Dania Jai-Alai Palace, Inc. v. Sykes
450 So.2d 1114 (1984)
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Rule of Law:
The corporate veil may not be pierced to hold a parent corporation liable for the acts of its subsidiary unless it is shown that the subsidiary was organized or used for an improper purpose, such as to mislead creditors or perpetrate a fraud. The mere fact that a subsidiary is a 'mere instrumentality' of the parent is insufficient, by itself, to justify disregarding the corporate form.
Facts:
- Saturday Corporation is a parent company that wholly owns two subsidiary corporations: Dania Jai-Alai Palace, Inc. (Dania), which operates a jai-alai fronton, and Carrousel Concessions, Inc. (Carrousel), which handles valet parking and other concessions at the fronton.
- On December 15, 1977, Gladys Sykes drove to the Dania fronton.
- Sykes purchased a parking ticket from a Carrousel valet attendant and then exited her vehicle.
- The Carrousel attendant entered Sykes's car to park it.
- Sykes walked in front of her car, into the space between her car and the one parked ahead of it.
- The attendant, intending to brake, accidentally pressed the accelerator.
- The car lunged forward, crushing Sykes between her car and the car in front.
Procedural Posture:
- Gladys Sykes sued Carrousel, Dania, and Saturday Corporation in a Florida trial court.
- At the end of the trial, the court granted directed verdicts against Carrousel for its employee's negligence and against Dania for operating as a single entity with Carrousel.
- The jury found Saturday Corporation liable and returned a total verdict of $775,000 against all three corporations.
- The three corporations (petitioners) appealed to the Florida Fourth District Court of Appeal, an intermediate appellate court.
- The District Court of Appeal affirmed the judgment, holding that piercing the corporate veil to reach Saturday was proper under the 'mere instrumentality' doctrine without any need to show fraud.
- Saturday, Dania, and Carrousel (petitioners) sought review from the Supreme Court of Florida, which granted review based on conflict with prior Supreme Court decisions.
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Issue:
Does the 'mere instrumentality' doctrine alone, without proof of fraud or other improper conduct, justify piercing the corporate veil to hold a parent corporation liable for the torts of its subsidiary?
Opinions:
Majority - Shaw, J.
No, the 'mere instrumentality' doctrine alone does not justify piercing the corporate veil. To disregard the corporate entity and hold a parent corporation liable for its subsidiary's actions, there must be a showing that the corporate form was organized or used for some illegal, fraudulent, or other unjust purpose. The court analyzed and distinguished the line of cases relied upon by the lower court, concluding that they either involved allegations of improper conduct or were factually inapplicable. Instead, the court affirmed its precedent from cases like Advertects, Inc. v. Sawyer Industries and Riley v. Fatt, which explicitly require proof that the corporation was used to mislead creditors or perpetrate a fraud before its veil can be pierced. Since the plaintiff stipulated that there was no wrongdoing or fraud by the parent company, Saturday Corporation, there was no legal basis to hold it liable. The court also held that the trial court erred in directing a verdict against Dania, as there was conflicting evidence creating a jury question as to whether Dania and Carrousel operated as a single enterprise.
Analysis:
This decision reaffirms the strength of the corporate form and the principle of limited liability in Florida law. It clarifies a split among lower courts by establishing that mere control or dominance of a subsidiary by a parent (the 'instrumentality' test) is not enough to pierce the corporate veil in a tort action. The ruling solidifies the requirement of showing 'improper conduct,' such as fraud or illegality, making it significantly more difficult for plaintiffs to reach the assets of a parent corporation for the liabilities of its subsidiary. This holding protects the legitimate use of subsidiary corporations for business purposes and sets a high bar for plaintiffs seeking to disregard corporate separateness.
