Lucas v. Texas Industries, Inc.
27 Tex. Sup. Ct. J. 491, 1984 Tex. LEXIS 380, 696 S.W.2d 372 (1984)
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Rule of Law:
To hold a parent corporation liable for the tort of its subsidiary under an alter ego theory, a plaintiff must prove more than a mere blending of corporate activities. The plaintiff must show the corporate form was used as an unfair device to achieve an inequitable result, with the subsidiary's undercapitalization being a key factor for consideration.
Facts:
- Miner-Dederick Construction Company subcontracted with Everman Corporation to fabricate and erect concrete beams for a parking garage.
- Everman subcontracted some fabrication work to Texas Structural Products, Inc. (Structural), a wholly-owned subsidiary of Texas Industries, Inc. (TXI).
- Engineer drawings required the beams to have 1.25-inch inserts on the edge and 1-inch inserts on the face for lifting.
- Everman advised Pre-cast Erectors, Inc., the company hired to erect the beams, that it would only need 1.25-inch lifting equipment for the job.
- Randall Wade Lucas was an employee of Pre-cast.
- On May 20, 1977, a beam fabricated by Structural arrived at the jobsite with 1-inch inserts on its edge, contrary to the specifications.
- Using the 1.25-inch equipment they were told to bring, Pre-cast employees attempted to lift the incorrectly fabricated beam.
- The beam fell from its rigging and landed on Lucas, causing severe injuries.
Procedural Posture:
- Randall Wade Lucas sued Texas Industries, Inc. (TXI) and Everman Corporation in state trial court.
- A jury found that TXI's subsidiary was its alter ego and that Everman was negligent.
- The trial court entered a judgment against TXI and Everman, jointly and severally, for $2,000,000.
- Both defendants appealed to the Texas Court of Appeals, an intermediate appellate court.
- The Court of Appeals reversed the judgment against Everman, finding no liability.
- The Court of Appeals affirmed the judgment against TXI after ordering a remittitur, which Lucas accepted.
- TXI appealed the judgment against it, and Lucas appealed the judgment in favor of Everman, to the Supreme Court of Texas.
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Issue:
Does evidence of shared officers, a common logo, consolidated tax returns, and inter-corporate business, without proof of fraud, undercapitalization, or other inequity, suffice to hold a parent corporation liable for the torts of its subsidiary under an alter ego theory?
Opinions:
Majority - Campbell, Justice.
No, evidence of blended corporate activities alone is insufficient to hold a parent corporation liable for the torts of its subsidiary. To pierce the corporate veil under an alter ego theory in a tort case, there must be proof that the corporate structure was used as an unfair device to achieve an inequitable result. The court reasoned that while intent to defraud is not required in tort cases, the financial strength of the subsidiary is a critical consideration. The alter ego doctrine protects the public from undercapitalized corporations that transfer business risks to others. Lucas provided no evidence that Structural was undercapitalized or unable to pay a judgment. The evidence presented—shared officers, a common logo, consolidated tax returns, and inter-corporate business—does not demonstrate that TXI used Structural's corporate entity to perpetrate an injustice against Lucas. Therefore, the jury issue based merely on the 'blending of activities' was legally incorrect and cannot support a judgment against TXI.
Analysis:
This decision significantly clarifies the alter ego doctrine in Texas tort law, reinforcing the principle of limited corporate liability. It establishes that operational entanglement between a parent and subsidiary is not, by itself, a sufficient basis to pierce the corporate veil. The ruling mandates that plaintiffs demonstrate an element of fundamental unfairness, highlighting undercapitalization as a key indicator of abuse of the corporate form. This precedent forces future litigants to focus on the subsidiary's financial viability and whether the parent used the corporate structure to unjustly avoid liability, rather than just pointing to shared administrative functions.
