinois (as in every state), "[a] corporation is a legal entity separate and distinct from its shareholders, directors, and officers." In re Rehabilitation of Centaur Ins. Co., 158 Ill.2d 166, 198 Ill. Dec. 404, 406, 632 N.E.2d 1015, 1017 (1994). That same principle "applies even where one corporation wholly owns another and the two have mutual dealings." Id. To disregard that well-established principle, a plaintiff has a "substantial burden" to overcome. Kelsey Axle & Brake Div. v. Presco Plastics, 187 Ill. App.3d 393, 135 Ill.Dec. 4, 8, 543 N.E.2d 239, 243 (1989). Indeed, "in general, a parent corporation may not be held to account for the liabilities of a subsidiary ...


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