Frazier v. Bryan Memorial Hospital Authority
775 P.2d 281, 1989 WL 47163 (1989)
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Rule of Law:
A parent corporation may be held liable for the torts of its subsidiary if the subsidiary is merely an instrumentality or agent of the parent. Summary judgment is improper when there is a genuine factual dispute regarding the degree of control the parent corporation exercises over the subsidiary.
Facts:
- Frazier's decedent suffered an alleged harm leading to wrongful death at Bryan Memorial Hospital.
- Bryan Memorial Hospital Authority (Authority) operated the hospital under a management agreement with HCA Management Company, Inc. (Company).
- Company is a wholly-owned subsidiary of Hospital Corporation of America (HCA).
- Frazier alleged that the harm was caused by negligent employment and administrative policies created and implemented by the hospital entities.
- Evidence suggested HCA and Company had common officers, commingled cash in an HCA-managed account, and that HCA guaranteed Company's performance of the management contract.
- The management agreement between Company and the hospital required amendments to have HCA's written consent and named HCA as an insured party.
Procedural Posture:
- Frazier sued Hospital (a collective group including Bryan Memorial Hospital Authority) and Hospital Corporation of America (HCA) in a single action for wrongful death in an Oklahoma state trial court.
- Hospital moved for dismissal for failure to state a claim, arguing it was a political subdivision and Frazier had failed to provide timely notice under the Political Subdivision Tort Claims Act.
- On May 22, 1985, the trial judge dismissed the claim against Hospital.
- The trial court subsequently granted Frazier leave to file a second amended petition.
- Hospital filed a 'motion to strike' the second amended petition, which the court treated as a motion to dismiss.
- On October 1, 1985, the trial court again dismissed the claim against Hospital.
- Frazier, as appellant, appealed the October 1 dismissal to the Oklahoma Supreme Court (appellee: Hospital).
- In the same case, HCA moved for summary judgment, arguing it was not a proper party and that it was entitled to the same immunity as the hospital.
- The trial court granted summary judgment to HCA.
- Frazier, as appellant, appealed the summary judgment to the Oklahoma Supreme Court (appellee: HCA).
- The Oklahoma Supreme Court consolidated the two appeals for review.
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Issue:
Is summary judgment for a parent corporation appropriate on the grounds that it is a separate entity from its subsidiary when the plaintiff presents evidence creating a genuine issue of material fact as to whether the parent corporation exercises sufficient control to be held liable for the subsidiary's actions?
Opinions:
Majority - Opala, Vice Chief Justice
No. Summary judgment for a parent corporation is improper when genuine issues of material fact exist regarding its control over a subsidiary. A parent corporation may be held liable for the actions of its subsidiary if the subsidiary is merely its instrumentality or agent. The court found that Frazier presented sufficient evidence to create a factual dispute over whether HCA controlled Company. This evidence included HCA's 100% ownership of Company's stock, common officers and directors, commingling of cash, and HCA's guarantee of Company's performance. Because the question of whether a dominant corporation is liable for a subservient entity's tort hinges on control—a fact-intensive inquiry—the trial court erred in resolving this issue by summary judgment. The court also held that the trial court's dismissal of claims against Hospital was improper because Frazier's amended pleading alleged facts that, if proven true, could entitle him to relief.
Analysis:
This case reinforces the principle that corporate form will be disregarded to impose liability on a parent corporation that excessively controls its subsidiary, a doctrine often called 'piercing the corporate veil.' The decision emphasizes that the determination of an 'instrumentality' relationship is a highly factual inquiry, making it difficult for parent companies to win on summary judgment if the plaintiff can produce some evidence of control. This ruling protects plaintiffs by ensuring that questions of corporate dominance are resolved by a trier of fact rather than being dismissed prematurely. It also highlights Oklahoma's liberal pleading standards, which allow plaintiffs an opportunity to amend a defective complaint if the defect is curable.
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