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JOINER v. RYDER SYSTEM INC.
March 15, 1996
DAVID E. JOINER AND RUTH E. JOINER, PLAINTIFFS,
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.
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
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).
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.
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 ...